HongWu002
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China rejects dollars for new Yuan
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PaklovesTurkiye
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If China dumps US$, what will happen? asks as a layman. Will US start a war to save its global domination of its currency? Will this move of China piss of Americans?
US can't start war with China. China is a country with proven effective miniature MIRV hydrogen nuclear warhead ICBM that can wiped USA off the world map.
Chinese are not afraid to kamikaze with US. If they want, bring it on. Chinese are no Iraq or Libya.
21stCentury
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CHINA SAYS "NO DOLLARS" FOR NEW YUAN
Post by U.S.Reporter - Apr 13, 2016
In a shocking move likely to crush the US economy overnight, China is refusing to make its new gold-backed Yuan, convertible from or to US Dollars. The new Yuan will be introduced next Tuesday, April 19.
When the International Monetary Fund (IMF) agreed to add the Yuan to the basket of world currencies used for Global Reserves and International Trade, they wanted China to make the Yuan more reliable as a currency. Since then, China has almost un-pegged its Yuan from the Dollar, allowing its value to fluctuate on world markets.
But for years, China has been amassing huge amounts of gold bullion; some have said their appetite for bullion has been "staggering." And with a new gold-backed Yuan to be issued next Tuesday, the entire world will have a choice of a new currency to use for international trade: The old US Dollar which is backed by nothing, or the new Chinese Yuan, which is backed by gold. Which currency would YOU use?
When this new currency is issued, countries that have been forced to use US Dollars for decades, and have had to keep billions of dollars in their foreign currency reserves, will be free to dump those dollars. But they won't be able to dump them to China for the new gold-backed, Yuan!
China has reportedly decided "there can be no conversion of gold-backed Yuan to or from US dollars." What China fears is that many countries around the world will want to trade their reserve US dollars for the new Yuan, leaving China with mountains of worthless US dollars. China already has several trillion in US dollar reserves and does not want or need more.
If news of this decision by China is correct, then countries around the world may just have to decide whether or not they wish to continue trading with the USA at all?
The upheaval this could cause as early as next week, would be staggering.
This is a fast-=developing story; check back.
https://www.superstation95.com/index.php/world/1152
Post by U.S.Reporter - Apr 13, 2016
In a shocking move likely to crush the US economy overnight, China is refusing to make its new gold-backed Yuan, convertible from or to US Dollars. The new Yuan will be introduced next Tuesday, April 19.
When the International Monetary Fund (IMF) agreed to add the Yuan to the basket of world currencies used for Global Reserves and International Trade, they wanted China to make the Yuan more reliable as a currency. Since then, China has almost un-pegged its Yuan from the Dollar, allowing its value to fluctuate on world markets.
But for years, China has been amassing huge amounts of gold bullion; some have said their appetite for bullion has been "staggering." And with a new gold-backed Yuan to be issued next Tuesday, the entire world will have a choice of a new currency to use for international trade: The old US Dollar which is backed by nothing, or the new Chinese Yuan, which is backed by gold. Which currency would YOU use?
When this new currency is issued, countries that have been forced to use US Dollars for decades, and have had to keep billions of dollars in their foreign currency reserves, will be free to dump those dollars. But they won't be able to dump them to China for the new gold-backed, Yuan!
China has reportedly decided "there can be no conversion of gold-backed Yuan to or from US dollars." What China fears is that many countries around the world will want to trade their reserve US dollars for the new Yuan, leaving China with mountains of worthless US dollars. China already has several trillion in US dollar reserves and does not want or need more.
If news of this decision by China is correct, then countries around the world may just have to decide whether or not they wish to continue trading with the USA at all?
The upheaval this could cause as early as next week, would be staggering.
This is a fast-=developing story; check back.
https://www.superstation95.com/index.php/world/1152
hirobo2
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Fantastical thinking much? Just watch what happens 1 month from the date, USD will strengthen against most major currencies contrary to what most ppl expect...
When China says Yuan not convertible, what you think ppl will convert USD to? Nothin! This is why 6 months from now USD will be stronger than what it is today...
Brainsucker
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People still can buy this Yuan just like they buy gold. China can has bilateral agreement by exchange this new yuan to other countries money. The rate is the same as the gold.
Solomon2
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From ancient times to the present day, understanding how currencies work has not been a Chinese strength. It'll be interesting to see if today's China can improve their score so that their new policy actually benefits their country and the world rather than serving as a liability. A lot of Westerners have put in a lot of effort into educating them over many decades so maybe now there's a chance.
PaklovesTurkiye
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Hmm....
JSCh
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Possibly refer to this ->
https://defence.pk/threads/chinese-economy-news-updates.80982/page-418#post-8251972
Beidou2020
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Chinese government lacks the balls to dump dollars. Too many pro-American corrupt crooks within the CPC.
Jlaw
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in the old days, paper money was used as a promissory note in exchange for gold. Since US backed out of Bretton-Woods in the early 70s they were able to print as much money as possible thus diluting the dollar and creating inflation year after year
Solomon2
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That's a superficial analysis - not wholly correct, nor wholly incorrect. The breaking of the international gold peg to the dollar meant that the value of the dollar now rested upon what foreigners were willing to purchase with dollars, and for how much. Basically, the dollar is ultimately backed upon the strength of the U.S. economy. As long as the government doesn't wildly overspend more than it takes in in revenues, It's mostly the Federal Reserve that controls dollar liquidity, and the mandate of its government-appointed chairman is to seek maximum employment, stable prices, and moderate long-term interest rates.
China is a big reason why the U.S. can currently spend far more than it receives in revenue, because China buys massive amounts of U.S. bonds. This is an advantage to the U.S. gov't welfare state but damages U.S. manufacture, while limiting China's flexibility in foreign reserves in case of a U.S. economic downturn or financial shock, which now keeps the value of the dollar higher than it should be for rapid worldwide recovery. So establishing another form of widely convertible currency both protects China and helps stabilize the world economy. China is, in my estimate, about 15-20 years behind where China could be, had its leaders taken these steps earlier.
But in the late 1990s mainland Chinese still lacked enough knowledge of Western macroeconomics and confidence in their own people to start building alternate reserves and engage in large-scale foreign loans. They panicked and reacted to the 1998 crisis by dumping hard reserves to grab dollars, when they should have been buying gold and their neighbors' foreign currency while they were cheap and needed support. We'll see if this time it's any different...
jhungary
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Gold backed currency work when you have a certain amount of gold you can back up the value of your fiat currency. In another word, instead of holding 100 tons of gold, you are holding fiat currency that worth 100 ton of gold and that same 100 tons of gold instead of being store in local banking institution, they were stored under federal reserve.
However, as the world started to expand, development on a country demand excessive amount of currency (to pay for their own development) however, as gold can only extracted in a certain amount over time due to the technological process advancement, your country may need 500 tons of gold that year to back up the project your country is developing, but in reality, you can only extract 100 tons of gold in that year, then you either stop the 4/5 of your development, or you "floated" your currency and start issuing debt or deflated your pegging rate to gold.
In a long term the value of gold would depreciated to a point it is no longer capable as a reference currency (Where the value of gold is lower than the extraction cost of gold).
The Gold Backed RMB is basically nothing but a pipe dream, what it was is to instead rely on Dollar Bond, the Chinese tried to put their reserve on gold (by liquidate USD to buy gold) This could not work because to do that, China need more gold than they have stowed to be able to back the world second economy, which means they were to buy from other countries as well, and that would involved the USD.
At the time China sell their USD, this will devalue the USD in the international trade (As you flood the market with USD), and which mean you will get less RMB for every dollar you sell, at the same time, the Gold Price would be higher (projected, as buying activities increase) or at least the same (kind of a wishful thinking) That would mean you will need more RMB to buy gold. That would means RMB reserve would be seriously depleted (if not completely depleted) by the two acts (Selling USD and Buying Gold), That means the value of RMB would crash.
This move will basically bring down every country in this world, with the exception of the United States, simply because regardless on how USD being valued, $1 USD will also be $1 USD, which means US will be the only exception (along with country that have USD as their official currency) where other will collapse.
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