Saturday, October 29, 2011

ABSURD: EFSF Considers Issuing CNY-Denominated Bonds

Just copied the headline (couldn't improve on it) from Business Insider here.

This just gets harder to understand. The European policy leaders are apparently investigating a course of establishing liabilities in the Chinese currency instead of their own currency.

18 comments:

Kevin Fathi said...

What are they thinking?. To obtain said bonds, one has to have chinese currency(who else other than China has substantial quantities of this?) and the stream of payments a bond holder(China?) would receive would be in the form of chinese currency. Eventually, more Chinese currency would be in circulation relative to the Euro. Is this an attempt(by some Europeans) to lock Europe into consuming more Chinese goods. What am I missing here?

Anonymous said...

"What am I missing here?"

These people are truly idiots, don't underestimate their foolishness.

Ryan said...

Wouldn't it be more sensible to ask the Chinese to spend a small portion of their Euro reserves in Greece, Spain and Italy to stimulate the economies sooner rather than later. I'm confused as to why the Europeans would go to the country that hoarded the Euro financial assets and caused AD to fall and unemployment to increase only to ask them to buy more bonds and leave the countries with more debt.

Beowulf said...

If the Europeans want to be as thoughtful as they are stupid, they could offer to help China out with their shortage of females by negotiating a womenfolk for yuan asset swap.

Ralph Musgrave said...

Europeans are only trying to copy Americans: Americans have persuaded the Chinese to part with thousands of shiploads of consumer goods in exchange for easy to print bits of paper called “dollars” – on which the Chinese earn a zero real rate of interest.

If you see someone who is loaded with cash and apparently willing to buy bum steers, why not try to sell them another bum steer?

googleheim said...

Are they trying to make a mound out of a molehill ?

i.e. make the Yuan finally worth something ?

Maybe the Americans and Europeans are working together ?

Let me retrieve my conspiracy theory from a few days ago ...

googleheim said...

This is from the "Tim Duy on Double Dip" post from Oct 23 :

I would only add that :

Americans and Europeans are additionally using the excuse of austerity and cut-backs to finally get China to spend it's hoarding of US Treasuries.

They are both reversing a "counter peg" to the Chinese "peg."

Furthermore, now we'll see a fight between the USA and the EU on where the USD treasuries are spent - either USA or EU.

But in MMT it does not matter since the currency will immediately drop in it's own trade zone i.e. the USD.

The only problem is if Bernanke's OPEN SWAP LINES to the EU will muddle up the effect making it more beneficial to the Europeans rather than the Americans ...

====================
More Looney Tunes in Economics ?

The Germans and French flirt with disaster to prevent their Euro from appreciating too much and then also from depreciating too much.

So they find the sweat spot with this game of tennis.

Greece is the ping pong and American is the one who has to come in an provide open swap lines of credit to the Euro boyz.

It's all a game to whiplash the Arabs whilst they have their spring time frollicks -

The game is a perfect excuse for the war supports and for draining Euro liquidity from the Arab nations.

Then Obama his role is only as Nobel Peace Prize lapel wearing foo
who is like "Reagan" was to the soviet block melt down.

His somewhat quasi Muslim-ness has the right currency to make it all look OK to everyone.

However, Obama will not even go down to Wall Street and meet some of the Occupy 99'ers because
he is the clutches of big money puppetry.

fact or fiction ?

friction

=================

Anonymous said...

Here is the real 1%. Brought to you by government out of control http://www.thereformedbroker.com/2011/10/30/washington-d-c-is-the-1/

googleheim said...

CAN ANYONE MAKE A DETAILED POST WHY THE JAPANESE YEN IS SO STRONG GIVEN THE "DEBT" THAT JAPAN HAS ACCULMULATED ?

HOW IS THIS SO ?

Anonymous said...

A random but not unrelated question for any of you well versed in MMT...

According to MMT, many of the Euro countries find themselves in a difficult situation because of an inability to issue currency, coupled with an inadequate central bank. It seems many of the States here in the U.S. find themselves in a similar situation.

If many Euro countries would be better off with Monetary Sovereignty, would the same be true in the U.S?

Would the United States be better off with 50 states which are “monetarily autonomous, are monopoly suppliers of their own currency and exist within a freely floating exchange rate system.” ?

Broll The American said...

@Anonymous - This is far from a technical answer to your question, but I think the fact that the "dollar zone" of the states works better than the eurozone, has to do with the shared history and culture of the US.
Certainly since the end of the Civil War, the economies of the individual states have relied on a greater level of interconnectivity than the economies of Europe. Each European nation is more self contained while the states are much more fluid.
The States also have the proper political and bureaucratic structures in place to go along with our historical and cultural ties, while Euro nations share only a common bank. People from the midwest may feel some sense of compassion for the plight of those in California ( or vice versa ), while Germans and French want to lay blame at Greece and Italy.

Anonymous said...

@Broll The American

Thanks for the response. I definitely have a general understanding of why the states in the U.S. are in a better position than countries in Europe: e.g. shared history, common language of communication, labor and capital mobility, union thats not only economic but also political, and so on.

But my question was aimed at the advantages/disadvantages of a "50 states, 50 currencies" type of an arrangement. One of the advantages is obvious: states could issue debt in their own currency are therefore become no longer "revenue constrained" much like the U.S. federal government is now.

So I guess my question reworded more precisely would be: what are the downsides or the disadvantages to having 50 states that are "monetarily autonomous, are monopoly suppliers of their own currency and exist within a freely floating exchange rate system.” ?

Ryan said...

Anon, the United States has a central fiscal authority so the comparison to Europes monetary union without fiscal isn't helpful. I think the tax and spending balances out current accounts, in a sense, for our states.

beowulf said...

You'd have to amend the Constitution to allow it. Even then it'd be virtually impossible to implement. Congress (which has sole power to regulate interstate commerce) would have to set exchange rates between the currency of each state, the US dollar and with foreign currency as well. Of course, they'd certainly require federal taxes be collected in (and federal benefits paid in) US dollars.
It'd be more practical to require elementary school students be taught in Esperanto.

Anonymous said...

So really we just need MMT people running the FED? :)

Matt Franko said...

& Treasury, & Congressional Budget Committees....

Ryan said...

The Europeans returned from China without a check from the Chinese but an explanation of how modern monetary systems operate, President Hu explained, "We are convinced that Europe has the wisdom and has the competence to overcome the current difficulties," he offered cooperation and technical assistance that comes with 'friendship' Privately, he no doubt reminded the Europeans that they control their own central bank, fiscal authority and dont really need the Chinese to buy their bonds to which the Germans scoffed.

googleheim said...

ding dong the witch is dead.

@ANON :

you don't need 50 states with 50 currencies because the Fed has Reserve Banks all over the place ready to credit issue a 1 followed by lots of 0's at any moments notice.

the problem is the banks in the RReal economy !