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NO MORE STIMULUS MONEY SAYS PBOC - I AGREE! [Copy link] 中文

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Post time 2014-9-22 11:46:13 |Display all floors
This post was edited by abramicus at 2014-9-24 09:33

Finally, I am seeing some light at the end of the tunnel for the PBOC that has heretofore been led by its Western-trained, and possibly Western-beholden, advisers and employees to revalue the Yuan until China's exports drop across the board, and Chinese imports rise, due to underpriced foreign goods beating the crap out of China's own manufactures, all thanks to the unilateral decision of the People's Bank of China to "look good" by revaluing the Yuan and overvaluing it, since July 2010 when the GDP growth rate peaked at 14%+ till December 2013, when it bottomed out at 7.0%.  

The Yuan/Dollar exchange rate is still at an incorrect and deleterious level of 6.14 as of today, due to stubbornness and obstinacy in error, ERROR unbecoming of the stellar achievements of its past governors.

As you can tell, who is paying in hard dollars for the "benefit" of a dramatic decline in Chinese manufactures?  China, through the generosity of the PBOC towards foreign banks and businessmen.  No wonder it is so "well-respected" and "welcomed" abroad.

The PBOC recently released five tranches of 100 billion yuans each to the commercial banks to help them inject some life into the Sick Economy of Asia, sickened by poisonous exchange rate raises that are just about done with their victim.

But recently, at the G20 meeting of central bankers in Cairns, Australia, China's representative rejected the calls of foreign bankers and businessmen for China to spend still more money to rescue the poor, dying economy of China, unable to overcome the effects of an overvalued Yuan no matter how hard it tries.  At least, that is facing the truth.  And the truth of the matter is that unless China overrules the PBOC in setting the exchange rate of the Yuan ever higher than before, they, the leadership would ultimately be held responsible by the people on main street for their indifference and inaction.





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Post time 2014-9-24 06:28:07 |Display all floors
The G20 is being held in Cairns not Sydney

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Post time 2014-9-24 09:33:43 |Display all floors
dusty1 Post time: 2014-9-24 06:28
The G20 is being held in Cairns not Sydney

Thanks for the correction.

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Post time 2014-9-24 09:39:06 |Display all floors
abramicus Post time: 2014-9-24 09:33
Thanks for the correction.

No problems, it's being held 2 hours from where I live

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Post time 2014-9-24 09:56:26 |Display all floors
This post was edited by abramicus at 2014-9-24 09:58

China Is an Honest Fisherman, and a Fisherman Sells, Rather Than Buys, Fish.

A fisherman sells fish and does NOT buy fish.  He cannot, for example, hope to earn more by buying up all the fish in the market, so that the price of his fish goes up, because what he lost in the purchase of his own fish, would exceed what he earns by their later sale.  Besides, even if he can drive up the price of fish this way, as soon as he begins selling his fish again, the price will collapse.

The only time when the fisherman may be justified in buying his own fish is if some big customer bought a large consignment of his fish, and then intentionally sells them below cost in the market, hoping to drive down the price of fish to such an extent that he, the fisherman, would be driven out of business.

Aside from the above emergency measure to correct a market distortion caused by foreign banks and speculators, buying his own fish in the day to day course of commerce only depletes the savings of the fisherman, such that if a speculator one day would appear on the scene to buy up his fish and then dump it into the market, he would not have enough money to buy all the fish back, preserve the fair pricing of his fish, and enable normal business to continue.

China should therefore not buy any Yuan just to please its critics who blame her for "currency manipulation".  What she is doing in buying up the Yuan to raise its exchange rate to please its critics is in fact "currency manipulation".  And if therefore, China has to engage in currency manipulation in order to offset the currency manipulation of foreign central banks that refuse to accept the Yuan as payment, in reciprocity to China's accepting the dollar, euro and yen as payment, then it might as well do it to bolster her manufacturing sector, by letting the Yuan devalue, than undermine her manufacturing sector, by buying up the Yuan with its own dollar reserves, and overvaluing it to the point all Chinese products are overpriced abroad in dollars and at the same time overpriced in Yuans at home.

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Post time 2014-9-25 10:45:20 |Display all floors
This post was edited by abramicus at 2014-9-25 10:54

WESTERN PROPAGANDA MACHINE IS TRYING TO SWITCH CHINA FROM THE DISASTER OF AN OVERVALUED YUAN TO THE EVIL CATASTROPHE OF A STIMULUS-FUELED HYPERINFLATION - REJECT ALL DIAGNOSIS AND ADVICE FROM THE WESTERN ECONOMISTS WHO ARE BASICALLY ECONOMIC HITMEN TRYING TO DESTROY THE CHINESE ECONOMY.

BEWARE THE WALL STREET PROPAGANDA MACHINE NOW MOWING DOWN THEIR BEST ADVOCATE OF A REVALUED YUAN IN ORDER TO REPLACE HIM WITH A CHAMPION OF HYPERINFLATIONARY STIMULUS MONEY.

Suddenly, the Western propaganda machine has turned on its spigot of rumors, declaring the Zhou is on the way out, "BECAUSE HE DOES NOT AGREE WITH FLOODING CHINA WITH FREE STIMULUS MONEY"?

Repeat that please?

First of all, there is no basis in saying Zhou, of PBOC, is anywhere on the way out.

Secondly, there is even less basis to say that it is because he refused to commit the SECOND CARDINAL MISTAKE OF TRYING TO CORRECT THE CATASTROPHIC EFFECTS OF AN OVERVALUED YUAN WITH INFUSION OF MASSIVE LOANS THAT CANNOT BE USED FOR PRODUCTION, BECAUSE THE YUAN WHEN IT IS STILL OVERVALUED, MAKES ALL CHINESE MANUFACTURED PRODUCTS NON-COMPETITIVE, AS THEY WILL BE OVERPRICED IN DOLLARS ABROAD, AND WILL ALSO BE OVERPRICED IN THE DOMESTIC CHINESE MARKET AS WELL (BECAUSE FOREIGN MANUFACTURED PRODUCTS WILL BE UNDERPRICED IN YUANS AS LONG AS THE YUAN REMAINS OVERVALUED SUCH AS AT THE CURRENT 6.14 YUAN/DOLLAR EXCHANGE RATE).

BEWARE WHEN WALL STREET PRESUPPOSES IT KNOWS WHAT IS WRONG WITH CHINA AND WHAT IS THE RIGHT SOLUTION.

THE TRUE DIAGNOSIS OF A CHINA WHOSE MANUFACTURING SECTOR IS DYING FROM ASPHYXIATION BY AN OVERVALUED YUAN IS SIMPLY NEVER MENTIONED IN ALL THE WESTERN FINANCIAL PAPERS.
INSTEAD, THEY POINT TO A SOLUTION WITHOUT IDENTIFYING THE CAUSE OF THE PROBLEM, BY INSISTING IT IS BECAUSE THE PBOC REFUSES TO BLOAT THE CHINESE ECONOMY WITH A MONETARY STIMULUS THAT ITS CHIEF IS BEING REPLACED.  THEY WANT HIM TO PANIC AND COMMIT THE SECOND CARDINAL MISTAKE OF INFLATING THE ECONOMY, WHICH CANNOT IN ANY WAY SAVE CHINA FROM THE PRICE DISADVANTAGE OF AN OVERVALUED YUAN, AND WILL FORCE ALL THE STIMULUS MONEY TO FLOW INTO FIXED ASSETS AND NON-PRODUCTIVE ASSETS, CAUSING PROPERTY PRICES AND COMMODITY PRICES TO SKYROCKET, FINISHING OFF THE CHINESE ECONOMY WITH HYPERINFLATION, WHILE THE MANUFACTURING SECTOR REMAINS UNABLE TO PRODUCE BECAUSE IT IS STRANGULATED BY THE OVERVALUED YUAN AND CANNOT MAKE USE OF THE MONEY TO PRODUCE GOODS AND SERVICES, AS ITS PRODUCTS WILL STILL NOT SELL.

THE SOLUTION IS TO

1.  DEVALUE THE YUAN BACK TO 6.20 YUAN/DOLLAR IMMEDIATELY.

2.  AND ONLY AFTER THE PMI HAS RISEN PAST 52.0 SHOULD A LARGE INJECTION OF STIMULUS MONEY BE PUT INTO PLAY, WHICH WITH THE DEVALUED YUAN WILL BOOST CHINA'S GDP GROWTH RATE PAST 8.0% AGAIN.

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Post time 2014-9-25 11:07:08 |Display all floors
This post was edited by abramicus at 2014-9-25 11:48

That being said, what is needed at the PBOC is a change of policy, especially the Exchange Rate Revaluation Policy that has been implemented at great loss to China in terms of GDP as well as in the growth of its Foreign Currency Reserve, which has been misused to buy up Yuans in order to prop up its exchange rate.  This policy in times of a speculative attack on the Yuan or HK Dollar as in the 1997 Currency Crisis is correct.  But at this time, when China is trying to grow internationally into a major trading partner of every country on earth, where it is trying to grow its domestic economy into a consumption-oriented economy, it cannot afford to overvalue the Yuan to the point its manufacturing sector cannot sell abroad due to overpricing of its products in dollars, AND at the same time, unable to sell domestically, due to overpricing of it products in Yuans (as foreign imports will be underpriced in Yuans instead).  This fundamental error in exchange rate policy is the ROOT of China's faltering GDP growth rate, and cannot be corrected by more stimulus money that only gets misused further in fueling inflation of fixed assets and commodities.  Two wrongs do not make a right.  It is simpler and more effective to correct the initial mistake first, i.e., devalue the Yuan to 6.20 first, aiming for 6.80 in the longer run, and then, later on, if still need be, inject a large stimulus money to help production going once it has a market for its products abroad and at home.

Of course, I respect the wisdom of President Xi in choosing who should take over the reins of China's monetary policy.  First of all, you can trust Xi to do whatever is best for China, from the bottom of his heart.  This is the most important basis of credit.  Trustworthiness is everything.  Secondly, you can depend on him to do the smartest thing as well, because he thinks very deeply in everything he has done so far, and has outplayed all those who have or will harm China's national interest.  As for knowledge of western economics, that is really nothing to carp about, Chinese economics is grounded in reality, not in theory, and reality does not mislead, theory often does.  Deng Xiaoping, the father of China's reform, was not a Western trained economist, but he correctly decided that the market economy will be good for China and took concrete steps to make it happen.  Zhu Rongji was not a western-trained economist, but he navigated the 1997 Currency Crisis with unparalleled confidence and pragmatism that made the Soros crowd weep, and run away in total disgrace, strengthening the monetary side of the Chinese economy for more than 15 years now, leading China's foreign currency reserve to a growth of 1000%.  

Now is not the time to make a historic monetary mistake in overvaluing the Yuan, which serves no purpose, as it cannot create a domestic economy nor increase China's trade with the world.  Instead, an overvalued Yuan shrinks China's international market, and also shrinks China's share of its own domestic market, tying its capable manufacturing sector's hands, and letting foreign manufacturers squeeze and punch the life out of China's manufacturing sector.  This has gone on for too long, and too far also.  If China does not start devaluing the Yuan toward 6.50 or higher, its manufacturing sector will begin collapsing, first with defaults on loans, and next with layoffs of workers, and finally with closure of its factories, which will take another five or ten years to bring back to life, if ever at all.  Today, China is at the crossroads, and it is very fortunate to have President Xi at the helm to guide it towards stability, security, and continued prosperity.



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