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Singapore and China to start direct currency trading; USD on its way out?
Topic Started: 28 Oct 2014, 08:05 AM (456 Views)
Frank Castle
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Business As Usual

What does this mean of the AUD and Australia?

http://www.channelnewsasia.com/news/business/singapore/singapore-and-china-to/1437832.html
Edited by Frank Castle, 28 Oct 2014, 08:06 AM.
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Glenn Stevens
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The currency is today a little stronger than we had been assuming if you went back a year — there’s not a huge amount in that but it is stronger.

I think one of the potential forecast difficulties is that previous experiences with the exchange rate — we certainly had quite big cycles around what was clearly a lower mean level than we have today.

We didn’t have an extended period of a much higher level.

So, it’s possible that it turns out to be quite difficult to forecast the full effects of a very persistent shift up, because the modelling experience and so on of the past 30 years doesn’t have such an episode in it.

That’s possible, I think more generally though the exchange rate being persistently quite high, and I mean we can come back to whether it’s too high or not, but I don’t think it’s any surprise that it’s persistently much higher given what’s happened to the terms of trade in the global economy.

We’ve had a very big shift in relative prices, unless you think all of that is temporary, we can’t know, but if that turns out to be persistent and it certainly has been pretty persistent so far, that means a couple of things.

One is — you would expect the exchange rate to be persistently high but you’d also expect that the structure of the economy is going to change. Some sectors will grow, some will shrink, that’s what happens when relative prices alter.

It’s not pleasant, the people who are on the downside of the relative price shift don’t like it obviously — who would? But that is what the global economy has handed us by the look of it.

And so structural adjustment will occur, you can’t really stop it. Exchange rates are part of that but it is reflective of this deeper thing that I think has happened in the global economy.
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Count du Monet
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China has the reduced the rate at which it devalues the currency from the 11% pa of last decade to 5.5% today. This means it can float on equal terms with the other tradable currencies.
The next trick of our glorious banks will be to charge us a fee for using net bank!!!
You are no longer customer, you are property!!!

Don't be SAUCY with me Bernaisse
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miw
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Count du Monet
28 Oct 2014, 06:05 PM
China has the reduced the rate at which it devalues the currency from the 11% pa of last decade to 5.5% today. This means it can float on equal terms with the other tradable currencies.
What you mean is that China is no printing half as many 100RMB bills as it was before, which is understandable because people are not using paper money as much any more.
The truth will set you free. But first, it will piss you off.
--Gloria Steinem
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Count du Monet
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miw
28 Oct 2014, 06:39 PM
What you mean is that China is no printing half as many 100RMB bills as it was before, which is understandable because people are not using paper money as much any more.
From what I've been able to figure over the years, the meaningful quantity is currency. It is that and that alone which is the synthetic commodity that trades against other goods like a real commodity. Hence the relation abundance or scarcity of cash makes a real difference.

Modern credit makes no difference because credit in various forms has always been around, whether people paid bills with cheques or ran up a slate at the corner store.

No sorry miw, you can't get something for nothing. There is no magic pudding! :re:
The next trick of our glorious banks will be to charge us a fee for using net bank!!!
You are no longer customer, you are property!!!

Don't be SAUCY with me Bernaisse
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