Let the Dollar Dump Commence!

I know I've used this title before, but it's not my fault different countries keep deciding to dump dollars in favor of currency baskets and pegs in favor of bands.

In today's installment, China is no longer pegging to the dollar.

China's shift was followed swiftly by announcements from Malaysia that it would move to more flexible exchange rate rules. Singapore's central bank was expected to announce similar measures.

Let's get this straight, this is a very mild move, but it is reflective of the growing discontent in East Asia with the U.S. economic situation as well as the move toward a more cohesive East Asian trading bloc.

Roubini's site does not have a piece on China's new policy up yet (I will post it when it does), but here's a couple sentences snatched from an article in Foreign Affairs.

In March, a former manager of China's currency reserves questioned China's current development strategy, asking why it should seek out foreign investors looking for a 15 percent return on their investment only to have the central bank lend these funds back to the United States at 4 percent. China will conclude that rapid accumulation of dollar reserves no longer serves its interests sooner than optimists think.

At the same time, Brad Setser has the facts behind him when he argues that the Fed's prediction for a decade of economic stability is a load of crap.

Face it, you cannot trust Republicans with your money.