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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

#101

Post by rrggrr »

throwaway4633 wrote: post #94
rrggrr wrote: post #58

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.

Debt doesn't really matter when it's your own currency for your own country. For example, imagine you control a cult of 50 people and invent a currency (cultcoin). You can create a debt of 10 billion cultcoins and it won't affect the real wealth of the residents. What really matters more is the exports and imports to the outside world, and the value produced by the residents.

No. What matters is the ability of the majority of people to have decent jobs, such that the State can maintain economic and social stability. The ineffecincies huge debt driven growth create make stability long term impossible.

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

#102

Post by beachstartup »

rrggrr wrote: post #100
fspeech wrote: post #76

Earlier quoted context omitted.

Internal debt is also internal asset, which net out to zero. China is a net international creditor. Its internal debt structure may have implications for its economoic future, but is not nearly as relevant as its current account balance for foreign holders of RMB.

Internal debt is not an asset because the debt holders are SOE's, provincial governments and companies too big too fail. Therefore the largest share of debt is public debt, and work must be done to raise incomes throughout China so that debt can be serviced by taxes on a healthy private sector.

i think previous commenter was referring to the balance sheet definition of debt, which is Assets = Liabilities + Equity

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

#103

Post by dools »

nradov wrote: post #91
dools wrote: post #57

Earlier quoted context omitted.

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

Is an electron a particle or a wave? From a trading standpoint gold sometimes acts like a currency and sometimes like a commodity. Does the distinction even matter?

Various precious metals in the past have been used in coinage, and at times certain currency issuers have promised to exchange their currency for gold at a fixed rate, but at no time has gold been a currency. And yes the distinction matters -- goods do not buy goods. Goods buy money, money buys goods. Money, as a definition, should not be producable through the application of labour

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

#104

Post by dools »

jacobolus wrote: post #85
dools wrote: post #78

Earlier quoted context omitted.

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 for…

I don't find it confusing, I find that the man is confused about economics. I already listed the main points in my post above, although 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 versus a post on Hacker News[1]

MMT agrees with most of the points Wilson and Riley make (ie. that exporting is a cost and importing is a benefit, referred to in the article as "Seignorage", and lower transaction costs) but they're incorrect on the notion that one of the advantages of being the reserve currency is the ability to "run up huge amounts of debt at low interest rates" -- the US doesn't need to borrow US dollars, it creates US dollars. If they're referring to the advantage in being that the US private sector has been able to borrow US dollars from foreigners cheaply, then maybe that's a benefit I'm not really sure but they could just as easily have gotten that money from other banks with accounts at the Fed anyway (so long as there was sufficient cash reserves to satisfy the demand for dollars!)

[1]http://www.amazon.com/Modern-Money-Theory-Macroeconomics-Sov...

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

#105

Post by tmlee »

throwaway4633 wrote: post #94
rrggrr wrote: post #58

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.

Debt doesn't really matter when it's your own currency for your own country. For example, imagine you control a cult of 50 people and invent a currency (cultcoin). You can create a debt of 10 billion cultcoins and it won't affect the real wealth of the residents. What really matters more is the exports and imports to the outside world, and the value produced by the residents.

When debt is created, wealth is being transferred from the residents to the government. If the government fails to use the debt created to stimulate the economy in the long term, the impact will trickle down and the residents will find themselves poorer and not being able to be competitive enough for the outside world to demand their goods.

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

#106

Post by tmlee »

jquery wrote: post #89
jacobolus wrote: post #81

Earlier quoted context omitted.

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?

A weakening currency is probably aimed to boost exports.

I think in theory, say the US Dollar weakens, everything appears cheaper, exports increase. US companies will then be able to employ more people within the country and thus improves employability and domestic consumption.

It makes us poor overall, if we consume imported products, travel internationally, and if the economic plan fails in which employability and domestic consumption does not increase. This can happen when other equally competitive countries counter by de-valuing their currency as well.

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

#107

Post by dear »

dools wrote: post #103
nradov wrote: post #91

Earlier quoted context omitted.

Is an electron a particle or a wave? From a trading standpoint gold sometimes acts like a currency and sometimes like a commodity. Does the distinction even matter?

Various precious metals in the past have been used in coinage, and at times certain currency issuers have promised to exchange their currency for gold at a fixed rate, but at no time has gold been a currency. And yes the distinction matters -- goods do not buy goods. Goods buy money, money buys goods. Money, as a definition, should not be producable through the application of labour

https://en.wikipedia.org/wiki/Gold_standard

Origin

"The gold specie standard arose from the widespread acceptance of gold as currency.[7] Various commodities have been used as money; typically, the one that loses the least value over time becomes the accepted form.[8] The use of gold as money began thousands of years ago in Asia Minor."

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

#108

Post by dools »

dear wrote: post #107
dools wrote: post #103

Earlier quoted context omitted.

Various precious metals in the past have been used in coinage, and at times certain currency issuers have promised to exchange their currency for gold at a fixed rate, but at no time has gold been a currency. And yes the distinction matters -- goods do not buy goods. Goods buy money, money buys goods. Money, as a definition, should not be producable through the application of labour

https://en.wikipedia.org/wiki/Gold_standard Origin "The gold specie standard arose from the widespread acceptance of gold as currency.[7] Various commodities have been used as money; typically, the one that loses the least value over time becomes the accepted form.[8] The use of gold as money began thousands of years ago in Asia Minor."

The terminology is wrong in subtle bu important ways. Here's a great presentation on the origins of money and debt: http://m.youtube.com/watch?v=0zEbo8PIPSc and here is the analysis of nominalism vs. Metalism from Randall Wray who is one of the key proponents of modern monetary theory http://neweconomicperspectives.org/2011/08/mmp-blog-12-commo...

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

#109

Post by kuschku »

aianus wrote: post #99
kuschku wrote: post #83

Earlier quoted context omitted.

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.

> 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. You have a lot of misplaced faith in foreign central banks. A lot of foreigners absolutely do not trust their central banks, some even to the point of using the US dollar in their day-to-day transactions (Cambodia, various African nations, etc.) If you're…

Well, for many people it makes sense to trust their own central bank more than a foreign one, especially when their nation is stable.

No matter what happens, I can pay my taxes and get food at the bakery in Euro. Even if the Euro crashes.

But if I hold Dollar, my government and bakery won’t take Dollar, so I’d have to convert – and lose or make money based on the exchange rate every time.

It’s the same reason why bitcoin isn’t effectively used: If you have to exchange currencies every time you try to buy something, the currency is worthless to you.

And for a billion chinese people, the Yuan is going to be the currency of choice. For 500 million europeans, the Euro is the currency of choice.

But only the US and a handful of instable african or island nations use the Dollar, all combined still less people.

For private holdings, the Dollar is going to lose power. (In fact, it has lost the majority of private holdings long ago)

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

#110

Post by caskance »

thaumasiotes wrote: post #88
caskance wrote: post #82

Earlier quoted context omitted.

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.

If he were living in Vancouver, the Chinese government would likely have not been able to execute him. And not everyone gets capital punishment.
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