An economics, investment, trading and policy blog with a focus on Modern Monetary Theory (MMT). We seek the truth, avoid the mainstream and are virulently anti-neoliberalism.
China Just Started A Currency War: Here’s what it means for you
Nonsense.
China is just following Japan and then the EU in devaluing.
Blaming China for starting a currency war is just imperial propaganda now that China has been put above the level of ISIS as an adversary of the US, along with Russia. Se expect a continual onslaught of propaganda orchestrated by the deep state through the mainstream media.
I happened to be listening to the BBC News Hour while driving yesterday and a fellow from FT was being interviewed about the "devaluation." Total BS from beginning to end.
Actually, the US accused China of currency manipulation owing to the peg and has been after China to relax it and let the RMB float more against the dollar. China is just doing what the US told it to do, relax the dollar peg and let the RMB float more in the market. With China's economy weakening and the US economy strengthening, the direction is obvious. The RMB needs to decline relative to the USD to mirror conditions.
China is also seeking to have the RMB included in the IMF's basket of currencies and the IMF also told China that it would have to relax the peg and give indication of ending it. This is further reason for China's actions. Eventually, China has to end the peg for the RMB to become a reserve currency, as China intends.
The RMB became overvalued due to the peg to an increasingly strong dollar putting it at an export disadvantage to other countries that had been devaluing through monetary policy, chiefly Japan and the EU. China is not devaluing but revaluing in the direction of the market value.
They are just making a regulatory adjustment at the CB in response to price reductions the Chinese merchants have already made...
That's generally how a floating rate system works through international competition.
But central banks can alter the general price level by intervening in the currency, as the SNB did wrt the rising value of CHF wrt to EUR. That's what the Bank of Japan and the ECB did with QE for example, and the ECB also seems to have been issuing euro to buy US tsys.
The PBOC is responding by recognizing what already is and accommodating it.
Right Tom they have to do this or they could end up "bankrupt" (ie seen as "losing money") so they reprice so it takes MORE YUAN PER USD then their USD holdings are worth more in yuan terms (which a yuan is what they report in).... so they are ok now... ie not bankrupt. ..
Thank you for that analysis Tom, and for the extra comment, Matt. What could I read that would enable me to have made that analysis? I've read Mosler's 7 Deadly... and also a couple of shorter things on Mike's list. But that's not enough to enable me to make the sort of analysis you make here. I think it would be very helpful (and also more burdensome for you, I'm sorry to say) if you would at times give your underlying reasons for such analyses for lay people like myself--it would serve as a kind of ongoing education for us. Of course, many of your readers are experts, but not all of us.
When I read people like Corbett and others on economic issues, they seem to make sense (Ignorance is bliss), perhaps because their political views also seem to be correct. For instance, a book like Confessions of an Economic Hit Man illuminates many things, as do the comments of people like Paul Craig Roberts, but I suspect that their purely economic analysis would not be the same as yours. I may be wrong, but it seems that MMT does not entail a full-on critique of the capitalist system, but rather is interested in how the system actually words at present, and what can be done to make it more efficient and just within those parameters.
Thanks, Veronica. I don't know any other way of getting this POV than reading this blog regularly. Maybe someone else does.
I may be wrong, but it seems that MMT does not entail a full-on critique of the capitalist system, but rather is interested in how the system actually words at present, and what can be done to make it more efficient and just within those parameters
You are correct. We take a more expansive view here that incorporates MMT but recognizes that it is necessary to move beyond not only the contemporary view of capitalism as neoliberalism but also to address the deeper of issue of prioritizing capital over people and the environment. That means moving in the direction of socialism as prioritizing people. I think that most MMT economists are in agreement with that, too, in that their top priority is full employment.
However, MMT analysis as MMT economists conduct it stays pretty much within the frame of contemporary economics. Since none of us here are academic economists, we have license to roam.
Those folks imo have at least a tinge of conspiracy theory about them and this makes me wary of listening to their analysis. ..
My thesis is that none of our current policy makers is competent or qualified in General Systems Theory or maybe just plain mathematical aptitude to understand what is going on much less be in conduct of some sort of conspiracy.... or currency war or whatever...
Imo what is happening is we DO have a regulated system BUT it is operated by unqualified incompetent individuals via self interest and situational ethics.
We can still study the operations of the regulated system (in this case why the CB adjusted the exchange rate) and make predictions similar to how biologists do this with biological systems ... . Rsp
When the US embarks on perennial quantitative easing, that's OK. When the EU does QE as well, that's OK. But when the Bank of China decides it's in the best interest of the nation to let the yuan go down a bit instead of infinitely up, that's Armageddon.
It took the Bank of China to devaluate the yuan on two consecutive days — moving within the 2 percent band that it's allowed to — for the proverbial global financial banshees to go completely bonkers.
Forget the hysteria. The heart of the matter is that Beijing has stepped on the gas in a quite complex long game; to liberalize the yuan exchange rate; allow it to free float against the US dollar; and establish the yuan as a global reserve currency.
So this is essentially exchange rate policy liberalization — not a currency "war", as the frenetic spin goes from Washington/Wall Street to Tokyo via London and Brussels.
11 comments:
China Just Started A Currency War: Here’s what it means for you
https://www.corbettreport.com/china-just-started-a-currency-war-heres-what-it-means-for-you/
China Just Started A Currency War: Here’s what it means for you
Nonsense.
China is just following Japan and then the EU in devaluing.
Blaming China for starting a currency war is just imperial propaganda now that China has been put above the level of ISIS as an adversary of the US, along with Russia. Se expect a continual onslaught of propaganda orchestrated by the deep state through the mainstream media.
I happened to be listening to the BBC News Hour while driving yesterday and a fellow from FT was being interviewed about the "devaluation." Total BS from beginning to end.
Actually, the US accused China of currency manipulation owing to the peg and has been after China to relax it and let the RMB float more against the dollar. China is just doing what the US told it to do, relax the dollar peg and let the RMB float more in the market. With China's economy weakening and the US economy strengthening, the direction is obvious. The RMB needs to decline relative to the USD to mirror conditions.
China is also seeking to have the RMB included in the IMF's basket of currencies and the IMF also told China that it would have to relax the peg and give indication of ending it. This is further reason for China's actions. Eventually, China has to end the peg for the RMB to become a reserve currency, as China intends.
The RMB became overvalued due to the peg to an increasingly strong dollar putting it at an export disadvantage to other countries that had been devaluing through monetary policy, chiefly Japan and the EU. China is not devaluing but revaluing in the direction of the market value.
They are just making a regulatory adjustment at the CB in response to price reductions the Chinese merchants have already made...
They are just making a regulatory adjustment at the CB in response to price reductions the Chinese merchants have already made...
That's generally how a floating rate system works through international competition.
But central banks can alter the general price level by intervening in the currency, as the SNB did wrt the rising value of CHF wrt to EUR. That's what the Bank of Japan and the ECB did with QE for example, and the ECB also seems to have been issuing euro to buy US tsys.
The PBOC is responding by recognizing what already is and accommodating it.
Right Tom they have to do this or they could end up "bankrupt" (ie seen as "losing money") so they reprice so it takes MORE YUAN PER USD then their USD holdings are worth more in yuan terms (which a yuan is what they report in).... so they are ok now... ie not bankrupt. ..
Thank you for that analysis Tom, and for the extra comment, Matt. What could I read that would enable me to have made that analysis? I've read Mosler's 7 Deadly... and also a couple of shorter things on Mike's list. But that's not enough to enable me to make the sort of analysis you make here. I think it would be very helpful (and also more burdensome for you, I'm sorry to say) if you would at times give your underlying reasons for such analyses for lay people like myself--it would serve as a kind of ongoing education for us. Of course, many of your readers are experts, but not all of us.
When I read people like Corbett and others on economic issues, they seem to make sense (Ignorance is bliss), perhaps because their political views also seem to be correct. For instance, a book like Confessions of an Economic Hit Man illuminates many things, as do the comments of people like Paul Craig Roberts, but I suspect that their purely economic analysis would not be the same as yours. I may be wrong, but it seems that MMT does not entail a full-on critique of the capitalist system, but rather is interested in how the system actually words at present, and what can be done to make it more efficient and just within those parameters.
Thanks, Veronica. I don't know any other way of getting this POV than reading this blog regularly. Maybe someone else does.
I may be wrong, but it seems that MMT does not entail a full-on critique of the capitalist system, but rather is interested in how the system actually words at present, and what can be done to make it more efficient and just within those parameters
You are correct. We take a more expansive view here that incorporates MMT but recognizes that it is necessary to move beyond not only the contemporary view of capitalism as neoliberalism but also to address the deeper of issue of prioritizing capital over people and the environment. That means moving in the direction of socialism as prioritizing people. I think that most MMT economists are in agreement with that, too, in that their top priority is full employment.
However, MMT analysis as MMT economists conduct it stays pretty much within the frame of contemporary economics. Since none of us here are academic economists, we have license to roam.
V,
Those folks imo have at least a tinge of conspiracy theory about them and this makes me wary of listening to their analysis. ..
My thesis is that none of our current policy makers is competent or qualified in General Systems Theory or maybe just plain mathematical aptitude to understand what is going on much less be in conduct of some sort of conspiracy.... or currency war or whatever...
Imo what is happening is we DO have a regulated system BUT it is operated by unqualified incompetent individuals via self interest and situational ethics.
We can still study the operations of the regulated system (in this case why the CB adjusted the exchange rate) and make predictions similar to how biologists do this with biological systems ...
.
Rsp
Thanks, Tom and Matt!
What the Latest Currency 'War' is All About
Pepe Escobar
When the US embarks on perennial quantitative easing, that's OK. When the EU does QE as well, that's OK. But when the Bank of China decides it's in the best interest of the nation to let the yuan go down a bit instead of infinitely up, that's Armageddon.
It took the Bank of China to devaluate the yuan on two consecutive days — moving within the 2 percent band that it's allowed to — for the proverbial global financial banshees to go completely bonkers.
Forget the hysteria. The heart of the matter is that Beijing has stepped on the gas in a quite complex long game; to liberalize the yuan exchange rate; allow it to free float against the US dollar; and establish the yuan as a global reserve currency.
So this is essentially exchange rate policy liberalization — not a currency "war", as the frenetic spin goes from Washington/Wall Street to Tokyo via London and Brussels.
Let's check some expert reaction
Read more:
http://sputniknews.com/columnists/20150812/1025667927/yuan-devaluation-reserve-currency.html#ixzz3ipIr7sUF
Thanks. Promoted.
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