1. US tries to make Dollar more competitive w/ the RMB via QE2.
2. China wants an artificially-low RMB.
3. North Korea, a vassal state of China, lobs some shells onto a South Korean island.
4. Investors flee to the safety of the Dollar.
5. Dollar moves higher on worldwide currency markets.
And we're back to square #1.
Is all this just a coincidence?
I hate to say it. But I'm becoming a protectionist.
The US is already at war with China. It is a war being fought in the currency markets and in the factories.
North Korea is just a midget stalking pony for China. Its leadership cannot take a piss without approval from Beijing.
These flare-ups will continue because they are win-win proposition for China.
North Korea will not trigger an all-out war, because that would not be in China's interest.
I've been to China quite a lot. IMO, it will lose a currency war. It will lose a trade war with the US.
It was rattled by QE2. First, it screamed bloody murder about the US debasing its currency.
The next week it pulled out all the stops and purchased huge amounts of US Treasuries.
Now...North Korea fires some artillery shells onto an island and the Dollar is up again on world currency markets.
American politicians are too spineless to fight the war the US is already in. China sees the US as a
cow to be milked and later, slaughtered. But in reality, it is a very weak government built on shifting sands.