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LunarEclipse
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IMF to make the Chinese Yuan a Reserve Currency?
#21686230 - 05/16/15 08:26 AM (8 years, 8 months ago) |
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China recently adopted IMF accounting standards in hopes it will help their yuan become a reserve currency. They were denied by the IMF in 2010, but this could happen at the IMF meeting on October 20th, 2015.
The negative implications for the USD if this happens are huge, particularly given the BRICS bank.
Stay tuned...
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ReposadoXochipilli
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Re: IMF to make the Chinese Yuan a Reserve Currency? [Re: LunarEclipse]
#21686653 - 05/16/15 10:53 AM (8 years, 8 months ago) |
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I'm pretty ignorant to this issue but wouldn't that have even bigger implications for the Chinese internally then abroad? I thought they had an inflated currency over there compared to what domestically it is worth to their citizens.
Either way interesting.
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LunarEclipse
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Quote:
ReposadoXochipilli said: I'm pretty ignorant to this issue but wouldn't that have even bigger implications for the Chinese internally then abroad? I thought they had an inflated currency over there compared to what domestically it is worth to their citizens.
Either way interesting.
That's a good point, the internal inflation, but of course they have 7% growth if you believe that. I think they are so deep in debt that becoming a reserve currency is their best way out. It's been working for the US so far, kind of. The Petrodollar and having gold and wheat largely priced in USD along with 60% of the world's currency "reserves" means we have pretty much been able to print our way out, and are considered the "lender of last resort"??
I also think the Chinese and other central banks have been accumulating gold, with China in particular having tons and tons. So another very real possibility is for the Chinese to introduce a gold backed currency at some point. Imagine how that would impact the paper USD...
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CaptainKurt
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Re: IMF to make the Chinese Yuan a Reserve Currency? [Re: LunarEclipse]
#21690091 - 05/17/15 10:51 AM (8 years, 8 months ago) |
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That would be strange using Chinese Yuan to buy stuff internationally as opposed to the standard US dollars.
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memes
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Re: IMF to make the Chinese Yuan a Reserve Currency? [Re: LunarEclipse]
#21690684 - 05/17/15 01:52 PM (8 years, 8 months ago) |
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Quote:
LunarEclipse said: China recently adopted IMF accounting standards in hopes it will help their yuan become a reserve currency. They were denied by the IMF in 2010, but this could happen at the IMF meeting on October 20th, 2015.
The negative implications for the USD if this happens are huge, particularly given the BRICS bank.
Stay tuned...
not too worried.
B is struggling R is struggling I is struggling C is waning S has GDP (2013 $350B USD) that's only 88% the size of Exxon's revenue (2013 $394B USD)
definitely not worried.
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memes
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Re: IMF to make the Chinese Yuan a Reserve Currency? [Re: memes]
#21690699 - 05/17/15 01:55 PM (8 years, 8 months ago) |
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that being said; i fully acknowledge and accept that the USD's sole rein over the global financial environment will eventually come to an end, for any number of reasons that we may or may not have preconceived at this point in time (USD hyperinfation, rising china, global war, nuclear events, whatever)
just wanted to post this so you didnt think i was just dismissing the whole topic alltogether. i'm not, it's relevant. i'm just not worried short-term. and not really long-term either. a gradual backing-out of the limelight for the USD isn't inherently a miserable event. sure, we lose our various advantages, but whatever - it's not like that implies disadvantages
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LunarEclipse
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Re: IMF to make the Chinese Yuan a Reserve Currency? [Re: memes]
#21690982 - 05/17/15 03:26 PM (8 years, 8 months ago) |
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Quote:
memes said: that being said; i fully acknowledge and accept that the USD's sole rein over the global financial environment will eventually come to an end, for any number of reasons that we may or may not have preconceived at this point in time (USD hyperinfation, rising china, global war, nuclear events, whatever)
just wanted to post this so you didnt think i was just dismissing the whole topic alltogether. i'm not, it's relevant. i'm just not worried short-term. and not really long-term either. a gradual backing-out of the limelight for the USD isn't inherently a miserable event. sure, we lose our various advantages, but whatever - it's not like that implies disadvantages
If the IMF does in fact make the yuan a reserve currency, that clearly is to the disadvantage of the US. We lose our various advantages, it clearly won't be good in either the short term or the long term. The flow of dollars into yuan isn't favorable along with us being more and more excluded from trade.
-------------------- Anxiety is what you make it.
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memes
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Re: IMF to make the Chinese Yuan a Reserve Currency? [Re: memes]
#21691288 - 05/17/15 04:44 PM (8 years, 8 months ago) |
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Quote:
However, the limited financial market development and structure of political and legal institutions in China make it unlikely that the renminbi will become a major reserve asset that foreign investors, including other central banks, turn to for safekeeping of their funds. At best, the renminbi will erode but not significantly challenge the dollar’s preeminent status. No other emerging market economies are in a position to have their currencies ascend to reserve status, let alone challenge the dollar.
http://www.imf.org/external/pubs/ft/fandd/2014/03/prasad.htm
A long, but very good read. It touches a lot of the things i quickly said a few minutes ago. see the text again, below, with quotes from the page speaking to the same effect.
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memes said: that being said; i fully acknowledge and accept that the USD's sole rein over the global financial environment will eventually come to an end
Quote:
Indeed there are indications that the dollar’s status should be in peril. The United States is beset by a high and rising level of public debt. Gross public (federal government) debt has risen to $16.8 trillion (see Chart 1), roughly equal to the nation’s annual output of goods and services. The aggressive use of unconventional monetary policies by the Federal Reserve, the U.S. central bank, has increased the supply of dollars and created risks in the financial system. Moreover, political gridlock has made U.S. policymaking ineffectual and, in some cases, counterproductive in driving the economic recovery. There are also serious concerns that recent fiscal tightening has constrained the government’s ability to undertake expenditures on items such as education and infrastructure that matter for long-term productivity growth.
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memes said: i'm just not worried short-term.
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Official and private investors around the world have become dependent on financial assets denominated in U.S. dollars, especially because there are no alternatives that offer the scale and depth of U.S. financial markets. U.S. Treasury securities, representing borrowing by the U.S. government, are still seen as the safest financial assets in global markets. Now that foreign investors, including foreign central banks, have accumulated enormous investments in these securities as well as other dollar assets, they have a strong incentive to keep the value of the dollar from crashing. Moreover, there are no alternative currencies or investments that provide a similar degree of safety and liquidity in the quantities demanded by investors. Therein lies the genesis of the “dollar trap.”
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memes said: and not really long-term either.
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The reason the United States appears so special in global finance is not just because of the size of its economy, but also because of its institutions—democratic government, public institutions, financial markets, and legal framework—which, for all their flaws, still set the standard for the world. For instance, despite the Federal Reserve’s aggressive and protracted use of unconventional monetary policies, investors worldwide still seem to trust that the Fed will not allow inflation to get out of hand and diminish the value of the dollar.
Ultimately, getting away from the dollar trap will require significant financial and institutional reforms in countries that aspire to have their currencies erode the dollar’s dominance. And it will take major reforms to global governance to reduce official demand for safe assets by providing better financial safety nets for countries. Such reforms would eliminate the need for accumulation of foreign exchange reserves as self-insurance against currency and financial crises.
The dollar will remain the dominant reserve currency for a long time, mainly for want of better alternatives
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memes said: a gradual backing-out of the limelight for the USD isn't inherently a miserable event.
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Of course, the dollar’s dominance as a store of value does not necessarily translate to continued dominance in other aspects. The dollar’s roles as a medium of exchange and unit of account are likely to erode over time. Financial market and technological developments that make it easier to conduct cross-border financial transactions using other currencies are reducing the need for the dollar. China has signed bilateral agreements with a number of its major trading partners to settle trade transactions in their own currencies. Similarly, there is no good reason why contracts for certain commodities, such as oil, should continue to be denominated and settled only in dollars.
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Re: IMF to make the Chinese Yuan a Reserve Currency? [Re: LunarEclipse]
#21691298 - 05/17/15 04:47 PM (8 years, 8 months ago) |
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Quote:
LunarEclipse said: If the IMF does in fact make the yuan a reserve currency, that clearly is to the disadvantage of the US. We lose our various advantages, it clearly won't be good in either the short term or the long term. The flow of dollars into yuan isn't favorable along with us being more and more excluded from trade.
There are already many other reserve currencies. nobody wants 'em. the same will go for china.
Quote:
The dominance of the dollar as a global reserve currency has been barely affected by the global financial crisis. Not only did the dollar’s share in global foreign currency reserves change only modestly in the decade before the crisis, it has held steady at about 62 percent since the crisis began (see Chart 2). Overall, foreigners have sharply increased their holdings of U.S. financial assets. Foreign investors now hold nearly $5.6 trillion in U.S. government securities (see Chart 3), up from $1 trillion in 2000. In fact, during and after the recent crisis (since the end of 2006), foreign investors purchased $3.5 trillion in Treasury securities. Even as the stock of U.S. federal debt has been rising, foreign investors have steadily increased their share of the portion of that debt that is “privately held” (not held by other parts of the U.S. government or the Federal Reserve). That share now stands at 56 percent. In some respects, then, the dollar’s role as the dominant reserve currency has strengthened since the crisis.
Edited by memes (05/17/15 04:52 PM)
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memes
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Re: IMF to make the Chinese Yuan a Reserve Currency? [Re: memes]
#21691313 - 05/17/15 04:50 PM (8 years, 8 months ago) |
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The point is; the world has already (and recently) watched a directed economy collapse. Granted, China has been taking lessons from Russia, but there are some underlying systemic weaknesses that are inherent in the environment that such governance creates. achievements are embellished, failures covered up or scapegoated; metrics and statistics are shaky at best; reporting is inconsistent and unreliable; whistleblowing is touted as acceptable but dissidence is quickly stamped. freedom is not everywhere.
"if there is hope, it lies with the proles"
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qman
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Re: IMF to make the Chinese Yuan a Reserve Currency? [Re: memes]
#21692239 - 05/17/15 08:34 PM (8 years, 8 months ago) |
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China doesn't want to strengthen its currency, in fact China might devalue the Yuan to stay competitive in Asia since the Yen has lost -25% relative to the dollar in the past 6 months.
China is a export driven economy, all that goes away with a strong Yuan, a gold backed Yuan is not likely going to happen and if it did it would be many decades in the future.
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LunarEclipse
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Re: IMF to make the Chinese Yuan a Reserve Currency? [Re: qman]
#21695005 - 05/18/15 03:53 PM (8 years, 8 months ago) |
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Quote:
qman said: China doesn't want to strengthen its currency, in fact China might devalue the Yuan to stay competitive in Asia since the Yen has lost -25% relative to the dollar in the past 6 months.
China is a export driven economy, all that goes away with a strong Yuan, a gold backed Yuan is not likely going to happen and if it did it would be many decades in the future.
China doesn't want to continue to finance our deficit, in fact China has their own deficit problems and to keep dumping money in our treasury securities is by no means a foregone conclusion.
China is export driven, true, but also have more gold and mine more gold than anyone else. They are also a massive import economy, and to buy oil with their yuan instead of dollars, to trade in dollars and exclude the US, it's happening already and will be happening more.
As for gold, China is on the cusp of taking that action away from the LBMA and Comex as well. They not only have a shit ton(s) of gold, they want to be the key trading exchange and start dictating prices as well. The idea of a gold backed currency isn't that far fetched, and would basically crush the USD.
-------------------- Anxiety is what you make it.
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memes
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Re: IMF to make the Chinese Yuan a Reserve Currency? [Re: LunarEclipse]
#21695182 - 05/18/15 04:49 PM (8 years, 8 months ago) |
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Lunar,
Your first sentence makes readily apparent you didn't read any of what I posted. Which saddens me, because this is one of the few times I actually took the time to write out my thoughts on one of your threads. I did so here because I (as I said originally) largely agree that what you're claiming will occur - will in fact occur. Where we disagree is in regard to (a) the time frame, (b) magnitude, and (c) degree and direction (+/-) of effect.
Quote:
China doesn't want to continue to finance our deficit, in fact China has their own deficit problems and to keep dumping money in our treasury securities is by no means a foregone conclusion.
It doesn't want to, but it has to. read the link
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qman
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Re: IMF to make the Chinese Yuan a Reserve Currency? [Re: memes]
#21695855 - 05/18/15 08:17 PM (8 years, 8 months ago) |
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Quote:
LunarEclipse said:
Quote:
qman said: China doesn't want to strengthen its currency, in fact China might devalue the Yuan to stay competitive in Asia since the Yen has lost -25% relative to the dollar in the past 6 months.
China is a export driven economy, all that goes away with a strong Yuan, a gold backed Yuan is not likely going to happen and if it did it would be many decades in the future.
China doesn't want to continue to finance our deficit, in fact China has their own deficit problems and to keep dumping money in our treasury securities is by no means a foregone conclusion.
China is export driven, true, but also have more gold and mine more gold than anyone else. They are also a massive import economy, and to buy oil with their yuan instead of dollars, to trade in dollars and exclude the US, it's happening already and will be happening more.
As for gold, China is on the cusp of taking that action away from the LBMA and Comex as well. They not only have a shit ton(s) of gold, they want to be the key trading exchange and start dictating prices as well. The idea of a gold backed currency isn't that far fetched, and would basically crush the USD.
"China doesn't want to continue to finance our deficits"
They really have no choice, all those US dollars that they receive have to go somewhere, if they don't buy US T-bonds the dollar will tank and China doesn't want that at all. There's a reason why China owns $3 trillion of US debt and it isn't for investment purposes, it's to keep the US dollar propped up relative to the Yuan.
If China's central bank was really buying gold the price would be soaring today, they're not. In fact, buying gold would defeat the very goal they're trying to accomplish, propping up the US dollar.
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memes
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Re: IMF to make the Chinese Yuan a Reserve Currency? [Re: qman]
#21697122 - 05/19/15 04:15 AM (8 years, 8 months ago) |
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not to mention the fact that China would never take a tool out of their toolbox by ditching monetary manipulation and pegging to (or explicitly backing with) gold
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LunarEclipse
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Re: IMF to make the Chinese Yuan a Reserve Currency? [Re: memes]
#21697373 - 05/19/15 07:16 AM (8 years, 8 months ago) |
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Quote:
memes said: Lunar,
Your first sentence makes readily apparent you didn't read any of what I posted. Which saddens me, because this is one of the few times I actually took the time to write out my thoughts on one of your threads. I did so here because I (as I said originally) largely agree that what you're claiming will occur - will in fact occur. Where we disagree is in regard to (a) the time frame, (b) magnitude, and (c) degree and direction (+/-) of effect.
Quote:
China doesn't want to continue to finance our deficit, in fact China has their own deficit problems and to keep dumping money in our treasury securities is by no means a foregone conclusion.
It doesn't want to, but it has to. read the link
The article really hinges on the notion that Treasury Securities are so "safe". In fairness to the author, it was written before the debacle of October 15, 2014, which showed just how vulnerable and illiquid this supposedly safe and liquid 10 year T Note has become.
The artificially low interest rates made "possible" by The Fed and other central bankers is an experiment gone wrong, and there is nothing safe about a huge bond bubble just waiting to explode. You really can't print your way out of a debt crisis, just as diluting shares of a failing company will do nothing in the long run...
-------------------- Anxiety is what you make it.
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LunarEclipse
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Re: IMF to make the Chinese Yuan a Reserve Currency? [Re: qman]
#21697383 - 05/19/15 07:21 AM (8 years, 8 months ago) |
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I'm not sure where you get the notion that China isn't buying gold. They are and have been accumulating massive amounts of gold, and are about to become a major force in the trading of gold.
The pricing of gold is another thing the Chinese want to be involved with, as opposed to the questionable pricing tactics of the LBMA and Comex.
The notion that China will "have no other choice" when all roads are leading to them having other choices in terms of excluding the dollar have already been implemented and more are coming.
-------------------- Anxiety is what you make it.
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qman
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Re: IMF to make the Chinese Yuan a Reserve Currency? [Re: LunarEclipse]
#21697811 - 05/19/15 10:13 AM (8 years, 8 months ago) |
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Quote:
LunarEclipse said: I'm not sure where you get the notion that China isn't buying gold. They are and have been accumulating massive amounts of gold, and are about to become a major force in the trading of gold.
The pricing of gold is another thing the Chinese want to be involved with, as opposed to the questionable pricing tactics of the LBMA and Comex.
The notion that China will "have no other choice" when all roads are leading to them having other choices in terms of excluding the dollar have already been implemented and more are coming.
http://www.resourceinvestor.com/2014/11/05/gold-economic-theory-and-reality-conversation-alan-greenspan?page=1
We all know that China buys a lot of gold, I'm referring to the central bank of China, from Alan Greenspan- "If China (central bank) embarks on a gold accumulation program, global prices will rise, but only during the period of accumulation."
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LunarEclipse
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Re: IMF to make the Chinese Yuan a Reserve Currency? [Re: qman]
#21698995 - 05/19/15 04:13 PM (8 years, 8 months ago) |
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Quote:
qman said:
Quote:
LunarEclipse said: I'm not sure where you get the notion that China isn't buying gold. They are and have been accumulating massive amounts of gold, and are about to become a major force in the trading of gold.
The pricing of gold is another thing the Chinese want to be involved with, as opposed to the questionable pricing tactics of the LBMA and Comex.
The notion that China will "have no other choice" when all roads are leading to them having other choices in terms of excluding the dollar have already been implemented and more are coming.
http://www.resourceinvestor.com/2014/11/05/gold-economic-theory-and-reality-conversation-alan-greenspan?page=1
We all know that China buys a lot of gold, I'm referring to the central bank of China, from Alan Greenspan- "If China (central bank) embarks on a gold accumulation program, global prices will rise, but only during the period of accumulation."
Why would I even begin to trust Alan Greenspan when he says how much gold is held in the US? When Germany is refused their gold by the US, when no one is allowed to view this gold, when there are no audits, why would you believe it's there?
And the distinction between China and it's central bank, given it's a communist country, seems a minor distinction at best...
-------------------- Anxiety is what you make it.
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