Is this the end of the dollar

[IAN 2411]

China yuan could be reserve currency with reform - IMF

Reuters – 6am... 18th March

BEIJING (Reuters) - China's yuan could become a reserve currency in future if the country undertakes further economic reform, International Monetary Fund managing director, Christine Lagarde, said in a speech on Sunday.

The IMF chief, speaking to a gathering of leading Chinese policymakers and global business leaders, added that China needed a roadmap for a stronger, more flexible exchange rate system.

China operates a closed capital account system and its yuan currency is tightly controlled, although Beijing has said it wants to increase the international use of the yuan to settle cross border trade and has undertaken a series of reforms in recent years to that end.

(Reporting by Koh Gui Qing; Writing by Nick Edwards; Editing by Jonathan Thatcher)


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Is this the end of the mighty US dollar ruling the world, an east-west power exchange? Your thoughts.

Be well Ian

[denuseri]

Nope

[IAN 2411]

You seem very sure denu...and with the loss of the AAA rating the odds are getting stacked higher against the USA keeping its status. The FED government are trillions of dollars in debt and the bank keeps printing money it hasn't got. I said once before, that at the moment the BRIC countries are fast becoming very rich. The Chinese have been buying gold like it was going out of fashion, and almost every person that works in China saves one third of their wages. If push came to shove, could America buy its debt back from the Chinese and stay solvant?

Be well IAN 2411

[denuseri]

You seem very sure denu...and with the loss of the AAA rating the odds are getting stacked higher against the USA keeping its status. The FED government are trillions of dollars in debt and the bank keeps printing money it hasn't got.

Thats nothing new. Been happening for decades now.

I said once before, that at the moment the BRIC countries are fast becoming very rich.

The until their economies too collapse under the weight of industrializing during a time of rapidly diminishing resources.

The Chinese have been buying gold like it was going out of fashion, (the market isnt based on gold so thats no different that buying up any other commodity) and almost every person that works in China saves one third of their wages. If push came to shove, could America buy its debt back from the Chinese and stay solvant?

Be well IAN 2411

It would take raising taxes for the rich for about 10 years or so at best.

[leo9]

You seem very sure denu...and with the loss of the AAA rating the odds are getting stacked higher against the USA keeping its status. The FED government are trillions of dollars in debt and the bank keeps printing money it hasn't got.

Thats nothing new. Been happening for decades now.

Well, yes, that's the whole point. And for decades people kept pushing around toxic derivatives and saying it must be OK because it hadn't gone wrong yet, but here we are.

If push came to shove, could America buy its debt back from the Chinese and stay solvant?

It would take raising taxes for the rich for about 10 years or so at best.

And any US government that even suggested that, never mind tried to do it, would be out of office so fast the door would hit them on the way out. The US is as much hooked on spending without taxing as Greece: the difference is, people have stopped lending to Greece.

[IAN 2411]

China to reform, grow economy, IMF eyes freer yuan
Reuters – 9 hours ago
By Kevin Yao and Koh Gui Qing
BEIJING (Reuters) - China cannot delay tough economic reforms, Vice Premier Li Keqiang said on Sunday, underscoring the top leadership's push for market-based change after the sacking last week of an ambitious provincial leader who wanted a bigger state role in the economy.

Li, widely expected to succeed Wen Jiabao as premier in a leadership transition that begins later this year, promised flexible policies to keep growth brisk and prices stable, with a focus on boosting domestic demand and pursuing structural reforms to make growth more stable and balanced.

"China has reached a crucial period in changing its economic model and (change) cannot be delayed. Reforms have entered a tough stage," Li said, echoing comments made by Wen last week.

"We will make policies more targeted, flexible and forward-looking to maintain relatively fast economic growth and keep price levels basically stable," Li said in a speech at an economic policy conference, attended by top Chinese officials, the head of the IMF and dozens of foreign business leaders.

He said China would "deepen reforms on taxes, the financial sector, prices, income distribution and seek breakthroughs in key areas to let market forces play a bigger role in resource allocation".

Li's renewed emphasis on reform-led growth comes after Wen said slower growth and bolder political reform must be embraced to keep the world's second largest economy from faltering and to spread wealth more evenly, promising to use his last year in power to attack discontent that he warned could end in chaos.

Wen told a news conference at the end of the National People's Congress (NPC) that growth would be made more resilient to external pressures, domestic property and inflation risks deflated and 10.7 trillion yuan in debt racked up by local governments dealt with, while also promoting political change.

He cut China's official 2012 growth target to 7.5 percent, down from the 8 percent targeted in each of the last eight years, aiming to create leeway to deliver reform of items including subsidies, without igniting inflation.

China's annual rate of inflation cooled to 3.2 percent in February, below the government's 4 percent target for the first time in more than a year. But policymakers remain particularly sensitive to elevated commodity prices, given China's huge imports of raw materials.

PRO-GROWTH POLICIES CRUCIAL

Zhang Ping, head of the country's top planning agency, the National Development and Reform Commission, told the Sunday conference that economic policies maintaining relatively fast growth were key to the country's future.

"First of all, we need to maintain steady and relatively fast economic growth -- development is the key for resolving all problems in China," Zhang said.

The government would maintain prudent monetary and pro-active fiscal policies, and stand ready to fine-tune settings -- a consistent refrain from China's leaders since the autumn of 2011.

The show of unity over pro-market reform took on new significance last week when China's central leadership moved to bolster control over the southwest city-province of Chongqing after ousting its contentious but popular chief, Bo Xilai.

The calls for unity with the ruling Communist Party's top leaders were emblazoned on the front pages of Chongqing newspapers on Saturday. They made no mention of Bo, removed from power after a scandal when his Vice Mayor Wang Lijun took refuge in February in a U.S. consulate until he was coaxed out.

After arriving in Chongqing in 2007, Bo, 62 and a former commerce minister, turned it into a bastion of Communist revolutionary-inspired "red" culture and egalitarian growth, winning national attention with a crackdown on organised crime.

His self-promotion and revival of Mao Zedong-inspired propaganda irked moderate officials. But his populist ways and crime clean-up were welcomed by many residents and others who hoped Bo could try his policies nationwide.

Li said that while the overall trend of China's economy was stable with sound fundamentals, it faced structural obstacles that must be overcome, adding that Beijing would push forward structural reforms while encouraging technological innovations to generate new sources of economic growth.

CURRENCY REFORM CARROT

International Monetary Fund managing director, Christine Lagarde, dangled an additional reform carrot at the same economic forum on Sunday, saying that the yuan could become a global reserve currency with the right mix of market-oriented structural change.

"What is needed is a roadmap with a stronger and more flexible exchange rate, more effective liquidity and monetary management, with higher quality supervision and regulation, with a more well-developed financial market, with flexible deposit and lending rates, and finally with the opening up of the capital account," Lagarde said.

"If all that happens, there is no reason why the renminbi (yuan) will not reach the status of a reserve currency occupying a position on par with China's economic status."

China, the world's biggest exporting nation and the second-largest importer, has long wanted to break the dollar's dominance as the principal global unit of cross-border trade, in part to battle internal inflation risks and also to enhance Beijing's influence on the international financial system.
China's has a closed capital account system and its currency is tightly controlled.

Although Beijing has increased the use of the yuan to settle cross border trade, undertaking a series of reforms in recent years to that end, yuan settlement was only about $300 billion in 2011, which Chinese exports were worth about $1.9 trillion.

Li said he expected China's total trade to maintain double-digit growth this year. The government has an official target of 10 percent growth in both imports and exports for 2012.

Exports are a key source of demand and jobs for China's vast factory sector and have been a principal driver of wealth creation for much of the last decade in the wake of the country's accession to the World Trade Organisation.

China's trade balance plunged $31.5 billion into the red in February as imports swamped exports to leave the largest deficit in at least a decade and fuel doubts about the extent to which frail foreign demand drove the drop.

Li said that there were some encouraging signs emerging about the pace of global economic recovery, and forecast that China's total trade would top $10 trillion in the five years 2011-2015, but added that the outlook was not certain, with efforts to resolve Europe's debt crisis still evolving.

Economists expect China's annual economic growth to slow to close to 8 percent in the first three months of 2012, down from 8.9 percent in the last quarter of 2011. That would be the fifth successive quarter of slower growth and leave China on track to end the year with its weakest expansion in a decade.

A raft of economic indicators in the last two weeks have signalled that China's economy is on a gentle glide lower and on course to avoid a so-called hard landing.

(Writing by Nick Edwards; Editing by Don Durfee and Jonathan Thatcher)
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Gold is still a safe camodity and there is very little chance of the price going down. All countries have traded in gold since time began, i dont think it will change in out lifetime.

Be well IAN 2411

[js207]

Ian, they seem to be talking about the possibility of it becoming A reserve currency in future if changes are made. Right now, it isn't even China's main currency for those purposes, let alone the whole world's: China itself uses it for less than one-sixth of international trade.

Someone I knew from university recently launched a popular new electronic product. It's priced in US dollars. He's in England, the device is manufactured in China - but still they use dollars for it, not pounds or yuan.

Gold is still a safe camodity and there is very little chance of the price going down. All countries have traded in gold since time began, i dont think it will change in out lifetime.

As long as gold exists and has some purpose, it will still be traded - but it's been a long time now since payments were made in gold rather than dollars. Of course the price will go down at some point, like any commodity: the alternative would be an economic perpetual motion machine. Just ask Gordon Brown, who managed to dump Britain's gold at one of the lowest prices possible...

[IAN 2411]

Ian, they seem to be talking about the possibility of it becoming A reserve currency in future if changes are made.

Hello...That is is the point of the thread...Do you honestly think that the BRIC nations could not come together and push the dollar aside, if you do i sugesrt you think again. Russia and China have been trading for decades before during and after their differences...Russia dont like America or much of the west...but they would love to knock America off of its hign perch. Start believing that European and Asian countries are not afraid of the American might now.

Be well IAN 2411

[leo9]

Someone I knew from university recently launched a popular new electronic product. It's priced in US dollars. He's in England, the device is manufactured in China - but still they use dollars for it, not pounds or yuan.

I've been thinking for some years that there is a real possiblity that the "electronic dollar" - the unit used for convenience in international online trading - might simply break loose from the US dollar and become the world's first currency without a country, with a value based solely on the global concensus.

The online dollar is the currency of choice for the same historical reasons that English is the first language of the Web. But if the US dollar goes on weakening, the international online community will have the choice of finding another national currency to trade in, or breaking the link to the national currency. The former would be the obvious traditional solution, but I wonder if the Web has enough originality to consider the latter?

[denuseri]

That or they will artificially keep the price up via hording like they do with diamonds.

[lucy]

Russia? Give me a break. If it weren't for their natural resources, they'd be ... hmm ... like, say, Brasil two decades ago. There is no diverse economic power behind Russia, almost no modern industry, no innovation. Besides, nobody trusts them (not as long as Putin and his cronies do as they please) and imho trust is a pretty important issue in this discussion.

But, yeah, I guess eventually one day there will be other currencies like the dollar now. The Euro could have been one, but won't for some time, not after the EU failed to ensure that their members stick to the rules.

[IAN 2411]

Russia? Give me a break. If it weren't for their natural resources, they'd be ... hmm ... like, say, Brasil two decades ago. There is no diverse economic power behind Russia, almost no modern industry, no innovation. Besides, nobody trusts them (not as long as Putin and his cronies do as they please) and imho trust is a pretty important issue in this discussion.

But, yeah, I guess eventually one day there will be other currencies like the dollar now. The Euro could have been one, but won't for some time, not after the EU failed to ensure that their members stick to the rules.

Don’t push Russia aside, lucy, because Putin knows that if he doesn’t get it right this time, there could be another revolution. The people are not happy but if he gets rid of the corruption like he has promised, then all those natural resources will give him the power he needs to get elected once more. The people will stand behind a strong Russian leader, and it is the natural resources, that is making Russia so rich.

You only have to see how far China has come in the last ten years with their kind of capitalism. In the last five years they have been astounding, and the creeping up has ended. The Chinese are habitual secretive nation, always sitting the other side of the wall ready to pounce. They, with a good quarter of the world debt held by them, are in a very strong position to do as they please. No doubt with their patience of watching and taking bites they will not strike until they think there is a chance of being successful.


Be well IAN 2411

[thir]

China yuan could be reserve currency with reform - IMF

Is this the end of the mighty US dollar ruling the world, an east-west power exchange? Your thoughts.

Be well Ian

I am not knowledgeable enough in these economical matters to have any idea - but does it matter which currency is prefered?

[leo9]

I am not knowledgeable enough in these economical matters to have any idea - but does it matter which currency is prefered?

It matters to the country that uses that currency. They didn't used to call it "the almighty dollar" for nothing.

[StrictMasterD]

You will know when the Value of the US Dollar looses all of its value when you go to your Local Big Box Store, or Pharmacy etc to buy a Small Bag of Chips and or Can Of Pop and there is a Sign over it that says "Financing Is Now Available" for these items

[leo9]

You will know when the Value of the US Dollar looses all of its value when you go to your Local Big Box Store, or Pharmacy etc to buy a Small Bag of Chips and or Can Of Pop and there is a Sign over it that says "Financing Is Now Available" for these items

No, you'll know it when Chinese tourists in America start saying "Isn't everything wonderfully cheap here?"

[Thorne]

No, you'll know it when Chinese tourists in America start saying "Isn't everything wonderfully cheap here?"

They're more likely to say, "Don't you have anything that's NOT made in China?"

[thir]

they're more likely to say, "don't you have anything that's not made in china?"

lol

[lucy]

You will know when the Value of the US Dollar looses all of its value when you go to your Local Big Box Store, or Pharmacy etc to buy a Small Bag of Chips and or Can Of Pop and there is a Sign over it that says "Financing Is Now Available" for these items

Financing for everyday purchases has been available for a long time already. It's called credit card.

Also, the US is very cheap to go to, at least when you can buy your Dollars with Swiss Francs. On the other hand, if you're not so smart, like me, and forget that you have several hundred bucks in an envelope buried in an office drawer and then have change them back with a loss of 150 it's kind of a pain in the ass. *rolls eyes*

Also, devaluation isn't only a bad thing. Exports profit. Paying debts gets easier, too. Traveling abroad, though, gets more expensive.

[leo9]

Also, devaluation isn't only a bad thing. Exports profit. Paying debts gets easier, too. Traveling abroad, though, gets more expensive.

Which is why one of the bones of contention with China is their artificial depreciation of their currency. Of course, travel abroad is not a priority for their government.

It's also one reason the Southern members of the euro are having such troubles. Normally, one of the consequences of an economic crash like theirs would be a massive fall in their currency value, which would help their recovery by boosting exports and discouraging imports; but that's not an option.

Too much pride in the value of your currency goes before a fall, as the Thatcher government discovered when they nearly bankrupted the Treasury trying to support the GBP above the market's valuation.

[js207]

Which is why one of the bones of contention with China is their artificial depreciation of their currency.

Yes - as noted earlier, that's one of the reasons China can't currently be considered as a realistic contender for a reserve currency, let alone a viable replacement for the USD.

Too much pride in the value of your currency goes before a fall, as the Thatcher government discovered when they nearly bankrupted the Treasury trying to support the GBP above the market's valuation.

It was Major, not Thatcher, and it wasn't pride but their ERM obligations to other EU countries which required them to prop up the currency value - but yes, it was disastrously stupid to make the attempt (they managed to burn £3.3 billion before figuring that out!) - though in the long term, that damage 20 years ago is probably a fraction of the damage we'd have suffered if the crisis had hit later on when it was harder to escape, as Greece and Ireland have found.

[leo9]

It was Major, not Thatcher, and it wasn't pride but their ERM obligations to other EU countries which required them to prop up the currency value - but yes, it was disastrously stupid to make the attempt (they managed to burn £3.3 billion before figuring that out!) - though in the long term, that damage 20 years ago is probably a fraction of the damage we'd have suffered if the crisis had hit later on when it was harder to escape, as Greece and Ireland have found.

The pride was in the decision to join the ERM at an unrealistic valuation fo the GBP. Once they had, in effect, bragged of the strength of their currency, they were committed to backing their boast with money. And not just their own money. I was following the crisis on the radio in the shop, and at one point a fellow in a sharp business suit asked me for the latest. When I told him interest rates had gone up to 15% he went white as a sheet.

And as many commentators pointed out at the time, if they had managed to stay the course it would have crippled our trade balance. I was one of many businessmen who were very relieved when the GBP was allowed to drop to a value where we could export again.

[Stealth694]

Don't they do that for Gas in California Strict Master??

Seriously though I have a feeling that world wide finance is going to stick with the dollar because our assets and debts are more open than china.
The Chinese yuan is not traded on any international market, and with the second richest financial institute in china is under investigation with several govt organizations and other questionable financial acts, these do not encourage govts to invest in highly questionable money. China will have to go a long way to earn the trust of the international markets. Among them opening up their books and letting the world see just how rich China is

[StrictMasterD]

Don't they do that for Gas in California Strict Master??

Seriously though I have a feeling that world wide finance is going to stick with the dollar because our assets and debts are more open than china.
The Chinese yuan is not traded on any international market, and with the second richest financial institute in china is under investigation with several govt organizations and other questionable financial acts, these do not encourage govts to invest in highly questionable money. China will have to go a long way to earn the trust of the international markets. Among them opening up their books and letting the world see just how rich China is

Just did a quick search and you are 1/2 right, finacing Gas in California is avaialbe but it appears to be linted loan wise to purchaes made for Gas ones usesin their Homes for Heating and Cooking, not for Gas Purchases for Cars
Not surei f you remark was mean in jest or not so i decideto research ti anyway, but NO gas for Cars not yet anyway in Califorina for Homes, Heating, Cooking etc yes

[StrictMasterD]

My remarls were intended as Black Humor, and apprentley not very sucessful either
Keep inmid Lucy. some palces have a minimum you need to charge on a Credit Card to buy that way I do not believe a Bag of Chips and a Can of Pop in some caseswould total enough to use a Card, I have been to alot of stors big andsmall tha have sign up that say "Minimum $10 purchas required for Credit Card or Debit Card use"

[StrictMasterD]

Interestly enough, I was out the other day, walked back to my car and passed a Track that had a bumper Sticker on it, a Inion one no less it said "Be American, Buy American Use Union Workers only" had a nice American Flag on it as well, I notice something in the lower right hand corner of the sticker, upon a closer look it said "Printed In Tiawan" I think that says it all even bumper sticker are now imported

[IAN 2411]

China to widen yuan trading band against dollar

AFP 21.23 Aprill 14th

The International Monetary Fund welcomed a decision by China's central bank Saturday to widen the yuan's trading band against the dollar in a major step towards loosening currency controls.

The yuan is currently allowed to trade 0.5 percent on either side of a midpoint price set by the central bank every trading day.

The new rules -- seen as a shift towards adopting more market-oriented reforms -- will come into effect on Monday and allow the currency to fluctuate by up to 1.0 percent either side, the bank said in a statement.

IMF (Berlin: MXG1.BE - news) chief Christine Lagarde described the move as an "important step".

"This underlines China's commitment to rebalance its economy toward domestic consumption and allow market forces to play a greater role in determining the level of the exchange rate," Lagarde said in a statement.

Beijing's trading partners have long criticised its yuan exchange rate, saying it is kept artificially low, fuelling a flow of cheap exports that have helped trigger huge trade deficits between some countries and China.

However, that pressure has eased since data this year showed China's trade balance with the rest of the world has shifted, ending a long period of huge trade surpluses based on low-cost labour and a cheap yuan.

China has repeatedly vowed to loosen its grip on the yuan as it moves towards full convertibility, but has rejected calls for a faster appreciation for fear of hurting its manufacturing sector, a key driver of its economy.

Saturday's announcement means that the yuan will be allowed to fluctuate further against the dollar but not necessarily appreciate as much as China's trading partners, including the United States, might like.

The bank said the change was decided "in order to meet market demands... (and) enhance the flexibility of RMB (the renminbi, as the yuan is officially known) exchange rate in both directions".

"In view of the domestic and international economic and financial conditions, the People's Bank of China will continue to fulfil its mandates in relation to the RMB exchange rate, keeping RMB exchange rate basically stable."

Wang Tao, an economist at UBS (NYSEArca: DJCI - news) , said the band widening was not a surprise as the dollar-yuan exchange rate was now close to fair value and the current account surplus was not excessive.

"It's a good time to increase the flexibility of the exchange rate," Wang said.

A Shanghai-based trader at a foreign bank added that "it shows that the authorities are confident that the yuan has reached an equilibrium level and widening the band won't trigger too much volatility".

Ting Lu, China economist at Bank of America Merrill Lynch, said the move would ease international pressure to allow the yuan to appreciate and was bigger than market expectations of a 0.7 percent trading band.

"External pressure for RMB-USD appreciation will be alleviated," he said in a note.

The announcement came after China said Friday its economy grew at its slowest pace in nearly three years in the first three months of 2012, expanding by 8.1 percent.

However, analysts predicted the world's second-largest economy would avoid a hard landing, which could trigger massive job losses and spark social unrest.

The central bank called in February for the government to move faster to loosen currency controls to make it easier for Chinese companies to invest overseas and boost the yuan's global status.

China restricts the movement of money outside the country such as investment in real estate, stocks and bonds to prevent sudden inflows and outflows of capital that could destabilise its financial system.

Beijing has vowed to increase the use of the yuan in international trade and encourage foreign investment in Shanghai's financial markets, according to a five-year blueprint unveiled this year by the National Development and Reform Commission, a powerful state planner.

But in its study released in February, the central bank said reforms were taking too long and China could loosen investment controls and encourage more enterprises to take opportunities abroad in the next three years.

-- Dow Jones Newswires contributed to this report –
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So the Chinese are closing in.

Be well IAN 2411