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I would love to hear more knowledgeable responses from someone familiar with historical currency devaluations, but it seems to me that: 1. Regardless of the cr
by delackner 18y ago
I would love to hear more knowledgeable responses from someone familiar with historical currency devaluations, but it seems to me that:
1. Regardless of the crisis, some currency remains (or becomes) a reserve currency.
2. That country has for the past few hundred years always been an industrial power.
3. The currencies that have effectively died seem always to be connected to countries that are highly indebted or politically unstable.
4. Gold's price may look attractive now, but its price also has a habit of collapsing when people start to return to the market, making it more of a speculative gamble than a safe reserve (at least, talking about TRADING gold, not the physical stuff). If you live in a non-G7 country, maybe holding physical gold is a good idea if it seems like your economy might totally collapse, but in the G7, if your currency totally devalues, it means that the entire world economy has gone to hell and there are more important things to worry about than how much "savings" you have, like how much food and water you have.
Given 3, even if you COULD buy RMB (it is illegal to take RMB outside China, so how exactly would you spend the money, unless you are willing to move to China?) their government is a group dictatorship one "unexpected" event away from collapse, despite everyone's hopes for continued calm running. Britain is too small to resume reserve currency standing, and most of the other US creditors are of questionable long term stability.
Except for Japan. They have insane savings, have not gone to war since WW2, and have a government so focused on stability that Koizumi made huge waves with his "controversial" plan to privatize their postal banking system -- a plan that would not even take effect until several years after he left office. The Yen may not appreciate much, since no one likes to see it go much higher, but I would love to hear someone explain how it could possibly drop much either.
- deleted 18y ago[deleted]
- oakmac 18y agoThe Swiss Franc is known for it's stability against other currencies.
- rms 18y agoAren't they facing serious trouble right now because of the extremely heavy emphasis of banking in their economy?
- oakmac 18y agoSure, but that isn't going to necessarily affect their currency's stability (only it's valuation). The stability of the CHF is rooted in the country's deep history of political and social stability.
- rms 18y agoEven as a dictatorship, to call China unstable is to buy into Western propaganda that dictatorship is inherently bad. Rather, dictatorship is the best government for China, as long as the goal of government is to maintain the stability of China. China spent millennia not united; the only thing able to keep a country of that size together right now is strong, authoritarian leadership. The leaders of China are not stupid, they understand that democracy is necessary in the long run, they are just in absolutely no rush to bring it to the people, looking at the failure of Russia as the only example of a rush from Communism to Democracy. A democratic China would be unstable. Right now, while the Communist Party continues to rule indefinitely, they have perhaps the only currency in the world guaranteed to slowly appreciate against the dollar, with a not insignificant chance of suddenly appreciating faster. Is there truly no currency market in the RMB? I understand that it doesn't make a good "bribe your way across the border" reserve, but I would think it could make a good hedge in a portfolio. And the Japanese banking system is still facing smoe collateral damage... http://www.economist.com/world/asia/displaystory.cfm?story_id=12498399 http://www.economist.com/world/asia/displaystory.cfm?story_i...
- delackner 18y agoAn unstable dictatorship is not the opposite of a democracy. Nor is democracy something that "China" would do well with, especially given that the country in its current composition is an empire that contains several distinct countries. Singapore did very well economically with a non-ideological dictatorship, as did Taiwan, both mostly peacefully, over the same postwar period that China went through successive mass slaughters. One can hope that China makes the transition safely to a stable government, but while they continue to treat their various populations as simply pawns with no rights to health, safety, the rule of law, then dissatisfaction and unrest remain a risk.