Chinese Economics Thread

[Gatekeeper]

That will never happen since SAR is pegged to the dollar and OPEC's transaction currency is US Dollar.

Nothing in the rule book or international law that says you can't unpegged! In fact we have seen it happened many a times. The reasons for the pegging the first place is ensure stability of prices. Accepting dollar for payment in oil has nothing to do with pegging, and more to do with politics when US coerced Saudis to accepting it for payment in return for the biggest cartel in the world.

Since they lose some of the money through currency exchange. With the SAR pegged to the dollar SA does not lose a penny through any transaction.
As for OPEC transaction, it's not dominated it's the rule since the price is pegged to the two major oil exchange markets.

Not ture. Pegging does not prevent the loss of money! It reduces the loss by taking out the currency risks, but it still incurred transaction action cost and holding cost!

Further from you;

Look in the later half of the 21st century, oil will not be a commodity any more since the hydrogen society will over take the present carbon society in which case the petro-dollar scheme will collapse.
OPEC nations as well as all nations dependent on exporting oil all feels this coming just not knowing when it will come.
So talking about RMB taking over the US dollar as a transaction currency is meaningless since there are no commodities that Mainland China has a monopoly of.


So you got a better crystal ball than any of us here then. Bully for you! But meanwhile In the real world, I quote J M Keynes:

'In the long run, we all be dead'!

 

[AndrewS]

Look in the later half of the 21st century, oil will not be a commodity any more since the hydrogen society will over take the present carbon society in which case the petro-dollar scheme will collapse.
OPEC nations as well as all nations dependent on exporting oil all feels this coming just not knowing when it will come.
So talking about RMB taking over the US dollar as a transaction currency is meaningless since there are no commodities that Mainland China has a monopoly of.

I agree oil will decline in importance significantly.

But I think Hydrogen will only take over about 20% of the carbon-based energy needs, with another 70% based around battery storage technology.

And if you're looking that far into the future, the collapse of the petro-dollar does mean the end of the US Dollar as the default reserve currency.

Particularly given the likelihood of continued trade deficits, along with much larger US dollar debts to foreigners, and the high likelihood of both China and India having larger economies than the USA.

So we should all be preparing for the day when the US Dollar is dethroned from its current role.
But what replaces the US Dollar is another question.

 

[galvatron]

It is a practical point too.

They already barred a high ranking Chinese official in Carrie Lam, who cannot use her VISA and Master Card anymore in Hong Kong.

Who is to say the Untied States won't go after the Saudi Royal family and bar them from US Dollar transactions?

Weaponize the USD, and lo and behold, people might start thinking of using alternatives.

The Chinese should something other than visa and mastercard.

 

[Tam]

The Chinese should something other than visa and mastercard.

Yes, Alipay and WeChat.

 

[Tam]

I think what Sima was trying to say was Saudis currently rely more on US/Western-made arms than Chinese arms, so they need more USD in order to pay for their weapons from the west rather than China doesn't sell arms to the Saudis and therefore have a moral high ground.

The US and the EU can sanction the country using their arms when the US does not approve the way those arms are used. China does not seem to have an issue in what way their arms are used. I think its more the other way around, the Saudis are awashed in US dollars and need to spend it to get a token appearance of trade balance and use what they collected. Its not that they need more USD, they have an excess of USD. That's why the Saudis are buying US Treasuries.

 

[Tam]

Look in the later half of the 21st century, oil will not be a commodity any more since the hydrogen society will over take the present carbon society in which case the petro-dollar scheme will collapse.
OPEC nations as well as all nations dependent on exporting oil all feels this coming just not knowing when it will come.
So talking about RMB taking over the US dollar as a transaction currency is meaningless since there are no commodities that Mainland China has a monopoly of.

That's not the right way to approach it. What's going to be the transaction currency is the one that has the most gold behind it. A collapse of fiat currencies around the world --- because everyone is massively printing theirs all the same time as the US is printing its ---- will lead investors going back to the gold and silver standard. So whoever has been stockpiling the most gold secretly will suddenly win overnight. When was gold just $400 an ounce, now $800, then $1200, then recently its been up as high as $2000. When gold goes up, silver will follow, and down and up the chain with other metals, like platinum.

 

[galvatron]

Yes, Alipay and WeChat.

In addition, use Alipay and WeChat on harmony OS with its own app store.

 

[Tam]

Since they lose some of the money through currency exchange. With the SAR pegged to the dollar SA does not lose a penny through any transaction.
As for OPEC transaction, it's not dominated it's the rule since the price is pegged to the two major oil exchange markets.

I am not sure if you know how a currency is pegged to the US dollar. Its done two ways. First, to inflate at the same rate, the other currency has to print as much money relative to the amount of US dollar printing. To deflate at the same rate as the US dollar, you have to remove the same amount of currency from the system relatively proportionally the Fed is removing US dollars from its system.

The second mechanism is that the country needs to match interest rates. If the US interest rates go high, the country needs to raise its interest rates in proportion. And if the US interest rates go low, the other countries interest rates need to go low also in proportion.

The danger of following the US is when the US currency goes threading into a path were no one has ever travelled before by wantonly printing trillions. Those who have been pegging their currencies to the US dollar, like China and Hong Kong, may decide that this is not a path they want to follow because this means they have to inflate their currencies which can trigger hyper inflation, while low interest rates means banks will not make money and this can trigger a banking crisis. Hyperinflation and an instable banking system can also trigger capital flights. So this is a dam that might not be held and the result is that every central bank will be on its own.

 

[SamuraiBlue]

That's not the right way to approach it. What's going to be the transaction currency is the one that has the most gold behind it. A collapse of fiat currencies around the world --- because everyone is massively printing theirs all the same time as the US is printing its ---- will lead investors going back to the gold and silver standard. So whoever has been stockpiling the most gold secretly will suddenly win overnight. When was gold just $400 an ounce, now $800, then $1200, then recently its been up as high as $2000. When gold goes up, silver will follow, and down and up the chain with other metals, like platinum.

Been there, done that.
The present expanding economy will shrink and collapse since gold is a finite commodity on this planet therefore there is a limit to how much the world economy can grow on a finite source.
That is why nations had move to fiat currency in the first place.

 

[SamuraiBlue]

I am not sure if you know how a currency is pegged to the US dollar. Its done two ways. First, to inflate at the same rate, the other currency has to print as much money relative to the amount of US dollar printing. To deflate at the same rate as the US dollar, you have to remove the same amount of currency from the system relatively proportionally the Fed is removing US dollars from its system.

The second mechanism is that the country needs to match interest rates. If the US interest rates go high, the country needs to raise its interest rates in proportion. And if the US interest rates go low, the other countries interest rates need to go low also in proportion.

The danger of following the US is when the US currency goes threading into a path were no one has ever travelled before by wantonly printing trillions. Those who have been pegging their currencies to the US dollar, like China and Hong Kong, may decide that this is not a path they want to follow because this means they have to inflate their currencies which can trigger hyper inflation, while low interest rates means banks will not make money and this can trigger a banking crisis. Hyperinflation and an instable banking system can also trigger capital flights. So this is a dam that might not be held and the result is that every central bank will be on its own.

Don't really matter since the fact is SAR IS PEGGED TO THE US DOLLAR.
End of story.