What probably requires clarification is whether the PBOC will tie up its currency, already pegged to the USD, to the Yen, or the Pound, or whatever is the worst performing currency du jour, and adjust the CNY trading band on a daily basis.
What certainly demands clarity is just how will crushing the Chinese currency prevent the kind of soaring energy and food inflation that led to an explosion in civil unrest and disobedience in 2011, and when it took an abrupt end to the devaluation of all central banks to prevent an inflationary conflagration first in China, and then across the world.
We hope to get the answer to both soon, because once you pop (the first FX war shot), you don’t stop, until someone’s currency hits rock bottom.
Well, given that the U.S. has been turning the most widely used currency in the world into wastepaper (and the Chinese hold about a trillion bucks worth of the stuff), one of the obvious strategies is to trade their potential trash can full of crap for stuff that has real value.
Preppers understand this on an individual, human level: Many of us look at the supposedly non-existent inflation rate, and respond by not saving money (which has a net negative return after inflation, in other words, your money actually loses value the longer you save it) by spending our money on goods, mostly commodities like food – the fabled beans, bullets, and bullion.
As an example, I have several dozen cans of coffee purchased back when you could get a full-sized can from an outlet or big box store for seven or eight dollars. The same can today goes for about thirteen dollars, a loss in the purchasing value of your food dollar of nearly fifty percent in just a few years. And so I drink coffee made from my stash, and wait for prices to fall again before re-stocking. In other words, I pay about half as much for my morning java as you do, if you’re buying it fresh today.
What are the Chinese trading their potentially worthless Obama Bucks for? Oil and bullion, it looks like to me. And tanks and ships.
We may come to regret that a lot.