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Xinhua: The Strategy to Achieve Hegemony of the U.S. Dollar: Depreciation, Then Appreciation

Xinhua republished a commentary article from China Securities Journal on U.S. currency policy. The article said that after the European debt crisis surfaced, the E.U. and the U.S. began to diverge in their currency policies. The United States insists on having the original loose policy, whereas the E.U. has started to implement a financial tightening policy in order to reduce the deficit. The article concluded that an important avenue that the U.S. uses to get out of a crisis and repair an economic imbalance is to depreciate its currency and produce inflation. … The above is most likely the U.S.’s mid to short term goal. From the perspective of the mid to long term goal, as soon as the short term goal is reached, the U.S. will most likely appreciate the U.S. dollar by suppressing the euro, thus reestablishing the hegemonic position of the U.S. dollar.

Source: Xinhua, September 29, 2010