Yuan Peg?, Good/Bad Deflation, U.S. Jobs on Life-Support

Yuan Peg?, Good/Bad Deflation, U.S. Jobs on Life-Support?

Yuan Peg?

A July 23 article titled 'Chinese Central Bank Outlines Plan To Ditch The Dollar As The Yuan's Peg' says the deputy governor of the Chinese Central Bank has released a paper that suggests its becoming time for China to peg the yuan to a basket of foreign currencies instead of exclusively to the U.S.$ - but recognizes that this can't occur 'overnight'.  If interested, you can read more detail on this than is set out in the referenced article by clicking here.

That China would continue to focus on the efficacy of the U.S.$ as the world's reserve currency seems to me only logical and sensible - and something I think we will hear a lot more about over the coming months and years.  To me this type of commentary is clear evidence of China's increasing concern with both the U.S.'s financial position, and the U.S.'s relative position in a continuously re-balancing geo-economic environment.

Good/Bad Deflation

An article last week titled 'Good Deflation vs. Bad Deflation' suggests that deflation can result from either a collapse in aggregate demand or from a surge in aggregate supply - and that the first has very negative consequences while the latter has positive consequences.  Frankly, while I find the article interesting it seems to me convoluted and internally inconsistent.  I commented on the article as follows:

I see this article as very simplistic where the U.S. (and every other country viewed separately) is only one of many 'players on the field'. In my view, to believe the Fed can put its arms around America and administer policies that will balance wages, prices and innovation such that America will experience 'good depression' instead of bad depression' is naive at best. This theory would work best in a self-sufficient 1810's agrarian economy in Upper New York State where it was unusual for any participant in that economy to travel more than 50 miles from home during their respective lifetimes. Now that was an economy the Fed could have gotten its head and arms around and influenced in a meaningful way. As I see it, unfortunately for the U.S. and other developed countries this is 2010, not 1810, and all countries today are part of a highly complex geo-political economy, cannot unilaterally control their own economic destinies, and are able to control their own economic destinies less with each passing year. From my (Canadian) vantage point, the U.S. Fed's arms are hardly long enough to encircle the U.S. economy, let alone the world economy.

Interestingly, whereas I expected quite a number of negative 'thumbs-downs' on this comment, so far there has been only one 'thumbs-up' and no 'thumbs-down'.

U.S. Jobs on Life-Support?

A recent article titled 'This Sick Man of the West' includes what I think is an interesting chart that clearly shows the U.S., Japan and the U.K. are #11, #10, and #9 respectively out of 11 countries in job creation from the fall of 2008 to date.  Chile, Brazil, Australia, South Korea, Canada, Taiwan, Germany and Hungary are in that order #1 - #8.   Chile is up 7% since late 2008, the U.S. is down 5%.  Aside from the comparators being interesting, China is notably absent from the Chart - I think likely because comparative numbers for China may not be available.  

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