Word: dollars
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Dates: during 2000-2009
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...more stable arrangement for the global financial system. From the Chinese perspective, it will help relieve the tensions that have been building from its failed "sterilization" tactics?the inability of China to issue enough domestic debt to offset the massive purchases of U.S. Treasuries required by the now abandoned dollar peg. This was leading to excess money and credit creation?underscoring the mounting risks of inflation and asset bubbles. China's coastal property bubble was a manifestation of this risk, which Beijing could no longer afford to ignore. A "managed float" provides China with greater discretion on the sterilization front...
...rest of the world?but with a potentially painful twist. By moving to a currency basket, China will need to diversify its enormous portfolio of foreign-exchange reserves, which totaled some $660 billion at the end of the first quarter. Other Asian countries?also massively overweighted in dollars?should follow China's lead. The near-simultaneous announcement by Malaysia that it would abandon the ringgit's dollar peg in favor of a managed basket float confirms such a possibility. The Bank of Korea has also been itching to diversify out of dollars...
...Consequently, a more flexible renminbi mechanism raises the odds of an Asian shift out of dollars, in effect removing the artificial bid for dollar-denominated assets that has prevented U.S. interest rates from rising more sharply. This will undoubtedly put pressure on the interest-rate prop supporting U.S. asset markets?especially property. Asset-dependent American consumers may slow their spending as a result. While this may be painful, it may also be the only way for the U.S. and the rest of the world to come to grips with the U.S.'s glaring foreign-trade and current-account imbalances. China...
...China that goes slowly in feeling its way down the road to currency flexibility. A large move could have tipped the scales toward the more disruptive option?always a risk for a global economy with such massive imbalances. That could have led to a precipitous decline in the dollar, a spike in U.S. interest rates, a collapse in the U.S. property market, a severe adjustment by the American consumer, and a worldwide recession. By moving gingerly, China minimizes the risk of going too far and triggering a hard landing in a U.S.-centric global economy...
Over the past year, wild speculation and furious debate have turned the future of the Chinese currency, the yuan, into the hottest and most polarizing topic in the global economy. Pegged to the U.S. dollar since 1994?meaning that when the value of the greenback rose or fell, so did the yuan's?China's currency had come to embody the industrialized world's fears of a hypercompetitive mainland staging a hostile takeover of global manufacturing. Led by the U.S., critics accused China of clinging to the dollar peg in order to keep the yuan artificially weak, making its exports...