They don't have to pull the rug out from under the dollar, our government is doing it for them.

Hello dbhalling,
It is robbing the ignorant people of wealth... Purely done for political reasons to change one metric positively (exports) and point to it as a success and placate the ignorant masses. Legerdemain... Our government is doing the same thing when it prints money QE1, QE2... etc. The politicians benefit at the expense of everyone else. What matter when they can vote themselves raises to compensate personally?

The Chinese are at it again. This is the third time in as many days.
http://www.theguardian.com/world/2015...

Regards,
O.A.

China is losing control of its monetary policy with capital flight. I expect trade war then WW3.

Well, playing devil's advocate - If you have fixed debt and hold a lot of stocks and real estate it puts you ahead of the average schlub. But, in terms of a society getting wealthier, no. I hate the concept, actually.

Our government is certainly not interested in creating a strong economy. You are correct.

Guess what it's been pegged to for quite some time. Haha... I remember the first time I saw the exchange rate chart and went, "WTH?"

I find all of the comments interesting but they really do not get to the point of why the chinese have done what they have done, lack of sales of the products that they make for world wide consumption. I just received a 30 page flier from Cabelas. They are offering numerous items at 25% to 50% off. this is the start of hunting season so sales should not be in the cards until half way through the season. most of what they are showing comes from china! do you think they will be back there for reorders anytime soon. do you think that the orders for next year will be ans big as this years was.? The answer is simple, they will not restock when they alread have stock. You can discuss till the cows come home but the reality is if you don't sell what you have you don't replenish and that is the catch 22 that the communists face. their next step might be war.

When we buy from china, we have to pay dollars, so I am not sure I will see price reductions. I will try for them of course, but something tells me I wont get any sort of significant price decrease.

These things have all sorts of consequences. For example, the stronger the dollar, the more their huge stash of dollars is worth , at the expense of the chinese who are stuck having their wealth in chinese ruans. If the chinese let the ruan get stronger relative to the dollar, they depreciate immediately their huge stash of dollars. Also, they will probably print more yuans to stimulate their economy. Its all phony stuff, but it does have short term conssequences that may benefit them. Long term, its a joke. With a gold standard, they couldnt do these phony things.

EVERYONE is racing for the bottom. When you have a currency (NOT money) based on debt, it's in your interest to pay back with devalued currency (a form of theft). Compound that with the fact that your products are "cheaper," meaning that you can sell more product, it's almost irresistible.

We have had occasional posts from a Gulcher in Venezuela. What I find in your, and his, posts, are the reality of economic collapse - as opposed to the hypothetical accounts from people who have not 'been there'.

I do have a couple of questions: Why do you say that a Buck = Gold = risk? Did people who had precious metals (gold/silver) fare better than those who did not? Was there any other portable commodity you would have stocked up on if you had been able to see the future?

I wish you well, and good fortune.

Jan

"1/3 or more of the population not working so they do not have disposable income except to buy drugs and alcohol." -- have you ever seen a welfare family/unit/individual (whatever one may call them) without a wall to wall TV made in China?

Or, perhaps, there's another version: To obtain market share, it helps to devalue your currency and drive out the competitors. Of course, China has already done that. Now, to make that market share complete and permanent, it helps to not only force your competitors to close their factories and sell off their equipment, but to destroy the competitors' workforce and ability to compete. That requires about a generation or so of failed economy (or shifted into service, as opposed to manufacturing) and failed education, so replacements will not be available. The rest is, well, you can see for yourselves...

As an Argentine, back in 2002 and after suffering "the fall from the lap of the gods" (due to 9/11 which sent, ultimately; our economy to a full stop) banks couldn´t keep up with the panic, currency became virtual and, well; the famous "corralito" took our savings to a "crystal cage" we could not access, only observe. Through that "glass", we ended up getting a piece of paper saying "you have this much money in dollars";yet it was unattainable to us. I had to do long lines in international banks such as the old HSBC to open an account so as to transfer from the one I had in Banco Galicia and then, transfer my savings offshore. Sadly, like millions; I was too late.

After the shock that almost ruinned me (I lived alone, my family was scattered around London/Barcelona, and Damascus); I got to travel due to the charge of a loan to Syria to be with my parents, posted there on May 2001. On the way, through Alitalia Airlines, I had a sixteen hour pitstop in Malpenza, Milano. So I decided to take the airport bus to the center of Milan and catch the Duomo, the Vittorio Emanuelle Galery, the Palazzo Sforza, etc. On the bus, I got to share seats with a young "american" economist. He told me something that still remains in my mind today:

"inflation is constant, unavoidable and perpetual. The problem with countries like argentina is that they fake stability where there isn´t any, for world economies shift as we speak".

When the "lie" became unsustainable; the economy crashed because we denied the reality before us. I was young then, a 23 year old architecture student that, due to the stress of the entire situation, went seven days straight without sleep on the first week of October. I defeated this insomnia by abandonning responsabilities that were my plans for the future, having to addapt to a reality I was forced to see before many others. I could sense something was wrong very early on that year of our Lord, 2001. The Bank started making ridiculous mistakes, like a glitch that changed my account number by one digit and...FLASH ! I came home one day and the Gas Company had cut me off !!! That, and many other things of the sort began occuring. I quit College (University) in order to catch all these foul balls...

Argentina 2002 was, literally; psychotic. December 2001 had it´s infamous "week of five Presidents", and violence hit the streets like Hurricane Katrina did to New Orleans. Looting, Raping, Killing...all very melodramatic. I left not because of fear itself, but because of loneliness. A month and a half in the middle east, with my family; really helped me center. Despite the offers to stay; I returned. The "silent war" had just begun...

Three different forms of local currency were dispatched in Buenos Aires, Province. A Buck was Gold, and to have one to your power meant more of a risk than anything else. "Bankers" fled, and only the true ones remained. People, in the midst of destruction; began investing in the only thing that can be the antithesis of death...life. Those who couldn´t made love and multiplied, those who could began constructing in blocks. Industries shattered, bankrupcy destroyed families like there was no tomorrow; and the streets were flooded with mindless bodies that fell from their grace into a pit of despair that could only be seen through their eyes. Trading became the new means to an end, in every stratus of the social spectrum. From kids to real estate; the human unconscious resorted to it´s primal instincts...creation. So we passed from riots, pillaging and senseless destruction to stonemasonry, love and enterprise. That´s the way we occupied our time, that´s the way we survived. ¿The economy? Well, we still don´t believe in the old foundations that sunk in that swamp of illusion. Argentina still has much to do in that aspect yet.

Book review posted here:

http://www.galtsgulchonline.com/posts...

The Chinese are buying gold. They actually don't want the value of the yuan to increase right now given their stock market issues - they need to keep the exchange rate geared towards exports, but they are also looking to pull the rug out from under the dollar.

the chinese problem is simple their exports have decreased dramatically

Agreed. I also read "The Death of Money" and it very clearly explained how being able to print money has led the US to cause global inflation since 1971. I also agree with him that if the IMF moves to adjust SDR's to use a basket of currency rather than peg based on the dollar, it will spell all kinds of financial repercussions for the US, which is why there is currently a hidden run on physical gold and silver.

As a manufacturer of products that can be made in china, i have been bombarded by chinese companies to make my products in china or sell their version of the same type of product for 8 years now, and it continues daily. It can also be any product whether it is in my industry or not. So I have been saying for 8 years the chinese are in trouble. now the writing is on the wall for all to see. What we have here is a communist government that wants money and if they can not sell their products successfully at ongoing prices they reduce the price by devaluing their money. the communist government does not care how adversely it affects the people of the country because they are communists. I might add that the powers to be in the usa think the same way! in any event this tactic will not work because we in the usa have about 1/3 or more of the population not working so they do not have disposable income except to buy drugs and alcohol. Of course the chinese are also seeing less and less sales into the entire rest of the world. The problem is a direct result of the years of bad policy perpetrated by the usa government! So the out come of governments trying to control the economy of a country simply put "just does not work" If the government gets out of the way "let us alone" takes place which i doubt will happen any time soon or if ever maybe business activity of building wealth; a word politicians hate: then and only then the economy of the world will change for the better. I however would not count on it!

Devaluing also helps keep their export prices low. Helping keep up volume with their export customers with less than robust economies....like the US under the current administration.

Actually the situation is more complicated in China because they peg their currency arbitrarily. So if it has been pegged at too high a rate, then devaluing might be a good thing and would be good for their economy and probably our also.

As Rand Paul said the Fed is like the old economic central planning committee of the USSR.

No disagreement with you at all.

I was simply illustrating what they get out of it.

I think the assumption that a government is really interested in creating a strong economy to be false.

Governments are interested in increasing their power it is what motivates those in government to do what they do.

Central banks are also interested in increasing there power, and the same can be said for those that produce commodities of some kind.

This system accomplishes great things for those three groups. For everyone else its destructive.

You had asked why they would do that, I think I have illustrated why. I am not stating that its good for the economy as a whole, or that it is wise.

Fact is I think the system has to collapse at some time under the weight of debt, but as long as the governments of the world can keep things in an inflationary state thus reducing the debt it may be able to go on for a very long time, perhaps forever.

It hurts every other human entity on the planet other than those three groups. Those three groups are the control groups that will keep it going.

Grab 'Death of Money" and read it, good book and it helped me to understand it much better.

You are ignoring that you income taxes went. You are ignoring the dislocation in the economy because of inflation. Yes inflation tends to be good for people producing commodities, but not the economy.

Would not seem that way but look at it a bit differently. Here are some numbers behind it.

Adam Smith illustrates the fact of profit coming from partially the time that it takes to product a product, the ownership of the tools and assets used to produce that product and the cost of ingredients that are needed to produce the product. The portion of profit that comes from ownership increases with inflation.

Example: I own a small farm. My land is paid for that I operate that farm and while these numbers are rounded they are basically real.

6 Years ago a half ton of hay sold for approximately $100 dollars and cost about $40 to produce the bail of hay, not including the cost of property. Add typical farm property (out away from the city) costs and that cost goes up to about $80 a bail.

Today that same bail costs about $200 to buy and the cost to produce it has also about doubled to $80, and about $160 if you do not have your land paid for.

Now if I am a typical middle class farmer who works a family farm in a co-op I likely have a loan on my land so I make about $40 profit today and about $20 six years ago, producing about the same buying power.

I own my farm outright and as a result compared to buying power I could generate with my farm 6 years ago to today I have an extra $40 generated per bail because I own the ground. This means that within such a system overtime I increase my disposable income on my farm with no other changes than inflation because the price others must charge that have a loan to make money increases with the inflation on the cost of the property as well as the cost of goods.

In this way the inflation is good for me, but bad for anyone who does not completely own the property they have. In this way those with assets that produce commodities do become richer. This is why the rich generally favor this economic pattern.

Also true, but it helps the government to continue its cycle and in particular it helps those in control of commodity assets such as gold, sliver, land, rentals... to gain wealth as those assets increase in value at a greater pace than wages increase, effectively causing the price of all commodities (foods to land to wood....) to increase relative to the earning power of people.

This cycle is one of, if not the primary, driver causing the middle class to go away.

It also consistently over time shifts more and more power to a central bank as the problems it generates then require central banks to keep from collapse in the management of those problems, thus making the people or government that runs the central bank more powerful and capable of greater control over people.

If you are very wealthy in land, gold, oil or other commodity development, A government or a central bank this system gives you more power and control overtime. That is why they do it.