Author: cestmoi

Crude Oil Priced in RMB?   [Copy link] 中文

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Post time 2017-10-16 09:57:01 |Display all floors
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Post time 2017-10-16 12:33:10 |Display all floors
seneca Post time: 2017-10-16 09:57
sfphoto's major problem is chauvinism which takes a very oriental twist. Hence I call it "chivau ...

  His thinking may have been influenced by  a self-assertive Chinese  conservative named Dai Xu, who bleats on about America's intention to deter China from becoming a global leader. Dai Xu  even suggests that it wouldn't   be foolhardy for China to engage in a military show-down with America, since it's a nation beset by terrorism and racial strife, not to mention its  military entanglements in the Middle East.

  legions of Chinese conservatives are said to have taken up this suggestion, calling on China's leaders to show teeth with guns blazing when taking on America's military might or its "hegemony."  Some of sfphoto's anti- America rants happen to fit the profile.

  I know it would not be fair for me to make generalizations like this. Yet having read lots of snarky anti-America and pro-Russia comments on some Chinese websites, I have to say that a new school of thought      seems to be getting the upper hand, which is the argument that it's time to disregard the admonition that China should keep a low profile in international affairs. On the contrary, they think China should rise to the occasion to challenge America's leadership and bring Japan to its knees with its rising economic clout.

Some non-Chinese Asian savants and intellectuals who are in awe of China's rising power, say, Eswar S. Prasad, author of a recently-published book concerning the rise of the Renminbi, have also assented to the idea that Renminbi is going to be another global reserve currency, albeit cautiously.

  I'd advise reading this book because Eswar S. Prasad used to work in China for the IMF.
  

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Post time 2017-10-16 13:06:47 |Display all floors
This post was edited by sfphoto at 2017-10-16 13:44
Jaaja Post time: 2017-10-15 19:58
A simplistic reason why RMB is not a reserve currency already, is that there isn't considerable am ...

You're correct here in that there's not enough excess liquidity in financial markets for RMB to become an international reserve currency unlike the USD. In fact, USD deposits held in foreign banks outside of the USA is called "EURODOLLAR" and is outside of the control of the US Fed.
Same way as USD is a fiat currency instead of linked to gold now, RMB could become a fiat currency not linked to whims of Chinese government - and that is too much for the government to accept.

You're wrong here in that the US Fed decides the monetary policies which effectively set the interest rates of the USD. As the USD is a fiat currency, the US government mandates the use of the USD as legal tender for all financial transactions within the USA. However, the US Federal Reserve -- not the US government -- is the only financial institution based in the USA that has the legal right to issue USD and to control the supply of USD by setting interest rates, reserve requirements, etc. The US monetary policy in turn affects all the countries in the world using the USD as reserve currency and trade currency.

So the USD is linked to the whims of the US Fed in the same way that the RMB is linked to the PBoC. Both have the ability to issue new money, control its supply, set up reserves, etc. The only difference between the US Fed and the PBoC is that the former is owned by Capitalist-owned while the latter is State-owned.



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Post time 2017-10-16 13:15:37 |Display all floors
This post was edited by sfphoto at 2017-10-16 13:26
tedbrent Post time: 2017-10-15 12:24
I think you truly hate Western nations, sfphoto. Otherwise, you wouldn't roast America  while exto ...

The subject of this thread is oil not me. Besides, I've never criticized "Western" nations other than the USA because I don't know much about them. As for my criticism of the USA, if US citizens want to dish it out, they must be able to take it too.

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Post time 2017-10-16 16:21:46 |Display all floors
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Post time 2017-10-16 19:09:20 |Display all floors

Currencies in Nostro / Vostro Accounts

This post was edited by cestmoi at 2017-10-16 19:31

testing
Okay, great answers from most of you.

I am interested in all of your opinion (minus the irrelevant "chauvinism" interjection) on the currency accounts that banks have with other banks for settlement purposes, by which I mean vostro-vs-nostro accounts.

Obviously, both are in reserve currencies for buying and selling commodities AND other goods to minimize exchange rate fluctuations.

Assume a basket of currencies for both nostro and vostro, then, shouldn't the weight of the RMB reflects the percent in value of bilateral trade between the two parties?

If the "Belt and Road Initiative" achieves its purpose, the trade volume through B&RI would according to HSBC exceed USD2.5 TRILLION in the next decade, then, would the holdings in the B&RI settlement accounts be in the same order of magnitude?

Given these scenarios, shouldn't the RMB be freely convertible and traded as the aily exchange rate per se does not impact payment from vostro or nostro for both parties? As of now, today, are there any valid reasons the RMB should not be freely convertible?
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Post time 2017-10-16 19:43:01 |Display all floors
sfphoto Post time: 2017-10-15 12:27
I was replying to your earlier post about the geopolitical risk of trading oil in RMB which has no ...

To clarify for everyone else:
  • "medium of exchange" is reserve currency held in nostro/vostro for settlement;
  • daily echange rate is pegged to interest rate differential plus a subjective perception of the relative performance of the two parties



I am arguing for a basket of settlement currencies, which are all reserve currencies, in which the RMB should be in direct proportion to the percentage in value of bilateral trades. Since IMF uses RMB as a reserve currency, there shouldn't be any insurmountable problems.

But the RMB is not fully convertible, why is that and what are the concerns that PBoC has with a fully convertible RMB? Is emigration an issue?

Let the dice fly high

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