Traditionally, China is blamed for holding its currency at an artificially low level to spur exports. If the yuan appreciates, it would be bullish for everybody but China, because there will be more exports and higher growth in the Europe and US. But it could also lead to higher prices on Chinese goods imported to the US, causing inflation and leading the Fed to hike interest rates sooner. China couldn’t function without massive orders from the US. The U.S. Treasury is counting on the Chinese to hurl money at the US, which held down interest rates. The following USD-yuan chart (click to enlarge) shows that $1US=8.3yuan before 2005. Now $1US only worth $6.8 yuan Comparison between the U.S. and EU The euro has depreciated dramatically against the U.S. dollar over the past few months. The move has caused many investors to question the viability of the EU and its currency. George Soros called the euro patently flawed because EU members had to independently rescue their banking systems in the 2008 crash. According to the IMF, the U.S. dollar accounts for 64% of global central bank reserves, versus 26% for the euro. If China stays away from the dollar, the euro and gold could be the biggest beneficiaries. The economies of the EU (27 countries) and euro zone (16) are similar in size to that of the U.S. The following data from Forbes shows the EU is in a better shape: Descr US EU 2009 GDP Growth -2.7% -4.2% 2009 Inflation 2.7% 0.9% Deficit as % of GDP 10.6% 6.9% Gross National Debt as % of GDP 87% 84% Gold Advanced Against All Major Currencies Countries around the world fostered the inflation of assets prices by transferring trillions in private sector debts to the balance sheets of governments’. As a result, SPDR Gold Shares (GLD) was up 28% since Jan 1, 2009. Following chart from Minyanville shows gold’s movement against other currencies (click to enlarge): The euro has depreciated dramatically against the U.S. dollar over the past few months. The move has caused many investors to question the viability of the EU and its currency. George Soros called the euro patently flawed because EU members had to independently rescue their banking systems in the 2008 crash. According to the IMF, the U.S. dollar accounts for 64% of global central bank reserves, versus 26% for the euro. If China stays away from the dollar, the euro and gold could be the biggest beneficiaries. The economies of the EU (27 countries) and euro zone (16) are similar in size to that of the U.S. The following data from Forbes shows the EU is in a better shape: Descr US EU 2009 GDP Growth -2.7% -4.2% 2009 Inflation 2.7% 0.9% Deficit as % of GDP 10.6% 6.9% Gross National Debt as % of GDP 87% 84% Gold Advanced Against All Major Currencies Countries around the world fostered the inflation of assets prices by transferring trillions in private sector debts to the balance sheets of governments’. As a result, SPDR Gold Shares (GLD) was up 28% since Jan 1, 2009. Following chart from Minyanville shows gold’s movement against other currencies (click to enlarge):

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