kEiThZ
Superstar
The Chinese might....or that'll be the end of the CPC.
|
|
|
Financial Crisis
- Thread starter BobBob
- Start date
The Chinese might....or that'll be the end of the CPC.
jade_lee
Active Member
The Chinese think a one currency for all solution will help solve this current financial crisis as it's a perfect time to execute such a plan. This is not the first time this idea has been brought forward. Any comments?
kEiThZ
Superstar
I think Obama was spot on in his response. The US dollar is the world's reserve currency for a reason. And increasingly the Euro is becoming a good alternative.
As for a single global currency....any idea by the Communist Party of China should be viewed with suspicion. All in all, a global currency, although a great ideal would merely dilute risk. I don't see how any well managed country would want this. I certainly would not want the Canadian dollar to have to cover for the problems in the US economy or be subject to the whims of the Communist Party of China for that matter. We all know how a global currency would be organized. Biggest economies would get the most say. The US initially and eventually China and India would pretty much set global monetary policy. Thanks but no thanks. If anyone thinks the American banking sector is in poor shape, wait till they see Chinese banking practices.
afransen
Senior Member
They aren't talking about a new currency as a medium for exchange, but rather a new reserve currency rather than the US dollar. Our exchange rates float, so whether the US dollar is the reserve currency or some other currency doesn't seem to make a whole lot of difference to me, other than reduce the risk that the US will simply print trillions of dollars and make those reserves worthless.
jade_lee
Active Member
."...any idea by the Communist Party of China should be viewed with suspicion." Keithz
Every idea by any party of any government should be viewed with suspicion! Clearly a sign of the times.
http://www.businessweek.com/globalbiz/content/mar2009/gb20090316_305393.htm?chan=globalbiz_asia+in[/url]
I found this article interesting.
The Crisis continues. Trusting the same group of people who got us into this mess is illogical. They should be scrutinized every step of the way. And at least held accountable.
I still can't believe our government told us in Nov 08, that's only 4 months ago!!, that we would be better off than the United States during this recession. Todays report from the budget office says we are tanking faster than this budget can help our economy or the huge group of Canadians who have lost their jobs. Reality . What happens when the government has to make a choice between making the choice corporations solvent or caring for it's citizens? Surely the government can't continue printing money indefinitely.
Every idea by any party of any government should be viewed with suspicion! Clearly a sign of the times.
http://www.businessweek.com/globalbiz/content/mar2009/gb20090316_305393.htm?chan=globalbiz_asia+in[/url]
I found this article interesting.
The Crisis continues. Trusting the same group of people who got us into this mess is illogical. They should be scrutinized every step of the way. And at least held accountable.
I still can't believe our government told us in Nov 08, that's only 4 months ago!!, that we would be better off than the United States during this recession. Todays report from the budget office says we are tanking faster than this budget can help our economy or the huge group of Canadians who have lost their jobs. Reality . What happens when the government has to make a choice between making the choice corporations solvent or caring for it's citizens? Surely the government can't continue printing money indefinitely.
kEiThZ
Superstar
Wow. Talk about shoddy journalism from Business week. You should read up about non-performing loans with the Chinese banks:
http://seekingalpha.com/article/65851-chinese-banks-non-performing-loans-rising
http://www.strategycenter.net/research/pubID.66/pub_detail.asp
http://www.livemint.com/2007/04/03031202/Problems-Galore-for-China-Bank.html
And if you want credible analysis, of course, there's always stratfor:
http://www.stratfor.com/inflection_point_chinas_banking_problem
As far back as 2002: http://www.nytimes.com/2002/02/01/business/bank-of-china-s-mounting-problems.html
That's just from a three word google search.
It's hilarious that you see the problems in the US and think that's bad but think nothing of praising a country where at the whiff of a crisis nearly every bank becomes insolvent. Yes, we should take advice from the Chinese. I propose not only getting banking advice, but also adopting their labour, environmental and human rights standards.
Last edited:
kEiThZ
Superstar
I can see the purpose and it's limits. One fundamental problem would be the inefficiency of making two currency conversions I would think. This is more so the case where most countries trade with the US and hence will end up buying and selling US dollars at some point....particularly in the case of Canada.
The other problem I foresee is governance. How would the IMF enforce policy in participating countries? The Euro struggles so much at achieving consensus on monetary and fiscal policies across the euro zone. Can you imagine what it would be like to have to deal with the likes of China which refuses to float its currency?
I will admit that there is the faint risk that the US might resort to the presses to get out of its problems. But I think most US policymakers understand that doing so, although affording them short-term gain would severely undermine their long term strategic interests. They would really shoot themselves in the foot if they did that.
Over time though, a global currency is probably going to be needed as India and China mature and we end up with a multi-polar global economy. The key though will be those emerging markets maturing to the point where they are able to make sensible decisions about fiscal and monetary policy, possess deep economies, have strong and effective legal systems and have strong political stability. These days only the Europeans come marginally close on all those fronts to the US dollar. I could see the Indians getting there someday. But I still don't know who'd want to bet on China; one bad year of economic growth away from another revolution.
Last edited:
kEiThZ
Superstar
http://online.wsj.com/article/BT-CO-20090325-715946.html
Given that the worsening economy has already over-run the government's stimulus, I'd like to see them add a little more...preferably to the infrastructure pot.
Given that the worsening economy has already over-run the government's stimulus, I'd like to see them add a little more...preferably to the infrastructure pot.
cacruden
Senior Member
We had another reserve currency before the USD, it was the gold standard - and we moved away from that for a reason.
There is possibly an alternative that I can think of for a global currency, and that would be a currency that is composed of a basket of currencies (sort of an index currency) based on some formula. I fear creating a global currency with a strong organization like a UN Fed - I just don't think the UN is competent enough in other areas.
For example:
If there were three participating currencies (to keep it simple), and based on that, the US GDP was 50%, China 15%, and EU 35%, then the currency would be composed of 50% USD, 15% Chinese Yuan, 35% Euro's. The value of that currency would then be based on that. If one currency devalued considerably, the would be held up by the other participating economies. This would allow the Chinese to demand the US issue the debt in the the World currency - which could be less risky than having it all in USD.
Of course the transition would likely create severe financial shocks which would cause a major depressionary event - which should be avoided if the US does not royally mess up their own currency.
There is possibly an alternative that I can think of for a global currency, and that would be a currency that is composed of a basket of currencies (sort of an index currency) based on some formula. I fear creating a global currency with a strong organization like a UN Fed - I just don't think the UN is competent enough in other areas.
For example:
If there were three participating currencies (to keep it simple), and based on that, the US GDP was 50%, China 15%, and EU 35%, then the currency would be composed of 50% USD, 15% Chinese Yuan, 35% Euro's. The value of that currency would then be based on that. If one currency devalued considerably, the would be held up by the other participating economies. This would allow the Chinese to demand the US issue the debt in the the World currency - which could be less risky than having it all in USD.
Of course the transition would likely create severe financial shocks which would cause a major depressionary event - which should be avoided if the US does not royally mess up their own currency.