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Is A Currency War Inevitable?

Chart Forum » Forex & Bonds » Is A Currency War Inevitable?

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colin_twiggs
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Username: colin_twiggs

Post Number: 786
Registered: 06-2009

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Friday, October 08, 2010 - 11:59 am:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)




quote:

Has the time for a currency war with China arrived? The answer looks increasingly to be yes. The politics and economics of an assault on Chinese exchange rate policy are increasingly convincing. The idea is, of course, deeply disturbing. But I no longer believe there is an alternative.




Martin Wolf, FT.com
How to fight the currency wars with stubborn China


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colin_twiggs
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quote:

IMF guidelines call on member countries to take into account the “interests of other members, including those of the countries in whose currencies they intervene”, but there is no indication that those intervening ever do........This gap can be filled, however, by the introduction of a new policy instrument: countervailing currency intervention. When China or Japan buy dollars to keep their currency substantially undervalued, the US should sell an equivalent amount of dollars to push back. The IMF should authorise such intervention when necessary, to discipline countries that are violating their obligations by engaging in deliberate undervaluation.




Fred Bergsten, FT.com
We can fight fire with fire on the renminbi







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colin_twiggs
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quote:

Faced with fiscal exhaustion, hostile electorates and booming China's refusal to allow a rapid rise of the yuan, the U.S., Japan and possibly Britain seem set on another bout of money printing to reboot their ailing economies and weaken their currencies.

Fast-growing developing countries with flexible exchange rates are caught in the crossfire and are reacting fast, leading to Brazil on Monday to double taxes on foreign inflows and South Korea on Tuesday to threaten curbs on currency trading.




Mike Dolan, Reuters
G20 proximity talks needed to avert FX war


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colin_twiggs
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quote:

Richard Fisher [head of the Dallas Fed] worried that what appears to be a global tilt toward greater central bank action via asset purchases could be problematic. Citing "the specter of competitive quantitative easing," Fisher said "such a race would be something of a one-off from competitive devaluation of currencies, a beggar-thy-neighbor phenomenon that always ends in tears."




Michael S. Derby, Wall Street Journal
Dallas Fed’s Fisher Rebuts Calls for More Action


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ehmu
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Friday, October 15, 2010 - 01:00 am:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



We all know how teenagers with a freshly printed drivers licence like to steer the vehicle, and sit in the drivers seat, and name the person that sits in the front passengers seat along side them.

Well in terms of world reserve currencies the $US is it. The US is in the drivers seat, and I'm pretty sure that they are not about to allow any one else driving privileges.

$US is used to purchase gold. The US also wants to own more gold, especially knowing that everyone else wants gold. They are devaluing the world reserve currency to weaken purchasing power of others, selling gold futures to lower the price of gold, and purchasing gold bullion with some of the monopoly dollars that they just printed.

Will there be a currency war ?? I personally don't think so. There might be a bunch of unrest, grumbling, scheming, complaining, defiance, oppression and struggle; but as long as the US is in charge there will be no currency war.

The Golden Rule has been invoked, "them with the gold rules".

http://en.wikipedia.org/wiki/Reserve_currency




(Message edited by ehmu on October 15, 2010)


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ehmu
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The jig is up Mr. Geithner. This in my opinion at least, is why Mr. Geithner came out with a plan for diplomatic international problem solving.

Why does he seem so relaxed? It is likely because the rest of the world has finally realized that their donation has already been made (they have been disadvantaged in the last two years of chaotic financial crisis), and now they need to pay attention or pay more dearly to the maestro. The "who owns what" is becoming painfully visible.

http://online.wsj.com/article/SB10001424052702304011604575564661615005500.html?m od=WSJ_hpp_LEFTWhatsNewsCollection

A simple lesson on international pecking order has begun.



(Message edited by ehmu on October 23, 2010)




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colin_twiggs
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Wednesday, February 23, 2011 - 11:16 am:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)




quote:

My concern about the Chinese economy:
It is true that they have during the crisis shifted towards a more domestic demand-driven economy, but it is not consumption that is picking up the slack -- it is largely investment. Unless consumption growth catches up with investment growth we will have two sets of problems. One, is the potential problem for the banking system if non-performing loans (NPLs) build up. Second, this excess capacity has got be exported somewhere if they cannot absorb it domestically. So I don't take as much comfort as Joe (Gagnon) from the (Chinese) trade data (Dec/Jan shows a narrowing trade surplus).




~ Eswar Prasad, economist with the Brookings Institute
Wall Street Journal: Experts Shine Light on World's Currencies

(Message edited by colin_twiggs on February 23, 2011)







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ingot54
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Monday, July 09, 2012 - 10:10 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Colin

I discount EVERYTHING said about currencies, finance, China, debt, Quantitative Easing and so on, if it comes from the lips of any American administrator.

Clearly China is well on-track to invite nations to adopt the Renminbi as the next Reserve Currency of the world.

Indeed, we are hearing more and more from such respected sources as the AFR about this.

The BRIC counties have been trading in RMB for some time. In fact, everywhere you look there are more signs that this is the trend.

However, in reading Wikipedia just now, it is said that:

The Chinese yuan or renminbi (RMB) cannot be used
as a reserve currency as long as the Chinese government
maintains capital controls on the conversion of
its currency.

The currency would not be attractive to central
banks for holding unless China developed a strong
open bond market.

The Bank for International Settlements estimates
that in 2010 around 0.9% of all currency market
transactions were carried out in renminbi.

Chinese President Hu Jintao has said that it would be a
long process before the yuan was accepted as a global
currency.



According to economist Michael Hudson, China has said,
"we don't want to make any more foreign exchange
reserve of any paper currency, because all the paper
currencies are government debt currencies."

China, Russia, India, Turkey, Brazil, Venezuela and
oil-producing countries have recently agreed "to
transact all of their mutual trade and investment
in their own currencies" effectively minimizing
the need, at least in the short term, for a global
reserve currency.

And yet oil is still priced in dollars, which has
brought complaints about OPEC's policies of
managing oil quotas to maintain dollar price stability.


Even so, the world has shown that when things need to happen, they can happen at the speed of light, if there is the will to do so.

I believe that we consumers of such information are the last to know the news, and in holding to that view, I have rarely been surprised by any development s in the financial world.

With that in mind, I take the idea of the RMB as the next reserve currency with a grain of Sodium Chloride. China has some serious short-term issues with its banking, and this WILL - ie there is NO DOUBT - cause a serious recession in this country within 18 months ... maybe sooner.

China has severe toxic debt problems of its own.

In dealing with those, how will that affect trade and thus economics between our countries?


Keep Smiling - Don't look back

Hell, there are no rules here - we're trying to accomplish something ~ Thomas A. Edison

Never believe that a few caring people can't change the world. For, indeed, that's all who ever have ~ Margaret Mead

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