Some say China is behind the dollar’s weakness

[seven7seven]

I have to laugh at the people who keep saying that China is a big bubble waiting to burst. These people have no understanding of what makes a true economy and China is without a doubt a true economy in its biggest and best form. You make things that people want and you sell it abroad in return for money or goods and/or materials you want. China has been doing that on a scale, for the last few decades, that nobody in history has matched. Using this earned money and stockpiled raw materials, China has built its domestic infrastructure, manufacturing base, R&D infrastructure and education of a huge highly skilled workforce. These are things that can't be taken away even if stock markets crash. China can keep making and building things that can be sold, even if it is just to its own huge domestic market. Stock markets and currency valuation only matters to those top few rich billionaires, who would become significantly poorer, if a crash occurred.

USA on the other hand is the definition of a bubble where most of its wealth and prosperity is predicated on the rest of the World still using its Dollar. This has been maintained for more than the last half century because everybody is scared of USA's military might and have attacked any country looking to opt out of the Dollar reserve racket. However, with Russia and China overtly defying Dollar dominance and showing the World that they are genuine counterweights to US intimidation, the rest of the World are realising they can start to move away from USA's parasitic Dollar system. Once this Dollar ditching has hit a critical mass, say goodbye to USA as we know it!!

USA, unlike China, don't have the same manufacturing capacity and supply chain and reorganising to become a real economy again will be impossible without money and other nations willing to trade with an insolvent nation, which is what USA has been for decades.

China doomsayers can keep up their fantasy of a China crash, but crash or no crash, China is in fine shape either way.

 

[Economic superpower]

I have to laugh at the people who keep saying that China is a big bubble waiting to burst. These people have no understanding of what makes a true economy and China is without a doubt a true economy in its biggest and best form. You make things that people want and you sell it abroad in return for money or goods and/or materials you want. China has been doing that on a scale, for the last few decades, that nobody in history has matched. Using this earned money and stockpiled raw materials, China has built its domestic infrastructure, manufacturing base, R&D infrastructure and education of a huge highly skilled workforce. These are things that can't be taken away even if stock markets crash. China can keep making and building things that can be sold, even if it is just to its own huge domestic market. Stock markets and currency valuation only matters to those top few rich billionaires, who would become significantly poorer, if a crash occurred.

USA on the other hand is the definition of a bubble where most of its wealth and prosperity is predicated on the rest of the World still using its Dollar. This has been maintained for more than the last half century because everybody is scared of USA's military might and have attacked any country looking to opt out of the Dollar reserve racket. However, with Russia and China overtly defying Dollar dominance and showing the World that they are genuine counterweights to US intimidation, the rest of the World are realising they can start to move away from USA's parasitic Dollar system. Once this Dollar ditching has hit a critical mass, say goodbye to USA as we know it!!

USA, unlike China, don't have the same manufacturing capacity and supply chain and reorganising to become a real economy again will be impossible without money and other nations willing to trade with an insolvent nation, which is what USA has been for decades.

China doomsayers can keep up their fantasy of a China crash, but crash or no crash, China is in fine shape either way.

Well said. I agree with you.

The problem China has is the slowdown in fixed asset investment. China's property prices were skyrocketing the past few years as people got rich they bought property. The easy money from 2009-2010 also helped boost property prices. The government introduced strict down payment and other restrictive policies to cool down property prices as a result around 2011-2012.

Once property investment slowed, demand for raw materials slowed. Sectors related to property such as steel, aluminium, glass, cement, etc lost its demand which created overcapacity as producers didn't think the property investment will fall as much as it did.

 

[anon45]

USA on the other hand is the definition of a bubble where most of its wealth and prosperity is predicated on the rest of the World still using its Dollar. This has been maintained for more than the last half century because everybody is scared of USA's military might and have attacked any country looking to opt out of the Dollar reserve racket. However, with Russia and China overtly defying Dollar dominance and showing the World that they are genuine counterweights to US intimidation, the rest of the World are realising they can start to move away from USA's parasitic Dollar system. Once this Dollar ditching has hit a critical mass, say goodbye to USA as we know it!!

USA, unlike China, don't have the same manufacturing capacity and supply chain and reorganising to become a real economy again will be impossible without money and other nations willing to trade with an insolvent nation, which is what USA has been for decades.

China doomsayers can keep up their fantasy of a China crash, but crash or no crash, China is in fine shape either way.

The US is the second largest manufacturing nation in the world. To call the US economy not 'a real economy' and an insolvent nation when it is one of the most well-diversified countries in the world is ludicrous, especially when you use Russia of all countries as a counter-example.

The Irony is you are doing the same thing you laugh at China declinists for doing.

 

[seven7seven]

The US is the second largest manufacturing nation in the world. To call the US economy not 'a real economy' and an insolvent nation when it is one of the most well-diversified countries in the world is ludicrous, especially when you use Russia of all countries as a counter-example.

The Irony is you are doing the same thing you laugh at China declinists for doing.

USA's manufacturing sector makes up only about 10% of its economy compared to China where it is nearly half of its economy. However, in terms of real goods made and trade, the difference is far, far bigger and USA manufacturing capacity is far smaller and USA trade volume is exaggerated by USA's inflated Dollar worth. Much of USA's GDP is based on massively inflated real estate and the inflated value of the Dollar itself. Once USA loses its number one Dollar reserve status, the USA economy isn't going to be worth much and there will be chaos which USA is not structurally going to be able to rebound from easily.

I used Russia in the context of a military counterweight, in unison with China. I did not mean Russia as an economic counterweight.

 

[Rechoice]

Some say China is behind the dollar’s weakness
Published: Feb 19, 2016 10:31 a.m. ET

The dollar’s weakness against the euro and yen over the last two months has frustrated traders as well as central bankers in Europe and Japan who’ve watched their currencies strengthen despite looser monetary policy.

Many market strategists have blamed the currencies’ resilience on investors seeking safe harbor from turbulent global markets. But others believe it’s an inadvertent consequence of a mysterious policy shift by one of the U.S.’s largest economic rivals: China.

In recent months, the People’s Bank of China has been rebalancing its massive foreign currency reserves, which were worth $3.231 trillion at the end of January. To do this, the PBOC, the Chinese central bank, has likely sold dollars and dollar-denominated assets like U.S. Treasurys in favor of government debt from eurozone countries and Japan, said Douglas Borthwick, head of currency trading at Chapdelaine & Co.

The necessary purchase of euros EURUSD, +0.1980% yen USDJPY, -0.56% needed to fund these transactions has supported both currencies against the dollar, even as the U.S. currency strengthened against other rivals in the G-10, Borthwick said.

Since mid-December, the euro has risen 1.1% against the dollar and the yen has gained 6.7%. Meanwhile, the dollar has strengthened by 1% against the yuanUSDCNY, +0.1013% in China’s onshore market.

China’s rebalancing follows a decision in mid-December to begin measuring the yuan’s value against a trade-weighted basket. Previously, the yuan was primarily viewed against the dollar.

Borthwick said recent communiqués from China suggest the central bank is increasingly concerned with managing the value of the yuan, also known as the renminbi, against the basket, and not against the dollar, which necessitated the shifting reserves.

A long time coming
Chinese officials have been advocating for such as shift for at least five years.

On June 19, 2010, Yu Yongding, a former adviser to the People’s Bank of China, suggested in the China Securities Journal the country should reduce its dollar holdings to protect itself from a sharp depreciation in the U.S. currency.

But Chinese officials have been more concerned with the recent surge in the dollar’s value since 2011, which has dragged the yuan higher, weighing on the competitiveness of Chinese exporters.

“Over the last five years, they’ve been seeking to diversify their reserves in a more prudent manner, Borthwick said. “Either they would base their reserves on the SDR or on a trade weighting. And by the looks of it, they’ve gone with the trade weighting.”

According to China’s foreign-exchange authority, the largest constituents of the index are the U.S. dollar, at 26.4%, the euro at 21.4% and the yen at 14.7%.

It also includes the British pound, Hong Kong dollar, Australian dollar, New Zealand dollar, Singapore dollar, Swiss franc, Canadian dollar, Malaysian ringgit, Russian ruble and Thai baht.

China doesn’t publish details about the composition of its foreign reserves, and its process for managing the value of the yuan remains opaque. But China’s reserves declined by a total of more than $200 billion in January and December, according to official data, which Borthwick said supports the idea that China has been swapping Treasurys for assets denominated in other currencies.


Don’t believe the hype
Investors are worried that capital flight and China’s efforts to fend off speculators will drain reserves, possibly forcing the country to allow its currency to depreciate sharply. But a report published earlier this month by Gavekal Dragonomics argued that claims of capital flight from the Chinese economy have been overexaggerated.

The report, published earlier this month, showed that domestic renminbi deposits actually rose in 2015. Household deposits rose by 10% and corporate deposits rose by 14%.

“There are few signs that people are withdrawing renminbi and switching into dollars on a large scale,” said Chen Long, the China economist at Gavekal and the report’s author.

Buying by the PBOC helped turn the yield on the 10-year Japanese government bond negative earlier this month, and it’s also one of the reasons why the yen has remained buoyant, despite the Bank of Japan’s efforts to weaken it, Borthwick said.

Indeed, speculation that China has been selling Treasurys en masse has intensified as of late.

The dollar has been relatively stable against most of its G-10 rivals over the last two months, as the chart below shows. It illustrates the buck’s value versus the Canadian dollar, New Zealand dollar, Australian dollar, Swedish krona, Norwegian krone, Swiss franc, British pound, euro and yen.

Large investors and market strategists alike believe the yuan will depreciate against the dollar as China struggles with slowing economic growth and the fallout from nonperforming loans.

Kyle Bass, founder of hedge fund Hayman Capital Management, said he’s placed a massive bet against the yuan on the expectation that China will need to choose between deleveraging its financial system and defending its currency from speculators.

But Borthwick believes the yuan’s value relative to the buck will be more or less stable this year as policy makers shift their focus to the trade-weighted basket.

“The idea that there’s immense capital flight leaving China is misplaced,” Borthwick said.

Some say China is behind the dollar’s weakness - MarketWatch

good deal. It is FED real intention.

 

[anon45]

USA's manufacturing sector makes up only about 10% of its economy compared to China where it is nearly half of its economy. However, in terms of real goods made and trade, the difference is far, far bigger and USA manufacturing capacity is far smaller and USA trade volume is exaggerated by USA's inflated Dollar worth. Much of USA's GDP is based on massively inflated real estate and the inflated value of the Dollar itself. Once USA loses its number one Dollar reserve status, the USA economy isn't going to be worth much and there will be chaos which USA is not structurally going to be able to rebound from easily.

I used Russia in the context of a military counterweight, in unison with China. I did not mean Russia as an economic counterweight.

Again, the irony is you are doing the same thing you laugh at China declinists for doing.

Yes the Service sector is the ovewhelming majority of our economic output, but that only shows how massive the service sector is. Again our manufacturing is only slightly behind China. and has not been lower than 2nd for the last 120 years or so, it isn't an aberration that the US has so much manufacturing and it isn't because of a strong US dollar (which would actually be worse for manufacturing btw).

I see people like you scream about the imminent end of the US dollar reserve status and the coming chaos to the US as its economy magically becomes worthless now every week. We aren't a great economic power because the dollar is the reserve currency, we are a reserve currency because we are a great economic power. Even should the dollar no longer be the reserve currency, we would still be a great economic power, one of the top in the world.

We are doing fine.

U.S. overtakes France to become Germany's top trading partner| Reuters

"The American economy is currently experiencing a stable economic upturn, which benefits German companies," said Bernhard Mattes, head of the American Chamber of Commerce in Germany.

You Chinese feel like you are the target of economic hit pieces with all this China decline stuff? you don't know the half of it!

 

[Hamartia Antidote]

The article says one of the reasons is that many countries simply don't have the cash to buy treasuries due to their economic slowdowns. So it's not like there is some huge loss of faith.

 

[jhungary]

So, basically there are two set of article out there

Article like this one and also this

Is the U.S. economy headed towards recession?

One set is US weak dollar lead to US Collapse.
Another is US is heading toward recession which again leads to US Collapse

I don't know about you, but for all my economic knowledge tells me that weak dollar boost trading (Sell for less) and therefore cannot collapse the US market, in fact, it's quite the opposite. And the reason for recession is Strong Dollars. Those two things are contradictory.

US cannot crash with a weak dollar, US can only enter recession if the dollar is strong. Some people ought to tell whoever writing all these article

 

[jammersat]

Iran is officially waiting for the Brexit referendum to announce Euro as their petro currency :lo: @@

 

[seven7seven]

Again our manufacturing is only slightly behind China.

If you truly believe this, then your level of delusion is much bigger than I first thought. I will agree to disagree with you on America being a great economic power and that they don't rely on their Dollar reserve status. We shall see what happens when the Dollar loses its reserve status. And yes, it is a matter of when and not if this happens.

 

[anon45]

If you truly believe this, then your level of delusion is much bigger than I first thought. I will agree to disagree with you on America being a great economic power and that they don't rely on their Dollar reserve status. We shall see what happens when the Dollar loses its reserve status. And yes, it is a matter of when and not if this happens.

https://fas.org/sgp/crs/misc/R42135.pdf

Photo Gallery: Top 20 Manufacturing Countries in 2020 | US Will Overtake China in Future | IndustryWeek

Specifically when it comes to the US being a great economic power, it sounds like you are just disagreeing for the sake of not wanting to admit you were wrong, the evidence of the US as a great economic power both before and after its ascension as the primary reserve currency in the aftermath of WW2 at the very least is overwhelming.

There is no shame in admitting wrongness or misunderstanding, in fact it is the sign of an open mind to do so if the evidence against your view is overwhelming, as it is in this case.

Just look at what happened to the UK economy when the pound sterling was no longer the primary reserve currency.



For my part I may have overspoken when it comes to US and China manufacturing. When it comes to the rest of the world the US and China are on nearer terms when it comes to manufacturing than not, but it would probably be inaccurate to say the US is objectively only 'slightly' behind today, moderately behind China is more accurate, at least as of 2013. I'd say that even being wrong with the use of the word slightly, my assertion that the US is and will remain a great economic power barring some horrible global catastrophe is still supported by this data.

 

[seven7seven]

https://fas.org/sgp/crs/misc/R42135.pdf

Photo Gallery: Top 20 Manufacturing Countries in 2020 | US Will Overtake China in Future | IndustryWeek

Specifically when it comes to the US being a great economic power, it sounds like you are just disagreeing for the sake of not wanting to admit you were wrong, the evidence of the US as a great economic power both before and after its ascension as the primary reserve currency in the aftermath of WW2 at the very least is overwhelming.

There is no shame in admitting wrongness or misunderstanding, in fact it is the sign of an open mind to do so if the evidence against your view is overwhelming, as it is in this case.

Just look at what happened to the UK economy when the pound sterling was no longer the primary reserve currency.



For my part I may have overspoken when it comes to US and China manufacturing. When it comes to the rest of the world the US and China are on nearer terms when it comes to manufacturing than not, but it would probably be inaccurate to say the US is objectively only 'slightly' behind today, moderately behind China is more accurate, at least as of 2013. I'd say that even being wrong with the use of the word slightly, my assertion that the US is and will remain a great economic power barring some horrible global catastrophe is still supported by this data.

I never said US has never been a great economic but they are not one now, in relation to China. USA was once a manufacturing giant but over the last few decades, successive administrations have gutted US industry and manufacturing. All that's mostly left is service industries, pushing around magic money, conjured out of thin air by your Fed Reserve.

There's a reason why most countries want out of Dollar reserve because they are fed up with having their hard earned foreign exchange reserves being devalued by US quantitative easing. No economic power behaves this recklessly and deserves to call themselves one. You are welcome to disagree, but that's just my opinion. You're welcome to your own opinion.

 

[anon45]

I have provided the hard data from a respected institution to show that the US remains a manufacturing and economic power at least as of 2013, and have seen no hard data in return, just assertions that, while having been popular in certain circles, are not born out by economic realities and hard data.

Given what I have not seen and what I have provided I suppose I will just have to leave it at this.

 

[F-22Raptor]

I have provided the hard data from a respected institution to show that the US remains a manufacturing and economic power at least as of 2013, and have seen no hard data in return, just assertions that, while having been popular in certain circles, are not born out by economic realities and hard data.

Given what I have not seen and what I have provided I suppose I will just have to leave it at this.

China actually lost ground to the US economy in dollar output in 2015. China has practically made no progress in closing the gap with the US economy the past couple years.

China Stumbles in Race to Pass U.S. as World's Biggest Economy - Bloomberg Business

 

[seven7seven]

China actually lost ground to the US economy in dollar output in 2015. China has practically made no progress in closing the gap with the US economy the past couple years.

China Stumbles in Race to Pass U.S. as World's Biggest Economy - Bloomberg Business

Like I have been saying, Dollar is inflated because of its reserve status. Nominal GDP, given in Dollars, will always be favourable looking to US but real trade of goods and purchasing power, and who the rest of the World likes doing business with the most is unquestionably, China. China gives you tangible products and not Dollar IOUs that USA can depreciate whenever they feel, with quantitative easing. Bask in your nominal GDP all you want but most countries want to trade with China the most.