Who will get China -- the Chinese or Wall Street?


1:17a ET Monday, February 19, 2007

Dear Friend of GATA and Gold:

An insightful and even profound analysis of the U.S.-China relationship has been written by Gabriel Ash for Sanders Research Associates in Dublin. Ash's conclusion:

"One must see the American fixation with floating the renminbi in the light of the history of U.S. control of the world monetary system rather than the trade balance. Many economists challenge the very premise that the renminbi is undervalued. Others fear that an exchange rate readjustment would damage the U.S. economy, raising inflation and interest rates and potentially tipping the U.S. into a severe recession.

"Besides, floating exchange rates do not prevent the Japanese and European central banks from intervening in currency markets. The major effect of a floating currency is loss of central bank control over either interest rates or exchange rates.

"Under a floating currency regime, the United States is the only country that can have an autonomous monetary policy, thanks to the status of the dollar as a reserve currency. A floating renminbi might go up or down; nobody knows for sure. But the ability of the Chinese government to exercise control over the Chinese economy would be severely reduced, resulting quite probably in increased economic volatility and quite likely a crisis.

"Conversely, U.S. leverage over China will increase and the U.S. government would be better able to pressure China on behalf of U.S. businesses. Trade balance might or might not be restored, but U.S. global power would be undoubtedly replenished. And -- who knows? -- Wall Street might come to own China."

You can find Ash's analysis, "A Yankee in a China Shop," here:


Or try this abbreviated link:


CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

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