An economics, investment, trading and policy blog with a focus on Modern Monetary Theory (MMT). We seek the truth, avoid the mainstream and are virulently anti-neoliberalism.
Monday, June 21, 2010
Effects of China's decision to let the yuan float
China caved in to Western pressure over the weekend in its decision to abandon the dollar peg and let the yuan float.
This will have two major consequences:
1. It will create new instability for the Chinese currency and global financial markets as the yuan peg was a great source of stability. That's going to be gone now.
2. It will hurt China's exports and, therefore, it's growth. Unless China now takes major steps to boost domestic spending and investment, China's growth rate will be on a steady track down. Bad for the world economy.
I'm not so bullish on China anymore.
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