gold seems to be on the way up. is there anyone out there who can honestly see an alternative?
also.. and on another note, it seems that china will be making a move sooner rather than later to internationalize the yuan. it was a few months ago when sdrs were mentioned and a bilateral arrangement with brazil appeared in the news.
connected with this is of course the expected instability resulting from the us fed. printing dollars.( quantitative easing) I don’t even like dredging up the trite euphamism.)
china and brazil agreed to use their own currencies rather than denominate their trade in us dollars. it was some kind of currency swap) brazil is a large producer of ethanol from sugar. my guess is that this is what china is after (as well as making a test case).. an alternative fuel source before something else can be developed or at least some sort of insurance policy. (china will not be able to power its economic expansion on oil.)
there is also still a lot of bad air about iron ore.. with at least one official in the cooler at last count.
the g-8 members basically ignored china in calling for an altenative to the us dollar as an international currency. . a devaluation of their (chinas) dollars is obviously a worry. one of the solutions maybe to make the yuan an international currency sooner rather than later. if it is going to pay people to use the yuan, then they will use the yuan. that is the law.
the usa ensured the use of its currency as a reserve by post ww2 aid and particularly by controlling oil production having it priced in us$. (this is the reason for us dominance of the middle east.) it was crucial for american policy of basically spreading it around.. (euro/petrodollars) .. things have changed.
what china controls is manufacturing. though there is overcapacity atm, the slack won't be long in taking up. by the time it does there will have been a reconfiguration. its really up to what the chinese bank decides.. when the time is right. trade finance will be extended in yuan.
without a doubt, the chinese will act to protect their reserves.
the consequence will probably be that the yuan becomes a sought after currency as was the us dollar in the post war period (especially after 1971). .. something which will revalue it taking away the prc's price advantage (as an exporter of manufactured goods.)
the ramifications are probably as many as are the perks and pitfalls of seigniorage.
the yuan, underwritten by the huge manufacturing capacity of the prc is a known (heheheh) unknown. gold or copper as a standard is more easily quantified. for sure.
people say that the chinese banking system has problems of bad debt and inexperience with modern methods.. I tend to scoff at that. the chinese invented it. didn’t they?
i do doubt that they want to hear anything about a gold standard. (at least they dont admit to having much.)
another thing for sure is that the system we have now is on the nose.
we live in interesting times.
watch this space and be ready to hold on to your hat.
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