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Forget about Wall Street and all the glitz of "making money" on the world's bourses.|
China has better use of its foreign currency reserves than to waste it on brokerages who profit more from Chinese investments than China does herself. Making money on the stock market is only one way to benefit the Chinese people whose savings are stocked up in the People's Bank of China. Storing these savings in treasuries runs the risk of loss of purchasing power as the money supply of dollars, euros and yens are arbitrarily unilaterally increased by the issuers of these currencies, inflating away the purchasing power of China's foreign currency reserves with wanton glee.
How about real assets then? Real assets that make returns in excess of 1000% decade after decade? Where?
Starting from China's doorstep, across Asia to Europe, to Africa, in one steel mesh of railways and another maritime chain of Ironsides that guard and transmit the wealth of nations safely and in a timely manner, unmatched in all human history?
But, to power this two-way trade, China's currency must be correctly priced, not too high that others cannot afford and would not want Chinese products, nor too low that China cannot afford what others produce. This market-clearing exchange rate does not have to be determined by the markets which are often rigged to benefit the middlemen and speculators. This market-clearing rate can be determined by a revamped and renewed People's Bank of China that is wlling to peg the Yuan exchange rate, not according to the brokers of the world, which is what they want China to do, via the demands of the IMF to "liberalize" and "restructure" China's banking system according to their specs, but simply by experimenting with various rates until the flow of goods and services are in fact balanced, a fact requiring no marketmakers to accomplish, just a systematic ratcheting of the Yuan exchange rate down from its perch of 6.20 CNY/USD of today, to 7.00 CNY/USD, if necessary, to find the point of trade equilibrium. This is the function of the PBOC that it is derelict in not performing for the people of China and of the world.
The curent exchange rate favors Japan to take over China's export markets by the hundreds of billions every year until there is no market left for China to ship its goods to, even if it should have the world's best land and maritime transportation system that is envisaged by the opening of the Silk Road.
A new crew at the top is necessary to ratchet the Yuan exchange rate by 0.50 CNY/USD every 3 months, to find empirically, as Deng always emphasized is far more important and dependable than theoretical considerations. Feeling the stones to cross the river always works regardless of the erroneous advice being fed into China's brains by its Western-trained advisers. Lose touch with the stones, and you get swept down the river, courtesy of these false guides.
It is time China gets a crew that is willing to work in finding the correct Yuan exchange rate, instead of one that keeps referencing its biblical sources of the IMF and WB as to what THEORETICALLY China should or should not do.
It was Deng's PRAGMATISM that saved China from penury, and it is time China practice some REAL TIME PRAGMATISM, to save its economy from deflation, followed by inflation if it adopts the erroneous remedy of lowering its interest rate or bank reserve requirements, flooding non-productive economy with free money, resutling in STAGFLATION.
China should just lower its exchange rate from 6.20 to 6.25 CNY/USD on market open on Monday, and see if the economy will not instantly jump back to life, whatever the PBOC says.
In another month or two, China should just lower the exchange rate to 6.30 CNY/USD, and see if both exports and imports will not increase. If the Western backers of the PBOC complain, show them the stats. Under 6.20 CNY/USD, both exports and imports dropped dramatically in April 2015 - yes, BOTH EXPORTS AND IMPORTS DROPPED, AND IMPORTS DROPPED EVEN MORE, SO WHAT ARE THEY COMPLAINING ABOUT IF CHINA SHOULD LOWER THE EXCHANGE RATE TO 6.30 CNY/USD???
In fact, if the Chinese leadership has real power, it should just dictate to the PBOC, not the other way around, with the PBOC transmitting to it its marching orders from the IMF, and lower the Yuan exchange rate to 6.30 CNY/USD on Monday.
Of course, this will never happen. Perhaps, not in a hundred years. Because China may have already been SOLD.
After achieving the correct Yuan exchange rate, then the building of the land and maritime Silk Roads can finance itself, as the two way trade is what generates the income for the infrastructure to pay for itself over time, and allows China to recoup its investment of 2 trillion dollars with profits of 1,000% over the lifetime of the investment.