The Phaserl


How the Yuan-Dollar Currency Peg Ends

by Jim Rickards, Daily

In yesterday’s Daily Reckoning, I discussed currency pegs and how they caused problems when the pegged rate was out of kilter with economic reality.

China just gave us another example of the effects of a flawed currency peg, or managed exchange rate. Yesterday, the central bank announced that it would place restrictions on margin lending in an effort to stop stock market speculation.

China’s stock market promptly fell 7.7%, its biggest decline since June 2008.

But the authorities are fighting a losing battle. Let me explain why…

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