China Wants to Ditch the Dollar 54 comments
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Last night China escalated its criticism of U.S. fiscal and monetary policy. The governor of China’s Central Bank, Zhou Xiaochuan, called for a new reserve currency to replace the dollar. FT:
China’s central bank on Monday proposed replacing the US dollar as the international reserve currency with a new global system controlled by the International Monetary Fund…
Analysts said the proposal was an indication of Beijing’s fears that actions being taken to save the domestic US economy would have a negative impact on China.
“This is a clear sign that China, as the largest holder of US dollar financial assets, is concerned about the potential inflationary risk of the US Federal Reserve printing money,” said Qu Hongbin, chief China economist for HSBC.
Although Mr Zhou did not mention the US dollar, the essay gave a pointed critique of the current dollar-dominated monetary system.
“The outbreak of the [current] crisis and its spillover to the entire world reflected the inherent vulnerabilities and systemic risks in the existing international monetary system,” Mr Zhou wrote.
In his Sunday interview, Obama noted there’s a limit to U.S. borrowing capacity. How ironic that he dodged the question of how close we are to reaching that limit. If China’s lack of confidence in the dollar is any indication, we’re very close indeed.
This is good news for folks who dislike the Geithner plan…and “stimulus.” China can badger us into balancing our books. If we don’t, they’d be in their right mind to punt Treasurys. And that means higher interest rates, which–as I’ve outlined before–will cancel out any positive impact from stimulus or bailouts.
Before long, the Fed printing press may be our only source of incremental debt finance.
Here is the statement from China’s Central Bank Governor.
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This article has 54 comments:
What they do want for the short term is more voting power in the IMF and better assurance from US goverment about their Treasuries and Agency bonds investments beyond mere words.
The dollar will gain strength as current account deficits continue to improve over the next year or two. Sorry China, but the US dollar is doing just what it should do...be the whipping boy and savior of the world economy...in it's role as world reserve currency.
China is a bubble on the end of an American bubble, a command economy, and a currency manipulator. Does anyone believe the G20 or IMF will take this proposal seriously?
It's intended, as I understand it, to help nations settle current account deficits. Like those the US suffers with who? China...so, thank you China for proposing a system to help the US settle it's account deficits with you. Here's an idea. Let your currency float! Buy US beef, especially since your grasslands are drying up.
Don't worry about the dollar, there are just as many reasons it won't fall as reasons it will. One thing not mentioned often is our current account deficits are improving.
I would appreciate everyone's thoughts on this, please reply.
On Mar 24 09:20 AM HaavBline wrote:
> At the same time of this proposal, China also announced they will
> continue to buy Treasuries. They know the US is unlikely to agree
> with Dollar's fate any time soon. Changes, if any, is going to take
> a long, long time.
>
> What they do want for the short term is more voting power in the
> IMF and better assurance from US goverment about their Treasuries
> and Agency bonds investments beyond mere words.
The interesting fact is that China appears to be supporting the IMF -- in contrast to many developing Asian nations who have a very sour taste in their mouths after the IMF and US driven efforts in the 1997 crisis.
On Mar 24 09:20 AM HaavBline wrote:
>
> What they do want for the short term is more voting power in the
> IMF
It seems that China may have learnt the lesson, and the talk of continuing to buy treasuries could be the cover for their gradual and cautious selling of treasuries to buy hard assets instead.
Why should they expect someone else to set this up for them and then manage that reserve currency for their benefit?
When you rely on someone else's currency, the tradeoff is that currency management decisions are made to support the sovereign country, not you. If China doesn't like that, they are free to propose their own currency as the new world reserve. They are, after all, the world's most populous country at nearly four times the size of the US and with significant manufacturing output.
Oh, I see. China wants to pay its workers in an artificially depressed yuan and receive payment for its exports in an artificially propped up dollar. China just doesn't understand why the US won't play along with this. It's just not fair, is it?
seekingalpha.com/artic...
Good Morning, Brazil..........
On Mar 24 09:23 AM Asbytec wrote:
> Look, China loves not playing by free market rules. They are, of
> course, a command economy with a free market interface. So, what
> hubris they display demanding a world reserve bank run out of the
> IMF. They are the worst manipulators of currency markets.
>
> The dollar will gain strength as current account deficits continue
> to improve over the next year or two. Sorry China, but the US dollar
> is doing just what it should do...be the whipping boy and savior
> of the world economy...in it's role as world reserve currency.<br/>
>
> China is a bubble on the end of an American bubble, a command economy,
> and a currency manipulator. Does anyone believe the G20 or IMF will
> take this proposal seriously?
>
> It's intended, as I understand it, to help nations settle current
> account deficits. Like those the US suffers with who? China...so,
> thank you China for proposing a system to help the US settle it's
> account deficits with you. Here's an idea. Let your currency float!
> Buy US beef, especially since your grasslands are drying up.
>
> Don't worry about the dollar, there are just as many reasons it won't
> fall as reasons it will. One thing not mentioned often is our current
> account deficits are improving.
Salvador, oh you could not be more right. I have argued in other threads/forums that very issue. That's why I support Obama's push to build schools and develop a base of engineers and scientists so we can sell more than CDSs.
I think China knows that it is not (yet) equipped in terms of capital market infrastructure to host the world's reserve currency.
Frankly wouldn't it be better to have a global currency that was beyond the control of any one central bank and its printing press?
If China floats their currency, they won't be needing to buy all our treasury debt. Then what happens? I guess we could look forward to our myopic state and local governments selling off infrastructure to the Chinese to get hard currency.
Our government wants China to float their currency about as much as they want to find Bin Laden.
Simply fulfill the mandate of the Constitution and mint coins for anyone who brings metal to the mint. No need to abolish or start a new currency, just let them compete. When times are sweet, the metal loses its luster, and in times like these it gets its shine back. Just mint enough to keep up with demand for crying out loud! I'm pretty sure that gold and silver would be accepted anywhere.
Let's see..... $2.5 trillion (in 2009 alone) x 9 (deposit multiplication factor) = $22.5 trillion in additional M3 money supply.
In March 2006 (before the Fed, suspiciously, decommisioned the M3 measurement), M3 was sitting at just above $10 trillion.
Wow....in 3 short years, the U.S. total money supply (at the fully loaded level) would have just tripled..... And it's not going to stop there. There's gonna be another $3 to $4 trillion of new debt issuances over the following 5 years....not to mention another $4 to $5 trillion of debt refinancings that the Fed may eventually monetize. I'm not even going to attempt to calculate what this will do to M3......it's going to be scary. This is what the Chinese are worried about. Their assets (U.S. debt) is at risk of being severely devalued.
Husker, I am all for gold and a gold standard. I get an ear full of that almost daily. I just believe the powers that support our debt banking system are too entrenched for a gold standard to survive without another revolution.
And what's all this non sense about war with China. Jeeze...someone needs to stop subscribing to conspiracy websites. You're scaring yourself.
Mr Big, of course no one wants the yuan to float, besides a few of us in here. We use it to hide inflation. But, I have a feeling things might change. Maybe...maybe not.
Despite all the above, and even despite our coming lost decade through QE, we are gonna settle into a couple of decades with lower rates of sustainable debt accumulation...once the balance sheets are wiped clean...and lower, sustainable global growth. Regulation and fresh memories will see to that.
China is gonna have to accept this fact and at a bad time, too. Their middle class is not entirely formed to sustain domestic demand on par with their exports. I suspect this is one reason they are threatening a global reserve currency (implying it won't be the dollar.)
The Fed is just doing what it needs to do to keep our system stable. People who bash them offer no better solutions.
On Mar 24 09:23 AM Asbytec wrote:
> Look, China loves not playing by free market rules. They are, of
> course, a command economy with a free market interface. So, what
> hubris they display demanding a world reserve bank run out of the
> IMF. They are the worst manipulators of currency markets.
>
> The dollar will gain strength as current account deficits continue
> to improve over the next year or two. Sorry China, but the US dollar
> is doing just what it should do...be the whipping boy and savior
> of the world economy...in it's role as world reserve currency.<br/>
>
> China is a bubble on the end of an American bubble, a command economy,
> and a currency manipulator. Does anyone believe the G20 or IMF will
> take this proposal seriously?
>
> It's intended, as I understand it, to help nations settle current
> account deficits. Like those the US suffers with who? China...so,
> thank you China for proposing a system to help the US settle it's
> account deficits with you. Here's an idea. Let your currency float!
> Buy US beef, especially since your grasslands are drying up.
>
> Don't worry about the dollar, there are just as many reasons it won't
> fall as reasons it will. One thing not mentioned often is our current
> account deficits are improving.
Asybytec: IMF will eventually create a new world reserve currency. No choice. USD will drop value as the US start spending all bailout money. Expect DJI hit below 1000 and stop bickering other country and stick to find answers to our problem.
Isn't it that once inflation starts to hit, people will become poorer, because the dollar will have less buying power. Which means people will be less likely to spend. Which in turn means that every thing will come to a halt!
The Fed was the only dog in this fight until the Bush stimulus plan. Bernie pushed congress to shore up the GSEs back in Oct 07. They did nothing. Then the Fed remained the only dog in this fight until Obama too office. Now, Obama is hitting this hard and some items are just ugly.
For example, floating FDIC loans on toxic assets no one wants sounds silly. And it probably is, but somehow those toxic MSBs gotta get sold to someone (some sukka) somewhere. It's laughable if it wasn't so serious.
Another example, seems AIG officials, including those in the Financial Products Division...ground zero, managed to save their retirement packages while main street lost nearly 50% of ours. I understand, ugly as it is, this was aggressive lawyering. And their bonuses were shielded from the performance of CDS and CDOs.
But, if Obama can halt the housing market decline, even by propping it up, and getting mortgage rates down...those assets might turn a profit in a few years. Maybe, maybe not...but this whole thing screams the trouble we're in and how our financial institutions simply raped our economy. The evils of a paper based GDP...and the ugly things that go on to fix it are absolutely stunning.
This is why the market volatility is not over. Dead cat's sometimes bounce, sometimes splat. The people are pissed and they should be. I am.
As for the Fed, reserve banking is a big mistake. I think many see this clearly. I get an (agreeable) ear full of gold standard almost daily. But, the Fed is what we have to work with for the time being. I don't think Obama is gonna push a return to a commodity currency.
Yes, drastic, inflationary actions are being taken and China is complaining about the value of their US assets. Well, let them buy European bonds and complain about them in a few months. Most assuredly, the EU will engage in it's own version of QE. Or maybe, since they're eliciting Russia's support, they can invest in the ruble.
On Mar 24 09:24 AM Asbytec wrote:
> Besides, according to a Bond expert I saw on Bloomberg, if China
> dumped all it's bonds in a single day the US bond market could absorb
> it.
During deflation, imagine buying a house at a set price and trying to sell years later for less than what you owe on it. That's one evil of deflation.
They can't dump the dollar. If they do, it further weakens and they get screwed. They have just enjoyed a 25% run up in the dollar minus the recent pullback, so they need to quit their b!tchin.
If they are whining so badly about the dollar, their economy must be in real trouble.
I favor the analysis of KELM.
Techzone, everything will come to a halt in China with an inflating dollar...making imports more expensive. Again, it's deflation that causes the domestic economy to come to a halt. This is why the Fed is aggressively trying to inflate the economy...pushing water uphill.
Euarte, the dollar will improve. Read the link in my post above. It is a good article on that subject.
Mr. Yu. Yes, it is unsustainable in the long term and even unadvisable in the short term. I wish we weren't in this situation. But, $600bn in bonds is a small percentage (single digit, like 5%, I believe) of the total bond market. China will not dump them for the euro anytime soon. When recovery begins, I believe the dollar will be on top of the debased currency heap and retain it's reserve status. China will need more bonds to keep cheap product exports alive. Inflation is a threat in the G20, and more so in China. As you're aware, we've exported our inflation to China for decades.
Think of a future IMF as more of a globally-focused Fed that is dominated by the Chinese apparatchik, because that is what it is inevitably going to become.
On Mar 24 04:23 AM ExOut wrote:
> That's great, but... who controls the IMF?
China could have strengthened the Yuan against the dollar at any time during the last few years. Yet they have kept it artificially low to keep Chinese employment high. With rising social tensions and rising unemployment, it is more important than ever for China to maintain an artificially undervalued currency. With the US as their largest (but not only customer, it still makes economic sense for them to value everything in dollars.
I'm curious as to the real motivation behind the timing of this announcement.
The savings rate in this country has been negative for years now. The govenment has been spending more money than it's bringing in for years now. No entity large or small can go on spending money it doesn't have forever.
When this downturn came, instead of allowing the correction while trying to "soften" the blow as the Government and the Fed are called to do; they began throwing things at the economy to try and artificially prop it up. (yes, I know the Fed dropped interest rates instantly etc. but look at what's been done before and since) At the end of the day, if they succeed in creating a false floor strong enough to build on; that new U.S. economy will look nothing like it did.
On Mar 24 01:14 PM Stephen Yu wrote:
> Of course, the US can absorb it. China owns about $600 billion of
> Treasuries, and the FED just said that it was buying $300 billion
> worth of the same stuff last Wednesday. The question is not if the
> US can absorb it, but how it is going to do it. If private investors
> can use existing M1, M2 or whatever money supply to absorb the debt,
> that will work. But when the FED buys something without having to
> provide any cash upfront, that is pure money printing. It is quite
> self-evident that money printing is unsustainable over the long-run.
>
With the FOMC announcing plans to purchase treasuries, there is a good possibility that they will be purchasing some existing ones from the Chinese, rather than just freshly created ones, in order to appease them a little. All of which could ultimately lead to a collapse of the treasury market.
mostlymoneymusings.blo...
Disclosure: At the time of writing the author held a position in TBT.
Out on a limb with credit as the only way to continue this trend (absent of increasing productivity), Americans are starting to save again, and this upsets the U.S./China dynamic which was created by the U.S. Fed in 1913 and turned into a symbiotic relationship by the Chinese who found a way to augment this forced consumption with artificial thrift (by forcing their domestic growth by suppressing the value of their currency and, in turn, inhibiting personal income growth) and absorbed inflation (by taking U.S. dollars earned from these cheap exports to the U.S. and buying Treasuries instead of converting them on the open market, which would make the value of the yuan rise dramatically).
The Chinese government has always seen this method as a way to gain macroeconomic growth while containing their population from becoming too economically powerful to topple their regime. What they have found out, however, is that the end to this strategy is debasing their largest customer's currency to the point that their own reserves are greatly devalued, and their imports are not bought (due to the weakened value of the U.S. currency).
The "timing" of the statements from the Chinese are not so much "timing" as a reflection in the paradigm change that is occurring as we speak. They are indicating a final abandonment in the U.S./China symbiosis for good, because they have already gotten what they wanted out of it (industrial growth to the point of self-sufficiency as a soon-to-be-considered developed country) and realize that they cannot continue to become wealthier by continuing this strategy.
The next step for China is a transition from the world's center for factories and mills to that of an industrial and commercial power. I look for it to gradually begin to exit its Treasury positions (if it has not already done so), and to begin using these dollars to buy new forms of reserves, but more importantly, intellectual capital and global brands. What would happen if Bank of China bought Wells Fargo or US Bancorp, or GE for that matter and spun off GE Money to retain its industrial businesses? Something to think about, as this is the future.
Next up for the U.S. (after people stop putting their money under the mattresses): hyperinflation. Hold on to your hats, folks!
On Mar 24 01:31 PM Asbytec wrote:
> Krisandi, I am not blaming China for our financial woes. I am raising
> the bulls--t flag on their call for a global reserve currency. And
> I am explaining their unfair trade practices and how it's debased
> the dollar. Furthermore, I am saying that debasing is changing due
> to improving trade deficits. I am arguing against the dollars demise
> as both a fiat currency and the world's primary reserve.
>
> Techzone, everything will come to a halt in China with an inflating
> dollar...making imports more expensive. Again, it's deflation that
> causes the domestic economy to come to a halt. This is why the Fed
> is aggressively trying to inflate the economy...pushing water uphill.
>
>
> Euarte, the dollar will improve. Read the link in my post above.
> It is a good article on that subject.
>
> Mr. Yu. Yes, it is unsustainable in the long term and even unadvisable
> in the short term. I wish we weren't in this situation. But, $600bn
> in bonds is a small percentage (single digit, like 5%, I believe)
> of the total bond market. China will not dump them for the euro anytime
> soon. When recovery begins, I believe the dollar will be on top of
> the debased currency heap and retain it's reserve status. China will
> need more bonds to keep cheap product exports alive. Inflation is
> a threat in the G20, and more so in China. As you're aware, we've
> exported our inflation to China for decades.
All the Fed is worried about by "buying" these bonds is flattening the yield curve so that banks will still have the propensity to make long-term loans to consumers in the immediate term. And the "buying of debt" is really nothing of the sort. Think of it more like a swap... the obligation is still there after the Fed "buys" these bonds, only in the form of a now-expanded money supply, which will inevitably result in much higher inflation. To combat this later on down the road, they're going to have to offer *new* bonds at higher rates.
So they're really paying for it one way or another, maybe more akin to transferring the balance on one of your credit cards to another one, only to still have the debt obligation waiting for you to pay off eventually. The only way the Fed could avoid this obligation is rapidly increasing productivity in the U.S. economy, which arguably can't happen, given the aging population and the intrinsic limits of technological innovation.
On Mar 24 02:02 PM FE812 wrote:
> Great Comment ...
>
> The savings rate in this country has been negative for years now.
> The govenment has been spending more money than it's bringing in
> for years now. No entity large or small can go on spending money
> it doesn't have forever.
>
> When this downturn came, instead of allowing the correction while
> trying to "soften" the blow as the Government and the Fed are called
> to do; they began throwing things at the economy to try and artificially
> prop it up. (yes, I know the Fed dropped interest rates instantly
> etc. but look at what's been done before and since) At the end of
> the day, if they succeed in creating a false floor strong enough
> to build on; that new U.S. economy will look nothing like it did.
>
And why would anyone save? We've got SUVs and 60" LCD screens to buy. We've got to live beyond our means and make people, especially the ladies, believe we're better off than we really are. We've got equity to mortgage! Why save?
And it seems borrowing is the only way to do display our "wealth" (wealth effect, not effective wealth.) We worry about our credit scores, we should have them tattoo'd on our behinds and show them off at parties. We're part of the ponzi scheme and we've forgotten the age tested value of actually saving for a rainy day. I've relearned this...no debt and can pretty much buy what I wish even today. Trying to drive this point home to my kids. We need to learn this as a nation, too.
If China wants to cash in, maybe they can help buy AIG...hehe And I agree, China will diversify a bit. It's smart, and no one argues China isn't smart.
Greg, I am one of those few... :)
Marvin, a marvin-olous idea. Just don't see it happening, unless this crisis deepens and spurs some real fiscal changes.
FE812, yea, best I can gather, I think that's the plan...artificially prop up the market(s) until real appetite for such investments, especially toxic MBSs, can sustain it. What a gamble.
Then, well, back to business as usual...lending, borrowing, buying...consuming. We need more production, while we're reinventing our economy. Hopefully, regulation will prevent some log jams. Who knows. But, look for inflation once the financial markets recover from their coma...
And I think you've nailed it. Our economy will look nothing like it did. QE or no QE, we will settle into a period of lower growth in the coming decades. Many anti QE folks will say, "see, I told ya so." And argue incessantly we're just like Japan.
I am afraid this crisis mandated future, slower sustainable growth from the onset. Footloose financial markets will be hog tied for a good while to some...decades. Once bitten...Americans will learn excess debt is not sustainable...lest we forget.
But, this is good stuff. Now, if we can only get onto a commodity currency...were savings means hoarding and hoarding means protest against low bond rates. Don't like the bond rates? Hold onto your gold until they're favorable...keep and maintain your wealth. Now, that would be nice and worth a few thumbs ups...
On Mar 24 11:22 AM huskerbob wrote:
> Uh, guys, a renminbe float might not float your boat. Ha! I just
> came up with that.
> If China floats their currency, they won't be needing to buy all
> our treasury debt. Then what happens? I guess we could look forward
> to our myopic state and local governments selling off infrastructure
> to the Chinese to get hard currency.
> Our government wants China to float their currency about as much
> as they want to find Bin Laden.
China is not the first country to propose a independent world reserve currency. other countries have proposed similar ideas. The idea has nothing at all to do with keeping their own currencies artificially low against US Dollar or whoever. Countries need a STABLE currency reference to keep world trade smooth. US Dollar used to be the most robust and stable currency in the world, that is why world economies used USD to settle international transactions.
But the USD has been going up and down like a yoyo, creating havoc in world trade. With US applying quantative easing policies going forward, this is going to get worse and causing violent convulsions in world trade.
China may have to float soon, but that does not solve any problem for the US or all countries that must use the USD as an unstable reserve currency.
On Mar 24 10:07 AM Chris B wrote:
> Why doesn't China just let the yuan float? There's your reserve currency.
>
>
> Why should they expect someone else to set this up for them and then
> manage that reserve currency for their benefit?
>
> When you rely on someone else's currency, the tradeoff is that currency
> management decisions are made to support the sovereign country, not
> you. If China doesn't like that, they are free to propose their own
> currency as the new world reserve. They are, after all, the world's
> most populous country at nearly four times the size of the US and
> with significant manufacturing output.
>
> Oh, I see. China wants to pay its workers in an artificially depressed
> yuan and receive payment for its exports in an artificially propped
> up dollar. China just doesn't understand why the US won't play along
> with this. It's just not fair, is it?
Reserve Currency 1900's - US Dollar
Reserve Currency 2000's - ???????
This meltdown illustrates the need for a stable, difficult to inflate currency. Why not a supra national currency based on Gold and Silver vs. a bucket of national currencies... Bretton Wood's 2.0
On Mar 24 10:07 AM Chris B wrote:
> Why doesn't China just let the yuan float? There's your reserve currency.
>
>
> Why should they expect someone else to set this up for them and then
> manage that reserve currency for their benefit?
>
> When you rely on someone else's currency, the tradeoff is that currency
> management decisions are made to support the sovereign country, not
> you. If China doesn't like that, they are free to propose their own
> currency as the new world reserve. They are, after all, the world's
> most populous country at nearly four times the size of the US and
> with significant manufacturing output.
>
> Oh, I see. China wants to pay its workers in an artificially depressed
> yuan and receive payment for its exports in an artificially propped
> up dollar. China just doesn't understand why the US won't play along
> with this. It's just not fair, is it?
On Mar 24 01:55 PM bcncv wrote:
> The timing of this announcement is more curious from a political
> perspective than an economic one. The implication that the US dollars
> weakening is bad for China is particularly strange.
>
> China could have strengthened the Yuan against the dollar at any
> time during the last few years. Yet they have kept it artificially
> low to keep Chinese employment high. With rising social tensions
> and rising unemployment, it is more important than ever for China
> to maintain an artificially undervalued currency. With the US as
> their largest (but not only customer, it still makes economic sense
> for them to value everything in dollars.
>
> I'm curious as to the real motivation behind the timing of this announcement.
ihttp://chinadaily.com.cn/bizc...
On Mar 24 11:30 AM huskerbob wrote:
> We have two parallel currencies in the US right now - the US mint
> makes gold and silver coins that serve as US tender, and the Fed
> makes dollars from rags, ink, and electrons.
> Simply fulfill the mandate of the Constitution and mint coins for
> anyone who brings metal to the mint. No need to abolish or start
> a new currency, just let them compete. When times are sweet, the
> metal loses its luster, and in times like these it gets its shine
> back. Just mint enough to keep up with demand for crying out loud!
> I'm pretty sure that gold and silver would be accepted anywhere.
I mean the US Government is a huge problem, but giving the benefit of the doubt to a Government that isn't completely sold on human rights and had a "pretty girl" lip synch during the Olympics while the "ugly" girl sang behind a curtain is a bit silly.
2) China's suggestion, similar to the above, is heard over radio/TV only this morning -- suggesting that her suggestion is independent of LEAP's.
3) In tonight's press conference, president Obama was asked about China's suggestion. Not surprisingly, he answered that there is no need to abandon the dollar as the reserve currency.
4) In tonight's Nightly Business (a PBS show), there was a segment showing China is encouraging trading partners in SE Asia to settle accounts using RMB (yuan); very interesting coverage.
5) One commentator above, Celcius, said something along the lines of using gold/silver as the reserve currency. If and when the IMF attempts to link the new reserve currency (LEAP uses the term "global") to gold/silver, this would be, indeed, the end result. No more printing press as morph366 talks about. omooc
This sounds like what the jokers in Iran did when they said they were going to start an alternative oil market where the trading would be done in Euros.
How'd that go over?
If China keeps on making noise, what needs to be done is this. We send someone over there to quietly say, if you stop buying our bonds, then we'll stop buying your goods. And we'll find reasons to turn your ships away from our ports.
The United States and China have a relationship like a huge customer and a supplier. The supplier lends the customer lots of money and says, you know, you've got to get your finances in order. And then they keep on lending to the customer because they need their business.
I don't believe Chris meant a floating currency qualifies as a reserve currency. I believe he was saying if the yuan floated and fair trade was reciprocated, then dollar devaluation would not be much of an issue. (Oh, goodness, here comes some Fed bashing...)
The Chinese proposed the Yuan as the major world reserve currency? Now, that's interesting. What hubris. Again, it might be nice if it wasn't so heavily devalued. Stability is one thing, value is another.
So,let me get this straight, China is on fractional banking, correct? So, they will have the same problems as any western nation's currency in maintaining a stable money supply. Except, they will manage money from a command economy perspective as opposed to the more or less free market rules in the US. That is interesting.
Besides, the western bankers have too much power (money.) Having some of that power reside in foreign banks gives them additional leverage in world dealings. That is not gonna go away easily.
China has arrived, but they are still too heavily dependent on trade to be taken seriously as a host to the world's reserves.
And, can someone tell me what fiat currency would be stable enough to serve in this fashion? A gold peg would be nice.
It may not be pretty and it may not be moral, but China will do what's best for China, eventually, and not a damn thing our free lunch fools can do about it. The Lexus has crashed into the Olive Tree, and we should all pray to God that Thomas Friedman's dangerous propaganda is dead.
Listen to these people here berating China for having a "command" economy -- as if handing over trillions of dollars to a cartel of financial criminals who are looting our Treasury, who gutted our industries and outsourced them to the world, who bought up our politicians and destroyed our democracy, who repealed age-old usury laws and threw millions into misery, who destroyed the unions, who lied about globalization, who opened our borders to a flood of immigrants to betray our own workers, our own middle class -- to call the actions of this pack of venal gangsters, who even today constitute a massive financial parasite, sucking the blood of a dying nation: to call this pathetic state of affairs "free market economics" is the height of hypocrisy and the apex of idiocy.
We are in a free society and the Federal Reserve’s Board every policy decision can and will be critiqued by every one who has interest in such matters. The critiques will come from congress through their policy hearings to written responses and written commentary on blogs such as this one.
And I think that this is the advantage that we have over China’s, Russia, or any other currency change proposals, the ability to freely respond to policy decisions made by our Federal Reserve.
Currently they are printing way too much currency for current and future economic needs, but, because of our freedom of expression, the end result will not be hyperinflation, but higher than normal interest rates on savings for an extended period of time.
On Mar 24 12:54 PM krisandi wrote:
>
> Asybytec: IMF will eventually create a new world reserve currency.
> No choice. USD will drop value as the US start spending all bailout
> money. Expect DJI hit below 1000 and stop bickering other country
> and stick to find answers to our problem.
>