China just dumped the dollar system

[Agnostic_Indian]

my bro from america told me that america do some malpractice with dollar trade in oil..some thing like printing more notes.. but i didn't quiet get it.

 

[below_freezing]

The article is saying that the PBoC is willing to start making the Yuan a defacto reserve currency. This may indeed happen because China is the source of much of the world's manufactured goods. The Yuan would essentially be backed by these goods. The dollar is not backed by goods, but by the power of the US Military.

At the same time China doesn't want the Yuan to float because then the currency would be vulnerable to attack by the West. In the end, I just don't see America sitting back and allowing this to happen. America would rather overthrow King Abdullah or the CPC before they let petroleum trade in Yuan.

Well I guess Saudis better watch out because CPC is stable like a rock. Anything they can do to destabilize the CPC outside of psychological warfare will hurt them far more.

 

[gpit]

I can think of two reasons for China to be cautious: First, it's only in the past two decades that China has sent students abroad to learn modern macroeconomics, ...

Completely wrong on this aspect!

One of my friends in China got bachelor degree in Economics back in the mid 1980s. And macro-e is one of her mandatory classes.

...and as I can attest the first ones studied it in secret from their Chinese government sponsor, sneaking economic books to read in their science labs.

If we believe you, that's a personal study interest of that INDIVIDUAL that was in conflict with the gosl of the government that paid for the individual's study.

Second, for the past several hundred years China's governments have often issued or employed bad money, currency that did not maintain its purchasing power.

This was particularly so when China was devastated by foreign forces, including the US. Even having a mostly peaceful time in this country, bad stuff happened, too.

But please don't deny the good time in the past "several hundred years", either.

Still, things are proceeding slower than I think could be the case: China should have started accumulating precious metal reserves in the 90s, should have moved into the Euro sooner, should have made the yuan convertible a year or two ago, and should have issued tradeable bonds for big capital projects a decade ago. But while the purchasing power and economic might of China's citizenry would have been greater, I think the prospect of high labor costs and unemployment does not please China's leadership.

Europe doesn’t quite have its own independent voice. For instance, EU wants to lift military embargo, but has to be constrained by US unhappiness. In trade, the end result is that US gains the most trade benefit with China with EU degraded into second class, because US has to be the first in the field (with huge profit), would then EU be allowed in next.

A complete free conversion of Yuan serves only SOME Westerners' interest and will damage Chinese interest, as well as ordinary Americans’ interest. I guess you probably don’t know the fact that vast small private shops in China living on small gain based on currency differences; and probably you haven’t figured in that up-lift of Yuan value means inflation in US.

So, I'm in full support of limited float of Yuan, not completely free conversion, but maybe a bigger gap to move, for the moment.

 

[below_freezing]

Lots of people have the misconception that China's success is dependent on RMB value. it's not. RMB rose 20% in the past 5 years and is still rising while China's economy has been growing faster than ever. RMB rising doesn't affect small shops because those are mostly retailers that sell within the country only. It only affects contract export processing companies of all sizes like Foxxcon (and in fact, even high tech ones like TSMC and SMIC). Truly indigenous high tech companies like ZTE, Huawei, Shanghai Electric, Changhong, CSSC, etc. are relatively unaffected due to both domestic sales and irreplacable high tech, and in fact importers like Sinopec are directly benefitted by increased RMB value.

As China is a huge importer of raw materials, a reasonable, controlled increase in the RMB value is in our interests. Not the suicidal shock therapy the US is recommending.

 

[Aramsogo]

Well I guess Saudis better watch out because CPC is stable like a rock. Anything they can do to destabilize the CPC outside of psychological warfare will hurt them far more.

I think when America is out of Iraq and Afghanistan and replenished its military, it will try to draw China into a regional war. The easiest thing would be to talk Taiwan into declaring independence. The winner gets to be the world's reserve currency.

 

[below_freezing]

I think when America is out of Iraq and Afghanistan and replenished its military, it will try to draw China into a regional war. The easiest thing would be to talk Taiwan into declaring independence. The winner gets to be the world's reserve currency.

Any war between US and China will be hard to keep regional and the Wall Street regime knows this better than anyone else. Especially in the period after 2020, it's difficult to forsee Taiwan being able to maintain independence longer than 2 days.

 

[Aramsogo]

Any war between US and China will be hard to keep regional and the Wall Street regime knows this better than anyone else. Especially in the period after 2020, it's difficult to forsee Taiwan being able to maintain independence longer than 2 days.

The implications of reserve currency status is H U G E. It means the world is working for you. It means the world lends you money for free. It will lift another 200 million people in China out of poverty or send 30 million Americans into poverty. Trust me, if PBoC comes close to threatening dollar dominance, it is a war worth fighting for Americans.

 

[below_freezing]

The implications of reserve currency status is H U G E. It means the world is working for you. It means the world lends you money for free. It will lift another 200 million people in China out of poverty or send 30 million Americans into poverty. Trust me, if PBoC comes close to threatening dollar dominance, it is a war worth fighting for Americans.

Depends, if they have the confidence to win it. It's either act now or never for the Wall Street regime. They can't wait to get out of Afghanistan, by the time they do it'll be 2015 and our carriers would be in the sea and J-20 starting to be mass produced, then assume a few years for restructuring. Also, the USD is directly tied to petroleum. Whoever is independent of petroleum is independent of USD. Within the next 20 years, I think we will begin making steps towards that end, with electric vehicles such as trains powered by nuclear, hydroelectric and solar power.

 

[marshall]

The article is saying that the PBoC is willing to start making the Yuan a defacto reserve currency. This may indeed happen because China is the source of much of the world's manufactured goods. The Yuan would essentially be backed by these goods. The dollar is not backed by goods, but by the power of the US Military.

Here is where I disagree with those who believe that fiat currencies must be backed by redeemable precious metals or else they run the danger of uncontrolled monetization and long-term depreciation. Although, I agree that there should be some level of inflation inherent in the monetary system, I think the confidence in a currency is largely based on psychology and the control of international institutions, as they are controlled and/or indirectly manipulated under the current Anglo-Saxon world order, aka "Western" countries. Once this confidence is broken, it doesn't matter how financially strong a currency is in reality because it will come under attack anyways. The 1997 Asian Financial Crisis is a perfect example considering how the currencies of Singapore, Hong Kong and Taiwan were attacked, even though they were all fiscally sound. When the US Dollar falls, the thing the Renminbi will need is not physical assets to back the currency, but it will need to be protected from hostile foreign financial attacks that will inevitably be launched under the auspices of the free market even though they will actually be ordered by hostile foreign governments and their proxies.

At the same time China doesn't want the Yuan to float because then the currency would be vulnerable to attack by the West. In the end, I just don't see America sitting back and allowing this to happen. America would rather overthrow King Abdullah or the CPC before they let petroleum trade in Yuan.

This is a valid point for every country thinking of switching to the Renminbi because they will become the targets of false flag operations, coups and color revolutions. So, they had better be prepared if they go this route. My guess is, the smaller countries will jump on board simultaneously through regional blocs within multilateral currency swap agreements with China and larger countries doing the same via bilateral currency swap agreements. This would avoid opening up China's current account to financial attack while allowing the Renminbi to spread as a reserve currency anyways. This process is already underway.

 

[marshall]

The implications of reserve currency status is H U G E. It means the world is working for you. It means the world lends you money for free. It will lift another 200 million people in China out of poverty or send 30 million Americans into poverty. Trust me, if PBoC comes close to threatening dollar dominance, it is a war worth fighting for Americans.

This is only true if there is a dominating world reserve currency. In such a situation, the country printing the world reserve currency would be able to print perpetual current account deficits and as a result basically steal the economic wealth of other countries using their currency. In the case of China, it will never have the dominating status of the US Dollar so China does not have the same potential to steal the wealth of other countries like the US and UK do today. China has also proven that it does not have a predatory international financial relationship with other countries as the Anglo-Saxon world order, aka "Western" world does.

 

[Aramsogo]

^^Marshall, I agree but why would the US freely give up its dollar dominance. It has so many advantages. The GBP to USD transition was smoothed over by the fact the same clique controlled both the Federal Reserve and the Bank of England. I doubt these people are in charge of the PBoC ?? You can't threaten their world order without expecting war.

 

[below_freezing]

^^Marshall, I agree but why would the US freely give up its dollar dominance. It has so many advantages. The GBP to USD transition was smoothed over by the fact the same clique controlled both the Federal Reserve and the Bank of England. I doubt these people are in charge of the PBoC ?? You can't threaten their world order without expecting war.

Sure you can. Make the cost of physical war so high that it is unfeasible to go to war. Then again, expect China to be the target of false flag attacks, propaganda, psychological warfare, etc. and for more "dissidents" and fake news popping up.

 

[CardSharp]

The implications of reserve currency status is H U G E. It means the world is working for you. It means the world lends you money for free. It will lift another 200 million people in China out of poverty or send 30 million Americans into poverty. Trust me, if PBoC comes close to threatening dollar dominance, it is a war worth fighting for Americans.

Money makes money and that's what's propping a frail American economy.

 

[casual]

does this mean i'll finally be able to buy and speculate in RMB?

 

[Anonymous user]

I doubt the world powers that be will allow for another countries CCY to become a reserve after seeing what shi*t that happened when Lehman went under. I am pretty if it wasn't for the USD being backed by a Oil economy the USD would be worth half or less then its current value

The IMF was pushing for a World CCY to be created by a basket of CCY's or backed by gold, if the world ever breaks out of a USD stranglehold I believe that is what they will push for first.