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I.M.F. Makes China’s Renminbi One of World’s Select Currencies

nytimes.com

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Re: I.M.F. Makes China’s Renminbi One of World’s Select Currencies

#51

Post by socrates1998 »

chollida1 wrote: post #7

China 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…

Yeah, I didn't know the details, but China for sure had to make some concessions to get in.

It will be interesting to see how much they allow their currency to float and how much more (if any) they will allow their citizens to expatriate the yuan.

Re: I.M.F. Makes China’s Renminbi One of World’s Select Currencies

#52

Post by the-dude »

adventured wrote: post #40
the-dude wrote: post #36

Earlier quoted context omitted.

> The Euro was widely expected to pose a challenge > to the dollar globally, which has not happened at all. The dollar was trading at about 0.75 to the Euro around 2009. What is a challenge in your eyes? Anyway, these are just opinions ( yours and mine ). Mine: no US rate hike in the foreseeable future, QE4.

The Euro has acted as a strangling device for everyone in the union not named Germany. For Germany, it has enabled them to ride an artificially cheaper currency with their exports (were they using their own currency, it would be far more expensive). For Italy, Spain, Portugal, Greece etc, the currency held them back by being even more expensive than their own currency would have been; for eg Finland, it has prevented…

You are absolutely right!

Re: I.M.F. Makes China’s Renminbi One of World’s Select Currencies

#53

Post by fredgrott »

vxxzy wrote: post #2

What 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?

not all oil...Saudi oil is because of the US agreement to defend Saudi which has that clause

Re: I.M.F. Makes China’s Renminbi One of World’s Select Currencies

#54

Post by mark_l_watson »

Before today, I think the US dollar was about 60% of the SDR bucket of currencies.

For years I have read about probable problems if the US dollar was no longer the reserve currency, but it seems from what I have been reading that there is some sort of negotiated slow migration from the US dollar to using SDRs as the reserve currency.

I like slow and steady change, even is it means that eventually my country (USA) will lose a lot of economic advantage.

Re: I.M.F. Makes China’s Renminbi One of World’s Select Currencies

#55

Post by mark_l_watson »

mooreds wrote: post #33

Note that actually, being a reserve currency isn't all that great, as you cede some control over your local economy. See http://blog.mpettis.com/2014/10/are-we-starting-to-see-why-i... for more.

Respectfully, I must dissagree.

My country (USA) has benefitted hugely by being the reserve currency: effectively being able to generate money by fiat with lower chance of this causing inflation because other countries buy dollars and hold them in reserve to buy oil, etc.

I expect the economy in the USA will take a small gradual hit over the next decade as we lose (mostly exclusive) reserve currency status.

Re: I.M.F. Makes China’s Renminbi One of World’s Select Currencies

#56

Post by dools »

mooreds wrote: post #33

Note that actually, being a reserve currency isn't all that great, as you cede some control over your local economy. See http://blog.mpettis.com/2014/10/are-we-starting-to-see-why-i... for more.

That guy is seriously confused. He seems to be referring to sectoral balances but doesn't realise that having the USD as the international reserve currency is what has allowed the US to consistently run trade deficits (where importing is a benefit to society and exporting is a cost), that the US government does entirely determine the ability of the US private sector to save USD and is able to pursue full employment because it is a sovereign currency issuing government, and that foreign central banks can only buy US treasury bonds in USD, and mostly do so with reserves earned by exporting to the US, with interest being paid in USD. The entire article is like economic sounding gibberish.

Re: I.M.F. Makes China’s Renminbi One of World’s Select Currencies

#57

Post by dools »

dear wrote: post #16
acd wrote: post #6

This 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 think Gold was the 'global reserve currency' before the 20th century.

Gold was never a currency, it's a commodity.

Re: I.M.F. Makes China’s Renminbi One of World’s Select Currencies

#58

Post by rrggrr »

This story masks BAD news.

http://blog.mpettis.com/2015/11/chinas-rebalancing-timetable...

China's debt today is over 200% of its GDP and may exceed 300% in five years. One hopes the IMF and China agreed on concessions will assist China in rebalancing its economy quickly, because as Petits' posting points out -- a disruptive end is near for the current model.

Re: I.M.F. Makes China’s Renminbi One of World’s Select Currencies

#59

Post by dools »

mikeash wrote: post #20
chimeracoder wrote: post #10

Earlier quoted context omitted.

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…

Wouldn't the gold standard render the entire notion of a "reserve currency" meaningless, too? If you're holding a gold-backed currency then you're effectively just holding gold. Holding a currency as a "reserve currency" probably meant actually holding a bunch of gold in a vault. It hardly matters whose face was on it.

All a gold standard does is increase instability in the economy and reduce domestic policy space. It was abandoned for a very good reason, and typically would be abandoned often anyway even when it was "in effect". It's a ludicrous way to run an economy, similar to a pegged exchange rate.

Re: I.M.F. Makes China’s Renminbi One of World’s Select Currencies

#60

Post by dools »

adventured wrote: post #5
vxxzy wrote: post #2

What 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…

Japan's debt is denominated in Yen. They don't have foreign denominated debt and they issue their own currency, therefore they're fine. The crisis in the Eurozone is due to the fact that members of the EMU gave up their currency sovereignty and can't make new Euros when they need to. Japan and Europe are in a completely different situation to one another.
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