At the start of every year, many citizens of China opt to take out their entire yearly allotment of $50,000 in foreign currency. The rest of the year, it’s a struggle to defeat capital controls.
Authorities complain of ‘leaks’ in system and demand reporting of large deals.
Please consider China Tightens Control of Personal Forex Purchases.
China has tightened checks on citizens exchanging foreign currency in anticipation of renewed downward pressure on the renminbi in the new year.
Banks have been asked to improve standards for verifying customers’ identities and to report “large or questionable transactions”, the State Administration of Foreign Exchange (Safe) said in a public statement at the weekend.
“There have been leaks in China’s system of personal foreign exchange purchases,” the statement said, giving as an example the way individuals and companies avoid capital controls on overseas investments by disguising their transactions as goods purchases.
China’s policymakers have clamped down on capital flows leaving the country in recent weeks, imposing fresh restrictions on outbound corporate acquisitions and investments. European companies have reported difficulties in remitting dividends to stockholders abroad. The restrictions are partly an attempt to keep the renminbi from steep falls in the future after it depreciated almost 6 per cent against the dollar in 2016.
“The first day of the new year can be crazy — it’s always a big test for the renminbi,” said Jonas Short, head of research at NSBO China, an investment bank. “People who are anticipating further renminbi depreciation will take out their quota early in the year, and some will want to take out the full amount as soon as they can.”
The central bank is trying to ensure the renminbi’s value stays above the red line of Rmb7 per dollar, a symbolic number for the country’s policymakers. The renminbi was trading at Rmb6.94 to the dollar at the weekend.
On Thursday night the central bank, the People’s Bank of China, scolded media outlets for being irresponsible in reporting the exchange rate crossing Rmb7 to the dollar, after a momentary glitch in the Bloomberg currency quote system showed the renminbi weakening beyond that point during overnight trading.
It’s ridiculous that people actually believed the yuan would replace the US dollar as the world’s reserve currency.
The yuan does not float, China’s bond market is not big enough, and China has to resort to capital controls.
Mike “Mish” Shedlock
Mish,
Euro will eventually replace dollar. The Eurozone has little external debt, a nice positive balance of trade, and a stable polity, plus manufacturing, plus better food
Euro is up about 20% versus dollar since introductions.
It will take a generation.
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That’s part of the plan if new basket not created first & if the EU manages to keep it together with the Euro surviving. Perhaps big ifs.
A part of the EU wants to confront the US too in every realm, including military supply. Work in progress there, now.
I doubt Obama cared and might have even encouraged this thinking as US influence to be rolled back in a managed decline so the Pacific South China Sea could get greater US focus.
Vacuums to be filled will be the result.
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The Euro and the EU won’t even be around in 5 years….
They came within a hairs breath in 2016.
And things are getting worse.
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I think along those lines too but also know the vested interests involved and they will move heaven and earth to continue to exist. The EU, Euro will survive but possibly changed. No way back.
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If there is no way back then they have already jumped… ADIOOOooooooooooosss…….. splat.
Do you understand the amount of damage any simple vehicle poorly handled might do?
Now imagine one carrying several hundred million people that has a turning circle that is measured in years and that is not allowed a total deviation more than the width of a rail track over that time?
Fish, they aren’t just fascists or zealots, they are completely f’ing insane. If the reasonable majority sit quietly as the pilot disables one security feature after another when failures occur while telling them he ‘has what it takes’, well ****#?_%[) , but I am getting off thank you very much and have a nice journey , hope to see you all back again some day and buy a chute along the way.
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Insane – yes. Numerous state clearly they need crises to enable completion. Crises that force countries to give up more sovereignty until they are ONE. They don’t give a shit so long as it brings about their aim.
ONE CURRENCY, ONE FISCAL AUTHORITY, ONE TAX AUTHORITY etc.
The risk to those in charge is minimal. Make it clear they could be hung if they get it wrong and things would be different.
As is they face nothing more than embarrassment and some unpopularity but walk away with copper bottom pay offs in whatever currency.
THAT’S THE PROBLEM – TOO LITTLE HAZARD FOR THOSE IN CONTROL.
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why ?
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There are many individual reasons why this is direction, from the ‘average person’ being drawn in without choice, those that are sold a future, those that share some part of the ideal, through to opportunists and the power hungry that may only see the establishment as a rewarding position. Those threads that unite or run through it all do not change human nature, people remain as good or corrupt as ever, as mistaken or correct, as familiar or as alien. Mixing it all up and slipping in central is just stupid, it is asking for trouble, it is denying citizens a fair and basic say. For what? To protect them from megalomaniacs who want to control the continent and stop them starting wars? Please. As far as I know this all occurred because the last war ended hope of more for a long time and a new means had to be found to achieve same effect. I know the mindset and it is a corrupt reasoning, an insult to common goodwill, BUT if EU wants it that way, if people accept it that way, if it is imposed as the only way, all I can do is point out the errors and disassociate from it. As someone living in Europe the topic of EU is almost a ‘non dit’, and there are still many people who are ‘traditionalist’ in most of their views and ways, a majority even, with varying levels of EU veneer present also in their lives. So that is why I see it headed to failure, it really does not encompass what it needs to, and to encompass more is not only not possible in real terms, but further wrong. Europe should have been left a century or two to quietly and peacefully assimilate a cheerful and voluntary framework of understandings. Now they are just wiping out centuries of culture and good evolution, while wasting the resources and futures of entire populations for the undefined ‘ greater good’.
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Euro likely won’t survive the slow mo train wreck.
But if it does it will never be reserve currency because
Reserve economy must export currency to satisfy desire of foreigners wishing to save in that currency. This means they must import more goods than export, I.e. Export jobs.
This means by definition export regions such as eu and china will never have reserve status unless they convert to trade deficits.
Plus, people must have long term faith in economy to want to save in that currency, locals are bailing out of yuan, would you like to park your retirement savings in yuan? For euro, whole countries are will bailing out. Dollar safe until other economies undergo fundamental change.
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Very valid but things do change and in hard to predict ways, especially over 50 yr type time spans.
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Euro will be destroyed because it destroyed competitiveness and jobs from ALL euro countries except Germany.
Southern europe was DEVASTATED by Euro and western european countries like Netherlands, Belgium, France Austria and Finland also lost competitiveness under Euro.
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The destruction was multi-fold:
1.The value of Euro was mostly determined by the strenght of Germany so Euro rose to unsustainable high value against dollar and asian currencies so european competitiveness as a whole was destroyed.
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Now euro has crashed against dollar from 1.45 dollars per euro to 1.05 dollars per euro.
2. Germany was NOT destroyed during the rise of euro because they are more efficient than other euro countries when it comes to jobs and wages and german economy is concentrated on high value products making it possible to raise the prices of their products outside of euro area.
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3. Consequently the current downward trend in euro is making it so that german companies will be reporting record profits soon.
As the flipside US companies where large part of earnings come from euro area or elsewhere outside USA will be making negative earnings surprises soon because the crushing of euro and strenght of the dollar.
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4.Even at the lower 1.05 dollar value against euro (which feeds into China and Japan and many other developing countries because their central banks target their currencies to the dollar value) all other euro countries have destroyed competitiveness against Germany because during the strenght of Euro they already lost the market war inside euro area against german made products because Germany was more efficient.
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5.In total euro destroyed other european countries export possibilities outside euro area with it’s strenght for most of its time and euro destroyed other european countries export possibilities to other euro countries because german exports were more competitive and euro destroyed other european countries internal home markets due to avalanche of german made products in many product categories and chinese membership of WTO in 2001 started the flow of chinese made stuff in low value product categories.
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6. The consumption of german products by other euro area countries was financed with increasing debt for people and increasing debt for the countries.
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7. Whole mess was hidden by massive real estate bubbles at first in early 2000’s and after 2008 with massive debt binges and welfare payments by western europe.
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8. Whole cake was topped by german invented “welcome culture” where Angela Merkel first followed Swedens example of GUARANTEEING 100% acceptance for all syrians with permanent residences and quick family re-unifications LURING people from SAFE Turkey to drown in the Mediterranean Sea between Turkey and Greece and then lured even more people to drown when huge amount of people started to come in 2015 by DEMANDING borders must stay open (thereby keeping the route open from NO-welfare and NO-free-apartment Greece to western-welfare-europe that starts from Austria northwards and westwards and that was the target of millions of WELFARESEEKERS in 2015) and at the height of insanity declaring that DUBLIN-regulation no longer applies in August 2015 (meaning even those people who had earlier registered asylum claims in Hungary and Italy would be welcome to German welfare, the dublin returns to Greece had already been stopped by incompetent ruling in EU-court in 2011 starting to build Greeces position as a favored gateway to welfare Europe.)
The rush of 2015 was also speeded up by Greece because communist-leftist Syriza party and prime minister Alexis Tsipras stopped all detention, freed everyne previously put into detention and stopped border patrols in early 2015 as he had promised as his election promise and when millions started coming quickly gave them boat rides from Greek islands near turkish coast to Greek mainland and bus rides to the border of Macedonia there by Greece also LURED more people to come.
Italy had also LURED people to come since 2013 by giving sea taxi rides from Libyan coast to Italy to “stop drownings” LURING more people to come and then PUSHING asylum seekers to northern welfare Europe starting in 2014 when Italy “lost” over 100,000 people from the 170,000 people they gave sea taxi rides to but Italy did not realize that while sea taxi rides LURED more people sea taxi rides and pushing people to northern europe without registering asylum applications and fingerprints in Italy LURED lots and lots of people so by 2015 the situation was so bad that Frances leftist president Hollande was FORCED to start border checks at the borders between Italy and France and stop asylum seekers at the border and tell them to register in Italy and even THROW asylum seekers that got hundreds of kilometers inside France back to Italy and telling them to go yell “asylum, asylum” to Italian police instead of the french one.
This french policy made less people to come to ITaly that otherwise would have come and many that had came to Italy went by ferries from Italy to Greece and travelled the greece-macedonia-serbia-hungary-austria-germany route that became the greece-macedonia-serbia-croatia-slovenia-austria-germany route after Hungary closed it’s borders and then the whole rush of people was stopped by Austria and Slovenia closing their borders which forced Croatia, Serbia and Macedonia to also close their borders within 24 hours thereby removing 80% of the flow from Turkey to Greece because the only thing LURING people to come to Greece namely access to travel to welfare paying europe was removed.
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The economic destruction of Euro area is complete and still politicians and PARTIES responsible for destroying their countries economies are cheering Euro despite the only beneficiary being German companies and bankers.
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The destruction of Europe’s SAFETY is almost complete with terrorism, murders, gang rapes, rapes,assault and sexual molestations committed by asylum seekers and still politicians and PARTIES responsible for destroying their countries internal SAFETY with IRRESPONSIBLE asylum seeker policies LURING people to come are cheering Open Borders and demanding common european asylum policy despite numerous EU-directives shortening asylum processing time and making family re-unification easier and EU’s EASO (spreading Sweden developed practices to process asylums and train asylum bureaucrats around EU countries) meaning EU has made the whole of EU more attractive and luring and Germany and Sweden have taken LURING of people to drown to extreme levels with 100% ACCEPTANCE GUARANTEE to all syrians.
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Merkel is kept by the media as an example to be admired despite her causing ALL the terrorism, murders, gang rapes, rapes,assault and sexual molestations committed by asylum seekers in Germany because Merkel lured asylum seekers to come and Merkel and German government REFUSED to use the 18-month DETENTION allowed under EU-law for the duration of asylum processing as DEMANDED by Donald Tusk the leader of European Council.
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Merkel is kept by the media as an example to be admired despite her and german government causing ALL the drownings in the mediterranean sea (with Sweden) by their 100% acceptance guarantee and demand for borders to stay open so people can reach welfare paying europe through Greece and Italy.
Merkel LURED Aylan and his little brother and mother to drown because Aylan drowned 2nd of September 2015 and Merkel had unilaterally declared in August of 2015 that dublin-regulation NO longer applied thereby luring Aylans father to try to reach Sweden through Greece with the KNOWLEDGE that the borders were OPEN like Merkel DEMANDED and getting to german Welfare was GUARANTEED even if one of the countries in route to Germany registered the Aylan familys fingerprints and made them submit asylum application because Merkel had said that dublin NO longer mattered.
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Medias biggest trick was making Merkel a hero despite her LURING people to drown and BLAMING all critics of open borders and critics of lax asylum bureaucracy and critics of incompetent asylum application processing bureaucrats and critics of stupid EU-directives as the guilty ones responsible for drowning people.
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People drowned because Sweden and Germany lured them to come with loose acceptance and generous welfare benefits.
People drowned because Greece and Italy lured them to come by pushing everyone coming towards welfare europe.
People drowned because EU-directives had made processing times short and family re-unifications quick luring more people and because EU-commission had made EASO (European Asylum Support Office) spread asylum processing modules and asylum bureaucrat traing around EU-countries which increased the acceptance rates for asylum (because EASO policies were originally developed in SWEDEN, only EU could be so incompetent as to make the loosest and stupidest asylum processing standard the standard of the whole EU)
P.S.
Yuan is semi-floating so it has an acceptable trading-band where chinese bureaucrats let it float but if it is about to get too low then communists inside China’s central bank will purchase yuan with the dollars they have saved up by exporting a lot of chinese made stuff to USA.
Before chinese central bank communists used to sell Yuan and buy dollars to keep the value of Yuan low to give chinese companies more advantage in exports to USA and EU and lure more companies to transfer their factories to China OR outsource their manufacturing to China (in both of those cases chinese copied the technologies and ruled the chinese market and african market and asian markets other than Japan with chinese brands that had copied european and american companies IP without payment and in extreme cases making knockoff electronics.).
This buying of dollars and selling of Yuan was done when China was still thought by bankers to be a growth fairytale and there was not enough knowledge about massive chinese malinvestments like ghost cities and insane destruction of chinese environment as a strategy to get competitive advantage.
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Now the situation has got so bad that China has put severe restrictions in transferring money out of China going to the absurd limit of limiting ATM withdrawals in Macau.
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If the appetite inside China to change yuan to dollars increases then chinese government will start locking people up for changing yuan to dollars in large amounts.
Prison sentences for bitcoin owners and destruction of the value of bitcoin that will follow that will also probably happen.
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India will most likely also attack bitcoin owners after Modi wonders how did the black money disappear he was so sure was absolutely massive and that he tried foolishly to get with demonetization while being so incompetent that he did not realize he was also destroying India’s economy and indian growth and many businesses and many jobs.
I guess Modi never heard about “velocity of money”…
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When China and India attack bitcoin the value crash of bitcoin will be totally epic…
Thanks to easy trackability and public ownership history bitcoin owning chinese and indians will be put to prison in large numbers if their leaders so choose.
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Many rich chinese have already real estate bought up in the west to escape and that is also the reason for the rush because so many want to escape and the complete destruction of environment is also the reason chinese elites want to escape so after destroying nature, water and air to get more profits and allowing this to happen as a people the elites of China want to escape what they have done.
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When you see a chinese millionaire you see an environmental criminal and when you see a chinese billionaire you see Mr.Burns times x100 (the environment polluting nuclear reactor owner to whom Homer Simpson works for)
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Communism and central planning ALWAYS fails, even chinese “open market”-communism enabled by environmental destruction.
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If the chinese wake up to the destruction of environment made in the name of economic growth when economic growth fades the fate of communist party members will be very ugly hence even many communist party members have real estate and investments in the west.
Its easier for leading communists to let chinese nature including water and air quality to be completely destroyed when they have their escapes already planned.
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I predict there will be lynchings of communist party officials who allowed nature, water and air to be destroyed while taking bribes from factory owners or just being certifiably insane with the growth at all cost hallucinations in the top leadership of chinese communist party.
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If you buy products made in China YOU are supporting destruction of nature, water and air and are partly responsible for the birth of deformed babies (deformed babies was one of the reasons the one child policy was stopped so that parents who gave birth to a deformed and handicapped child due to all the insane pollution could try again, in the west the only reported reason to stop one-child-policy is to get better demographics of more kids and stopping the abortion of female babies because of the sick obsession in china about giving birth to boys that was completely skewing female-male ratios and leaving tens of millions of chinese men with NO chance to find a wife but inside China there is a belief the stopping of one child policy was done also because of increase in deformed and handicapped babies).
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The extreme spread of imaging technologies during pregnancy in China was not just for aborting female babies but also because many chinese people have been destroyed by the toxic stuff in air, water and land so much that anybody who has money does the tests even if they are not obsessed about getting a boy because everything is polluted and people know they themselves are full of pollution even with a air-filtered office job and have heard horror stories about deformed and handicapped kids born to factory workers or to families living close to factories.
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In the future there will be brand destruction for companies who had much of their production in China and there will be truth commissions locking up people and calling also companies guilty if China gets to a democracy without lynching all the communist leaders and factory owners responsible for pollution.
Maybe china will demand extraditions of those communist party leaders and factory owners who manage to escape to the west.
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Apple is risking their whole brand with the manufacture of Iphones in China…
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Euro was 0.88 to dollar
now is 1.04
that seems to be a huge increase
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1 Euro got around 1.40 dollars (ranging from 1.55 to 1.35) for many years. Now 1 euro gets 1.05 dollars.
In the last year euro has dropped from 1.15 to 1.05 US dollars.
Once companies hedges run out this will push profits of many US multinationals much lower causing downward pressure on their stocks.
I think we will see parity in US dollar and Euro this year.
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Also the european banking crisis is coming back and now the governments have loaded themselves up with debt after saving the banks last time and trying to furiously goose growth since 2008 by increasing government debt spending through recession.
The government spending stopped things getting really bad but as a consequence stopped structural changes in the flexibility of jobs and employment markets that should have been made because euro has taken all competitiveness from inside EU and given it to Germany which has more efficient labor markets and apprenticeship training and industry than in rest of EU.
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All european politicians and unions have been living through the whole euro time like debts would not need to be paid back and like it would still be possible to correct policy mistakes through their own currencies value dropping to get back competitiveness.
Your in Euro now and Germany is taking your jobs and selling you stuff you can not afford and you are paying it with more individual debt and more government debt that would crush everybody if ECB would be forced to stop their version of ZIRP…
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Forget the x-rate. It’s just doing what it’s supposed to.
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X-rate does what it does and signals what it signals , but as Euro becomes worth less there is still no advantage within EU as costs/prices are quite rigid bureaucratically and wages for a large swathe of consumers are now stalled or non existent, asset deflation also continues, deficit spending remains valueless and high. Only beneficiary maybe German exports plus some foreign investment in EU.
Personally still finding that purchase and shipping from US of mid level goods is still cheaper, in spite of low rates, than local – just a pointer to how costs are pyramided in EU.
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Vooch
I assume you are joking but on the off chance you aren’t, there is more chance of Bitcoin becoming the world’s reserve currency than the Euro. The Euro is structurally unsound and doomed to fail – it has been fracturing in front of our very eyes for years now and politics plays a large part in its weakness.
If by some miracle it does survive, the number of countries involved will be severely diminished and will consist either of northern Europeans or Club Med (but not both).
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Euro has a slight positive balance of trade, nil outside debt, highest unit labor productivity, plus a stable polity.
compared to the alternatives ( dollar, Yuan, SDR ) the Euro seems a shoo-in for reserve currency status over the long term.
does anyone really believe US can grow itself out of its staggering long term liabilities ?
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@vooch — The EU will not survive. And the Euro will not survive, much less become a reserve currency.
I hope you were trying to make a joke, and not seriously thinking a fascist regime with its three “anchor” economies in ruins was somehow going to become a reserve currency?
Just because the US economy is seriously flawed (thanks to your a–hole politician Obama), that doesn’t mean that an even worse system is going to replace the dollar.
Maybe you just have a terrible sense of humor. If you were serious, than you are a fool
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This devaluation seems to have accelerated since they were allowed SDR status at the end of the summer.
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Chinese communists believed international bankers stories about china’s great future and then the bankers themselves stopped believing the china story when seeing the massive communist mal-investment and environmental destruction.
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What is a ghost city worth in a country destroyed by insane pollution?
NOTHING.
What is a building in a large chinese city worth if people can NOT breathe the air and with chinese economic success being boosted by destruction of water, air and land that has ruined most of China beyond repair and that can NOT continue?
Much less than that building is currently valued at…
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China is moving into its 7th year of drought and is now dependent on the rest of the world for food. I don’t know for sure, but I suspect they started this on their own by over farming the rural land that has since turned into an expanding desert, much like what happened in the 1930’s here with the dust bowl. Unfortunately, their days of self sufficiency may be already over.
http://www.geocases1.co.uk/printable/Desertification%20and%20land%20degredation%20in%20China.htm
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MENA and to an extent India ( via fertilizer use/oil) all very dependent also. Should the established trade framework get messed up, lots of trouble.
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O/T How to cross a border in a glove compartment of a car.
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Re-Energized Dollar Looms Over the Rest of the World
For China, the rising dollar is exacerbating capital outflows and tightening liquidity, shaking markets that had enjoyed a period of relative stability for most of 2016. Chinese bond markets plunged in reaction to December’s Fed meeting, at which the U.S. central bank decided to lift rates and signaled several more boosts. Chinese regulators injected money to allay a possible credit squeeze, while stocks also fell.
http://www.wsj.com/articles/re-energized-dollar-looms-over-the-rest-of-the-world-1483272003
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And BTC breaks $1000 today. When will you finally be a BitLIEVER, Mish?!?
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It seems to be about the only place where markets are predictable… but then again, you have to be able to tell where markets are going to crumble next and there is a lot of crumbling competition these days, lol.
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I love & appreciate bitcoin simply for the fact that it defies national power and confounds policy makers. It beautifully demonstrates the ultimate power of market forces over coercion.
But knowing what I know about cyber vulnerabilities, given the choice between holding a gold in my hand or having BC on a thumb drive, I’ll take the physical gold every time.
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Most of bitcoin demand is coming from India and China.
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What do you think will happen when India led by demonetization Modi and China led by “speculator” hating communists will choose Bitcoin as their next scapegoat and BAN bitcoin inside their countries and put bureaucrats at work in tracking bitcoin ownership from the publicly available ownership history each bitcoin has to find people to punish?
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There are many reasons to love Bitcoin but the volatility can be off the chart at times. Bitcoin could easily erase 25-30% of its value in a matter of days:- headlines relating to Bitcoin thefts, government scrutiny etc can have punters stampeding out of the crypto currency in their droves.
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Look at the 200-day moving average on a log scale. Not that volatile in the long run.
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What happened to the Chinese officially backing the yuan
And / or renmibi with gold fixed price at bank of china exchanges ?
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That would deplete China’s gold reserves in months if put into place…
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More likely to happen is a ban on owning Gold inside China and branding gold holders evil “speculators” that need to be punished by communists.
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The RMB does float,…. in a tighter range, but it does.
Even if you take the case of a fixed rate both the pound and the usd became reserve currencies when they where fixed, so i don’t see how that would impede the RMB being a currency reserve as long as it is available in bank reserves readily to be exchanged, if it was fixed, which it isn’t.
The bond market is one of the largest in world at nearly 9 trln USD nearly the size of Japan, and. the third largest, after the US and Japan, and bigger than all emerging market bond markets put together.
The problems that prevent the RMB from becoming the undisputed reserve currency for now are regulatory issues not macro related. International investors hold less then 4% of these bonds, the demand that has grown China’s bond market so far is local, and even this local demand as a percentage of GDP is still small, which means there is ample room to grow. Once it opens up one would expect it to overtake the US. Regulation is moving towards that direction, to better reflect both China’s status and to meet international requirements and accounting standards.
Give it time mish, all in due time.
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Floating in range decided by a communist party controlled central bank is NOT freely floating.
Yuan is NOT a feely floating currency.
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And having capital controls that stop people withdrawing too much money from ATM’s in Macau so as to not enable chinese to get dollars by laundering themselves dollars through casinos (hong kong dollars->US dollars (majority of currency used in macau is Hong Kong dollars with Macau pataca also being pegged to Hong kong dollar) with Hong kong dollars being pegged to the US dollar) by “losing” in the casinos of Macau is not a feature of a reserve currency.
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Threatening “speculators” with prison time for changing too much forex and requiring a permit from a communist party official before a company can invest abroad are not features of a reserve currency.
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Most of the Macau success that created billionaires out of Macau casino owners was all about giving chinese people the ability to get dollars through “losing” at the casinos.
If hong kong dollar is un-pegged to stop yuan escape through Macau and Hong Kong expect Macau casino revenues and occupancy to crash BIGLY…
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P.S.
When dollar became a reserve currency it was fixed to GOLD.
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When the pound became a reserve currency it was fixed to SILVER.
Hence the name pound sterling.
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Yuan is fixed to communist party and to environmental destruction being used by communists as a competitive advantage to make profits bigger for capitalists…
(In addition to being fixed to a certain trading range by communist central bankers)
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@katsus.
The USD fixed rate or the pound fixed rate to gold and silver means nothing in this discussion. It was fixed rate on something it could have been potatoes as far as fixed vs float is concerned. The status of an economy as the largest, the availability of currencies as reserves, it’s use in global trade, it’s store value, is what makes it a reserve currency. The USD is no longer fixed to gold but floating, it is not even a good store value, yet it still is a reserve currency, the pound is no longer fixed to silver yet it is no longer a reserve currency for the world. Hence the point that floating or fixing an exchange rate, (regardless of the fix gold or not) is not the determining factor of a reserve currency.
You keep going on and on about maccau. Believe me you know so little about China that i will not waste your time and mine, replying. Actually let me rephrase that, you know nothing of what you are talking about.
“BIGLY”???? 🙂 Well done! It must have been such a challenge to write it, given the small size of your fingers.
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Being tied to Gold is what caused US dollar to become the reserve currency and since US economy was the strongest in the world it continued to be the reserve currency after the link to gold was removed since US dollar had no credible competition because UK was a basket case economically those days and Germany was divided between soviet control and american control.
UK later even put the pound under a trading range and tied it to ERM the precursor to Euro in their economic incompetence enabling George Soros to break the pound and earn billions.
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I am slightly skeptical about your professed knowledge about Macau and China since you have trouble spelling Macau and seem clueless.
Nevertheless your idea to fixing a currency to potatoes would be a superior fix to the current fix of yuan to communists and environmental destruction (in addition to a trading range decided by communist chinese central bankers using a basket of currencies as a supposed benchmark when straight tie to dollar was thought to be too obvious).
One can always eat the potatoes but it is hard to eat chinese communists or environmental destruction.
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To believe, a communist ruled country with no elections that is destroying it’s water, air, nature and land by extreme pollution because of communist-capitalist greed to lure more factories to China and get more profits to chinese businessmen so they could pay communists more bribes, could become the reserve currency of the world is delusional,
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To believe a country, whose citizens want to escape said currency and country so bad they need to be stopped from changing currency to the point of only having an allowance to do it and even limiting withdrawals at ATM’s in Macau when chinese went “gambling” in Macau to “lose” money and thereby transfer more yuan into dollars through the US dollar pegged currencies of Macau and Hong Kong, could become the reserve currency of the world is delusional,.
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To believe a country, whose companies need a permit from a communist to invest abroad, could become the reserve currency of the world is delusional,.
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To believe a country, whose debt markets are full of zombified debt thanks to incredible mal-investment into massive real estate bubble including centrally planned ghost cities (even soviet union was not this incompetent) and chinese government propping up money losing factories through subsidies (factories that still manage to lose money even while cutting corners and polluting air, water and land…only in communist-capitalism where people have no access to an independent judiciary to get redress can this happen) and chinese government owned banks supporting factories making product under cost with loans and chinese stock market being a massive bubble with chinese figures from either government or companies NOT being trustworthy, could become the reserve currency of the world is delusional.
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To believe a country, whose elite including factory owners and communist party leaders are planning escapes to the west and buying real estate in the west and acquiring second citizenships or residence permits with investments to facilitate escape to the west and whose obsession is to get every possible yuan switched into dollar, euro and even bitcoin, could become the reserve currency of the world is delusional.
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BTW rich chinese people are paying middle class chinese to change dollars for them to max out the amount of US dollars for them.
What does a mid-level factory manager do when his boss wants him to change some US dollars for the boss?
He says yes.
What did a mid-level factory manager do when his boss gave him a gift of free holiday in Macau with the instruction to “lose” money at the Macau casinos so that the factory owner could get US dollars and pay the employees “losses” in cash yuan to him?
Thank the boss for a free holiday and take it.
etc.etc.
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@ katsus. The USD became reserve currency after WW2 with the Marshall plan, seeing that the rest of the world was in ruins, and it finalized it’s status during the international debt crisis, later on. It had nothing to do with it’s gold backing. At the time all currencies where backed by gold and silver, including the USD. I gather you are not getting the point though. I am not deriding the merits of gold and siver as money, merely stating the obvious that it is not a factor in determining a reserve currency, the other factors are, regardless if the currency is fixed or floating. Gold backed money determines the quality of money, not it’s international status.
You can be as much skeptical about my credentials as you like it doesn’t change anything. If my argument is unsound you are welcome to point it out.
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birdprey,
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I think your arguments show themselves to be unsound to those reading them and if your arguments unsoundness needs any more pointing out I have already written about that quite extensively.
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When it comes to getting points it seems you incapable to understanding any points and with your delirious and blind faith in believing that a communist country can and will become the reserve currency of the world I am sure you would have gotten more useful credentials if you had studied queer theory than whatever it was that you studied.
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Your claim that all currencies were backed by Gold and silver at the time is astounding in it’s illiteracy and your claim that the Marshall plan made US dollar the reserve currency is laughable.
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Both making good opposite points, personally I don’t see China having the credibility or turn to status now or for a long time. System transparency, reliability, stability… not saying the US is perfect but it has a lot that makes it acceptable plus has fair record of use . Euro? Only as a poorer hedge and part of any political sweetheart deals. As part of SDR maybe.
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And chinas bond market is funding mal-investments including ghost cities and money losing factories and even when funding profitable factories it is funding extreme pollution of air, water, land, nature and chinese people…
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Who would buy chinese bonds when the social mood is bitter as hell and all the chinese want out of Yuan and the INCOMPETENT communists are in control of everything and using threats and heavy handed policing to stay in power while destroying their own country with a bastardized version of capitalism (which I would call communist-capitalist-envirodestructionism) all the while the guilty communists and guilty factory owners are themselves planning an escape away from China for their families and relatives to the west to escape the pollution and the disaster they have caused?
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BTW chinese government censors are censoring environmental discussions from the chinese internet…
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Prediction:
In the future after locking up all the chinese communist party leaders and factory owners including extraditing communist party leaders and chinese factory owners who escaped to the west back to china the new chinese government will launch class-action lawsuits in the west against many western companies currently having factories in China and manufacturing products in China and demanding billions in compensation to try to clean environment and demanding extraditions also to western born CEO’s and managers who worked in China and also trying to extradict western CEO’s who were NOT in China but just made the decisions to transfer manufacturing to China without ensuring that environment is not harmed.
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Why is the favored model to manufacture in China to just order the products from a chinese factory that is chinese owned?
Apple CEO and other Apple management and other companies CEO’s and managements who use China to build their products can sleep a little better while telling themselves that contractors are doing the bad things and because contractors are doing the bad things the liability for coming lawsuits against environmental destruction is hopefully considered to be just on the chinese owned factory contractor and not on the western owned company.
The brand destruction will however be epic…
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The communists in their incompetence thought that keeping factories in China in chinese ownership would make chinese richer.
Well it has made chinese factory owners richer put it also ensured that environment could be destroyed totally insanely because chinese owned factories insulated western brands from the environmental destruction they benefited from together with the chinese factory owners and the communists party leaders benefited from chinese factory owners having no problem in paying bribes despite the death penalties china has because if the communist party leader would confess to bribes he would also be dead and both the factory owners and communist party officials were buying real estate in the west and making plans to escape with their families after getting rich.
The factory owners with the profits they made by destroying environment and the communist party leaders with the bribes they took to look the other way to factories breaking the already much too loose and incompetent chinese environmental regulation.
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Why are chinese the biggest customers of all the schemes around the world where one can purchase a citizenship outright or where one can purchase a permanent residence permit which can be converted to citizenship after x years?
They are hoping to avoid extraditions back to china when the sh*t that they have put into China’s water, land, nature and air hits the fan if leadership in China changes from communists to a democracy.
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Communism and capitalism are NOT a good combination…
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All trade access to the west should be stopped from China unless they hold free democratic elections which would hopefully stop the environmental destruction and corruption in China.
But this would make manufacturing in China more expensive and thereby lower the profits of western companies whose customers in the west can still consume cheaply manufactured chinese made products with high margins with more and more debt despite jobs being destroyed in the west by production moving to China.
So ALL western companies WANT the chinese communists to stay in power…
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China is in WTO thanks to George W. “dubya” Bush who lobbied other countries to let China join WTO but equally GUILTY is Bill Clinton who was funded by chinese during his presidency and richly rewarded with large speaking fees from China after the end of his presidency and who laid the groundwork for Chinas acceptance into WTO.
Clinton-Bush destruction of american factories and jobs is without equal.
US presidents should get just a pension from US government and be FORBIDDEN from collecting speaking fees for themselves to remove incentives for corruption while in office and speaking fees to charity should be allowed only to charities which are in no way controlled by the ex-presidents or their family and relatives and with strict limits that the charities in question have to put over 90% of funds into actual charity work.
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The chinese communists are not desperate to cling onto power because they love communism and believe in it, they are clinging to power to save their lives from angry chinese whose lives and country they have destroyd in communist-capitalist greed and short-sightedness.
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katsus While i appreciate your enthusiasm on Austrian economics try not to veer into extremes as it leads you astray and to a loss of focus in life.
Mal-investments as Misses calls them, or misallocation of capital as Hayek puts it, occur everywhere, but to different degrees. China is no exception to this. The boom that China experienced is bound to produce excess. The excess of credit boom and the subsequent deleveraging ( or not according to some ) that the US underwent in 2008 is proof that misallocation of capital is not a racial or ideological phenomena, but exist in all credit and market based economies.
China does not censor blogs talking about the environment in fact the opposite.
Guilty factory owners? Guilty of what exactly? You are too ideological to make any sense katsus, You speak of private entrepreneurship as something bad, yet deride communism.
Who would buy chinese bonds? Seriously?
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Mal-investments happened in the US because there was not a free market in ratings agencies but a government certification of ratings agencies leading to a rating agency cartel where the ratings agencies competed on giving good ratings to total cr*p to get more business and more fees.
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The business was created by demand from yield-starved investment managers everywhere which were desperate because of Fed lowering interest rates to a level free market would have never placed them so they invested in sliced and diced investment products with 1000 page prospectuses created by bonus addicted bankers that got bonuses based on sales with no regard to what happened to investments after they were sold.
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Further the destruction was boosted by people buying a payment so FED created lower interest rates created artificially high real estate values where amounts loaned and prices paid for real estate continued rising in sync as interest rates were dropped by Fed.
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This lead to real estate price increases and cash out refi’s creating a completely unsustainable consumer demand and fake wealth that enabled all the stupid policy decisions like mass illegal immigration and employees training their H1B-replacements and mass offshoring of manufacturing and even some services jobs without the crashing of consumer demand so companies and bankers and politicians started believing they could eat their cake and still have the cake aka they could offshore jobs to save money and still earn high priced products with people buying with more debt.
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Also government demands to loan to specific groups led to those groups to fall victims in larger numbers as a percentage of them to the real estate bubble and lending that was based on unsustainable increases in real estate values causing them great hardship when a free market would have loaned to them much more conservatively thereby saving them from the bursting of the bubble.
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Incompetent bureaucrats allowed totally insane loan products like Ninja-loans with no verification of anything that were commonly called liars loans.
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Government controlled Fannie and Freddie bought all the crap banks were putting out creating a false demand in packaged loans that a free market would have never provided.
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Government regulations enabled bond insurers to sell a product they had no hope of paying out so they were selling a product they knew or should have known being undeliverable if it was needed and bond insurer scam also further enabled total vomit to get ratings.
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Retirement products that were calculated with 8% increase in investments per year forced their administrators to invest in all kinds of stuff and with huge prospectuses it was a fact that they did not even read what they were buying but they just read that one of the three ratings agencies has an acceptable rating for their investment profile on the product in question so they bought sliced and diced and packaged products that the bankers were privately calling “vomit”.
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However what happened in USA in 2008 is but a small blip when it comes to the chinese crash that is coming.
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Chinese do censor environmental discussions inside China when it goes to discussing those who are to blame for environmental destruction namely chinese communist party officials and chinese factory owners.
Saying that air is difficult to breathe is OK as a discussion because that can’t be censored when millions have trouble breathing when they step out of their apartment on which they and their parents have pledged all their wealth to buy it at a bubblicious price with there usually being a dark loan on top of the bank loan to make sure the banks demands are met but with the bankers knowing there must be a dark loan but still accepting of just being a cog in the bubble machine just like loan brokers in Us during the 2005-2008 craziness giving liars loans.
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If a factory owner pollutes air, water,land and nature he is GUILTY of polluting and their GUILT is not lessened by the fact that all is OK for the communist party running the police, judiciary and government because the factory owner paid a bribe to a communist party official so that his factory could pollute eve more than the already loose, inefficient and pollution friendly chinese government regulations allow.
I hope that explained their guilt for you.
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When a mans job depends on him not understanding something it is very difficult to get them to understand that something…
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All bankers have to do is stop printing inflation, then people will trust their paper.
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We should not be fooled into believing that China is a communist country. It is a capitalist country divided between the private and state sector. China created coastal production zones to entice foreign capital to produce exports. The state companies flourished as they provided the infrastructure, the materials, the energy and the labour force to make these zones viable. Then the bureaucracy, protected by the communist party, skimmed off the profits of the state sector to set up private businesses. They were nothing more than a state mafia, but their purpose like all the other mafias that preceded them, was to turn themselves into legitimate businessmen and women or what is the same thing, from illegal thieves into legal thieves living of the workers they now employed. What is happening now in China with the crack down on corruption, is that the legitimates have the upper hand and want to put the brake on the illegitimates because it is undermining their businesses and increasing competition.
The fact that the renminbi is falling and capital outflows unmanageable goes beyond speculation, it is a vote of no confidence in the future of the Chinese economy. Normally an economy that is growing three times “faster” than its rivals would attract capital not repel it as is the case now. It is of course a paradox that the currency of the world’s largest exporter has not become a favoured means of settlement. In that sense the renminbi is peculiar, testifying to the fact that while China dominates the world industrially it does not do so financially because of the restricted nature of its credit markets.
Finally on the Euro. The Euro could stand alongside the Dollar if the political structure of the EU became more like the Federal Structure of the US. The economic unevenness in Europe is no greater than the US, say Greece versus Germany as against Alabama versus California. The difference is that the tax system in the USA is used to redistribute income from the richer states to the poorer states because it has a unitary state system. If the EU became the United States in terms of its political structures then the EU would consolidate, but the political changes required can only take place in a booming world economy enriching all its citizens, which as we know is the opposite of what is happening now.
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The political changes in the EU are expected to occur as a consequence of CRISES.
Schauble said crisis is needed but way before him the founders of the Euro knew crises would be needed to help finish the job.
That’s why they are perverse. Ordinary citizens are completely unaware of how they are being used and experimented upon. All they know is their economies are flat-lined and their kids are having to change country to find a job, if they can.
No joke – it’s all expected, wanted, a necessary part to create the greater Europe and Euro.
Failure is a risk but be under no doubt they will do whatever is needed to keep the show on the road. Crush, crush, crush.
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Well USA has one language (unless you are an illegal immigrant and press 2 for spanish) so the flyover states are much closer to California hippies than greek-italian-spanish are to dutch-finnish-german.
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In addition to the language barriers the EU is destroyed by sheer INCOMPETENCE at the top in EU-commission as exemplified by liar-Juncker and Germany’s Angela “NO LIMITS on how many asylum seekers Germany can take” Merkel.
The eastern europe did not sign up for EU to get a muslim invasion INVITED and LURED by Sweden and Germany with their incompetent policies and boosted by EU-commission through trying to make the swedish INSANE way of processing asylum applictions the european standard through EASO or making several EU-directives increasing the attractiveness of whole EU through quicker asylum processing time demands and quicker family re-unifications.
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The corrupt and disgusting way Italy and Greece have tried to take care of too many people coming (lured by Germany and Sweden and EU-commission) just by pushing everybody to the north towards welfare europe thereby luring even more people should lead to Greece and Italy being kicked out of EU and Germany and Sweden should NEVER again be listened in anything to do with asylum policy decisions because Sweden and Germany LURED people to drown in the mediterranean sea who were already COMPLETELY SAFE once reaching Turkey.
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The dutch economy and finnish economy has been almost as badly destroyed by Euro as the greek and italian economy, the only difference is the debt levels were not as high with Netherlands and Finland so they have created fake internal demand through growing the government debt levels quickly since 2008.
Once the living on debt binge stops Netherlands and Finland become the italy and greece of the north with loyalty to Angela Merkel swearing politicians replaced,
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If one is a welfareseeker (asylum seeker going through several safe countries to a country with generous welfare to leave their asylum claim to do asylum shopping to get the best benefits) the only long term solution to continue to get welfare is to get into UK quickly before they formally start the 2 year process to get rid of EU.
There is already massive movement inside EU to UK to get the best in european welfare that UK offers among somalis who have gotten the EU-residence permits enabling them to choose the country they want to live in and whose welfre they wish to claim.
Somalis who have moved from other EU countries to UK also get on the UK welfare but still claim benefits from the country they originally received sylum from like Sweden and Finland because the welfare systems do NOT share information so one can get welfare benefits and childrens allowances from several countries in one time.
Welfare capacity of Netherlands and Finland will get crushed under Euro and Swedens capacity does not exist anymore because taking almost 200,000 new welfareseekers during 2015 was the final nail destroying their productivity and safety after the millions taken since 1990’s by Sweden.
Swedens immigrant ghettoes: 3rd generation stone throwers…
Total and complete and utter failure at integration brought by crazed open borders naivety and incompetent asylum seeker policy and politically correct multiculturalism instead of integration and police force that is the laughing stock of the world that says sorry to thugs throwing them with stones because the police “yelled” at them inappropriately after being hit with a stone…
All asylum seekers still in processing should get to Germany to see how long germn lunacy lasts and if the welfareseekers has EU-residence permit already they can move to UK to cash UK welfare benefits thanks to essential part of free EU trade 8as cliamed by incompetents): “free movement of people”.
Uk is not in Schengen and has border control but every EU-resident all 500+ million of them including welfareseekers Italy just quickly slapped with EU-residence to get them to move to north without France being able to stop their movement is able to move into UK.
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EU is rotten to the core with INCOMPETENCE on even basic things
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Excellent comment.
Note that the fake news financial times called the move below 7 a temporary glitch. It was anything but that. There has been a liquidity crisis unfolding in China. It shows up as a severe shortage of dollars. The dollar is up against the RMB because people are BIDDING IT HIGHER.
Nobody knows if there will be a crash, but lots of Chinese people are running from a sinking ship.
Did anyone really think building vacant cities was a business plan?
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In other news about the failure of the Euro and EU… Angela Merkel is afraid to attend the next Davos conference of arrogance. She is “suddenly” realizing that the notion of a closed clique of “elite” (aka corrupt) people having secret meetings costing several times a normal person’s annual salary — it might not play well with the people she works for. Heck, they might even throw her into the unemployment line.
Its the end of so-called “globalism” — not global trade, but the arrogance of a bunch of losers meeting behind closed doors and deciding how they are going to f-ck over the rest of the world.
When China is (relatively) more responsive to ordinary citizens than so-called democracies … that is a big problem. That isn’t praise for China’s communist, it is the realization that Soros and his miserable “globalists” are nothing but fascist criminals.
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what curency we are talking now.?
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Great piece. Thank you for sharing.
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