Whats the problem with China pegging its currency to the dollar?
There’s a very very good reason why you don’t want to peg the currency to the dollar. Let’s look at what happened in Argentina: In (IIRC) 1991, Argentina decided to peg its currency to the dollar in order to stave off inflation (the U.S. was seen as a stable currency, so tying the two would thus mean Argentina’s peso would also be stable). Unfortunately, pesos were not treated like dollars on the foriegn exchange market. People like dollars overseas — they’re seen as a reliable form of currency that won’t devalue overnight (as has happened in a lot of Asian and S. American countries). Basically, you could never get as much trading pesos as you could dollars, even though they were, for all intents and purposes, the same thing. Since the peso was at a high valuation, Argentina’s exports became very expensive and their imports very inexpensive. The U.S. went through the tech boom in the 90’s, and the growth rates were around 5%, but in Argentina, you have an ever increasingly “expensive”
