Reflections on Basically Stable
ForexLive reports PBOC says it will maintain the exchange rate of the yuan at basically stable levels.
Comments from Liu Guoqiang, a vice governor at the Bank (emphasis mine)
- China will maintain the exchange rate of the yuan at “basically stable” levels
- Trend of the exchange rate will be decided by supply and demand along with changes in international financial markets
- Yuan will be kept at reasonable and balanced levels
Did You Catch the Contradiction?
The pledge to peg the yuan to “basically stable” and “reasonable and balanced levels” is anything but a supply and demand market-driven floating rate.
Moreover “reasonable and balanced” can mean anything. In practice it will mean whatever the heck China wants it to mean.
ForexLive also noted April 16 comments from Zhou Chengjun, director of the Bank’s finance research institute.
- China has to give up its control over the yuan exchange rate eventually if it wants to achieve greater global use of the yuan
- The PBoC has made it clear it stopped regular intervention
- China will let the market play a bigger role in deciding the exchange rate.
Points number 2 and 3 will only hold true so long as China concurs the Yuan is at “reasonable and balanced levels”.
Meaningless Announcement
Defending a hard peg means whatever it takes.
But Basically and reasonable can and will mean anything China wants, so it’s not quite a hard peg.
One clear possibility is that if the dollar sinks vs the Euro, China wants the Yuan to sink with it.
The announcement is a meaningless cop-out and easy to see through.
The only thing that makes any sense is point number 1. But go back and read that sentence carefully.
Please note the word “eventually“. Strike that from the sentence so it reads properly.
What’s China Doing?
China wants everyone to believe it is on the verge of letting the yuan float, driven by market forces.
Obvious contradictions and words like “eventually” prove otherwise.
What a joke announcement. China tried to fool everyone with meaningless words.
Weight Fixing
What the world needs is not “price fixing” but “weight fixing”.
A dollar, yuan, euro, or yen needs to represent a fixed weight of gold, audited, and 100% redeemable on demand.
This is vastly different than saying “x” dollars will buy “y” gold given that dollars can be printed at will.
Such pegs can’t last, and the soaring price of gold from $35 an ounce to $1900 an ounce is proof enough.
True Stability
A 100% gold-backed dollar, by weight, implies no government or central bank shenanigans. That’s true stability.
Mish
Before any
nation might successfully challenge China — a country with almost 1.5 billion
consumers — that nation must first have a compatible trade-export/import
bargaining chip. One can imagine that a large enough number of world nations securely
allied, however, likely could combine their resources and go without the usual
bully-nation China trade/investment connection they’d prefer to sever, instead
trading necessary goods and services between themselves.
Maybe such
an alliance has already been covertly discussed but rejected due to Chinese
government strategists knowing how to ‘divide and conquer’ potential alliance
nations by using door-wedge economic/political leverage custom-made for each
nation. Every nation placing its own big businesses’ bottom-line interests
first and foremost may always be its, and therefore collectively our, Achilles’
Heel to be exploited by huge-market nations like China.
Logically,
China would take advantage of this serious flaw or weakness in Western virtual
corpocratic governances — i.e. big corporate profit before individual and even
national interests. (It’s as though elected heads are meant to represent huge
money interests over those of the working citizenry and poor.) Accordingly,
major political decisions will normally foremost reflect what is in the
influential corporations’ best interests.
governance basically controls the corporations within the nation (and even
without, to some degree); whereas Western governances, notably the U.S. and
Canada, are essentially steered by corporations’ economic intimidation (or
worse). Western corporate lobbyists actually write bills for our governing
representatives to vote for and have implemented, typically word for word,
under the guise of saving the elected officials their time. It has become so
systematic here that those who are aware of it — including the mainstream
news-media — don’t bother publicly discussing it. Anyone who doubts the potent
persuasion of huge business interests here need to consider how high-level
elected governing officials can become crippled by implicit or explicit
corporate threats to transfer or eliminate jobs and capital investment, thus
economic stability — a crippling that is made even worse by a blaring
news-media that’s permitted to be naturally critical of incumbent governments.