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China lets yuan break 7-per-dollar level for first time in over a decade
- HNisCurated 7y agoBitcoin is up, gold at all time highs. Who are the losers when a government prints money?
- imtringued 7y agoThe government that doesn't.
- seanmcdirmid 7y agoThat isn’t true. The Swiss are not hurting much atm, keeping ones currency strong means imports are cheaper even if exports are more dear, which is useful if you import a lot.
- sokoloff 7y agoHolders of currency (to include currency-denominated debt [as a lender] and those on fixed currency-denominated incomes)
- b_tterc_p 7y agoPeople with savings Those with a lot of money invested in the domestic market can do ok if the rise in imports offsets it.
- netsharc 7y agoIt does seem like bitcoin now goes up when Trump spooks the market (the traditional financial markets). Is it pro-traders thinking at least they'll make that day's profits that way?
- AnimalMuppet 7y agoGold's all time high was in the $1700s. It's at a recent high, but that's all.
- tedeh 7y agoDoes anyone have any good links to how the trade war is affecting the Chinese economy and population? Most everything I read in the western press seems to mostly concern the "American consumer" and how him/her is hurting due to higher prices. It would be interesting to hear what's going on on the other side, too.
- wtdata 7y agoChina has an autocratic regimen, it's difficult to gather what the population there truly thinks about US trade tariffs, when they all pretend they never even heard about Tianamen.
- duxup 7y ago>when they all pretend they never even heard about Tianamen The usual reaction I've seen when it is acknowledged (even if generally) is to note that it is "unhelpful" to talk about it.
- 420codebro 7y agoChinese got their euphemism-game down strong. Nazis would blush.
- AnimalMuppet 7y agoIn particular, it doesn't help the one doing the talking.
- SkyMarshal 7y agoNot all of them pretend, many actually haven't heard about it. I know at least one older Chinese adult who came to the US for the first time recently and saw the videos on Youtube for the first time in her life. It was 30yrs ago has been pretty well suppressed by the censors.
- businessinchina 7y agoI've run a business in China for over a decade and follow the macroeconomic situation here closely. Here's the deal: The Chinese economy became investment-driven instead of export-driven following the Great Financial Crisis. Exports are less important to GDP than real estate construction and infrastructure development (subways, high speed rail, bridges, etc). In terms of exports, Europe is the biggest trading partner, not the US. The US is number 2. The Chinese economy has a big problem: the government can drive GDP as much as it wants via state-driven investment and debt, but much of that is malinvestment and the debt cannot be self-funded. So there is and has been a large debt problem. This is why the Chinese economy has been slowing and the government has not found a politically acceptable way to tackle the problem. The US trade war is basically kicking the Chinese economy while it's already down, but it's not the key source of the problems here.
- nikhizzle 7y agoSo trying to parse this out as a non-economist: - first order effect: Yuan gets cheaper, meaning non-Chinese can buy more Yuan per dollar or unit of their currency - second order effect: non-Chinese can buy more units of Chinese goods, making Chinese exports more competitive. - second order effect: Chinese can buy less non-chinese goods per Yuan, weakening the ability of China to import items, but potentially strengthening the domestic market. I imagine this will also create some amount of inflation. An interesting technicality is that Chinese currency trades in two separate, mainly correlated markets. The onshore market (CNY) is regulated in a very tight band by the central bank, the offshore market (CNH) is much less controlled and trades in Hong Kong. See https://www.google.com/search?q=cny+vs+cnh https://www.google.com/search?q=cny+vs+cnh for the linkage.
- mc32 7y agoIt also counters the import tariff tax lessening the price increase on consumers who seem to be the main constituency of pundits.
- sokoloff 7y agoWhich plays towards the “and China is going to pay for it” rhetoric.
- zaroth 7y agoThe cost of tariffs is always split between suppliers and consumers, roughly in proportion to the elasticity of demand.
- rrss 7y agoI agree that that is typically true, but in the particular case of the 2018 tariffs on China, the cost pretty much fell entirely on consumers. > Overall, using standard economic methods, we find that the full incidence of the tariff falls on domestic consumers, with a reduction in U.S. real income of $1.4 billion per month by the end of 2018 > We find that the U.S. tariffs were almost completely passed through into U.S. domestic prices https://www.nber.org/papers/w25672.pdf https://www.nber.org/papers/w25672.pdf
- _iyig 7y agoSomewhat related question: does anyone know how many yuan there are? That is, how many have been issued in total by China’s central bank(s)? Are such figures even made public, or is it a matter of detective work and estimation, perhaps funded by outside private investors? Needless to say, the ability to issue more currency without anyone knowing you’ve done so (to increase/maintain domestic spending without the unwanted side-effects of inflation, for example) would be a very useful tool in any trade war.
- JumpCrisscross 7y ago> does anyone know how many yuan there are? Money supply is always estimated. Modern monetary systems don't have a single person with a monopoly on creating money. The central bank "prints" a lot money, but so do private banks. (Some systems have a tighter handle on money supply than others. But the measure is always an estimate.)
- ps101 7y agoWhere and how do "non-central" banks print money?
- JumpCrisscross 7y ago> Where and how do "non-central" banks print money? "If you borrow £100 from the bank, and it credits your account with the amount, ‘new money’ has been created. It didn’t exist until it was credited to your account. This also means as you pay off the loan, the electronic money your bank created is 'deleted' – it no longer exists. You haven’t got richer or poorer. You might have less money in your bank account but your debts have gone down too. So essentially, banks create money, not wealth. Banks create around 80% of money in the economy as electronic deposits in this way. In comparison, banknotes and coins only make up three percent. Finally, most banks have accounts with us at the Bank of England, allowing them to transfer money back and forth. This is called electronic central bank money, or reserves." TL; DR Through borrowing. The process is regulated, but not centrally controlled. https://www.bankofengland.co.uk/knowledgebank/how-is-money-created https://www.bankofengland.co.uk/knowledgebank/how-is-money-c...
- axus 7y agoThis happened when China stopped "manipulating their currency", am I correct? And wasn't that a goal of the USA for a while?
- sct202 7y agoChina has usually been accused of devaluing their currency to make their exports cheaper, this is still in line with that.
- deleted 7y ago[deleted]
- seanmcdirmid 7y agoThe reality for the last few years has been that China has been manipulating the RMB to make it stronger. This drop to 7 should have come in 2016 based on market forces and everyone could see the pressure in CNH trade.
- rdtwo 7y agoThis China has been propping up their currency in reality. They chose to let it float more and it instantly crashed. There it could go all the way to 8.4 ish if they let it fully free float.
- seanmcdirmid 7y agoThey float it but manipulate the price the way other countries do (buying/spending forex, interest rates, etc...). I doubt they it would crash all the way back down to 8 at this point (ah, to remember 1999 when it was 8.8), but it depends on how much money they’ve actually been printing to support their bubbly real estate market.
- perl4ever 7y agoIs it really possible to change the value of a currency without constantly spending money on keeping it away from equilibrium? What I'm saying is, isn't it like extending a spring, where it's always going to go back to its natural state whenever you release it?
- luxuryballs 7y agois this why bitcoin is mooning?
- wtdata 7y agoI am wondering what does this mean (if anything) to the huge amount of US public debt that China holds.
- bwb 7y agoDoes anyone know what happens if we label them a currency manipulator?
- AnimalMuppet 7y agoI don't think this is just cause for labeling them. This, if anything, is them manipulating less than they used to. That said, labeling them would be a political act, not necessarily one based on objective evidence. In the current climate, it might happen. And to answer your question: I at least do not know.
- bwb 7y agoGotcha, thanks! I was reading some background, and someone mentioned an estimate of 10 per dollar to be a really true free-floating variable...
- eb0la 7y agoThis might explain the sudden bitcoin spike today?
- cm2187 7y agoAs in capital flowing out of China?
- momentmaker 7y agoWell China did recently shift its stance on Bitcoin: https://www.fxstreet.com/cryptocurrencies/news/china-potentially-changes-stance-on-bitcoin-calls-it-a-safe-haven-asset-201906280246 https://www.fxstreet.com/cryptocurrencies/news/china-potenti...
- cjbprime 7y agoIt might, but 7% isn't much of a spike -- that happens anyway once every week or so.
- Proven 7y agoThe CCP is throwing in the towel.. The communist Ponzi is coming to an end. But richest party members' assets and savings are in AUD, CAD and USD, so this won't hit them too hard. Hong Kong banks will be in deep trouble when mainland borrowers stop answering emails and phones...
- deleted 7y ago[deleted]
- cheaprentalyeti 7y agoThe US and China are a lot alike and a lot different. The US debases its currency, to pay for welfare and social services and to pay Pakistan for the privilege of fighting its clients in Afghanistan. China debases its currency but then uses the resulting funds to build factories in Shenzhen and coal mines in Inner Mongolia.
- ryacko 7y agoDebasing currency is a product of ensuring low interest rates by printing money. The Federal Reserve and the Chinese Central Bank neither directly loans money.