Author: abramicus

WHAT REASON FOR PBOC TO KEEP THE YUAN AT 6.20 CNY/USD?   [Copy link] 中文

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Post time 2015-8-11 12:53:05 |Display all floors
This post was edited by abramicus at 2015-8-12 13:21

CHINA DEVALUES THE YUAN TO 6.325 YUAN/DOLLAR . . . THANKS TO PRESIDENT XI'S TIMELY ACTION . . . CHINA IS SPARED THE GUILLOTINE BY THE BREADTH OF A HAIR!

Yellen was just about to flip the switch for a rate hike that would have decapitated China's economy like a guillotine, cleanly and quickly, and Xi pulled China's head out of the way, missing the blade by the breadth of a hair!

Now, a rate hike would not knock over China's economy instantly.

A rate hike would have made the dollar much more expensive than it is right now.  And it would mean that the overvalued Yuan that is already overpriced with respect to the dollar would become extremely expensive, making all Chinese products unsellable abroad in dollars and at home in yuans (against foreign products).  This would have forced millions of factories, especially the smaller ones that do not have excess capital to weather losses of revenue for more than six months, into bankruptcy, triggering mass layoffs, and stoking a conflagration of labor unrest throughout the country.  Now, with the Yuan devalued back to 6.29, a rate hike by the Fed would merely pull the head of China back into the guillotine, but not chop it off.

The next step, is equally if not more important than this first step of devaluation of the Yuan.

If the Fed hikes interest rates, the devaluation of the Yuan today would have been cancelled, or neutralized.  

This is why the announcement of the PBOC that this devaluation is a "ONE TIME DEAL" is not only stupid, but extremely dangerous, because it signals that a double rate hike would still achieve the effect of a single rate hike, as long as China is stuck to its less but still overvalued Yuan at 6.325 Yuan/Dollar exchange rate.

Depending on the magnitude and the number of interest rate hikes by the Fed, China would have to devalue the Yuan in tandem in order to allow its exporters to be able to sell their products without being tied to an overvalued dollar.

Thus, the correct, common sense, and only logical response to a Fed rate hike is to devalue the Yuan immediately to 6.50 Yuan/Dollar, which in effect pulls China's neck not just one hair's breadth away from the guillotine of factory closures, mass unemployment and bank failures, but a whole body's length away from that awful machine, once and for all times.

Don't listen to the stooges who brought China to this sorry state of the economy for what NEXT to do, because they will want China to RETURN TO ITS PREVIOUS PREDICAMENT as much as possible.

IGNORE THESE TRAITORS, AND DO IT THE WAY DENG SOLVED THE RIDDLE OF 1994, KEEP DEVALUING UNTIL THE ECONOMY IS FIRMLY AND SOLIDLY BACK ON ITS GROWTH TRAJECTORY.  DENG MOVED THE YUAN EXCHANGE RATE FROM 5.5 YUAN/DOLLAR TO 6.37 YUAN/DOLLAR, WHICH BROKE THE STRANGLEHOLD OF FOREIGN BANKS ON CHINA, AND THEN, HE THREW THEM OFF WITH A MASTER JUDO MOVE, BY DEVALUING THE YUAN TO 8.8, AND THE ANNUAL GDP GROWTH RATE OF CHINA HIT A PEAK OF 15% - AND THUS WAS BORN THE CHINA MIRACLE THAT LED EVENTUALLY TO AN UNHEARD OF FOREIGN CURRENCY RESERVE OF NEARLY 4 TRILLION DOLLARS, WHICH CHINA DOES NEED TO GENERATE JUST TO PAY OFF THE MASSIVE FOREIGN-CURRENCY-DENOMINATED LOANS THAT THE PBOC ALLOWED THE CHINESE PUBLIC AND GOVERNMENT TO ABSORB IN THE PAST THREE YEARS.


PAYING OFF THESE FOREIGN LOANS WILL BE THE NEXT HURDLE, AND THE ANSWER WILL BE CHINA'S EXPORTS, WHICH WILL EARN AS MUCH IF NOT EVEN MORE ARMED WITH A DEVALUED YUAN THAT MAKES THE "CHINA PRICE" UNBEATABLE ALL OVER THE WORLD.



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Post time 2015-8-12 13:26:01 |Display all floors
BETTER TO LET THE YUAN DEVALUE TOO MUCH THAN TO LET IT DEVALUE TOO LITTLE . . . because like every fight for freedom, it is absolutely necessary to achieve freedom first, then worry about its aims, than to achieve freedom only in part, and worry about being enslaved again.

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Post time 2015-8-13 07:30:49 |Display all floors
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Post time 2015-8-13 14:18:44 |Display all floors
This post was edited by abramicus at 2015-8-13 14:59

ANOTHER FORM OF ABUSE OF CHINA'S MONETARY RESOURCES, SIMILAR TO THE LOGISTICS ABUSE CASES, SELLING OFF BILLIONS OF DOLLARS TO BUY YUANS WHEN THE YUAN NEEDS TO DEVALUE, WASTING HARD EARNED DOLLAR RESERVES WITH NO BENEFIT TO THE COUNTRY.

The PBOC went back to its old habit of buying Yuans with hard earned dollars, just to show the world its current management is still in power, and did they prove it on the second day of allowing the market to devalue the Yuan when in the last hour of trading, they revalued the Yuan from 6.44 to 6.38, with continuous dollar selling by some banks linked to the PBOC.  If the aim is to bring the Yuan exchange rate higher, contrary to the goal set by the State Council, then it is an act of disobedience, if not defiance.  If the aim is to prevent the Yuan from depreciating by more than the pre-set 2% band, it is unnecessary because it had not yet touched the 2% devaluation limit.  If the aim is to punish the market, by making the sellers of the Yuan feel a temporary loss when the Yuan appreciates at the last minute, even causing a short squeeze amongst those who shorted the Yuan, it is an irresponsible waste of hard earned dollars, since the final equilibrium yuan exchange rate is bound to go back down again, which it did when the market opened on the 3rd day (August 12, 2015), wiping out all the "Yuan appreciation gains" that the PBOC wasted tens of billions of dollars to achieve for the glory of the closing bell.

Missing here is the first cardinal rule of preventing corruption, which is that no government entity should be allowed to waste public money or lose it outright, in the name of policy or privileged power, without accounting for it.  Without accountability, who can tell if any monetary intervention is for the benefit of a foreign government, a foreign financial institution, or some big wig who needs dollars on the cheap, to be taken at the close of the day from state-sponsored banks commanded to sell dollars at any price?

What the surges of Yuan appreciation proves is that the foreign powers still have leverage over the decision-making bodies of China's Yuan exchange rate policy, and that their point men, still have control over sizable chunks of China's dollar reserves, to spend at will without any gain to expect.

There are powerful forces trying to put China's neck again on the chopping block, to allow a Fed rate hike to decapitate China's fragillized and malnourished manufacturing sector which will go bankrupt by the hundreds of thousands and by the millions, if the devaluation of the Yuan is not enough to offset the appreciation of the dollar caused by the Fed rate hike.  These Economic Hit Men are doing their darndest worst to bring China back to the brink of economic collapse.  And, they are succeeding on the 2nd day of the liberation of the Yuan from their unwanted overvaluation, by showing they can dump a hundred billion dollars in a day to do the Yuan in, even now.

The proper, responsible use of these dollars is to sell them to Chinese firms that have borrowed dollar-denominated loans, so that they can pay off these loans, in return for which, these firms would have to borrow Yuans to purchase these dollars from the PBOC with, effectively swapping dollar-denomnated loans for yuan-denomnated loans.  That is the best way to use these dollar reserves.  Not in a futile attempt to punish those who are buying dollars and selling yuans in order to repay their dollar-denominated loans, but in a productive way to actually help them do this at the least possible cost to their bottom line.



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Post time 2015-8-13 14:22:54 |Display all floors
abramicus Post time: 2015-8-13 14:18
The PBOC went back to its old habit of buying Yuans with hard earned dollars, just to show the world ...

Simplest explanation is that the left hand don't know what is the right hand doing.




I've made my living, Mr. Thompson, in large part as a gambler. Some days I make twenty bets, some days I make none. There are weeks, sometimes months, in fact, when I don't make any bet at all because ...

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Post time 2015-8-13 14:30:41 |Display all floors
Revolutionar Post time: 2015-8-13 14:22
Simplest explanation is that the left hand don't know what is the right hand doing.

No, the faction responsible for bringing China to its present state of collapse are not yet done.  They are determined to revalue the Yuan, by hook or by crook.  You can expect the Fed to hike its interest rate, and the hike will be calibrated to cancel out the devaluation of the Yuan, such that the net effect is still an appreciation of the Yuan against other non-dollar currencies, effectively decapitating the manufacturing sector of China that will find it impossible to sell its products abroad in dollars or at home in yuans.  They are delaying the devaluation of the Yuan for a purpose, to let the Fed hike catch up with it, and chop off the head of China's growth engine, its manufacturing sector.

If Xi does not step in, boot these traitors out, left to these clowns, China will be finished by next week.

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Post time 2015-8-13 14:45:07 |Display all floors
abramicus Post time: 2015-8-13 14:30
No, the faction responsible for bringing China to its present state of collapse are not yet done.  ...

Hunting for traitors is popular with governments in stress.



I've made my living, Mr. Thompson, in large part as a gambler. Some days I make twenty bets, some days I make none. There are weeks, sometimes months, in fact, when I don't make any bet at all because ...

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