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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

#61

Post by dools »

AC__ wrote: post #13

While you present a compelling argument, I must respectfully disagree. I may catch some flack for saying it, and many people refuse to believe it, but the U.S. is insolvent. The value of the U.S. dollar is artificially propped-up. How long do you truly believe the Russias and Chinas of the world are going to keep using greenbacks? They will feign WWIII, Israel will expand to encompass 'Greater Israel' and U.N. will f…

The US issues it's own currency and only issues debt in it's own currency. It can't be insolvent.

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

#62

Post by mooreds »

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.

Mark, that's a good point. However, I don't know how much of the world's dollars are used to buy goods that are priced in dollars, but I suspect the holdings of the developing countries to defend their currencies dwarf the amount used to buy such goods. From http://usgovinfo.about.com/od/moneymatters/ss/How-Much-US-De... foreign governments own $4.5T of the US debt.

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

#63

Post by dools »

ethbro wrote: post #31
AC__ wrote: post #25

Earlier quoted context omitted.

AF http://www.usdebtclock.org/

The thing people who harp on debt miss is that it's a zero-sum game, not an absolute competition. Yes, the US has debt, but if the market believes it's stronger than any of the alternatives... the US dollar still holds value.

The US only has "debt" in USD and pays interest in USD which it creates. It deosn't even really have "debt" in the sense that it hasn't "borrowed" to fund any spending. The bond market just allows USD account holders at the fed to earn interest on reserves and is used as a tool to target the overnight interest rate. Nothing more.

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

#64

Post by mooreds »

dools wrote: post #56
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 b…

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 that you espouse.

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

#65

Post by dools »

adventured wrote: post #29
AC__ wrote: post #25

Earlier quoted context omitted.

AF http://www.usdebtclock.org/

That's a terrible argument. You're talking about public debt, which is a small fraction of all US wealth holdings (household + corporate + government), and can be trivially managed. Further, unlike a lot of countries, the US has significant spare taxing capability (it rests in the middle tier globally on taxation). The US could easily raise $200 billion in new annual income taxes on the top 25% and not miss a beat -…

A sovereign currency issuing government doesn't need to raise taxes in order to spend, and the US government only issues USD denominated "debt" in order to target the overnight interest rate. The "debt" people talk about is not a borrowing operation.

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

#66

Post by nl »

mooreds wrote: post #62
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.

Mark, that's a good point. However, I don't know how much of the world's dollars are used to buy goods that are priced in dollars, but I suspect the holdings of the developing countries to defend their currencies dwarf the amount used to buy such goods. From http://usgovinfo.about.com/od/moneymatters/ss/How-Much-US-De... foreign governments own $4.5T of the US debt.

Yearly world trade is around $37T, of which around 60% is done in $US. So, no.

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

#67

Post by mooreds »

nl wrote: post #66
mooreds wrote: post #62

Earlier quoted context omitted.

Mark, that's a good point. However, I don't know how much of the world's dollars are used to buy goods that are priced in dollars, but I suspect the holdings of the developing countries to defend their currencies dwarf the amount used to buy such goods. From http://usgovinfo.about.com/od/moneymatters/ss/How-Much-US-De... foreign governments own $4.5T of the US debt.

Yearly world trade is around $37T, of which around 60% is done in $US. So, no.

As of 2012, it was actually ~40% (half of 84%), but your point still stands: https://www.wto.org/ENGLISH/res_e/reser_e/ersd201210_e.pdf

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

#68

Post by AJ007 »

mooreds wrote: post #64
dools wrote: post #56

Earlier quoted context omitted.

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 b…

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…

Read his book The Great Rebalancing. There are pros and cons to it, whether you think it's an overall positive or overall negative likely depends on who you are and what interests you seek.

One thing I've learned, most people do not understand international trade or the balance of payments.

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

#69

Post by rrggrr »

adventured wrote: post #37
AC__ wrote: post #32

Earlier quoted context omitted.

Yeah you're right, your argument that the entire globe will absorb U.S. inflation indefinitely is much more grounded.

My argument rests on the fact that the US economy is the world's #2 manufacturing economy, has among the highest median incomes (and median disposable incomes), has one of the most productive economies with one of the highest GDP per capita numbers, does not have a demographic bomb going off (Europe, Japan, China), is capable of being fully self-reliant on energy (which very few nations are), has a boom coming in ene…

I must disagree. The US has a shortage of employable workers as evidenced by the current unemployment rate relative to wages; it has a demographic imbalance where too few young people earn enough to support resources drawn by a much larger aging population; and there is no realistic excess taxing capacity for political and economic reasons outside the scope of this reply.

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

#70

Post by Animats »

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 zones. Yet rich people in China are overpaying for US and UK real estate. What do they think is going to go wrong in China?

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