PBOC announces the start of interbank trading in yuan versus pound

good luck USD! Its pay back time for your money printing and military harassment

Care to elaborate ?

US and Uk is one and the same thing, mate. They are attacking together whatever comes their way

great stuff. I will finally have a reason to start trading GBP.

YEAH. China is running 22% empty rate on new housing and you are worried about the YUAN being king. In case you didnt know USA has printed money to buy assets and now has over 4.7 Trillion assets in the bank. That is 1/4 of our national debt, so only emphasis 1/2 of the equation is kind of silly. The govt. can sit on these assets for years or even a decade and slowly sell them back into the economy letting it be absorbed with economic growth. If they use these appreciating assets properly they can knock off a big chunk of the national debt in the future.

China meanwhile has been printing money and pouring it into the economy and it needed to, to match its growth. However, the problem they face is 15% of their GDP is real estate (USA its about 7%) and it is way overbuilt. It will slow down and has already. How much of a crash is hard to say but its there. Once you shave off the real estate growth their economy will slow down into a more mature economic system of 3-6% growth in the future. The question will be then, is that good enough to cover their debt from their free spending construction days which are clearly coming to an end.

Good point.

And the quality of the 'assets' bought by the Fed is questionable, therefore driving a truck through your rationale.

im think there is another angle to this. chinese are hard core gamblers. Even 70% drop in HK property has not dumped the speculative spirit.

Drop, if/when occurs should be used to load with property. Mak sure you have spare cash for that event as this is how one gets rich.

Does no good if there are not buyers. Those that can afford a house have one, the only way out of their mess is to stop building and keep growing so more can become middle class and buy the surplus .......... very difficult thing to do if not impossible. If a major part of your economic growth is real estate and that growth disappears off the map due to over building then what can you have to take its place??

The assets bought by the govt. is land, buildings, property, etc. (at the present bad mortgages) These assets have permanent value. As the economy grows and population grows, these assets come back into play again. That is why they ran the program. Only the govt. has the ability to sit on these kind of assets for 5,10 20 years if necessary and wait for their value to come back. So no truck is driven through the logic.

The concept that the USA is just blindly printing money is a false logic or a clear misunderstanding of what is happening. The money is not in play in the economy and will slowly be entered into the economy as assets are recovered. Since a growing economy and population needs money expansion (inflation) and gold cannot grow unless huge amounts of gold can be found (impossible in these days of much higher population and economic growth) the QE program was the best program to use under the circumstances. Gold is worthless and useless as a currency. It cannot grow with population growth, it cannot grow with economic expansion. Paper or digital money is here for mankinds currency needs.

2 comments:

1. china apparently has large peasant population that is moving to cities and this helps property cause. same as Australia is importing people and making property THE industry in Melbourne & Sydney. Not sure whether this will continue as jobs are exported in a big way from these 2 cities.
2. Gold will always have value because one can buy wife with it, at least in india. Also all sorts of religions promote it because, I presume, they have large holdings.