Tag Archives: currency

Business/Economics, International, U.S.

Chinese bankers say dump U.S. dollar, buy other currencies

Several banking officials in China, have stated that they Chinese government needs to “reduce” and “diversify” their foreign currency holdings.

Tang Shuangning, chairman of China Everbright Group said China must reduce its excessive foreign exchange reserves and further diversify its holdings.

Zhou Xiaochuan, governor of China’s central bank, said that China’s foreign exchange reserves “exceed our reasonable requirement”.

Xia Bin, a member of the monetary policy committee of the central bank, said China should further diversify its foreign exchange holdings.

According to western media reports, most of China’s foreign currency holdings are in U.S. dollars.  This is part of why the value of the U.S. dollar hasn’t dropped as far as it should have.  But if the Chinese government listens to its bankers, then the dollar could crash.

When the Chinese bankers say China must reduce its current foreign currency holdings they’re talking about U.S. dollars.  They’re saying the Chinese government has too many, based on how bad the U.S. economy is.

When the Chinese bankers say they want the Chinese government to diversify foreign currency holdings, they mean they want to get rid of U.S. dollars and buy money from countries that have good economies, like Russia, India, South Africa and several South American countries.

 

Business/Economics, International

Currency Wars Pushing Global Inflation

On October 2nd, the head of the International Monetary Fund (IMF) warned the world’s countries not to start a currency war. Such action could end any economic recovery. The problem is that it appears that the world is already in a currency war.

Today, October 6th,  an RT (I think it stands for Russia Today) program called Cross Talk, interviewed three currency analysts about the race, by most countries, to devalue their money.

Countries want their money to be low in value in order to attract foreign customers. International trade is key to growing a country’s economy. An economy that’s based on domestic trade only, leads to stagnation. But, if all the major traders in the world crash the value of their money the result could be worse than an economy based only on domestic trade.

The analysts interviewed on RT represent companies/organizations from Hong Kong, Russia and the U.S.

They said currency devaluation works only if a handful of countries do it. The problem is that “everyone” is doing it. The result will be global inflation.

The analysts agreed that the coming global inflation will not affect the ‘western’ countries as badly as the rest of the world. They didn’t give any example of how bad it would get.

An allegory was used to explain the effect of most countries trying to devalue their money at the same time: It’s like a marathon where you have so many runners that they knock each other out of the race. I other words, some countries are going to have their economies “knocked” out.

To solve the problem of currency wars, the analysts said world leaders might create a common global currency, or at least common rules on currency trading.

Increasing commodity prices, currency wars, actual wars, massive debts owed by governments, continuing job losses, etc. It seems to me that despite the positive spin our leaders, and main stream media puts on our economy, the evidence is clear that things are going to get worse. Buckle up.