Friday, September 25, 2020

The US Dollar Is Getting Crushed by the Yuan — and China Isn’t Even Trying Yet

by Darius Shahtahmasebi, The Anti Media:

China is struggling to rein in the yuan in its global currency chess game against the United States, the Wall Street Journal reports.

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According to the WSJ, after spending most of last year defending the yuan, China’s central bank is looking to “rein” in its recent ascent, which has been a notable climb compared to the dollar. From the WSJ:

“Driven by an unexpectedly prolonged softening of the dollar, the Chinese currency has surged to around its strongest level against the greenback since its surprise devaluation in August 2015. The yuan is now on track for its best monthly performance since April 1980, rising 3% against the dollar so far in January.” [emphasis added]

However, according to the WSJ, the yuan’s move coincides with a number of other currencies that are fast covering ground against the dollar. The euro has reportedly made a 3.5 percent gain while the Japanese yen has made a 3.8 percent gain against the dollar so far this month.

Just last Friday, the yuan made a further 0.2 percent gain against the dollar.

The WSJ describes this success as somewhat of a “policy headache” for the Chinese government, which regularly devalues its own currency to maintain an edge in exports. If the yuan keeps increasing, government advisers and analysts predict it “could encourage speculative fund flows from overseas and hurt exports amid already rising trade tensions between China and the Western world, particularly the U.S,” the WSJ reports.

“This is not what the central bank would like to see,” said Xiao Lisheng, a senior economist at the Chinese Academy of Social Sciences, a government think tank.

“The central bank wants the renminbi (yuan) to move up and down according to market supply and demand,” he added. “Now it’s basically being held hostage by the dollar index.” 

However, despite this, one thing the WSJ fails to mention is the fact that the U.S. is fast losing its control over the global financial market as country after country begins adopting the yuan for global trade.

According to the WSJ, the People’s Bank of China, which fixes the yuan’s daily official rate, allows the yuan to strengthen if the dollar weakens, and vice versa, allowing the yuan to weaken if the dollar strengthens. This predictability allows for safe “one-way bets,” though it seems to indicate that should the dollar start to strengthen again this year, China may put a dent in the yuan’s rise.

The issue for China, of course, is that in return, a weak yuan brings in a ludicrous amount of money into the country from its trade with the U.S. As the WSJ explains:

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Civil Unrest Is Erupting All Over The World, But Just Wait Until The United States Joins The Party…

by Michael Snyder, The Economic Collapse Blog:

All over the globe, the mood is turning sour.  Anger and frustration are bubbling over, and protests are becoming violent in major cities all across the planet.  In some cases economic pain is driving the protests and in other cases political matters are motivating the protesters, and it has been a very long time since we have seen so many angry protests happening all over the world simultaneously.  Unfortunately, many believe that what we have seen so far is just the beginning.  Global economic conditions are rapidly deteriorating, and as economic pain intensifies that is only going to make everyone more frustrated.  And here in the United States, the drama surrounding the potential impeachment of Donald Trump is going to greatly escalate the political tensions that are already deeply dividing this country.  No matter how things turn out, a large percentage of the population is likely to be deeply frustrated with the result, and that could very easily lead to tremendous civil unrest.

Will the Multi-Polar World be Backed by Gold?

by Tom Luongo, Tom Luongo:

It’s not news that China and Russia have been buying gold by the hundreds of tonnes. It’s not news that Russia divested itself of most of its U.S. Treasury holdings last year in response to Donald Trump’s sanctions on Rusal, upsetting the global Aluminum market.

Russia has led the charge on central bank gold buying, having increased its official holdings from 400.3 tonnes in Q1 of 2007 to 2168.3 tonnes as of the end of Q1 2019. That’s a 442% increase in gold reserves.

China, on the other hand, has only in the past couple of years joined Russia’s party of announcing its gold buying on a monthly basis. Previously, China would simply drop a 500-600 tonne bomb on the markets and see what would shake out of it.