Chinese Economics Thread

[ZeEa5KPul]

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.

There's no commodities that the US has a monopoly on either.

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

All caps doesn't give you any more credibility and it's far from the end of the story.

 

[Tam]

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.

And gold has risen from $32 an ounce in the '70s to the $2000 mark it is today. What's going to happen if gold reaches the $3000, then $5000 then $10,000 mark?

The problem with fiat currencies is that they isn't anything to check their devaluation, and investors are going to sink their money in ways that will preserve that value.

 

[SamuraiBlue]

There's no commodities that the US has a monopoly on either.

Actually the US Dollar is technically their commodity being the transaction currency for oil.
Any nation wanting to buy oil from the OPEC nations requires to buy the US dollar first.

 

[Tam]

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

It can be unpegged easily if and when they decide not to print the same amount of massive money and if banks are going to preserve their interest rates compared to the US. The pressure is there if you want to keep and protect the value of your currency to prevent hyperinflation and to keep your economy stable.

 

[SamuraiBlue]

And gold has risen from $32 an ounce in the '70s to the $2000 mark it is today. What's going to happen if gold reaches the $3000, then $5000 then $10,000 mark?

That is because it is not tied to any currency.
Any commodity based monetary standard requires a certain amount of stability or the economy will start wildly fluctuating since with a commodity based monetary system the government guarantees a certain unit of currency will be traded to a certain amount of that commodity.

 

[SamuraiBlue]

It can be unpegged easily if and when they decide not to print the same amount of massive money and if banks are going to preserve their interest rates compared to the US. The pressure is there if you want to keep and protect the value of your currency to prevent hyperinflation and to keep your economy stable.

Like I said it doesn't matter, SAR is presently pegged to the dollar.
You can talk about possibilities till the cow returns but it won't change the present situation.

 

[Tam]

Like I said it doesn't matter, SAR is presently pegged to the dollar.
You can talk about possibilities till the cow returns but it won't change the present situation.

You don't seem to know how pegging is done. Its not like an act of God or something. It has its economic consequences.

 

[SamuraiBlue]

You don't seem to know how pegging is done. Its not like an act of God or something. It has its economic consequences.

Still doesn't change the fact.

 

[ZeEa5KPul]

Like I said it doesn't matter, SAR is presently pegged to the dollar.
You can talk about possibilities till the cow returns but it won't change the present situation.

What a great philosophy: if someone fires a bullet at you, you're alright in the microsecond before the bullet hits you because it hasn't hit you yet.

 

[Tam]

That is because it is not tied to any currency.
Any commodity based monetary standard requires a certain amount of stability or the economy will start wildly fluctuating since with a commodity based monetary system the government guarantees a certain unit of currency will be traded to a certain amount of that commodity.

There is no stability for investors right now in fiat currency. If you are not into gold, then you have to be in some asset or equity, like real estate or stocks.

In the US, production is down while the money supply is going up. In order to have stability in the economy, its not petrodollars that shore it up, its the amount of productivity the economy generates. That total productivity needs to absorb the excess currency to keep the inflation down. In order to not hyperinflate, your productivity has to rise by the same amount at least of the currency.

That's not happening with COVID and productivity, along with the PMI, being way down. You are producing less but you have more currency. That is the recipe for inflation, as the dollars compete and bid for the restricted supply. Do you think petrodollars is what keeps the food prices in the supermarkets down? No. Do you live in the US? The prices of groceries are going stupid here.

Ironically, it was China that has been exporting deflation to the US in the form of cheap products. Then you put a tariff on them. But even without tariffs, China's production has increasingly turned towards satisfying its own massive and rising middle class, which means it will gradually export less and less. With less goods reaching the US markets and other parts of the world, while the currencies are being massively printed, the currencies are bidding against less and less supply and that drives the prices up.