Printing US Dollar and it’s impact on Chinese Yuan

China is a biggest creditor of US dollar. US is currently printing lots of money by just printing. US dollar is a global currency so many part of provided liquidity flows into other countries, such as China and Japan.

What will happen in 5 years? What will be the best allocation of asset? If you predict the way it goes then it will be very easy to make a profit.

 

30 years ago in 1970s after Vietnam War, US borrowed money from future by printing money, so the result was inflation. In 2010, the world is more connected each other so certain monetary policy doesn't work as we expect to be. Especially, United States as a biggest countries in the world, the monetary policy that was executed to sooth the domestic problem can affect the other countries policy.

With regard with Impossible Trinity theory, Fixed FX, Free Flow of capital and monetary policy can not be sustainable at the same time.

 

Let's take a look at the Chinese Case. China is still keep this 3 impossible policies and still want to keep all of these 3 policies.

 

 

 

Conclusion

My Guess is that sooner or later China will explode with abundant dollar liquidity. China will face another policy dilemma.

To solve impossible trinity problem, China should appreciate their currency. That's the situation what US is trying to make.

But there is no Myungboon to do this for Everyone, so Western press, I think, made justification to make it so. That's increase Chinese people's buying power can save the world by increasing the value of Yuan.

From Chinese perspective it seems appealing. But economic point of view it may sound good.

 

Chinese economy is mostly based on export. Companies in China is a basic unit of Chinese social system, supporting poor social infrastructure by providing wages and social safety net(employeement) .

Once China revalue it's currency, some parts of the company will fall behind the competition, which will cause unemployment in certain and area and industry. The number of this category will be enormous, although i have to think about the nearest number. But this people will be the possible cancer for politicians.

China historically always collapsed by outer threat but by inner people. Inner people, now can be increased by the gap between rich and poor, and people who have and haven't.