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Depegging only hurts if it drops as a result. Since the effect of the basket peg is to discount the RMB¥, unpegging would seem likely to increase its US$ or € value.

Depends. If they de-peg because domestic inflation has turned their previously undervalued peg into an overvalued peg, you might be in for a rude surprise.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue May 24th, 2011 at 04:09:48 PM EST
[ Parent ]
why would that cause them to depeg? they have a hidden basket peg, so they can adjust peg incrementally as they go.

if you mean, maybe they'll have runaway inflation and negative real interest rates ~ well, yeah, but since us$ is from an economy actively pursuing deindustrialization and the development of underdevelopment, the us$ risk of runaway inflation is more severe.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Tue May 24th, 2011 at 08:36:05 PM EST
[ Parent ]


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