China calls for new reserve currency | Forex Factory

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China calls for new reserve currency

  • #1
  • First Post: Mar 23, 2009 9:54pm Mar 23, 2009 9:54pm
"China’s central bank on Monday proposed replacing the US dollar as the international reserve currency with a new global system controlled by the International Monetary Fund."

http://www.ft.com/cms/s/0/7851925a-1...0779fd2ac.html

"Countries would entrust a portion of their SDR reserves to the IMF to manage collectively on their behalf and SDRs would gradually replace existing reserve currencies."

The bold part is why I don't believe this will happen...yet
Not all sins are created equal
  • #2
  • Mar 23, 2009 10:06pm Mar 23, 2009 10:06pm
Quoting Jay Walker
"China’s central bank on Monday proposed replacing the US dollar as the international reserve currency with a new global system controlled by the International Monetary Fund."

http://www.ft.com/cms/s/0/7851925a-1...0779fd2ac.html

"Countries would entrust a portion of their SDR reserves to the IMF to manage collectively on their behalf and SDRs would gradually replace existing reserve currencies."

The bold part is why I don't believe this will happen...yet
Why doesnt china just depeg the yuan, demand that it become the world currency and then value it at what ever they like?
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  • #3
  • Mar 23, 2009 10:09pm Mar 23, 2009 10:09pm
Quoting Passholder
Why doesnt china just depeg the yuan, demand that it become the world currency and then value it at what ever they like?
My guess is that this is exactly what they will do over time.

In 10 years from now, I wouldn't be surprised if the Yuan was if not the first currency in the world, one of the top 3.
Not all sins are created equal
  • #4
  • Mar 23, 2009 10:13pm Mar 23, 2009 10:13pm
Quoting Jay Walker
My guess is that this is exactly what they will do over time.

In 10 years from now, I wouldn't be surprised if the Yuan was if not the first currency in the world, one of the top 3.
10 years? That would take us to 2019 if my math is right. Everyone knows the world is going to end on 12 21 2012.

DUH
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  • #5
  • Mar 23, 2009 10:15pm Mar 23, 2009 10:15pm
Quoting Passholder
10 years? That would take us to 2019 if my math is right. Everyone knows the world is going to end on 12 21 2012.

DUH
Then why are we worrying about a recession?

Let's steal some Ferraris and a McMansion! Even if we get caught, by the time the trial is over and get thrown in prison, we'll be dead.
Not all sins are created equal
  • #6
  • Mar 23, 2009 10:16pm Mar 23, 2009 10:16pm
Quoting Jay Walker
Then why are we worrying about a recession?

Let's steal some Ferraris and a McMansion! Even if we get caught, by the time the trial is over and get thrown in prison, we'll be dead.
Well I wont get into the whole thou shall not steal thingy, but I'm not worried about the recession. Just let me figure out what that means for the pairs I trade
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  • #7
  • Mar 23, 2009 11:30pm Mar 23, 2009 11:30pm
Seems to me they are trying to eliminate cash and create one world central bank. The strange thing is, why are they trying to get all the carbon taxes paid to this new central bank, and why is Gordon Brown tripping over himself to tie global warming (which doesn't exist, and is why they call it climate change now) with centralisation of the worlds banking system.

The next question will then be, will we continue to be allowed to trade currencies afterwards.
  • #8
  • Mar 24, 2009 2:49am Mar 24, 2009 2:49am
Quoting TotalMadness
The next question will then be, will we continue to be allowed to trade currencies afterwards.
That's the question that crossed my mind as well.
  • #9
  • Mar 24, 2009 2:55am Mar 24, 2009 2:55am
Quoting Passholder
Why doesnt china just depeg the yuan, demand that it become the world currency and then value it at what ever they like?
All central banks need some reserve. This is not about yuan.

Quote
The next question will then be, will we continue to be allowed to trade currencies afterward
I have heard this question couple of times, I don't think people understand what reserve currency means. It means just that reserves of money are kept in that currency. So instead of holding pile of dollars as a reserve ("bank account" for government), governments would hold a "basket" (= more than one currency) of currencies - this is not about one world currency as people seem to think (at least yet that is).

Here is a link for you http://en.wikipedia.org/wiki/Reserve_currency

ps. part where countries give their money to IMF is INSANE and I hope that nobody even thinks about that option.
  • #10
  • Mar 24, 2009 3:39am Mar 24, 2009 3:39am
Thanks for the info, Mikkom.
  • #11
  • Mar 24, 2009 4:08am Mar 24, 2009 4:08am
Quoting Jay Walker
"China’s central bank on Monday proposed replacing the US dollar as the international reserve currency with a new global system controlled by the International Monetary Fund."

http://www.ft.com/cms/s/0/7851925a-1...0779fd2ac.html

"Countries would entrust a portion of their SDR reserves to the IMF to manage collectively on their behalf and SDRs would gradually replace existing reserve currencies."

The bold part is why I don't believe this will happen...yet
they are absolutly right
thanks for the information
  • #12
  • Mar 24, 2009 11:54am Mar 24, 2009 11:54am
Utterly ridiculous. China just doesn't like the idea that it relies pretty heavily on the Dollar, otherwise it probably could care less. They're hypocrites because you better bet if the yuan was where the dollar is today that they would NEVER support such an idea.
Adapt to the situation, and exploit.
  • #13
  • Mar 24, 2009 12:10pm Mar 24, 2009 12:10pm
If they give this or something similar a try again because of the crysis, it might be the end for FX trading...
  • #14
  • Mar 24, 2009 6:44pm Mar 24, 2009 6:44pm
Quoting kerrigor154
Utterly ridiculous. China just doesn't like the idea that it relies pretty heavily on the Dollar, otherwise it probably could care less. They're hypocrites because you better bet if the yuan was where the dollar is today that they would NEVER support such an idea.
It certainly makes them biased. But not hypocrites.

China is looking after their own interests as they should.
Not all sins are created equal
  • #15
  • Mar 24, 2009 6:45pm Mar 24, 2009 6:45pm
Quoting TrooperCoope
If they give this or something similar a try again because of the crysis, it might be the end for FX trading...
Your ideas intrigue me and I would like to subscribe to your newsletter. But until you have one, would you care to elaborate on what makes you say this?
Not all sins are created equal
  • #16
  • Mar 24, 2009 6:54pm Mar 24, 2009 6:54pm
Hey Jay... been following this notion for quite some time in one variation or another...

I think it's saber rattling Politics this time a'rd, just ahead of the G20 meetings... But notice is likely being served that they WILL have a Big Seat at the table for some time to come...

The next time... we'll have to wait and see. I sincerely don't believe things will look ANYTHING like they do now in 5-6 years, and especially so in the next 15-20...
FUBAR...
  • #17
  • Mar 24, 2009 7:10pm Mar 24, 2009 7:10pm
Quoting ak4x
Hey Jay... been following this notion for quite some time in one variation or another...

I think it's saber rattling Politics this time a'rd, just ahead of the G20 meetings... But notice is likely being served that they WILL have a Big Seat at the table for some time to come...

The next time... we'll have to wait and see. I sincerely don't believe things will look ANYTHING like they do now in 5-6 years, and especially so in the next 15-20...
Of course it's political saber rattling BS. Every time I see a story of a new multi-national currency, I look at the Euro.

Many are under the impression that the Euro came about first electronically in 1999 and physically in 2002. But before that happened, it took years of negotiating which culminated with the Maastricht treaty of 1992. That treaty had strict deficit and debt rules and still does. If it didn't, the Euro wouldn't be worth much.

There's also all sorts of logistical problems. The U.S. dollar while available in Cuba is technically forbidden due to the embargo. So would a country subject to an embargo still allowed to use that global currency?

What about countries that don't want in or are seen as pariahs? Do you use the same currency downtown L.A. as you do downtown Tehran or Pyongyang?

A tactic used occasionally in times of war is to devalue your opponent's currency like Germany did with the Sterling pound during WWII. If a war broke out, you couldn't do that without devaluing your own. And there's tons more that haven't even come to mind yet.
Not all sins are created equal
  • #18
  • Mar 24, 2009 11:14pm Mar 24, 2009 11:14pm
http://www.atnabtu.com/mod_perl/alln...0to%20the%20US

Check this link out.
  • #19
  • Mar 24, 2009 11:22pm Mar 24, 2009 11:22pm
ok but if they did this, would that be the end of Retail Forex trading? Does this new currency reserve imply a fixed kind of exchange rate in any way.

I mean if a country wanted to prop up their currency or defend it against other central bank, how would they do that if their reserves are a basket of all other currencies?
  • #20
  • Mar 24, 2009 11:26pm Mar 24, 2009 11:26pm
Quoting altrader
ok but if they did this, would that be the end of Retail Forex trading? Does this new currency reserve imply a fixed kind of exchange rate in any way.

I mean if a country wanted to prop up their currency or defend it against other central bank, how would they do that if their reserves are a basket of all other currencies?
There would still be trading. Not all countries would participate just in the same way the UK still has the GDP and not the Euro. So people would trade the currency of whatever country isn't participating against it.

Even if such thing came to fruition, it would take such a long time before it eventually got done that there's nothing to fret about.
Not all sins are created equal
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