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Is Chinese Centrally Planned FX Policy "Just A Silly Game"?
Submitted by Jake van der Camp via The South China Morning Post,
The mainland's foreign-exchange regulator said recent volatility in the yuan's exchange rate is normal, while playing down the possibility of large capital outflows, in a statement apparently aimed at easing market concern over a sharp currency depreciation.
South China Morning Post, February 27
Call me an artist: I always say a picture explains things best, and my chart on China's net capital flows certainly says all you need to know about why Beijing is playing silly games with the yuan again.
Let's get it straight first of all that this is indeed silly games. Until anyone in the mainland can take money freely in and out of the country, the yuan remains officially defined as funny money. There is no such thing as "normal" in the yuan exchange rate. Normal market forces do not determine it.
It is rather central government policy that is the operative factor here and, lest you think that policy results from the considered deliberations of informed experts, yuan policy over the last two years has been set by a huge crack-the-whip gyration in the balance of payments.
The chart shows you that capital inflows suddenly collapsed in 2012 and the year ended with a net outflow of almost US$100 billion.
It did not happen purely as a matter of chance. It happened because at the beginning of 2012 the authorities took the view that the yuan had strengthened enough since they had begun pushing it up two years earlier. As the second chart shows, they thus let it weaken a little against the US dollar. Almost instantly speculators decided they no longer saw a good bet in the yuan and fled. They had only come to the yuan because its steady appreciation against the US dollar had given them a currency translation profit. With that gone, they were gone.
"Hmmm …," said the smart fellows in Beijing, who thought that weakening the currency was a good idea. "Perhaps we should go the other way again."
They promptly did, the yuan strengthened once more, the speculators came back, and now the preliminary figures for 2013 show that capital flows turned positive again, with a net inflow of US$240 billion.
"Good," the smart fellows said last week. "So now we'll try to push it weaker again." And it's my bet that they will once more get exactly what they got in 2012 if they continue of this mind. I don't know if the yo-yo was invented in China, but I have never seen one swung to quite such extremes as this.
The simple fact is that the talk of an offshore yuan market hangs on little more than speculative purchases of yuan. People outside China are happy to take yuan in payment for trade goods only because they hope to turn a profit on the exchange rate. There is otherwise no natural offshore market for yuan.
This in turn says that Beijing will have to pay dearly if it wishes to maintain the illusion of the yuan as an international currency. If it stops pushing the yuan up, the illusion will pop like a soap bubble.
In short, it's just a silly game.
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They may not be playing correctly (who knows), but I do not think China plays silly games.
FX by definition is a silly game, a total divergence and diametrically opposed to true money.
FX is Currency Wars.
What's that saying about all's fair in Love and . . .?
Chinese Physical Gold Demand YTD 369t Up 51 % Y/Y
http://www.ingoldwetrust.ch/chinese-physical-gold-demand-ytd-up-51
Currency Wars: The Yuan's Silent Scream - Portrait Of A Derivatives Bomb Being Detonated
David Kranzler published a very interesting article confirming our discussion about the ongoing Financial War involving USA, Russia and China now. Bo Polny on the chart above presents his view about the implications of US Dollar crash below 80.00 level for the Gold market and you can find our thoughts on the links below. http://sufiy.blogspot.co.uk/2014/03/currency-wars-yuans-silent-scream.ht...
wars are not "short silly games" though the idea of war may sound ludicrous. (which is good, yes? we humans fight over the smallest of things. some of these things might "only be in our head" amazingly enough.)
as with dollar trading so it is with the yuan. i'm not expert and never will be...but this much i do know...if Vladimir Putin goes "all in on Ukraine" he won't be able to go "all out." In other words "you're in it to win it" which means you're gonna have "stay and pay." (or pray as the case may be.)
The USA has learned two very valuable lessons in both Afghanistan and Iraq...that "wars" are real, have real consequences both for the aggressor and the aggressed...and that "victory" is more often than not the most elusive goal to define.
"America" is not the first country in the world to define these matters in terms of "we win/they lose...over a set time frame...then we can all be friends again."
The world would do well to study French and the French people...total war for an entire generation...only once ever knowing defeat on the battlefield...yet winding up the "the biggest loser" in the end.
Sufiy
I though BoPo got run out of town....looks like Sinclair hasn't learned his lesson.
The only way gold can rise in price is as part of global inflation which will take all commodities up with it. Eventually paper gold may yield some great profits...in currency. The problem will come when the currency fails to perform. At that point 99 out of 100 gold 'owners' will find that they hold only large amounts of increasingly less valuable currency. At that point real assets will be preferred and the ultimate real asset, gold, will be unavailable....at least in its physical form. At that point you will still ba able to buy lots of paper promises....cheap.
Every currency, includeing the USD, is managed exactly like the Yuan. None of it is market forces. The only difference in the West is they use wider ranges so Soros can make money when the Central Bankers he manages money for push their curreny around. A set rate means no corrupt profits. A set range means a lot of corrupt profit,
http://www.zerohedge.com/news/2014-02-17/soros-put-hits-record-billionaires-downside-hedge-rises-154-q4-13-billion
We have already watched this movie. This may be someone just sending the WH a smoke signal.
Discussing China Currency Manipulation
Or was it this movie, that you are referring to?
Never saw that movie. Too young and probably was playing Zork on the Z-89 or H-89 computer or burning new Atari games. Thanks, watch it later. Yes, I was a bit into computers as a youngster. Call it my awkward nerd years.. LOL
LIGHT INTRODUCTIONS PRESENTS
Fly on the wall productions:
Putin and Wen Jiabao discussing Ukraine as secondary diversion from primary targets
Wen Jiabao: So things are proceeding according to plan.
Putin: Yes. We will draw in as many US and European military forces as possible.
Wen Jiabao: They have us cornered.
Putin: Yes. The Israeli controlled US forces and their allies are tightening the noose.
Wen Jiabao: Apparently we could not have stopped this at an earlier point.
Putin: Nyet. The last point at which we could have neutralized this threat was in 2008 when the United States failed to complete a business cycle purge of their Financial Elite and Government stooges. They were successful in preventing a reset of their financial system at that time. However they are running out of time to move forward to complete their global ambitions.
Wen Jiabao: This problem didn’t look like the end of things as we know them in 2008.
Putin: Very true. But we cannot do anything about that now. They have gained complete control of the American and all European governments and they are on track with their agenda.
Wen Jiabao: So. You will draw them in.
Putin: Yes. I will set the trap. The odds are in our favor as they are over confident of their military capabilities and they may never see us coming. You must not telegraph our intent to destroy them in any way that will be picked up by the NSA.
Wen Jiabao: Don’t worry about me. I’ve got a few tricks up my sleeve. We are being allowed to be much stealthier than what they perceive as your obvious movements and agenda Mr. Putin.
Putin: If we accomplish our mutual goals the Americans and Europeans will never be a threat to us again. We will be able to deal with the Israelis at our leisure.
Wen Jiabao: Let us make it so my friend. Let us make it so.
Who can manipulate their "currency" the most? Why the current winner, of course. I have no definition of "winning". Do they?
Your own garden is the most honest thing you can do.
China has built itself on massive stimulus for many years.
And now China has a larger GDP and a massive debt to contend with.
How do you say "we fucked ourselves" in Chinese?
the entire fx game is silly. everyone is standing near the exit for the dollar. despite the fact that the dollar may be the only game in town at the beginning of the collapse the rush to get out the door will be signalled by the first significant player to be seen sneaking out the door. that signal could take many forms and china has signalled for several years now that it is leaving. so far no one believes the reality because the fantasy is fueled by hopium, the most dangerous drug of delusion. stack 'em high!
While the US did not invent this game, it is shocking to me how few acknowledge US role in currency manipulation. For that matter, when do we stop and acknowledge that we are currently living under a communist government? What will it take? Do we have to put hammer and sickle on said flag - in place of stars and stripes? Look around you!
Having trouble seeing the correlation. Pretty pictures
The games central bankers are playing in supporting their and other currencies has reached a dangerous level, we may be in the "red zone". History has shown that in the past both leaders and governments have fallen with the demise of their coin.
The volume of trades, the sheer magnitude of monies flowing back and forth across borders has become staggering. This area of finance has become the worlds largest casino, where players have the potential to quickly suffer staggering losses. More on this subject in the article below,
http://brucewilds.blogspot.com/2013/01/currencies-games-in-danger-zone.html
Silly games?? Did US get to blame China?