I.M.F. Makes China’s Renminbi One of World’s Select Currencies • Hacker News Board

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

#81

Post by jacobolus » Mon, Nov 30, 2015, 10:34 PM UTC

mark_l_watson wrote: post #55

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.

Weakening currency and a bit of inflation would be great for most people in the US, reducing unemployment, strengthening US experts, and reducing debt load for all the folks struggling to pay off their mortgages and student loans. Prices on imported goods would of course rise a bit, but prices on non-tradeables like healthcare, housing, and education would probably stop rising so fast, or might even drop a bit. For the last few years now the US has had too little inflation (this year it’s stuck close to 0%), and too strong a currency. Getting inflation up to about 2–3% annually (the Fed target is 2%) would be great.

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

#82

Post by caskance » Mon, Nov 30, 2015, 10:38 PM UTC

Animats wrote: post #70

beatpanda wrote: post #46

Does this have an affect on the ability of wealthy Chinese people to move their money out of China?

That's a very big question. China has exchange controls, but only for residents of China. If you have access to Hong Kong, which the rest of the world does, you can exchange yuan for other currencies at market rates. China's exchange controls are leaking at the rate of about $500bn a year. It's worrisome that China's rich people want to get their money out of China. China is growing faster than the dollar or euro zon…

They think they will be charged with corruption and they'd like to own homes and assets in other countries that won't be seized when that happens.

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

#83

Post by kuschku » Mon, Nov 30, 2015, 10:48 PM UTC

TheLogothete wrote: post #47

dear wrote: post #16

Earlier quoted context omitted.

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

You are correct, currency and financial systems today are vastly different. That site seems to be pushing the "THE PETROLDOLLAR IS DYING ANY DAY NOW" agenda.

Well, because it is going to die.

Holding assets in dollar makes little sense for most people on the planet, and when these people become richer, it makes sense they will use their own currencies. With them, their companies. With those, their governments.

The EUR, despite current instability, and the Chinese Y have good chances.

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

#84

Post by npalli » Mon, Nov 30, 2015, 11:02 PM UTC

mark_l_watson wrote: post #54

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) wil…

The USD has gone from 41.9 to 41.73% in the SDR basket. So, no change in the Dollar status. The Euro has gone down the most from 37.4% to 30.93%. The importance of SDR as a reserve currency is not accurate.

http://www.imf.org/external/np/exr/facts/sdr.htm

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

#85

Post by jacobolus » Mon, Nov 30, 2015, 11:17 PM UTC

dools wrote: post #78

mooreds wrote: post #64

Earlier quoted context omitted.

I've been following Mr Pettis for a while. I don't have a degree in economics, just a few classes and an interest. I like how he argues from identities, but can't vouch for his methods in the greater economic landscape. I'm not sure I understand all of your argument, but would be interested in your counterpoints to point 6 of his appendix on that post. Perhaps he's missing some of the benefits of a reserve currency t…

Point 6 in his appendix is in counterpoint to his own article in that it states the benefits to the US of the USD being the international reserve currency. Wilson and Riley's article is accurate! However they fail to mention that US denominated debt is simply an instrument for controlling the overnight interest rate target, rather than a borrowing operation used to fund government spending (ie. it's not really "debt"…

The Pettis post under discussion in this subthread is straight-forward analysis according to standard textbook models of international trade. Everything he says is right out of an intro undergraduate course on the subject.

I don’t understand why you find it confusing. Perhaps you could elaborate a bit? (Admittedly, this stuff is clearer when spelled out over 100 pages of a textbook with a bunch of examples, clear formulae, and discussion of competing theories, vs. condensed into a blog post.)

Wilson and Riley’s argument is pretty hand-wavey, full of entirely unsupported assertions. (Which is fair for a very short blog post, I suppose, but isn’t very convincing.) I’m not sure what they have to do with “Modern Money Theory”, which from what I gather in a quick web search disagrees sharply with their analysis.

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

#86

Post by lambdasquirrel » Mon, Nov 30, 2015, 11:40 PM UTC

mark_l_watson wrote: post #54

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) wil…

They also have to allow more transparency and access into their financial markets. Being part of the club has costs too. They probably did it because they think they're ready for it.

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

#87

Post by thaumasiotes » Tue, Dec 01, 2015, 12:15 AM UTC

the-dude wrote: post #36

adventured wrote: post #19

Earlier quoted context omitted.

The Yen was a credible currency in 1995, and it's now in much worse shape (both today and its outlook). The Euro was widely expected to pose a challenge to the dollar globally, which has not happened at all. The dollar is as strong as it is even with 0% interest rates. Imagine if rates were even half the levels they were 20 years ago. I'd definitely make the argument the dollar is stronger today than it has been sinc…

> 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 dollar was trading at about 0.75 to the Euro around 2009. What is a challenge in your eyes?

I can't say what adventured meant by a challenge, but it certainly wasn't that. The exchange rate with the dollar is just a function of how many euros exist. Challenging the dollar would be something more along the lines of "do people prefer to store their wealth in dollars or in euros".

> Man, where to start? Just because a country's basic unit of currency is worth more than ours doesn't mean the country is richer. If you think that 100 pennies is "richer" than 10 dollars because the absolute number is bigger, then we're not going to have much luck dealing with foreign exchange rates.

> A common myth is that if a currency is worth less than $1, it's weaker than the U.S. dollar, and if it's worth more, then it's stronger. Your Latvian friend is trying to pull this on you, but it's nonsense.

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

#88

Post by thaumasiotes » Tue, Dec 01, 2015, 12:28 AM UTC

caskance wrote: post #82

Animats wrote: post #70

Earlier quoted context omitted.

That's a very big question. China has exchange controls, but only for residents of China. If you have access to Hong Kong, which the rest of the world does, you can exchange yuan for other currencies at market rates. China's exchange controls are leaking at the rate of about $500bn a year. It's worrisome that China's rich people want to get their money out of China. China is growing faster than the dollar or euro zon…

They think they will be charged with corruption and they'd like to own homes and assets in other countries that won't be seized when that happens.

A few years ago there was that entrepreneur who was executed (!) for seeking funding improperly. I'm not sure guarding against seizure in the case of corruption charges is what people are thinking of; corruption charges might be unrecoverable.

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

#89

Post by jquery » Tue, Dec 01, 2015, 12:34 AM UTC

jacobolus wrote: post #81

mark_l_watson wrote: post #55

Earlier quoted context omitted.

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.

Weakening currency and a bit of inflation would be great for most people in the US, reducing unemployment, strengthening US experts, and reducing debt load for all the folks struggling to pay off their mortgages and student loans. Prices on imported goods would of course rise a bit, but prices on non-tradeables like healthcare, housing, and education would probably stop rising so fast, or might even drop a bit. For t…

Can you explain how "weakening our currency" isn't equivalent to making us poorer overall? What's so bad about a strong currency?

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

#90

Post by nradov » Tue, Dec 01, 2015, 12:53 AM UTC

jacobolus wrote: post #81

mark_l_watson wrote: post #55

Earlier quoted context omitted.

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.

Weakening currency and a bit of inflation would be great for most people in the US, reducing unemployment, strengthening US experts, and reducing debt load for all the folks struggling to pay off their mortgages and student loans. Prices on imported goods would of course rise a bit, but prices on non-tradeables like healthcare, housing, and education would probably stop rising so fast, or might even drop a bit. For t…

This is nonsense. By that logic every country should continuously weaken it's currency in order to gain an advantage. So we would get caught in a descending spiral of every country constantly trying to have a weaker currency relative to its trading partners. If the USD weakened, which other currencies would strengthen and how do you think those other central banks would react?