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China removes the USD peg, What are the consequences for us?
mullokintyre
post Posted: Aug 12 2019, 11:05 AM
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In Reply To: nipper's post @ Aug 12 2019, 08:05 AM

Jim might be right this time.
The trouble is, Jim Rickards has been a non stop bull forever.
He is a regular on Kitco, and has been a gold bull forever.
If you constantly predict the same thing non stop, eventually you may be right.
Nothing wrong with his logic, just that the markets don't follow logic most of the time.
Mick (who is also a gold bull, and a silver bull, and one day will get it all right).



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sent from my Olivetti Typewriter.
 
nipper
post Posted: Aug 12 2019, 08:05 AM
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QUOTE
“We have a currency war, there’s trade war action, there’s central bank action and of course we see what’s going on in the market. They’re all connected.”

To Jim Rickards, this convergence has been coming like a slow-motion train wreck.

The US investment adviser, central bank expert and best-selling author has rusted-on followers who hang off his every word and he is heading to Australia next month.

“Start with the currency war.” This has to be Rickards’ favourite subject. “Nobody wins, tit-for-tat devaluations and after a while it morphs into a trade war. We have been in this state of trade war since January 2018 and unfortunately the last episode of this, in the 1930s, went from currency war to a trade war to a shooting war, World War II in fact. Now we have seen the currency wars going on, we’re in the trade war, let’s hope this one doesn’t go any further, but there is certainly some danger of that.”

Rickards speaks without drawing breath, his passion for economic and political history spilling through the narrative.

“On the currency war, headline writers all over the world, when we saw China let the yuan go below that seven-to-one red line the other day — they said ‘oh there’s a currency war’. No. We’ve been in a currency war since January 2010, you can date it from Obama’s 2010 State of the Union address when he announced a policy that would only be interpreted as weakening the US dollar and indeed in August 2011 the US dollar hit all-time lows.”

In 2011, Rickards wrote his first book, Currency Wars: The Making of the Next Global Crisis, warning that such wars could run for 15, even 20 years.

And he reminds us this is not the first time China has done this. “August 2015, they did a 3 per cent devaluation over a couple of days — US stocks fell 11 per cent in the next four weeks. In December 2015, they did another devaluation and then between January 1 and February 10, 2016, US stocks fell over 11 per cent. So this is the third episode of a Chinese shock devaluation followed by a US sharemarket drawdown.

“The Chinese shock devaluations are nothing new, but of course this one comes in the middle of a trade war.”...

https://www.theaustralian.com.au/business/e...65de8c2472f4d63

...he backs Gold

QUOTE
Gold hit six-year highs last week at $US1500 and the rise will continue, says Rickards, because gold competes with US Treasuries and their attraction is diminishing.

“One of the main drivers of higher gold prices are lower real rates, and I had, straight from the horse’s mouth, three central bankers telling me that their job No 1 is lower real rates. When you take the real yield away, then gold looks more attractive.” Combine this with geopolitics and currency wars and good old supply and demand and Rickards sees a Goldilocks time for gold.




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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
mullokintyre
post Posted: Aug 9 2019, 12:21 PM
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Going back a few years, from about 2011 thru to 2015 , I am sure we remember how the experts predicted that the USD would eventually be replaced by the Yuan/renmimbi as the default world currency of trade.
It is still no closer to happening.
The following article gives a few good reasons why it aint gunna happen soon.

yuan v usd

QUOTE
“The US dollar will collapse or it will be replaced by another currency” – we hear such statements all the time. Are they true? We decided to check these claims – so we invite you to read our today’s article about the US dollar’s international supremacy and find out whether the greenback’s demise is likely in the foreseeable future. Let’s also draw implications from the analysis for the precious metals market.

We have heard about the fall of the US dollar’s significance for over half a century. In particular, the rise of China’s economy threatens the greenback’s dominance. Trump’s unsound fiscal policy and the recent Powell’s dovish turn only reinforce these fears. So, let’s analyze whether such a scenario is likely in the foreseeable future and let’s draw implications for the precious metals market.
Investors should remember that there are four things needed in order for a currency to play a global role: size, stability, liquidity, and security. Although China’s economy and trade payments are big, the yuan is not stable, not liquid and not secure. The financial system is still heavily controlled by the authorities and it is not open and transparent.

Although the share of the US dollar in the world’s total foreign reserves has declined somewhat since 2015, it remained dominant, with share above 60 percent. The euro, which is the second most popular reserve currency, has share amounting to 20 percent, or one third of the greenback’s share. Moreover, although dollar’s role as official reserve diminished slightly, its share in bank external claims has risen. Similarly, volumes through U.S.-based dollar wire transfer and settlement systems have also continued to rise.

To sum up, Tina says that the US dollar will remain the world’s global reserve, despite all its shortcomings. Who is Tina? It is the slogan used by Margaret Thatcher: “there is no alternative”. Yen? Let’s be serious, Japan still cannot stand on its own feet after post-bubble recession, approaching the third lost decade. Euro? No way, as long as there are doubts about the Eurozone’s survival. Yuan? Maybe someday, but not anytime soon, as the renminbi is not freely floating, while China’s capital markets are not yet fully open.


One of the most instructive parts of this article is the chart of reserve currency levels. Tells its own story.

QUOTE
Let’s look at the chart below. The share of the yuan in global currency reserves amounted to 1.8 percent in Q3 2018. It does not look like a great threat for US dollar, does it?

Chart 1: Composition of World’s Total Foreign Currency Reserves from Q1 2010 to Q3 2018 (green line – US dollar, blue line – euro, purple line – pound sterling, orange line – Japanese yen, red line – Chinese yuan)





Mick



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sent from my Olivetti Typewriter.
 
nipper
post Posted: Aug 5 2019, 12:31 PM
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CNH through the 7.0 mark

wait for a Trump tweet? Start of the currency wars?
.......... one view
QUOTE
In order to take control of U.S monetary policy and force the recalcitrant Mr. Powell into cutting rates aggressively he will deliver lots of trade tensions.

Peter Navarro is going to be the happiest person in the White House.

This is not going to end well.

Any company that had not started reviewing its supply chains will most surely do so now.

Companies hate uncertainty, as do markets.

China will give up on trying to do a deal with Trump.

And if you were China what would you think of this statement from Trump on Thursday: “We’re going to tax the hell out of China until we make a deal.”

By the way, they’re still best friends...yeah, right!

We are about to see China retaliate and the currency will be the first signal.

Look for the Chinese currency to weaken through 7.0 versus the U.S dollar.

And then wait for the Trump tweet.

In the meantime Secretary of State, Mike Pompeo, is doing everything he can, at every public speaking opportunity, to annoy the Chinese.

Then there is Hong Kong, which is being drawn into the U.S-China conflict, with Chinese authorities accusing America of fanning the flames of civil unrest.




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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne

Said 'Thanks' for this post: early birds  
 
triage
post Posted: May 27 2016, 08:09 AM
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Here is an informative piece about the conundrum facing China's authorities regarding its currency. It was in the Wall St Journal a few days ago and reprinted in the Oz. You might need to google the headline:
"A Rare Look Inside China’s Central Bank Shows Slackening Resolve to Revamp Yuan" to get to the body of the article.

http://www.wsj.com/articles/china-preferri...ency-1464022378

It looks like President Xi is jamming Premier Li into an unwinnable position. Xi expects Li to deliver on the growth rate targets but will not allow him to loosen the RMB, which is probably somewhat overpriced.

The bottom line seems to be that President Xi flirted with market forces but quickly shied away back into the familiar arms of maintaining control. If so then I guess for the time being any devaluation of the RMB will be incremental at most.



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"The market can stay irrational longer than you can stay solvent." John Maynard Keynes

"The crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought." Rudiger Dornbush

Mozart fixes everything and Messi is a dog
 
triage
post Posted: Apr 11 2016, 07:01 AM
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Ambrose of the London Tele reports the views of one Chinese economist insider. Talk of China facing a similar situation to that the UK faced in 1992 when George Soros famously broke the pound, and the need for a 15% devaluation of the yuan. Though no mention of the probability of such an event nor the timing so not to be taken too seriously imo.

http://www.telegraph.co.uk/business/2016/0...eflation-persi/



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"The market can stay irrational longer than you can stay solvent." John Maynard Keynes

"The crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought." Rudiger Dornbush

Mozart fixes everything and Messi is a dog
 


triage
post Posted: Mar 30 2016, 12:12 PM
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Here's a thought ... just maybe those bloody central bankers have once again managed to prevent the international economy from being purged of its malinvestments.

http://www.valuewalk.com/2016/03/chinese-r...save-the-world/

Obviously I dispute the notion that any intervention by central bankers "saved" the world: the only way the world can be saved is to allow this current credit cycle to end. All the central bankers have done is to plug a leak in the wall, it only means that the credit level, like water, will find the next weakest point in the wall to leak through.

But yes for the time being at least outward signs of the crisis appear to have abated.

(hat-tip gunna at macrobusiness)



--------------------
"The market can stay irrational longer than you can stay solvent." John Maynard Keynes

"The crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought." Rudiger Dornbush

Mozart fixes everything and Messi is a dog

Said 'Thanks' for this post: nipper  
 
triage
post Posted: Mar 18 2016, 07:03 AM
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Continues to smell like an incoming devaluation to me.

Check out this aggregation of merger and acquisition stories involving unviable Chinese entities and foreign companies from ZH.

http://www.zerohedge.com/news/2016-03-17/c...-yet-bizarro-ma

As the bod from Goldman Sachs is quoted as saying: "A possible motivation could be a desire to acquire assets in dollars and euros ahead of a devaluation of the yuan".

Also check out the Dim Sums blog where it is noted that China has built up massive stockpiles of rice, corn and cotton. Also note elsewhere that China has also been active of late in rebuilding their stockpiles of iron ore and copper and that they have taken advantage of lower oil prices to fill their strategic oil reserves to 80% of capacity.

There seems an unusual level of motivation for the Chinese to spend their RMB buying assets which are not traded in RMB if you accept the official line that the RMB is not going anywhere...





--------------------
"The market can stay irrational longer than you can stay solvent." John Maynard Keynes

"The crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought." Rudiger Dornbush

Mozart fixes everything and Messi is a dog
 
triage
post Posted: Mar 14 2016, 04:56 PM
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Here's a Bloomberg piece about how some of the RMB shorters are being burnt by the currency's resilience and stability but how some foreign punters are staying the course.

http://www.bloomberg.com/news/articles/201...turns-worthless

China apparently now has an information blackout in place designed to prevent much of the international discussion of its economic situation from getting through to the Chinese hoi polio. It appears that they have been able to regain control of the RMB without any drastic action but if they decide to play nasty it will not be carried out in front of the Chinese people.







--------------------
"The market can stay irrational longer than you can stay solvent." John Maynard Keynes

"The crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought." Rudiger Dornbush

Mozart fixes everything and Messi is a dog
 
triage
post Posted: Feb 27 2016, 07:32 AM
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Here is some recent analysis from Michael Pettis in which he provides some commentary on the Kyle Bass newsletter that sent a shudder through the markets.

http://www.valuewalk.com/2016/02/china-kyle-bass/?all=1

Basically Prof Pettis takes issue with some of the detail in the Bass newsletter, both regarding the current state of affairs and the likely consequences, but ends with this:

QUOTE
...[The newsletter] addresses important issues, including its large and rising debt burden, but for the reasons discussed above I think China will be able to withstand net capital outflows longer than he and the market might currently believe. If I am right, however, it doesn’t mean that we can simply ignore the extent of the net outflows. And clearly the PBoC isn’t ignoring it. For reasons I can’t publicly disclose I am quite certain that Beijing and its policy advisors have been watching the large net monthly outflows with as much concern as anyone in the market.


There was talk that the Chinese authorities would attempt to address the capital flight just after last year's National Day, in early October, then some suggested that the Lunar New Year break earlier this month would be an opportune time, and now I've seen some speculation that the authorities are tightening foreign news flow in early March so that they can muffle any domestic reaction to major changes brought in around that time.

As always, the decisive action that I am expecting never seems to come (how many times have I jumped at shadows???). But I'm reminded of Tiananmen Square from 1989 which dragged on for weeks, and all the time the view in western media was that actions by the authorities were being measured and that international public opinion would protect the protestors. It did not turn out that way (and the authorities did a wonderful job then of keeping the Chinese population largely in the dark).



--------------------
"The market can stay irrational longer than you can stay solvent." John Maynard Keynes

"The crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought." Rudiger Dornbush

Mozart fixes everything and Messi is a dog
 
 


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