Will China Back The Yuan With Gold?

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There is a potentially massive seismic shift about to occur in the financial world, it looks possible that China will announce that the Yuan will be backed by gold. If this happens the US will find out what it means to no longer be the reserve currency of the world. Debts as massive as those held by the US are never paid and are usually dealt with by a massive devaluation, which is starting to happen now. China is not stupid and will not sit around and see their mountain of $1.5 trillion in U.S. debt dwindle, so don't be surprised if they announce it officially this year.

http://seekingalpha.com/article/1939741-will-china-back-the-yuan-with-gold
 
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It would also mean a seismic change in US tax policy as China wouldn't finance our spending sprees anymore. I don't see that as a bad thing. The US has suffered for a long time in trade due to the USD being the world reserve currency. Many parts of the world could not afford to import US goods due to the cost. With the devaluation of the US dollars due to inroads by the Euro there has been a significant increase in export trade by the US and a corresponding decrease in the US trade deficit. This is not a bad thing!!
 
Mott the Hoople said:
It would also mean a seismic change in US tax policy as China wouldn't finance our spending sprees anymore. I don't see that as a bad thing. The US has suffered for a long time in trade due to the USD being the world reserve currency. Many parts of the world could not afford to import US goods due to the cost. With the devaluation of the US dollars due to inroads by the Euro there has been a significant increase in export trade by the US and a corresponding decrease in the US trade deficit. This is not a bad thing!!
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Over the longer term it may well be a good thing but in the shorter term it could well precipitate another financial crisis maybe worse than 2008.
 
Mott the Hoople said:
It would also mean a seismic change in US tax policy as China wouldn't finance our spending sprees anymore. I don't see that as a bad thing. The US has suffered for a long time in trade due to the USD being the world reserve currency. Many parts of the world could not afford to import US goods due to the cost. With the devaluation of the US dollars due to inroads by the Euro there has been a significant increase in export trade by the US and a corresponding decrease in the US trade deficit. This is not a bad thing!!
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Now I am far from an expert on this subject but I do understand a cheaper dollar lowers the effective price of American exports (which is what you stated) which is great in the short term. But other countries see that and want to devalue their currency and the term I've heard used is we engage in "competitive devaluations". So while we may get a short-term bump, which of course politicians currently in office love, it only exacerbates our overall debt problems. So are we in a currency war now? I've heard it said we are although I'm not smart enough to say yes or no myself but from what I've read I think an argument can be made we are.
 
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aeprga said:
To answer the thread title: No. Not going to happen.
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Sorry Dung, didn't mean to leave you out in asking your opinion. What are your thoughts on the U.S. currency devaluation going forward? Will it start an economic currency war of some sort?
 
Mott the Hoople said:
It would also mean a seismic change in US tax policy as China wouldn't finance our spending sprees anymore. I don't see that as a bad thing. The US has suffered for a long time in trade due to the USD being the world reserve currency. Many parts of the world could not afford to import US goods due to the cost. With the devaluation of the US dollars due to inroads by the Euro there has been a significant increase in export trade by the US and a corresponding decrease in the US trade deficit. This is not a bad thing!!
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ROFLMAO... we have 'suffered' in trade by being the reserve currency? LMAO.
 
Abraxas said:
There is a potentially massive seismic shift about to occur in the financial world, it looks possible that China will announce that the Yuan will be backed by gold. If this happens the US will find out what it means to no longer be the reserve currency of the world. Debts as massive as those held by the US are never paid and are usually dealt with by a massive devaluation, which is starting to happen now. China is not stupid and will not sit around and see their mountain of $1.5 trillion in U.S. debt dwindle, so don't be surprised if they announce it officially this year.

http://seekingalpha.com/article/1939741-will-china-back-the-yuan-with-gold
Click to expand...

Ben Kramer-Miller






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I am an independent investor. I write in order to clarify my own ideas in order to refine my investment strategies. My investment philosophy is guided by two major themes: long term secular trends and deep value.

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China wants the US dollar stronger relative to the yuan, not weaker. It wants the US to continue buying cheap goods from China. It wants the value of the debt it holds to maintain as much value as possible. They also want the ability to manipulate their currency (just as we do)... they are not going to tie their currency to a commodity.
 
cawacko said:
Sorry Dung, didn't mean to leave you out in asking your opinion. What are your thoughts on the U.S. currency devaluation going forward? Will it start an economic currency war of some sort?
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No worries. I don't really have strong opinions on the matter other than to say that most of the commentary about dollar devaluation is hysteria based and completely unmoored from reality. Also, the idea that China will peg the yuan to gold is batshit.
 
aeprga said:
No worries. I don't really have strong opinions on the matter other than to say that most of the commentary about dollar devaluation is hysteria based and completely unmoored from reality. Also, the idea that China will peg the yuan to gold is batshit.
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Not often that Dung gets something correct, so we should all applaud him now and give him his moment.
 
cawacko said:
Sorry, I was speaking more about the currency devaluation talk (which you already spoke to).

Yeah, I would be shocked as well if they backed the Yuan with gold.
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I fail to see the logic in their argument, it just doesn't make a lot of sense. Especially if the same people are suggesting that China tie their currency to gold.
 
Superfreak said:
I fail to see the logic in their argument, it just doesn't make a lot of sense. Especially if the same people are suggesting that China tie their currency to gold.
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The currency devaluation talk I was referring to had nothing to do with the Chinese or backing the yuan with gold.
 
cawacko said:
Now I am far from an expert on this subject but I do understand a cheaper dollar lowers the effective price of American exports (which is what you stated) which is great in the short term. But other countries see that and want to devalue their currency and the term I've heard used is we engage in "competitive devaluations". So while we may get a short-term bump, which of course politicians currently in office love, it only exacerbates our overall debt problems. So are we in a currency war now? I've heard it said we are although I'm not smart enough to say yes or no myself but from what I've read I think an argument can be made we are.
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ahh... missed this post... a devaluation of our currency would actually help our debt problem, but it would hurt those living off of income and it would devalue assets for those that saved. Bottom line, it would reward those that outspent earnings (including the govt) and it would punish those that saved.
 
cawacko said:
Now I am far from an expert on this subject but I do understand a cheaper dollar lowers the effective price of American exports (which is what you stated) which is great in the short term. But other countries see that and want to devalue their currency and the term I've heard used is we engage in "competitive devaluations". So while we may get a short-term bump, which of course politicians currently in office love, it only exacerbates our overall debt problems. So are we in a currency war now? I've heard it said we are although I'm not smart enough to say yes or no myself but from what I've read I think an argument can be made we are.
Click to expand...
Interesting...another possible race to the bottom eh?
 
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