Monday, June 21, 2010

China is not really monitarist

Dave Rosenberg talks a bit about China's loosening of it currency control in his "Breakfast with Dave" this morning. What struck me was this.
While the U.S. still has a huge trade deficit with China, it is almost alone in this regard because Japan enjoys a $45 billion bilateral surplus with China; South Korea has a $59 billion surplus and Brazil too, at $14 billion. In fact, outside of the U.S., China is running a deficit with the G20.
So it's not really the case that China is undercharging for its goods. It's more like we just aren't competitive. That suggests that the dollar should be devalued. But with the Euro and perhaps the Pound also being devalued, what's left to devalue against? The Yen? The Swiss Frank. The Australian and Canadian dollars? The Brazilian Real? The Indian Rupee? The Swedish Krona?

Rosenberg thinks that at least the Canadian dollar is the place to be. (He is Canadian and writes from Toronto.)
It is difficult to see … the Canadian dollar failing to remain in what looks to be a long-term bull market.
That suggests that a safe and smart place to put one's savings is in Canadian government bonds. Earn interest and get capital appreciation at the same time.

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