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Jack Lew's Worst Nightmare - China's Currency Should Be 20% 'Weaker'
The constant chant from Washington over the past few years has been one of falling just short of labeling China "a currency manipulator" and proclaiming unilaterally that the Yuan is being artificially maintained at a lower level than it should be. However, as Bloomberg Briefs' Fielding Chen notes, based on a trade-weighted basket, China's currency is actually 20% over-valued. Having stayed close in value to this basket until 2007, China's policy since has been a stronger-than-market currency, but as the world increasingly de-dollarizes, and the Yuan gains more global prominence, the following chart suggests the direction of the next trend in China's currency.
As Bloomberg notes,
The yuan has been drifting away from a trade-weighted currency basket since the 2008 global financial crisis. Chinese authorities’ political preference for comparative strength in trend versus key trade-partner currencies is apparent in the yuan’s performance against a basket modeled by Bloomberg Economics.
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Following a currency basket in the wake of the 2008 crisis would have forced the yuan to depreciate against the dollar. This would have been politically unacceptable for China’s main trading partners and would have risked turmoil in global markets. As a result, policy makers halted ties to the currency basket, and the yuan rose.
Now approaching its fair value, China’s currency may move in either direction. The diminishing one-way pressure for the yuan to appreciate makes a case for Chinese policy makers to revisit the currency basket.
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As China’s yuan gains global prominence, its relationship to a currency basket becomes increasingly important. From the perspective of the yuan’s marketization, the basket is a key pillar for a managed floating currency regime. For investors, the basket may also predict the yuan’s moves. Thus a representative currency basket is likely to play a bigger role in both policy makers’ and analysts’ future determinations.
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well we know it's not going to go down because they are about launch a gold backed Yuan and dump all their UST's.....
Chinee love us good. Boom Boom long time.
Maybe that 20% premium reflects the ability of foreigners to exchange Yuan for gold in the Shanghai Free Trade zone gold market starting on Sept 26.
Expect a lineup of BUBA officials at the delivery window.
"Here you are, sir."
"Vait, ze bar iss already stamped "Germany!"
Exactly. And quality of life will improve vastly for the majority of Chinese who spend 30-40% of income on food, plus we have no capacity to grow consumption anymore, so no reason to keep subsidizing our "investment" (malinvestment) in consumption.
Union buster Jack Lew has no nightmares, his career path is set. When he leaves the steaming manure heap that is Obama monetary policy, he will slide over to a managing partner job at Goldman Sachs or something similar.
Jack Lew needs to employ EX Worldcom and Enron number fabricators. Raising the debt ceiling and competing against NIRP is a dizziness feeling in paying off US debt obligations.
For years and years I've heard that China, the "evil currency manipulator" is keeping its currency UNDER-VALUED. That was very bad. Now, all of the sudden, its OVER-VALUED by 20%. Of course, this is very bad too (worse ??).
Could these guys just make up their minds ?
ok, so inflation sets in and my house goes up in dollar value ? Bullish.
Or maybe inflation sets in, everything gets more expensive, and my house goes down in dollar value because the economy sucks.
Close your eyes, click your heels together and say this three times.... "QE is not currency manipulation." There now, in the words of George Costanza, "it's not a lie if you believe it."
"Its not a lie if you believe it"... George had very a illustrious precedent as example.
When the philospher Abelard, father of scholastic (logical) thinking in France defied in 1140 Papal firebrand--the most reactionary prelate of those days--Saint Bernard of Clairvaux, on the issue of Absolutes and relatives (nominalism) and questioned a Pope's right to shout "God wills it" as if he were Jesus himself, the irate prelate said : Your logic is mere human intelligence, lead in comparison to the gold of divine wisdom".. He had Abelard condemned by the Council of Sens and forced to retract his conclusions, considered as heresy.
Of course, History subsequently proved Abelard right and Saint Bernard wrong, as in spite of divine wisdom's so-called glow Jerusalem was lost; and Popes became Inquisitorial rapists in name of fighting "terrorist" heresy in Occitan France as in Orthodox Constantinople--both Christian domains (nothing to do with the INFIDEL, hint hint Patriot Act today...).
The Popes even invented the Indulgence, the financial derivative product-- that guaranteed eternal heaven to the sucker who believed it-- of that corrupt "we know better as God's agents" age.
So... WS and the neo-con GWB cabal Templars have not invented anything new under the sun!
And George Constanza learned his history!
Guess the idea of the US losing the reserve currency status and petrodollar is starting to sink in.
The US swaps with China and is starting to see the inflation instead.
Hyperinflation will be a bitch and that's a fact Jack!
Man, it's early, I thought the headline said Jack Jew's worst nightmare.
All the heated currency wars blew off his Yamaka aka skull cap.
Oh hell yes, please bring back the days of 8+.
This is the house that Bernanke built.
But 2008 was not necessarily a good starting point, maybe the Yuan was very undervalued at that point.
I'm mildly surprised at this chart, I thought China had given up the Bernanke deal over a year ago.
Try Alan Greenspan. Start researching instead of posting 'Fuck You Bernank'.
Remember when Geithner was laughed out of china? And the mindless "currency manipulator" crap? And the "China needs to allow their currency to rise"?
Nah. Neither do I.
Don't feel lonely, I remember. Borrowing money from the debt lords has ideology strings attached.
Good thing they have US Bonds, devalue and make 20% on them.
Just like pulling a rabbit from a hat. Ta-da!
Lets see...China sells 1.3 trillion in treasuries...the dollar goes down and the Yuan strengthens...is that what you're going for Mr Lew?
Jack Lew in shtine's worst nightmare. If I understand correctly there is a tight range around 6.2ish where positions on the yuan will shake out. Not sure if that still is the case. When I look at a five year chart it makes me think the yuan can easily go to 8. If they connect with the hong kong dollar and with all this gold you would think they would just put the focker at 10. That would be closer to 40% over valued. Now we have a very big problem.
When is the yen going to 92? After it hits 125??? I see the euro going back to 1.15-.20
The swiss franc will have to depreciate.
The pound sterling can't keep it up much longer without moar viagra.
Is kiwi going to be a winner again?
lack jew jack lew
Jack Lew's worst nightmare is the thought that goys might one day run the Fed.
What do you mean? The faggots Lew's worst nighmare is sitting in the farking white house. Fascist/nazi regime.
A floating CCY regime with the USD at the head that is degenerating at an accelerated pace. The writing has been on the wall for a good few decades and now he's worried. Many a nation is on the way in giving the US the BIRD!