China's New Reserve Currency

[jaysabi]

The IMF today is including the renminbi as a global reserve currency.

The International Monetary Fund will today usher China's renminbi into the elite club of currencies that make up the organization’s basic unit of exchange. While being a component of the IMF's Special Drawing Rights move is a political plum for Beijing, it won't drive the internationalization of Chinese financial markets, which will turn on China's willingness to allow foreigners to invest in its largely insulated bond market.

The IMF’s top governing body is set to approve the inclusion of the Chinese currency into the unit of exchange, which the IMF uses to track its own reserves and holdings of its members, and is sometimes used by members for their own transactions. Over the past year, Beijing had pushed strongly for the change, which nominally puts it in the same category as the U.S. dollar, the British pound, the Japanese yen, and the euro.

“The near-term effects will be the increased prestige and standing of the Chinese economy and the recognition that China has become more closely integrated into the global economy,” said Bill Witherell, chief global economist at Cumberland Advisors.

Source: http://www.ibtimes.com/chinas-renminbi-joining-imfs-elite-currency-club-2203365

It's a little baffling to me how a centrally manipulated currency that pegs its value to other global reserve currencies could itself become a global reserve currency, but there you have it!

[1715031958]

1715031958

[1715031958]

1715031958

[EggShells]

It's a little baffling to me how a centrally manipulated currency that pegs its value to other global reserve currencies could itself become a global reserve currency, but there you have it!

Japan is famous for two companies buying each other's stocks and holding them, because the two bosses are friends.  They now both enjoy high stock prices.

This is really not essentially different from the international monetary system.  Both the IMF and central bank "swap lines" allow each country to be bailed out by other countries when its currency gets into too much trouble, provided that it belongs to the club of friendlies.  The international gold standard worked basically the same way.

The elites figured out long ago that collusion among themselves is much better than competition, for the purpose of extracting wealth from everyone else.  If this prolongs the bubble and makes the eventual crash worse, that's a problem for future generations.

[n2004al]

The IMF today is including the renminbi as a global reserve currency.

The International Monetary Fund will today usher China's renminbi into the elite club of currencies that make up the organization’s basic unit of exchange. While being a component of the IMF's Special Drawing Rights move is a political plum for Beijing, it won't drive the internationalization of Chinese financial markets, which will turn on China's willingness to allow foreigners to invest in its largely insulated bond market.

The IMF’s top governing body is set to approve the inclusion of the Chinese currency into the unit of exchange, which the IMF uses to track its own reserves and holdings of its members, and is sometimes used by members for their own transactions. Over the past year, Beijing had pushed strongly for the change, which nominally puts it in the same category as the U.S. dollar, the British pound, the Japanese yen, and the euro.

“The near-term effects will be the increased prestige and standing of the Chinese economy and the recognition that China has become more closely integrated into the global economy,” said Bill Witherell, chief global economist at Cumberland Advisors.

Source: http://www.ibtimes.com/chinas-renminbi-joining-imfs-elite-currency-club-2203365

It's a little baffling to me how a centrally manipulated currency that pegs its value to other global reserve currencies could itself become a global reserve currency, but there you have it!

Good. Something waited from me. And it will be not the end but only the beginning. The most significant example and the most crushing fact that if the Government thing for the development of the country and the best for its people cannot exist other factor which can impede to be achieved everything wanted. Even being politically totally different from the developed countries.

About thirty years ago China was a poor country without any voice in the world scene. The life there was very simple and all the Chinese people was nurtured mostly (to not tell only) with rice. But the Government of that time worked for the today's days. And China did it. Even with the story of Tien An Men in the nineties or the being a state with only one political party. China now compete only with United States. And United States are obligated to enter in discussion with China about the behavior in their specific areas of interests.

I don't think that China can be, even for more, more time, world leader as the USA are already. But that always will be a factor (and every day more) which must be considered by every country with big attention. USA included.

[tabnloz]

It's a little baffling to me how a centrally manipulated currency that pegs its value to other global reserve currencies could itself become a global reserve currency, but there you have it!

Both the IMF and central bank "swap lines" allow each country to be bailed out by other countries when its currency gets into too much trouble, provided that it belongs to the club of friendlies.  

The elites figured out long ago that collusion among themselves is much better than competition, for the purpose of extracting wealth from everyone else.  If this prolongs the bubble and makes the eventual crash worse, that's a problem for future generations.

Nice post.

And as the SDR is 'trumps', when the next crisis hits, all governments have a ready made diversion / excuse, as the IMF controls its flow. All are happy, especially China, who reduce their exposure to USD (their trillions in foreign reserves swapped out)

The collusion is something Rickards writes about at length in Death of Money; the big boys try to get their gold reserves up to equal / equivalent ratios to GDP before the crisis hits, so its a level playing field when the reset happens.

[EggShells]

Nice post.

And as the SDR is 'trumps', when the next crisis hits, all governments have a ready made diversion / excuse, as the IMF controls its flow. All are happy, especially China, who reduce their exposure to USD (their trillions in foreign reserves swapped out)

The collusion is something Rickards writes about at length in Death of Money; the big boys try to get their gold reserves up to equal / equivalent ratios to GDP before the crisis hits, so its a level playing field when the reset happens.

The "excuse" is dead on.  When a peon country gets into trouble, the IMF will require austerity in exchange for bailouts.  (As opposed to a heavy-weight like the US, where policy will be aimed at soothing the pain.)

The poor country's leader can say "the IMF made me do it."  Focus public anger on a faceless, unelected bureaucracy, and it will go nowhere.  What an ingenious invention.

The different treatment for different countries is based on how best to protect the reputation of the global system of state-driven asset inflation.  Austerity and economic pain in a big, democratic country runs the risk of making people see the light about the system.  So they have to have as much comfort as possible.  For small, poor, or undemocratic countries, let them fight the bust by instituting austerity.  If they succeed, great.  If not, they are the only ones in pain and the world will see the crisis as their problem.  This is much better than accommodative policies which tend to bow to market forces, devalue, and inflate, because when investors see that promises are not being kept, they might realize the same promises from other countries are really not all that different in nature.

Greece is a good example of being on the receiving end of this system.