China to allow Yuan to be used to settle trades normally denominated in dollars
This is bearish news for the U.S. dollar for sure. With China ability to produce goods on a major scale so they will always have something to trade, it looks like the Yuan might become a reserve currency. It should be no surprise that with our reckless bailouts on companies that should of failed that is leading to a devalued dollar is not sitting well with countries that hold much of our sovereign debt.
News:
The pilot scheme was announced in a package of measures designed to help exporters hit by the global downturn. It means if the two parties to a trade have yuan available, they need not enter world exchange markets to pay.
Most of China’s foreign trade is settled in US dollars or the euro, leaving exporters vulnerable to exchange rate fluctuations. The yuan is not yet a freely convertible currency. Officials did not say when the trial scheme would start.
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China foreign debt rises to $442 billion
Debt worldwide is rising and will continue until the economy stabilizes and confidence is restored. One item that would help this process is letting market forces choose winners and losers so that the right people prosper and the correct lessons are set. Currently, people can not plan for the future because of the jeopardy that the rules will continue to drastically change and they could be hurt by their decisions. Once piece of evidence is the rush to U.S. treasuries even when your getting a negative return on your money in this environment.
News:
China’s foreign debt grew at a slower pace in the third quarter, the country’s foreign exchange regulator said on Friday, reflecting a slowdown in investment from abroad amid the weaker global economy.
China’s foreign debt reached $442.0 billion (300 billion pounds) at the end of September, up 3.4 percent from $427.4 billion at the end of June, the State Administration of Foreign Exchange (SAFE) said on Friday.
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U.S. has plundered world’s wealth with dollar according to China
Well this is pretty strong language coming from the state-owned newspaper in China. They are basically saying that we should not settle transactions in dollars and instead opt for settling trade in the native currencies. This will create a new pricing standard based on other currencies so that over time, trade will not be just denominated in dollars.
I would say that this would be a good thing for the long-term. WIth a dual price for major items, we would not only see what the true value is but also we would see monetary inflation more clearly when one price rises to fast compared to the other.
Press Release:
The United States has plundered global wealth by exploiting the dollar’s dominance, and the world urgently needs other currencies to take its place, a leading Chinese state newspaper said on Friday.
The front-page commentary in the overseas edition of the People’s Daily said that Asian and European countries should banish the U.S. dollar from their direct trade relations for a start, relying only on their own currencies.
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China central bank warns of risks in illegal gold futures speculation
Looks like a secondary market is developing for the gold market in China. With the paper price of gold bullion a far cry from the “street-price” that you would great if you walked into a dealer to purchase. We will likely see more of this as long as there is manipulation in the markets in general.
News Piece:
The People’s Bank of China said on Thursday that “underground gold futures speculation” was “typical illegal trading on gold futures” and was not protected by law. The central bank warned Chinese investors of the extremely high risks in illegal futures trading.
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China dumps $3 billion of US treasury bonds
Well there you go, the next leg of the dollar dropping is upon us. We can not run a trade and account deficit of this proportion and bailout the commercial banks, homeowners, investment bank, GSEs and expect foreigners keep keep funding our debt and consumption. All parties come to an end and I hope you have your chair reserved.
Release:
As of June, China held $503.8 billion worth of US treasury bonds, $3 billion less than in May, according to a report released by the US Department of the Treasury. This is the first time since February that China has cut its holding in the US government finance department.
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China’s July wholesale prices up 10 percent
With this news we should expect to continue to see raising inflation for some time to come. I don’t see Chinese manufacturers taking the pain for too long before they are raising the prices on the finished goods they send the U.S. and other countries.
The article cited rising energy and raw materials as the reason they saw such a robust increase in wholesale prices. I think they are correct that it is a little early to say PPI growth has peaked.
Article:
China’s wholesale inflation in July accelerated to its highest rate in 12 years, adding to the government’s headaches as it tries to rein in surging consumer prices, according to data reported Monday.
The producer price index was up 10 percent in July over the same month last year, the highest rate since 1996, the Xinhua News Agency said, citing the government’s statistics bureau. The index measures the price of goods as they leave the factory.
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