And it explains why foreign reserves cannot easily be used for domestic spending on infrastructure or shoring up pension systems, since simply converting the cash risks driving up both inflation and the value of the yuan currency.Yes, it would drive up inflation via money printing (they handed out 6 yuan when they swapped the dollar for yuan, now they spend it again for 6 yuan, total 12 yuan per dollar), but government directed spending is no longer efficient. The low hanging fruit was picked and wasteful investments are piling up. Given the state of the global economy, the losses are more likely to show up, at which time some people may question the value of the yuan and switch to U.S. dollars. And note, if they spent all of their forex, then the yuan would likely fall, as one cannot print money at a rate of 12 yuan to 1 dollar and not expect the exchange rate to head in that direction.
Year Twenty Begins
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FEEDThe longer I live, the shorter life gets. It’s a truism, I suppose, and
one of many which occur to humans as the years roll by. See, I started
Slope as...
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