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The BANKERS Have NO CLOTHES! [Copy link] 中文

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Post time 2015-4-7 15:08:17 |Display all floors
Since the end of WWII, the world has been treated to a fiction that there is a wealthy Central Bank of the world whose currency is as good as gold, and therefore, it can issue its currency as a reserve, or collateral, for redemption of other lesser currencies, in order that these lesser currencies will be trusted by their users to be dependable and durable stores of value, rather than just mere tokens of value.  Indeed, once in a while, it would show off its gold bars in its bank vaults as proof that indeed, its currency is as good as gold.  Until . . . Gen. De Gaulle of France demanded an exchange of the currency issued by this Central Bank for actual gold.

The rest is history.

Since then, central banks have agreed to value each other's worthless currencies on the basis of their own worthless currency, based on the interest rate of the issuing central bank, and the inflation rate of the country to which that central bank belonged.  They called it the "Floating Exchange Rate".

Worthless as the currencies they issued are, their value derives from the gullibility of the public to exchange their work, their produce, and their land for payment in these currencies, in the belief that the money they receive will purchase for them other things that in aggregate would provide them with the same or greater satisfaction as what they gave up in return.

China has therefore, logically, maintained a higher interest rate, and managed a lower inflation rate, than its currency competitors, in order to prove that its currency is indeed a dependable store of value, which in fact, not only preserves its purchasing power, but has been appreciating against the strongest currencies in the world, for at least 3 years in a row.

Because of this, the Renminbi has become an alternate means of settlement of trade between countries, a reserve based on which a foreign central bank can credibly issue more of its own currency, since receivers of such currency are confident that they can exchange them for Renminbi, which is has steadily been appreciating against all the older currencies, and therefore, has proven it can function like a reserve currency.

However, high interest rates, necessary to maintain a high exchange rate for the Renminbi, results in loss of international and domestic markets for manufactured goods, which if sustained and severe, could lead to deflation, recession and another great depression.  Toughing it out, with losses of future exports, month after month, year after year, China paid a stiff price for the right to be an international reserve currency.  Making its job even tougher is that the dollar has sharply appreciated against all other currencies, such that if the Yuan is to maintain its appreciation against the dollar, it would have to use up even more of its dollar reserves to buy up its own currency.

But China persevered.

It has won its first trophy for this feat of daring - it was able to form the AIIB - as a venue for future economic growth, using Yuan-denominated loans for a change.

However, the dollar will never give up without a fight, so it has appreciated further, leading to calls from within for a stop to the revaluation of the dollar, as it also crimps the export of its manufactured goods, as well as makes them relatively more expensive than imported goods of similar function.  

In this epic and pivotal struggle between the dollar and the yuan, only one will emerge victorious, but either or both countries would not be any richer for it, but rather, less so, as more of their factories will have to close, their workers laid off, and social conflicts will necessarly become more acute.

Bankers believe they are creating wealth by printing or lending more fiat monies of their own.  The bottom line is, this is not true.  They have exposed their workers to the risk of unemployment and defaults on their loans.  Indeed, how can the "rich" bankers clothe those who are naked, when they themselves have no clothes?

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Post time 2015-4-8 01:54:17 |Display all floors
seneca Post time: 2015-4-7 21:21
So why do I only see bankers dressed in Armani suits? These surely do not belong to their customer ...

Which type Armani?  Armani Black (Giorgio Armani), Armani Collezioni, or Emporio Armani?  But the key is the way the suit wears on the wearer.  And if that is your real measure of value (currency), then "bespoke" or made to measure suits are the best, which is how Hong Kong and Shanghai tailors continue to turn out the best suits in the world.  A Renminbi that looks and sounds good like an Armani is not any better than a locally tailored bespoke by a Hong Kong or Chinese tailor who makes sure the cut fits your body, and that the suit does not bloat your figure, i.e., the best Remnimbi is the Yuan that continues to create jobs, to increase the wages of workers, to keep the prices of consumer items affordable, to enable their collective security, internally and externally.

And, back to your question.

You can be sure none of the bankers' Armani's were tailored by their own hands, or even their own family, and its fabric could have been made in one country, and tailored in another.

But further back to your question.

You can pay for them with fiat money.

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Post time 2015-4-8 02:32:44 |Display all floors
Couple of things.

Chinese inflation has been a lot higher than EU and US.

No one knows the true value of RMB because it is not decided by the market but the communist party central standing commitee and their right hand, the people's bank of china.

A currency which is not freely convertible and which value is not reflecting the economy it stands for but corrupted criminals can never be world leader or a real reserve currency for the world.

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Post time 2015-4-8 16:08:09 |Display all floors
mixamixa Post time: 2015-4-8 02:32
Couple of things.

Chinese inflation has been a lot higher than EU and US.

China reports the REAL inflation rate, the rest, hmmm, the CORE inflation rate, meaning, they took out the core consumables of the public, which are food and energy (fuel and electricity), which is UNREAL, and of course, UNTRUE, and utterly UNBELIEVABLE.

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Post time 2015-4-16 12:12:42 |Display all floors
China seems able, for now, to sustain the revaluation of the Yuan against the Dollar, upholding its commitment to make the Yuan a dependable store of value, and a profitable one at that, at the expense of its large dollar currency reserve (now, not unexpectedly, overtaken by Japan, since China has been LOSING foreign currency reserves, while Japan has been ACCUMULATING foreign currency reserves, as China continues to overvalue the Yuan by buying up Yuans in the market with its dollar reserves AND crippling its own manufacturing sector that can no longer export its goods as they have become OVERPRICED IN DOLLARS abroad, and worse yet, are also overpriced in Yuans at home).

China's determination to keep the Yuan's value against the Dollar, whose position as the ONLY UNIVERSAL CURRENCY RESERVE (not just one of five international currency reserves) is being challenged by China, has caused severe pain across the Pacific, where the Fed has to keep hinting it will raise interest rates, wtihout doing so, to achieve an appreciation of the value of the Dollar, without at the same time crippling the economy.  But just the appreciation of the dollar alone, has caused US exports to become too expensive abroad (except in China), and US manufacturing to hold off coming back to America (as even its domestic products will be overpriced compared to products from other countries, except China).  

China can keep up the value of the Yuan by buying Yuans with its dollars.  But America cannot keep the Dollar up, by buying Dollars with Yuans, which it does not have and does not want to have as its own reserve currency, as this would immediately put the Yuan on parity with the Dollar as a universal reserve currency.  Instead, the Fed has to resort to hints it will raise the interest rate, and once in a while, actually doing so, to keep the threat of more raises in interest rates credible for the long haul.

This economic stalemate cannot be sustained indefinitely, as China would eventually run out of dollar reserves, experience unbearable unemployment due to collapse of its manufacturing sector, and undergo increased internal tensions, and as the Fed would be forced to keep raising the interest rate, to keep its threats of such credible, leading to pretty much the same kind of collapse of its own manufacturing sector, increasing unemployment, and increased political tensions.

Eventually, the test of which currency will remain the UNIVERSAL RESERVE CURRENCY of the world will revolve around which country can sustain the political power of the governments of countries that accept their currency as a reserve currency.  Countries like Saudi Arabia have no choice because it has too many enemies, and need all the help it can get.  But countries like Indonesia, Brazil, India, etc., may get the best of both worlds by holding both currencies as part of their foreign reserves.  Flashpoints are likely to transform into flames under such conditions of extreme political and economic tensions.  Who wins the jackpot may end up depending on who overturns the table.

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