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Europe’s central banks are starting to replace dollar reserves with the yuan

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Re: Europe’s central banks are starting to replace dollar reserves with the yuan

#11

Post by linkmotif »

indubitable wrote: post #5
tim333 wrote: post #2

Well China's now the world's largest economy by PPP GDP [1] so it makes some kind of sense. I'm not sure how freely convertible the Yuan is though. [1] https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)

This is not based on GDP. A big part of the USD's stability has been based on an indirect oil backing. Going back to the 70s the US in which we offered substantial benefits to oil producing nations in exchange for little more than them only selling their oil in USD, and then investing excess revenues in US securities. The petrodollar in another word. This has numerous positive effects other than what I'm mentioning h…

> but I want to keep this brief.

Feel free to elaborate

Re: Europe’s central banks are starting to replace dollar reserves with the yuan

#12

Post by tim333 »

indubitable wrote: post #5
tim333 wrote: post #2

Well China's now the world's largest economy by PPP GDP [1] so it makes some kind of sense. I'm not sure how freely convertible the Yuan is though. [1] https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)

This is not based on GDP. A big part of the USD's stability has been based on an indirect oil backing. Going back to the 70s the US in which we offered substantial benefits to oil producing nations in exchange for little more than them only selling their oil in USD, and then investing excess revenues in US securities. The petrodollar in another word. This has numerous positive effects other than what I'm mentioning h…

I not convinced oil is that big a deal these days. The US kind of owns huge swathes of the world economy - tech - facebook, google apple etc, fast food and drink - coke, pepsi, McD, places to stay - Hilton, Sheraton, airbnb and so on. Typed in Bangkok on an Apple while drinking coffee paid for on MasterCard while waiting to fly on a Boeing.

So people will lend to the US as it had a lot of income, assets and a reputation for paying. Compare that to the country with the world largest oil reserves, Venezuela.

Re: Europe’s central banks are starting to replace dollar reserves with the yuan

#13

Post by klodolph »

jhoechtl wrote: post #9

Do yourself a favour and call it by it's name: the curreny is called Renminbi

There's nothing wrong talking about yuan. Renminbi is just a bit more formal (note: not capitalized). Yuan is the denomination and exchange rates are expressed in yuan. The currency code for renminbi is CNY, or "Chinese yuan". Similarly we talk about reserves of "pounds" even though that's not the name of the currency either.

Re: Europe’s central banks are starting to replace dollar reserves with the yuan

#14

Post by wodenokoto »

indubitable wrote: post #5
tim333 wrote: post #2

Well China's now the world's largest economy by PPP GDP [1] so it makes some kind of sense. I'm not sure how freely convertible the Yuan is though. [1] https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)

This is not based on GDP. A big part of the USD's stability has been based on an indirect oil backing. Going back to the 70s the US in which we offered substantial benefits to oil producing nations in exchange for little more than them only selling their oil in USD, and then investing excess revenues in US securities. The petrodollar in another word. This has numerous positive effects other than what I'm mentioning h…

I have been wondering this myself and oil seems like a good explanation.

What is the explanation for Japan? They don't have oil and they have greater debt than the us (relatively), yet they haven't been met with anything worse than stagnation.

Re: Europe’s central banks are starting to replace dollar reserves with the yuan

#15

Post by smallnamespace »

indubitable wrote: post #5
tim333 wrote: post #2

Well China's now the world's largest economy by PPP GDP [1] so it makes some kind of sense. I'm not sure how freely convertible the Yuan is though. [1] https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)

This is not based on GDP. A big part of the USD's stability has been based on an indirect oil backing. Going back to the 70s the US in which we offered substantial benefits to oil producing nations in exchange for little more than them only selling their oil in USD, and then investing excess revenues in US securities. The petrodollar in another word. This has numerous positive effects other than what I'm mentioning h…

You may be correct on all the other points but increasing the monetary base by 400% happened at the same time all broader metrics of money (M2, M3, etc.) would have have rapidly fallen and collapsed.

The entire world economy was deleveraging at an enormous rate and essentially destroying tons of money in the process. Fractional reserve banking essentially lets banks create money; when everyone is busy running for the exits of course the Fed can increase the base by 400% and we would merely be treading water.

Re: Europe’s central banks are starting to replace dollar reserves with the yuan

#17

Post by seanmcdirmid »

mc32 wrote: post #7

I like Japan --I think for a mid-sized country they have done well for themselves... but their representation in foreign reserves is a bit outsized. The Yuan, given China's economic strength, has nowhere to go but up. We'll have to see how European Central banks like that in 10-20 years when they exert more influence on policy.

The yuan is not convertible, like the yen, dollar, and euro are. It doesn’t float, it’s exchange rate is set by fiat.

When the yuan is actually traded in the wild, then it will move a few steps closer. I don’t think the government will ever let it get stronger than 6 rmb/usd, it would absolutely ruin their exports.

Re: Europe’s central banks are starting to replace dollar reserves with the yuan

#20

Post by Animats »

China's exchange controls limit the external use of yuan. China's leadership and the PBOC go back and forth on this. If the yuan is to be used widely outside China, China will have to relax their exchange controls. But that means more exposure to external financial events like recessions. A few years ago, reduced exchange controls seemed likely, but now, things seem to be tightening up.
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