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Andy Xie mistakes cause and effect

November 8, 2010

Xie gets cause and effect wrong. China locked their currency to the U.S. dollar, not the other way around. Blaming the U.S. for wanting to feel the effect of QE is projection – a basic psychological error.

QE I (thats right – the first round, much less QE II) would not be viewed as necessary without the Chinese Currency lock. If china had let their currency float 3 years ago, the Yuan would have been at least 10% stronger now. The first round of QE would have caused 2.5 to 3% inflation in the U.S. and other countries. Chinese inflation would be much less as well.

But this isn’t what happened in the real world. China kept their currency locked and imported all of the worlds inflation plus a huge portion of the growth.

Note that China could end this at any time by simply letting their currency appreciate as it should. Heck, let the Yuan trade on an open market and see what happens. The Yuan would go up 40% overnight.

This isn’t to say that the U.S. is without fault. The U.S. elites caused the greatest theft in history. But blaming the U.S. for fighting back in a currency war that was clearly started years ago by China, he is simply wrong.

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