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The EUR Is Dead, Long Live Its Replacement - The Asian RMU

Tyler Durden's picture




 

In what could be the watershed news event of 2011, Dow Jones reports that Asean+3 governments (virtually every Asian country including China, Japan and South Korea), "have been concretely studying the idea of a common currency, though an internal paper shows anything like a euro for the region is still far off." In what appears to be Asia's attempt to recreate the Euro, "an Asian "regional monetary unit" could provide a helpful macroeconomic monitoring tool and its use could in time be expanded to include official and private transactions, according to a study by a high-level research group reporting to Asian officials." So for all those complaining that the Yuan would not be able to compete with the dollar as a reserve currency, how about a basket of currencies which includes the Yuan, the Yen, and virtually every other growth currency. It is only fitting that as a last ditch effort to save the current globalized system, as we see the last days of one failed "aggregator" currency, we get the inception of another.

More from DJ on this groundbreaking development:

The paper, part of documents prepared for a meeting of Asian deputy finance ministers in Hanoi, and seen by Dow Jones Newswires, was written by Japan's Institute for International Monetary Affairs, Singapore's Nanyang Technological University, and the University of Indonesia.

Commissioned by Asean+3 finance ministers last May, the paper provides the first concrete evidence that Asian ministers are actively discussing the option of creating a quasi-currency, although any attempt to put such a system into practice would undoubtedly face huge challenges, such as the region's economic diversity

The creation of a common Asian currency is occasionally discussed at regional finance meetings but always in the context of a long-term aspiration rather than a realistic goal for even the next decade. Toyoo Gyohten, IIMA President and a proponent of the idea, has said a basket of Asian currencies could be a precursor to a common currency.

The Association of Southeast Asian Nations comprises Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. The Asean+3 grouping includes China, Japan and South Korea.

The study suggested that the RMU be used for surveillance by the Asean+3 Macroeconomic Research Office, or AMRO, which is expected to play a key role in deciding whether member nations facing financial difficulties can tap a regional fund. It said a survey had found that the high level of economic integration in the region meant having an RMU would be beneficial, because it could "accelerate the integration process." "As economic integration deepens further in East Asia, it would be more beneficial to East Asian countries to adopt an exchange rate regime that collectively floats against the U.S. dollar and the euro while maintaining a stable intra-regional exchange rate," it said.

And what appears to be a very diplomatic nail in the USD's coffin, at least from the perspective of Asia:

The use of a common monetary unit could also contribute to the development of financial and capital markets in the region, the report said, adding that its use for official and private transactions would likely become more feasible as economic and financial integration deepened.

The study noted that use of RMU for official purposes, such as payment among member governments or credit transactions among member authorities, could support private use of the common unit. It could also encourage individuals, businesses and financial institutions to consider using the RMU to diversify their foreign-exchange risks, it said.

"As short-term measures, RMU could be utilized for surveillance by announcing the RMU value on a daily basis and constant monitoring of RMU and RMU deviation," the study found. It added that political consensus would be needed for medium- and long-term measures, such as the currency unit's inclusion in the budget of AMRO or other Asean+3 activities.

Confirming that this project is far more than just a thought experiment at this point is the following:

The paper said several steps could be explored for using the RMU for private sector transactions: issuance of RMU-denominated bonds by government or multilateral institutions, preferential treatment for RMU-related operations in foreign exchange regulations, acknowledgement--de jure or de facto--of the RMU for private use as a foreign currency, accounting and tax treatment harmonization, and support for the establishment of an RMU fund settlement system.

While noted, the push for a RMU is not a new thing (previous paper on the topic here), the urgency to finally move from a theoretical to a practical monetary regime appears to finally be there. And should the DXY drop below 71, one can bet that Asia will launch this "thought experiment" within the year, ending the US hegemony, and setting of a chain of events that could well lead to the insolvency of the US.

h/t TempFlashback

 

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Wed, 05/04/2011 - 07:28 | 1237323 Vlad Tepid
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China suggests they call the RMU the "yuan."

Wed, 05/04/2011 - 10:07 | 1237830 Crisismode
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Call it whatever you want . . . . it's still going to be fiat trash.

Wed, 05/04/2011 - 07:34 | 1237328 Tense INDIAN
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this cant be HAPPENING....Just who the HELL is discussing these ideas??

Wed, 05/04/2011 - 07:52 | 1237369 Harlequin001
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That will be the same politicians who have no idea how to resolve the current crisis.

kick it down the road again...

Wed, 05/04/2011 - 08:24 | 1237466 Sudden Debt
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The same once that call for world peace (and I'm not talking about Miss Universe)

 

 

Wed, 05/04/2011 - 07:31 | 1237329 TheGreatPonzi
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The universal, unified money already exists. It is gold and silver. 

But maybe their goal is not economic progress ; maybe their goal is to have more paper holders in order to practice stealth inflation, and fill the pockets of the small elite which will control this fiat currency. 

Wed, 05/04/2011 - 07:34 | 1237336 PY-129-20
PY-129-20's picture

You just hit the jackpot with possibility B.

Wed, 05/04/2011 - 07:40 | 1237344 Thunder_Downunder
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The problem with metal fever, is that not every nation has an adequate reserve of the stuff... we really only need one nation with a metal backed currency, everyone else can stay fiat... Just how do you keep that nation from looting the pot? 

 

Britain FAIL, France FAIL, Spain FAIL. Congrats USA you failed, NEXT!

Wed, 05/04/2011 - 07:45 | 1237354 TheGreatPonzi
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"The problem with metal fever, is that not every nation has an adequate reserve of the stuff"

Gold reserves? 

A country can adopt a gold standard with only 1 gram of gold in the whole territory. It would be stupid, but it would not cause any economic problem (you'd just have to use many decimals). 

Money is only a denominator. If there's not enough gold/silver/salt/sand/shells, prices and salaries will fall in synchrony. 

Wed, 05/04/2011 - 07:45 | 1237358 UGrev
UGrev's picture

You just can't get some people to wrap their head around this concept. They keep thinking of G/S in terms of "now" and in dollars. 

Wed, 05/04/2011 - 08:02 | 1237388 Harlequin001
Harlequin001's picture

The easiest way to demonstrate what you say is to use a very simple example. Assume we have two countries, A and B. Both have one gold coin in circulation as money and each produces and consumes one apple each year. As long as the supply of both remain constant then we have that elusive price stability.

Now assume that country A opens what everyone seems to want, a gold mine and produces one more gold coin. In country A the price of apples now rises to two gold coins but stays the same in Country B. A has inflation of 100% which is what no one wants. Not such a good idea having a gold mine eh.

Once we have an adequate supply of money we need no more, and the fact is that gold miners of old under a gold standard fulfill the same role as counterfeiters of today. Gold has a value based on the quantity of it in circulation, which must remain stable. By mining more gold you increase the quantity of it and prices of goods therefore rises.

Wed, 05/04/2011 - 08:16 | 1237422 Thunder_Downunder
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"Once we have an adequate supply of money we need no more, and the fact is that gold miners of old under a gold standard fulfill the same role as counterfeiters of today."

 

Let's not forget that in days of old, when this occured nation A also stopped making it's own apples, but instead bought them 'cheaply' from their neighbour, and for a while, needed no apple farmers to get fed. 

 

When the goldmine is plumbed dry, they were left with neither the capability to produce apples nor gold, and an economic and social collapse ensued...

 

Wed, 05/04/2011 - 08:23 | 1237449 Harlequin001
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That has got nothing whatsoever to do with a gold standard, or should I say, gold backing.

What you say is simple economic mismanagement...

Wed, 05/04/2011 - 09:58 | 1237787 Thunder_Downunder
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Yes, but how does a gold standard overcome this problem. Your simplified example presumes closed, static systems, which we both know they are not.

You cannot control the supply of gold, you cannot control the supply of goods, and you cannot control the supply of credit, within international markets. You can attempt constrain these things at the border, but that only negatively impact your own people.

This mismanagement is the cause of the discussion to discard paper, but gold is equally subject to this kind of mis management.

I would like to be convinced that there is an answer to the horrendous state of the world economy, but I have yet to see it.

Wed, 05/04/2011 - 10:13 | 1237837 Harlequin001
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Gold is not 'managed' by anyone other than real supply and demand, that is until you introduce an AM/PM Fix. If you increase your money supply by 10% each year then commodity prices will rise each year in terms of your fiat yet they will remain the same in gold. If the price of gold is rising by 10% each year in terms of fiat then that is your datum, the return that you as a banker must provide plus a premium to entice me out of gold and to take my risk of loss with you. It is the gold price that controls credit and that is set by the market, not CB's. They can try it for a while but that policy is now failing, badly...

Wed, 05/04/2011 - 08:25 | 1237457 TheGreatPonzi
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"When the goldmine is plumbed dry, they were left with neither the capability to produce apples nor gold, and an economic and social collapse ensued..."

Yes, and so what? 

If they're smart, they learn from their mistakes. I don't see the relation with gold. Nations who use salt or paper as money can do the same idiocy. 

Wed, 05/04/2011 - 10:00 | 1237796 Thunder_Downunder
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People don't learn from mistakes. Que incoming energy crisis

(hint, it will not be the first, second, or even third time we have plundered a resource without first finding a replacement, to our own detriment)

Wed, 05/04/2011 - 07:58 | 1237382 Thunder_Downunder
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"It would be stupid"

And totally unnecessary. Would kinda defeat the purpose metal backing wouldnt it (physical convertability, instead of labour based)? Besides, I could sneak 10kg of gold into this hypothetical nation and trash your monetary system.

I can see no reason why a domestic currency requires metal backing, provided that it can be traded against a common liquid trade unit that does have proper backing. Right now we have paper, backed with paper, which has led to the intentional mispricing of the common unit, in favor of the US.  

Of course, in the past the gatekeepers of the leprachauns pot have been totally unworthy. So, other nations amassed the metal to protect their own systems from the fingering of others.... and to allow them to exert their own pressure on trade. Why else did europe rush to stripmine south america?


Wed, 05/04/2011 - 08:10 | 1237397 Harlequin001
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'...in the past the gatekeepers of the leprachauns pot have been totally unworthy.' - A gold standard needs no gatekeepers because it is based on market based supply and demand as gold flowed through various markets. The problem with the gold standard was that it even existed, it is the AM/PM fix which sets gold prices globally in favour of the banking elite and prevents the free flow of gold through regional markets...

Wed, 05/04/2011 - 08:21 | 1237450 Thunder_Downunder
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Aww, come on. You can't really believe in free and fair markets.

If I'm a nation state, and I refuse to permit my reserves to physically circulate (which they'd be nuts to do), or I lie about my pledged reserves, then the market fails. I don't need to counterfeit it if I just lie about the quantities I hold.

You need a common, liquid, trusted unit. Physical gold cannot be that unless there is someone who is trusted to actually cite it's existence.

This whole premise relies as much on trust as fiat did, and that has never gotten us very far.

You're not going to see huge ocean going barges transferring the physical trade balance between nations....

Wed, 05/04/2011 - 08:32 | 1237479 TheGreatPonzi
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"If I'm a nation state, and I refuse to permit my reserves to physically circulate (which they'd be nuts to do), or I lie about my pledged reserves, then the market fails. I don't need to counterfeit it if I just lie about the quantities I hold."

That's what auditors and clearing chambers were created for in the first place.

If two Nations want to trade without physically exchanging gold, they just hire a common independent auditor like Deloitte. 

Really, I don't see where you're going. What are you pushing? The status quo? Keep using fiat paper? 

Wed, 05/04/2011 - 08:34 | 1237494 Thunder_Downunder
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Haha :) Not going anywhere in particular. My point, if I have one, is that as long as we have government, or rich people, or more then 1 guy with something to trade, someone is gonna get screwed. A gold standard or metal based trade looks like a solution, but it isn't. It can be gamed like anything else, unless or perhaps in spite of any controls that are put in place. It erks me to see people cheering for metal backing like it will fix the intrinsic corruption in the world... it won't.

 

If anything, I support the status quo because at least the system is known....

Wed, 05/04/2011 - 08:42 | 1237517 Harlequin001
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The we should agree that the economic system can only flip flop from one system to the other, and the benefit is gained from understanding what part of that cycle we are in...

I don't consider myself a gold bug, but I have invested in it for nearly 10 years now and have no intention to sell, yet.

But one day I will...

Wed, 05/04/2011 - 09:44 | 1237745 Thunder_Downunder
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I am bullish on PMs, but only as a speculative tool. I am not in the USA, so do not suffer the dilution of my labor and domestic asset values. If I was, I would certainly be using it as a hedge right now, at the very least. My primary concern with the PM markets, is that I have no idea how much leverage is deployed. It's all well and good to see the market set the price, but how many participants actually paid that price. I agree with Soros and his theories on destructive hot money as he calls it, tho I don't have the capacity to measure it's impact, hence I am skittish in trading commodities..

Wed, 05/04/2011 - 10:01 | 1237805 Harlequin001
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'My primary concern with the PM markets, is that I have no idea how much leverage is deployed' Well, according to GATA it is at least 100:1 at the LBMA...

Wed, 05/04/2011 - 08:56 | 1237580 MrPike
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Feels more like your a sophist.

Wed, 05/04/2011 - 09:44 | 1237748 Thunder_Downunder
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I hate waiting for ISM releases.. don't usually bother with forum spam, but tonight seems a good night for it.

I had to look that word up, I think I'll say thanks, and accept the earlier definition, rather than the latter...

Come on ISM....

Wed, 05/04/2011 - 08:30 | 1237486 Harlequin001
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'You need a common, liquid, trusted unit. Physical gold cannot be that unless there is someone who is trusted to actually cite it's existence.'

Thunder, that is precisely what the currency is supposed to do...

Wed, 05/04/2011 - 08:42 | 1237523 Thunder_Downunder
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Just forget for a minute our mistrust of bankers and politicians. Lets forget the competitive trade tentions between nations too.

In this world, where everyone plays fair, and does their job effectively, doesn't fiat perform the same task?

Isn't the principle problem with fiat that these forces can't be trusted?

So, given that those same forces would also be entrusted with a gold standard (as physical circulation is not practical even as a pipe dream), don't the problems remain the same under an equivalent metal backed system?

So.. why change? Sooner or later the someone is gonna hit the reset button the current regime. I agree that commodities are a great place to be hiding if/when this happens, but I don't see the system changing materially...

Wed, 05/04/2011 - 08:48 | 1237549 Harlequin001
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'In this world, where everyone plays fair, and does their job effectively, doesn't fiat perform the same task?' - no. You are always relying on governments to not increase the supply of it at will. With gold you aren't to the extent that it is not easily "produced".

Assuming today that the supply of dollars actually fell then commodity prices would fall as dollars became more valuable. Yet when you consider that the only money created when you take out a loan is the capital that you use to buy stuff, you can see that the interest on all debt outstanding today has yet to be produced, and if it isn't then the economy collapses regardless. This is why Fiat does not and has never worked; it is too easily replicated...

Wed, 05/04/2011 - 08:21 | 1237415 TheGreatPonzi
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"physical convertability, instead of labour based"

The current system is not labour based, it is based on nothing. 

"Besides, I could sneak 10kg of gold into this hypothetical nation and trash your monetary system."

That's true ; but (1) the Nation would acquire 10kg of intrinsic wealth (this would not be the case with counterfeit dollars) and (2) there would never be any hyperinflationary spiral and total loss of confidence in the money, because sooner or later, this spiral would hit a physical limit (not the case with printed paper). 

Besides, gold and silver were the only money in the world from 4000 BC to ~1920-1940, and it worked pretty well all that time. 

Wed, 05/04/2011 - 08:29 | 1237485 Thunder_Downunder
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Urm.. well I'm gonna have to disagree on that one. It is labour based, or more specifically, the perceived productive value of one nation labour force verses another. The USD is slightly different due to it's unique status, but even it is reverting to this intrinsic value.

"Besides, gold and silver were the only money in the world from 4000 BC to ~1920-1940, and it worked pretty well all that time. "

Urm.. no it didn't. This is a common rewriting of history. As far back as you can go there are examples of social collapse due to the boom-bust nature of metals discovery. Oversupply or under supply lead to people starving, just like today.

It existed because of the scarcity of the metal, and the fact that it was the only thing that could be stored without rotting and transported in reasonable quantities. They had no practical alternative. Thankfully, we have computers to store and transport things now. But we are still human, and corruption is still a part of our nature...

Wed, 05/04/2011 - 08:34 | 1237497 TheGreatPonzi
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"It is labour based, or more specifically, the perceived productive value of one nation labour force verses another."

It is not labour based, it is based on nothing. There is not one dollar emitted for one dollar of labor. 

"As far back as you can go there are examples of social collapse due to the boom-bust nature of metals discovery."

Such as?

"Oversupply or under supply lead to people starving, just like today."

I don't see your point. If there is not enough gold, prices of bread fall, and salaries too. If there is too much gold, prices of bread go up, and salaries too. 

" Thankfully, we have computers to store and transport things now."

I don't say gold is the best system, just that it is better than fiat ; BitCoin, for example, can be interesting too. 

Wed, 05/04/2011 - 08:39 | 1237502 Harlequin001
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Thunder - 'Thankfully, we have computers to store and transport things now' - Computers don't store or transport anything as I am sure you stated in error, they merely record what was done very quickly and over long distances but that has nothing to do with the underlying issue of using gold as a medium of trade...

Wed, 05/04/2011 - 08:56 | 1237579 Thunder_Downunder
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Well, scrip then I suppose. But it all net's out in the end.

If I wired you $50AUD, and you received $49USD, $46 after transfer costs, in your bank account, would you not agree that as an individual, you have received something of value? Something that you can now use to either consume (sustaining your personal capacity) or deploy labor of your own (invest expand productive capacity).

You could of course send it right back, and i'd recieve perhaps $43AUD. But now 20% has been lost in cost of transport... and even if we did nothing at all, I would now need to work to be in the same position I was when I first sent it to you.

I realize that it is actually slightly more abstract than this, in that it would affect the purchasing power of the AUD against the USD. After all, I transmitted a pledge on my labour that your banking system accepted, and translated into your domestic terms. I'm out of pocket $50, I either worked to create that value, or pledged to create it in the future, in order to have the right to send it to you. So what if it takes me 10 minutes to create that level of value, but it takes you a year? We'd have a wealth disparity.... What if your bank arbitarily changes the exchange rate between our nations, has the difference in our wealth changed?

I'm sticking to my guns on fiat currency being labor based.

Wed, 05/04/2011 - 09:08 | 1237607 Harlequin001
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'If I wired you $50AUD, and you received $49USD, $46 after transfer costs, in your bank account, would you not agree that as an individual, you have received something of value?  -

Thunder -  No, I would say I have received someone else's promises which might be exchangeable today but might not be tomorrow. Something of value is something I can store in lieu of buying goods today that will still be worth the same later on because it is valuable i.e. scarce.

Something that you can now use to either consume (sustaining your personal capacity) or deploy labor of your own (invest expand productive capacity).'

Yes I can use it today because it is exchangeable today at that rate but then that is my point, I might not be able to use it tomorrow or by even next meal time. It is not the same; it is not valuable, only exchangeable...

Wed, 05/04/2011 - 09:30 | 1237696 Thunder_Downunder
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You presume that the 'system' would cease to honor your pledge.

I agree that the risk of this event, lends intrinsic value to the metal. And this risk makes the fact that it is easily defined and non perishable valuable beyond the value of its consumption. But without that risk, it would lose that premium, and be no different from any other commodity. And the most basic value of a commodity is the amount of value it adds to someone(s) life, above the 'cost' of extracting it.

But this value is still only realisable on exchange, in the same way that fiat is. So, if I have a very large pile of gold I can affect the domestic realisable value of your store of value. Once again, if I am seen as trustworthy or powerful by the market, I can lie, and artifically change the realisable value of your gold.

Alternatively, if I have the right to dilute a domestic currency base under a fiat regime, I can affect the same thing.

Life is finite/perishable, therefore there is a degree of scarcity to the available labour of a human life (hence the importance of population and productivity to wealth creation in aggregate). If it was not, I could work infinitely long time and accumulate all of the available metal, making it increasingly scarce, and myself exponentially more wealthy. However, everyone else would too, and we'd live in a static world.

I still don't see the difference, if I am powerful, and I lie or cheat you get screwed either way, gold or paper, because I can affect the value of exchange...

Wed, 05/04/2011 - 09:54 | 1237765 Harlequin001
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'..this risk makes the fact that it is easily defined and non perishable valuable beyond the value of its consumption. But without that risk, it would lose that premium, and be no different from any other commodity' - Thunder I couldn't have said it better myself.

'And the most basic value of a commodity is the amount of value it adds to someone(s) life, above the 'cost' of extracting it.' - Gold is not a commodity like apples, it is a money, used for different purpose and for different reasons. To compare it to a consumable is to misunderstand it entirely...

'But this value is still only realisable on exchange, in the same way that fiat is.'-  and there the similarities end. Fiat is no store of value.

'I can lie, and artifically change the realisable value of your gold' - That's fraud, for which someone should go to jail, and to have an entire economy built atop it does not make it right, nor change the ultimate outcome one single jot. The entire derivatives system is is fraudulent which can only result in the loss of my wealth, which a real money is supposed to prevent, which gold does and fiat never can, because we/they will always print more of it to cover the lie...

Wed, 05/04/2011 - 08:51 | 1237555 Sean7k
Sean7k's picture

Urm..well, I'm gonna have to disagree on this one. Value has never been labour based, unless you live in a marxian utopia. That theory has bedeviled every economist since Adam Smith, because the amount of labour has nothing to do with value- it is perceived value, by the individual, that creates value or price.

Gold and silver have always worked well, except when there were manipulations: debasement, set values, refusal to redeem in specie. While the occasional oversupply of a metal has affected it's value- these events have always been temporary and resulted in the flow of metals away from the originator causing a new equilibrium. This is how markets function.

Computers and paper will never work, because people will always create more money to take advantage of the current value versus the value of the currency as it works through an economy. It fails to reflect the actual production of goods and services in real time.

There is only one discipline for currency- gold and silver. 

Wed, 05/04/2011 - 09:07 | 1237613 Thunder_Downunder
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There have always been manipulations, and there always will be. You can't read this site and believe that people won't fudge physical reserves, lie about mine outputs, and create derivatives to leverage off known values/relationships.

If I have a bar of gold, are you going to deny me the right to lend it to my friend, for a little extra bread? And what if he knows someone who's willing to spot him a little extra bread, above and beyond what he gave me, are you going to begrudge him the right to lend it to the 3rd guy? And this third guy only needs it for a day, because an auditor is coming past to check the quantity of gold in his vault...

Using a gold bar, did I just mess with the intrinsic value of exchange, because someone else needed it right now, whereas I could do without it for a little while?

Wed, 05/04/2011 - 09:21 | 1237665 Harlequin001
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'If I have a bar of gold, are you going to deny me the right to lend it to my friend, for a little extra bread? And what if he knows someone who's willing to spot him a little extra bread, above and beyond what he gave me' - But that's the point, to claim to have gold if you don't because you've loaned it or sold it to someone else and for any reason can't retrieve it is fraud.

And you can't return it if he has loaned it to someone else.

Wed, 05/04/2011 - 09:30 | 1237701 Thunder_Downunder
Thunder_Downunder's picture

:) and my point is people are dishonest :)

Wed, 05/04/2011 - 09:57 | 1237783 Harlequin001
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and my point is that I still need a store of value when the entire system is dishonest...

Wed, 05/04/2011 - 10:01 | 1237809 Thunder_Downunder
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haha :) Fair enough :)

 

ISM is out, I've got work to do. Has been fun :)

Wed, 05/04/2011 - 10:12 | 1237866 Harlequin001
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Absolutely, until next time...

Wed, 05/04/2011 - 07:35 | 1237332 PaperBear
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Creating yet another fiat paper currency ? What folly. Every fiat paper currency eventually reverts to it's intrinsic value - ZERO.

Wed, 05/04/2011 - 07:48 | 1237357 Harlequin001
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Even if they did they would only do so if they could devalue it straight away.

Asia exports to the West. That is its economy. To think that they can now suddenly stop and have a common currency of any worth is ludicrous.

Wed, 05/04/2011 - 07:33 | 1237333 Thunder_Downunder
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I'm calling BS on this. It will  attain a meaningful status a week after the Amero does...

 

There is far to much disparity between political regimes and economic enviroments.

Wed, 05/04/2011 - 07:37 | 1237335 Fred123
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Asians will copy anything Western.....good luck with the 'Chinese Century".....rofl.....

Wed, 05/04/2011 - 07:38 | 1237337 Zero Govt
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the Asians are trying to go to 1 (monopoly centralised) Currency?

...the Asians have shown a wonderful ability through the Centuries of developing into advanced sophisticated cultures and then shooting themselves in the foot. China was once the most advanced nation on Earth until the central command began stiffling their rich trading nation in red tape and authoritariasm.

It led to the Europeans nicking most of their great ideas and dominating the world for centuries as the Chinese leaders strangled the private sector to death with endless directives and mis-management. 

They're at it again by centralising, monopolising and politicising the currency... looks like Asian history of pig-ignorant political authority structures, instead of the free market and private enterprise, is repeating itself again. Don't underestimate Asian leaders to be any more competent or less destructive than the dross we have in the West, history teaches you they're all the same sack of shit

Wed, 05/04/2011 - 07:40 | 1237346 TheGreatPonzi
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+1

There's so much intelligence and potential in Asia, but so much blind submission to autority figures which spoils everything. 

Wed, 05/04/2011 - 07:59 | 1237373 Zero Govt
Zero Govt's picture

Yep ...look at Japan, the Govt is suffocated its private sector like a Python in a slow inevitable death

...it's happened in India, China (twice) even Africas Egypt and Ethiopia all the most technologically advanced nations (areas) on Earth at various times in history

...Asian leaders like Western have a 'fabulous ability' to be totally suicidal and destroy their nations (private) advances and wealth.. you can see it writ large in their suicidal histories and in this central command nonsense for their currencies

All Govts are a sack of shit... don't believe the Chinese (private sector) miracle, they've still got a sack of crap Govt sitting atop them with the ability to suffocate, mis-direct and vandalise the private sectors progress for a 3rd time in their suicidal history

Wed, 05/04/2011 - 08:56 | 1237581 Sean7k
Sean7k's picture

The Chinese invented fiat currency and allowed it to destroy their economy. So much so, it was outlawed for centuries. Of course, that was back in the 11th century. 

Everyone boasts that they can control the amount of currency in an economy, funny, they never can. Has anyone considered getting rid of bankers? 

Yes, read Rothbard's "the Panic of 1819". It was common knowledge that banks could not be trusted with the supply of currency. Still, the charters were granted, the bribes were received and people suffered.

Wed, 05/04/2011 - 07:39 | 1237339 Charley
Charley's picture

How is this possible? How can it replace the dollar when the primary role of the dollar is to allow the US to absorb global excess output?  Considering the three ring circus in the Eurozone, this appears to be a disaster waiting to happen.

Wed, 05/04/2011 - 07:41 | 1237345 swissaustrian
swissaustrian's picture

They will have huge imbalances, due to japans comming debt collapse and china´s yuan revaluation. RMU crisis bitchez!

This also is another step towards the end of the USD as the worlds reserve currency...

Wed, 05/04/2011 - 07:46 | 1237360 Confused
Confused's picture

Yes, another step towards the end of the USD, and another towards global governance. 

Wed, 05/04/2011 - 07:49 | 1237361 Confused
Confused's picture

Double post. 

Wed, 05/04/2011 - 07:40 | 1237348 BorisTheBlade
BorisTheBlade's picture

Before euro came into existence, there was ECU, to which RMU is a closest equivalent. There is still probably 5-10 years before the Asian currency in its own right will be set up, nevertheless, it's the first step to dollar being eventually forced out of circulation there. Of course, in whatever basket is chosen for RMU, yuan will take up a big chunk. RMB ~> RMU

Wed, 05/04/2011 - 09:07 | 1237604 Urban Redneck
Urban Redneck's picture

If the IMF/BIS folks want to push global SDR development, it would help to have a test bed outside of their ivory towers, in which case Asean+3 diversity becomes a benefit for what follows.

Wed, 05/04/2011 - 07:46 | 1237350 Thurifer
Thurifer's picture

Hey everyone let's have a unified currency but keep our seperate powers to tax and spend! That way we'll have all the downside of a gold standard but none of the benefits! Cool! Seriously, have these people learned nothing from the EUR?

Wed, 05/04/2011 - 07:47 | 1237356 BeeTee
BeeTee's picture

The article does not mention whether the RMU is backed by anything.

All the US needs to do to counter this, is to renew the gold standard.

USA=8,134 tonnes; China=1,054 tonnes.

(ok, these figures can be disputed, but whilst China may have an equally effective printing press, they don't yet have the commodity backing.)

 

 

Wed, 05/04/2011 - 07:51 | 1237366 Harlequin001
Harlequin001's picture

They don't need it. There is only so much gold that you need to make use of it as money. Any more and the price of gold falls and inflation appears. You can have too much gold...

Wed, 05/04/2011 - 08:05 | 1237394 ivana
ivana's picture

Don't think it matters so much. Even if new currency is 0.0000001% backed by gold - IT'S A MAJOR MAJOR GLOBAL CHANGE

Wed, 05/04/2011 - 07:58 | 1237378 TaxSlave
TaxSlave's picture

A common currency implies power (which must be backed by a gun) to limit money-printing by the individual member states.  That's the ONLY way the contraption can be held together for very long.  That's why the Euro is in difficulty--productive states balk at having their value destroyed to pay for the profligacy of welfare states.  And since welfare statism is the handle on each government's power, a common currency is as likely to lead to revolution and war eventually as it is to lead to enhanced trade.  To a statist, losing control over currency is losing 'sovereignty'.

Wed, 05/04/2011 - 08:03 | 1237389 ivana
ivana's picture

glad that you indicated in the end that such common ASEAN currency is not new idea and that's been developing for a while. Remember asian countries wanted to see Australia there but it appeared that down under they are strongly biased by USA.

Looking at yuan expansion - may be this RMU is not so far off!

Major game changer anyway

Wed, 05/04/2011 - 08:07 | 1237396 kapillar
kapillar's picture

How much BS can you showel on DJ newswire journalist with chopsticks? Obviously more than with a spoon.

Wed, 05/04/2011 - 08:21 | 1237438 Mercury
Mercury's picture

Lead balloon.

Wed, 05/04/2011 - 08:21 | 1237452 uniman
uniman's picture

Yes, China is a giant show and house of cards.  I happen to have spent several years here, many of them recently, and have observed first-hand how the vast majority of people are completely devoid of initiative and critical thinking skills.  They will day trade their stocks, sell Amway, and believe their government when it tells them the housing prices will never stop rising.  Many of them firmly believe that the best goal in life is a cush government job where they can sit in their smoke-infested office all day long doing nothing and enjoy a paycheck more reliable than gravity. The grand things you see built quickly fall into disrepair because nobody cleans or repairs them after construction.  They dump their garbage into the sewars and then wonder why they suffer clogs.  It's truly amazing to see all the empty stadiums and other mega-structures. The elementary schools all have observatory domes on them, apparently to disguise the fact that there is no telescope on top of the building nor any curriculum that includes school kids looking through one.

This is not going to be China's century until _after_ the existing system is annihilated by the upcoming crash.  Hopefully instead of reverting back to endless warfare the people here can unleash their hidden potential.  Despite these warts, I have tremendous admiration for the people here.  Most of them are very friendly and pragmatic, and they can deal with laisse faire much better than Westerners can.  This will be an interesting show.

 

 

Wed, 05/04/2011 - 09:07 | 1237615 Mercury
Mercury's picture

Many of them firmly believe that the best goal in life is a cush government job where they can sit in their smoke-infested office all day long doing nothing and enjoy a paycheck more reliable than gravity.

That will soon be, for all practical purposes American Dream II if it isn't already.

Wed, 05/04/2011 - 12:37 | 1238806 kumquatsunite
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This is not going to be China's century until _after_ the existing system is annihilated by the upcoming crash. ____

1.3 Billion People and growing. For this the words, "carrying capacity" comes to mind. At a certain point of pain, China will decide to turn those envious eyes toward the bread basket of the United States. Fueled by factory workers, who have turned out endless cheap chotchkies, which holding their heads down and eyes properly submissive, they nonetheless view with sheer greed and lust. Who are these Americans that we work for them so? That we send them off these goods we make whilst our own people own so little? China, facing severe food shortages (How many fat Chinese are there? Is anyone of the belief that the Chinese just so love us that after watching American movies and television shows with the affluence and stupidity, they say, "Oh sure, please let us continue to 'service' the Americans. Especially the fat ones on welfare, so that our Chinese friend Walmart can continue to ship us dollars! (stupidity because Americans have ceded morality and backbone, placing them in a fast food sack that is covered in the graffiti of rap music, reality tv shows, and "celebrities", who long ago should have been consigned to the "too disgusting for words" trash heap). Long ago China explicitly told you what they intended, what they do intend, and have achieved a significant bulkhead with Washington State and Massachusetts Chinese foreigners:http://www.nytimes.com/1995/03/08/news/08iht-beij.html

sh Or read this:http://www.navyleague.org/seapower/chinas_navy_today.htm and pay close attention to this: "These hybrid aircraft have the capability to cruise one meter above the water at speeds of 120 knots or more, and in the future such craft may prove capable of supporting amphibious operations." Now we might infer that the ability to land amphibious vehicles indicates that when opportunity meets a flashpoint, well, how much Chinese do you speak?

 These articles point with increasing alarm to: "China's drive for naval domination on both sides of the Malacca Strait, the South China Sea, and Taiwan Strait--and for extending a menacing naval presence far out into the Pacific." Of course, these articles appear to be from the late 1990s, apparently around 1999. With trillions of dollars, endless factories built, and a very hostile attitude towards the United States (the Chinese do believe that they "own" us and in the classic "Driving Miss Daisy" manner that we are now so dependent that there is some confusion about just who is in charge? Just who has their hands on the wheel of the biggest armada and what heir intent, so to speak...?

And while appreciating the "friendly and pragmatic, and they can deal with laisse faire much better than Westerners can," musing of Uniman, again we see the denigration (although probably not terribly intended) of the American people.  The key question really: Is there an American people? We continue to let in foreigners under the guise of "immigration" even as our employment numbers (even without counting the giant welfare complex) meanders around 21%. How truly stupid can any people be? We whine about no jobs even as we cut off our toes, then our feet, then our legs; American stands for the American way of "truth, justice, AND the American way." (Apparently in the new Superman movie Superman will renounce such triviality, he being a citizen of the world, but me thinks the movie people must change that back later in the movie, because surely the American people realize now that they've been had; played for chumps under the guise of "white people so racist", "Americans won't mow their own lawns", "American young people don't want those spots in colleges so they can be doctors, engineers and CEOs" and best of all, "America's day is over." 

Well ha ha  to the world. There is just enough of us to fight back, to take back, and to jettison anyone who says such things about this country to some deep trench in the Atlantic. But if we do not stop 1984: illegals are "legal" because they say so; Oboma says we must treat Muslims as just our best friends while they continue to denounce and attempt the destruction and subversion of us and our way of life (see: citizenship is obtained from illegals scamming across the border to steal a. medical care b. food stamps c. food bank services (it's said that the foreigners are so adept at using the food bank that by the time citizens of this country show up, there is nothing left), and lest we forget, we now have Muslim Day that blocks the streets of New York for prayer. Something that would not be allowed of Christians. One can't help but see that this country has lost its mind...when you come here, we do not "accommodate" you. We gave the proverbial inch: translating govt docs into endless foreign languages (and you pay for that!; money that could be spent elsewhere) and teaching children in the school in their "native" language. Hey, if you can't speak English, go home. Go elsewhere. Everything in this country should be in English only, and until there is no longer one single message saying, "Press 1 for Spanish" this country is hell bound and in a hand basket mess. The sophistry that we are not an English country follows no reasoning: Find one founding document written in any language but English. Find anything in our history in any language but English until the liberal twits who-would-destroy-this-country got their hands on it because they are living off of govt paycheck and university liberal politics and policies. Take back English Only, and your country may be yours, yet again, and you just might get a thanks from your children for saving their future from being Chinese/Russian slaves. A country and people so stupid as to not defend their way of live against foreigners deserves no sympathy, but your children will know what you did. Your grandchildren? They will probably never exist. And if black Americans find this rankles in any way: Remember, the Asians are the most prejudice people on the earth. Bar none.


Wed, 05/04/2011 - 08:29 | 1237472 Magnix
Magnix's picture

What about SDRs that IMF proposed????

Wed, 05/04/2011 - 08:45 | 1237514 ivana
ivana's picture

Think that everybody who export and have tangible production (all growth emerging markets BRIC etc) shun SDR. Only banksters like it. Guess why?

There's saying: one can't make a even small pie with piles of different shits

Wed, 05/04/2011 - 08:30 | 1237475 Cursive
Cursive's picture

the Yuan, the Yen, and virtually every other growth currency

The Yen is a growth currency?

Wed, 05/04/2011 - 08:55 | 1237576 SheepDog-One
SheepDog-One's picture

The problem is not currencies, the problem with the world is central banksters and fractional reserve banking. Players in a rigged casino trying to find fairness and balance is ridiculous. The problem is the system, this wont be resolved in meetings it will be resolved by overthrows. 

Wed, 05/04/2011 - 09:15 | 1237622 Marzen
Marzen's picture

South Korean Won?  growth currency?  I beg the differ.  Have you looked into S.Korea's household debt and current financial debacles?  Massive structural issues at S.Korean banking sector is alarming.  Some are calling another IMF bailout triggered by you guessed it,  bad housing and construction project loans.  This is just a talk.  All currencies will go down in flame along with Dollar collapse.  Let's not forget that Japanese central bank and Korean central bank both are proxy for US Fed.

Wed, 05/04/2011 - 09:41 | 1237739 slewie the pi-rat
slewie the pi-rat's picture

i don't see this middle finger extended toward the US as much as toward the IMF and the "sdr's"---my chinese isn't great, but:  fuk yoy!

Wed, 05/04/2011 - 10:18 | 1237899 binky
binky's picture

Take a look at this eleven part series -- some of you may find it to be of real value. 

 

http://henryckliu.com/page237.html

Wed, 05/04/2011 - 10:21 | 1237918 Stuck on Zero
Stuck on Zero's picture

All currencies fail because of mercantilism.  Whether gold-based or paper based mercantilists will amass the currencies for political purposes destroying the system.  Only a computerized barter system will work in a world full of mercantilists.

Wed, 05/04/2011 - 10:27 | 1237953 primalplasma
primalplasma's picture

This can only mean good news for precious metals. Just keep buying gold and silver.

Wed, 05/04/2011 - 12:47 | 1238871 jmc8888
jmc8888's picture

It's like it's 1912, and word gets out that the Titanic just sunk, and someone says....let's order another!

Glass-Steagall

Fixed Exchange Rates

Credit System (not monetary)

Wed, 05/04/2011 - 15:42 | 1239821 nuinut
nuinut's picture

US dollar is an aggregate currency too.

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Fri, 07/15/2011 - 07:42 | 1458775 hama
hama's picture

compound annual inflation rate, the appropriate term to measure this year over year inflation measurement? This level of inflation will make it difficult for people to properly value the products they buy relative to the products value in silver.. A value buying guide might be a useful tool going forward.
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Sat, 07/16/2011 - 09:13 | 1461915 hama
hama's picture

Think that everybody who export and have tangible production (all growth emerging markets BRIC etc) shun SDR. Only banksters like it. Guess why?
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Sat, 07/16/2011 - 18:49 | 1462742 hama
hama's picture

The first thing in the morning ZH read makes me wonder? Is the confidence and faith in the Government and Media so destroyed that it can not be rebuilt? Not to say that I believe any one of the sons of bitches. Just sayin that some how some way, trust has to be re-invented.
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