Disliked{quote}And what I was asking is how do you know? all their 'intervention' is hearsay, the BLS doesn't release private data ... .Ignored
what do you mean? Im not talking about intervention. The stated policy of almost all the emerging markets economies are pegs, ongoing interventions and or highly managed regimes. For example:
I did daily deals where a Chinese Computer company that needed to sell Dollars and Buy Argentine Peso, the Argentinean government sets limits on how much they could buy per day...it fluctuates
Any trading in the Indian Rupee can only be done on the LHS(bid side only). Meaning you can ONLY buy Rupees and Sell USD. If you ever wanted to sell Rupees you'd need an 'onshore' (in India) entity.
If you want to Trade Peru you needed an entity inside Peru to even touch the market.
In China the de jure policy is that there is a 2% band on the daily fix that the peoples bank of china sets. AND you again need an onshore entity to trade it, and it most cases its only on the bid side (you can ONLY buy CNY). For the majority of the period since the original 1994 devaluation the USDCNY has been pegged absolutely, with NO band at all. The currency trades wherever they fixed it.
All of the above mentioned restrictions are different measures the respective governments and central banks use to control capital flows, that is what I mean. This is separate and different from the ongoing speculated Chinese intervention in the Yuan since late February. All of these concepts are more about nuanced market mechanics than economics. For example if you roll with the example of QE2...
QE2 was inacted because Bernanke said inflation was too low. If you said the main market outcomes of QE2 were lower US dollar and US yields, does that create inflation? It probably does, but on a trade weighted basis the USD dollar's fall against the currencies that really mattered(Yuan and Oil Exporter currencies) dont really materialize because of the same controls I mentioned above. The Fed prints 600bn and USDCNY goes nowhere because the market doesnt set the rate, the government does.
ENTIRE point being, the Fed needs to take this into account. The minute they realized in the early 2000s the extent to which outsourcing was occuring, and the downward affect it has on inflation that should have adjusted their policy to goal to something more realistic, like 1% or 1.5%. You can't get the 2% inflation in todays economy because everything is produced somewhere else. If this were the case they never would have cut rates after 9/11 in the first place.
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