Saturday, August 13, 2005

Now I'm really convinced

From an article in today's Hindu about how the revaluation of the Chinese yuan is leading to more foreign investment in other Asian countries' stock markets:
"If China has a currency that is going to appreciate, then your currency becomes more competitive relative to China and your exports should do better."
But just a little further down:
But there is another rationale. The higher yuan means that Asia's other currencies will also rise, so foreign investors who buy stocks denominated in these currencies stand to see a return even if the stock prices go nowhere.
Translation: "We are investing more because the currencies will become more competitive. We are also investing more because the currencies will become less competitive". Can't they at least be consistent in their rationalisations? Reminds me of Mandelbrot's comment a while ago.