I.M.F. Makes China’s Renminbi One of World’s Select Currencies
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Re: I.M.F. Makes China’s Renminbi One of World’s Select Currencies
#2What implications could this have for oil? Isn't oil bought and sold using US Dollars? I've always heard the World "Does Business" in US Dollars. Is this the beginning of the end for the Dollar as an international norm?
Re: I.M.F. Makes China’s Renminbi One of World’s Select Currencies
#3A big deal has been made about this, however it was inevitable and the only logical thing to do. With the substantial Yen debasement, Japan's economy is now less than half the size of China's. That will fall to 1/4th in the next ten years. Even if China were to need to devalue their currency substantially over the coming years, as is being regularly argued now, that would pale in comparison to what Japan will do to its currency in the next decade or two in order to manage their debt disaster. There's no sound argument for keeping the Yuan out of that IMF basket. The next decade economically will be about the US and China, with Japan and Russia fading further into the background, and the Eurozone continuing to struggle with Europe showing zero net growth (the UK will be a bright spot in Europe thanks to not being part of the Euro (see: the depression it has put Finland in)).
Re: I.M.F. Makes China’s Renminbi One of World’s Select Currencies
#4What implications could this have for oil? Isn't oil bought and sold using US Dollars? I've always heard the World "Does Business" in US Dollars. Is this the beginning of the end for the Dollar as an international norm?
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Re: I.M.F. Makes China’s Renminbi One of World’s Select Currencies
#5What implications could this have for oil? Isn't oil bought and sold using US Dollars? I've always heard the World "Does Business" in US Dollars. Is this the beginning of the end for the Dollar as an international norm?
Modest implications. No more than the Euro or Yen at their peaks did.
No, it's not even remotely close to the end of the dollar as the international norm. The dollar is stronger today than it has been in 20 years, and it's gaining strength as the Eurozone and Japan are a mess.
The most likely outcome to this, is that the Yen loses the position it has held on the global stage for the prior 30+ years or so. Japan is the nation that will suffer the most as China's currency rises. Right now Japan is depending on the Yen as their only remaining prop to use against their debt; the weaker the Yen's global position, the less they can spread that debt monetization cost around. China's currency will become the dominant Asian currency; the Euro will remain the dominant European currency (unless something unexpected - and worse than it has already absorbed - happens to rip the union apart (that could be Finland bailing, triggering other nations to leave as well)); the dollar will remain the global reserve currency (there needs to be one, and the West is far more comfortable with that scenario than becoming more reliant on China, as are Japan and numerous China competitors in Asia).
Re: I.M.F. Makes China’s Renminbi One of World’s Select Currencies
#6This is how the worlds reserve currencies has looked historically. My personal guess is that the Yuan will be the next bar in the graph.
http://azizonomics.com/2012/01/04/a-history-of-reserve-curre...
Re: I.M.F. Makes China’s Renminbi One of World’s Select Currencies
#7China had to make some concessions to get the yuan into the SDR basket.
Most notably they have committed to issue 3 month T-Bills every week and to allow foreign central banks to access their currency and bond markets.
Note also that this doesn't take place until October of 2016 so there should be no immediate impact on the markets. Also note the SDR has a very minor share of the global currency reserves so this is more symbolic at the moment.
Re: I.M.F. Makes China’s Renminbi One of World’s Select Currencies
#8China had to make some concessions to get the yuan into the SDR basket. Most notably they have committed to issue 3 month T-Bills every week and to allow foreign central banks to access their currency and bond markets. Note also that this doesn't take place until October of 2016 so there should be no immediate impact on the markets. Also note the SDR has a very minor share of the global currency reserves so this is m…
> Also note the SDR has a very minor share of the global currency reserves so this is more symbolic at the moment.
More (10.92%) than GBP (8.09%) and JPY (8.33%) actually.
Re: I.M.F. Makes China’s Renminbi One of World’s Select Currencies
#9What implications could this have for oil? Isn't oil bought and sold using US Dollars? I've always heard the World "Does Business" in US Dollars. Is this the beginning of the end for the Dollar as an international norm?
Modest implications. No more than the Euro or Yen at their peaks did. No, it's not even remotely close to the end of the dollar as the international norm. The dollar is stronger today than it has been in 20 years, and it's gaining strength as the Eurozone and Japan are a mess. The most likely outcome to this, is that the Yen loses the position it has held on the global stage for the prior 30+ years or so. Japan is th…
> The dollar is stronger today than it has been in 20
> years
As far as I remember the US Dollar was about 1.25 the value of the Euro at it's peak in 1999/2000.
We traded in dollars at the time.
Re: I.M.F. Makes China’s Renminbi One of World’s Select Currencies
#10This is how the worlds reserve currencies has looked historically. My personal guess is that the Yuan will be the next bar in the graph. http://azizonomics.com/2012/01/04/a-history-of-reserve-curre...
I'm more than a bit skeptical of anything pre-1750 in that graph, because the "world's" reserve currency means something very different in today's global economy than what that graph appears to be using to define them.
Those might pass for European reserve currencies in a pre-Industrial Era, but they certainly do not reflect the world economy of the time period by any means.
In addition to all of that, the USD is the only currency on that graph that was not on a gold standard at the time. That's a huge difference.