2013-11-21 Bloomberg: China will not increase dollar reserves anymore

[qwerty555]

This could be big! Maybe China actually invented Bitcoin.... Fed up with the FED printing USD?  

Makes sense to distance themselves from the USD.  Maybe the chinese are so pissed that the USD is still considered the main currency for trade, that they invented BTC to takeover.

1 I believe Bitcoin is an entertaining side issue for China with a little (very) impact on the dollars status but LOTS of propaganda value

2 China is VERY active and vocal about CNY replacing the dollar as a ( eventually THE) reserve currency and pre emininent use in international trade transactions.

The answer is ....What is available in large quantities safe, less volatile, liquid and useful in your International trade as it is widely accepted.

Until recently that is  $ Euro and Yen being top.

This is/will soon change to include CNY and as I have posted elsewhere the Chinese are active and vocal on this.

http://www.zerohedge.com/news/2013-10-18/9-signs-china-making-move-against-us-dollar

2 China has just entered into a very large currency swap agreement with the eurozone that is considered a huge step toward establishing the yuan as a major world currency.  This agreement will result in a lot less U.S. dollars being used in trade between China and Europe...

Currency swap deals are a major part of China strategy to reduce reliance on the US dollar and replace with CNY. This will now further be enhanced by reforms on exchange of CNY (RMB) which will end up with NO restrictions and "FREE floating" the CNY ( as opposed to "managed floating")

China removed the yuan's peg to the greenback on July 21, 2005, and moved into a managed floating exchange rate mechanism based on market demand and supply, with reference to a basket of currencies.

Summary

CNY is the NEXT reserve currency ( not bitcoin which will be tolerated to show how "OPEN" China is)

They WILL achieve this by currency swaps ( in particular Petroldollar replacement) for international trade in the beginning .

https://www.google.com.ph/search?q=petro+yuan&ie=utf-8&oe=utf-8&rls=org.mozilla:en-US:official&client=firefox-a&gws_rd=cr&ei=616UUs6zFun9iAfG8YDgDQ

https://www.google.com.ph/search?q=value+of+curre4ncy+swap+deals+with+china&ie=utf-8&oe=utf-8&rls=org.mozilla:en-US:official&client=firefox-a&gws_rd=cr&ei=Z1qUUpmhHYTtiAfx3YGwBw#q=value+of+currency+swap+deals+with+china&rls=org.mozilla:en-US:official&spell=1

They will THEN remove ALL restrictions on holding and exchanging CNY (RMB)

https://www.google.com.ph/search?q=value+of+curre4ncy+swap+deals+with+china&ie=utf-8&oe=utf-8&rls=org.mozilla:en-US:official&client=firefox-a&gws_rd=cr&ei=Z1qUUpmhHYTtiAfx3YGwBw#q=restrictions+of+exchange+of+CNY+RMB+relaxed&rls=org.mozilla:en-US%3Aofficial

Finally they MAY fix the CNY to the GOLD standard to deliver the KILLER BLOW to US$

If you have $ bank deposits a MINIMUM 50% in CNY will be PRUDENT (or in bitcoin to be speculative). appreciation as of July 2013 from 2005 ..........34%

https://www.google.com.ph/search?q=petro+yuan&ie=utf-8&oe=utf-8&rls=org.mozilla:en-US:official&client=firefox-a&gws_rd=cr&ei=616UUs6zFun9iAfG8YDgDQ#q=appreciation+of+CNY+against+dollar&rls=org.mozilla:en-US%3Aofficial

Current exchange is around 6.15 to $1  I BET that the eventual mid term target (5yrs) is 5 to 1 coz humans LOVE round whole numbers

[deisik]

Between which contractors? If you read my posts carefully, you would have noticed that I was talking about international trade between China and the USA... If you tried to pay in BTC for USD orders but got caught what would happen?

"Got caught"? doing what?

Doing payments in BTC (or any other currency for that matter) for dollar-denominated orders while all your documents (contracts, invoices, customs declarations, bank guarantees, etc) are officially issued in dollars and you ultimately end up paying customs duties and taxes if applicable, selling currency to the state if required as well as falsifying your accounting and financial documents (e.g. bank statements) necessary for making corresponding accounting records...

I'm not talking here about you paying for a shirt you order from abroad but about multi-million contracts employing all available means of foreign trade...

[ShadowOfHarbringer]

Twelve Trillion USD invested in BTC with a 12 million BTC supply would be a $1 Million bitcoin.
...And that's without any user adoption by the people on the street; not even a single merchant accepting them.
WHAT IS STOPPING THIS AND HOW DO WE DESTROY THAT?

Nothing needs to be done really except improving Bitcoin clients & websites so Bitcoin becomes more scalable, easy to use, secure and anonymous.

If we do so, it will just happen. This is an unstoppable force of nature (or force of mathematics).

[qwerty555]

Swings and roundabouts and simple maths ( which i hope I've got right from a back of the envelope calculation )

Although the full picture is not quite as simple as this, as there is an effect on exports etc ( LESS important if China now moving and focusing on a domestic consumer based growth.. which is widely KNOWN and stated that they are).. it does indicate that China DOES want the yuan to continue to appreciate against the dollar as its EASY MONEY

Chinas M2 money supply is 17.4 trillion dollars equivalent

http://www.tradingeconomics.com/china/money-supply-m2

China Money Supply M2
Money Supply M2 in China decreased to 107016.66 CNY Billion in October of 2013 from

divide by 6.15 to get $ amount

Chinas foreign reserves are

http://blogs.wsj.com/economics/2013/10/15/chinas-foreign-exchange-reserves-jump-again/

China’s mammoth foreign exchange reserves rose to a record $3.66 trillion in the third quarter, as the country continued to use massive FX purchases to hold down the value of its currency.

If the dollar loses 34% against the Yuan their reserves/ treasuries etc lose 34% of their value

34% of $3.66 trillion is 3.66x.34= loss of 1.244 trillion dollars

BUT

a 34% appreciation of its money supply = 17.4 x.34 =  appreciation in dollar terms of $5.916 Trillion

Net gain in value to buy goods or increase reserves or distribute to the poor or..or...........$ 4.6 Trillion.

[StarfishPrime]

@qwerty555: great posts.

Thanks for your analysis, I think you're right about China's stance.

[StarfishPrime]

Between which contractors? If you read my posts carefully, you would have noticed that I was talking about international trade between China and the USA... If you tried to pay in BTC for USD orders but got caught what would happen?

"Got caught"? doing what?

Doing payments in BTC (or any other currency for that matter) for dollar-denominated orders while all your documents (contracts, invoices, customs declarations, bank guarantees, etc) are officially issued in dollars and you ultimately end up paying customs duties and taxes if applicable, selling currency to the state if required as well as falsifying your accounting and financial documents (e.g. bank statements) necessary for making corresponding accounting records...

I'm not talking here about you paying for a shirt you order from abroad but about multi-million contracts employing all available means of foreign trade...

Sorry but you clearly have no grasp of either of the processes or legalities of international trade. Nothing is "falsified" etc etc. You just agree to send the equivalent in BTC to settle an invoice in USD. Simple. Happens all the time, nothing remotely illegal about that!

[deisik]

Sorry but you clearly have no grasp of either of the processes or legalities of international trade. Nothing is "falsified" etc etc. You just agree to send the equivalent in BTC to settle an invoice in USD. Simple. Happens all the time, nothing remotely illegal about that!

Ok, I have no grasp of the processes of international trade. How would you then ask your bank to issue a bank guarantee on your behalf for the benefit of your foreign trade partner to guarantee the fulfilling of the contractual obligations if you are not actually going to pay the sum covered by the guarantee in the currency declared?