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 Post subject: Hyperinflation Hypothesis
PostPosted: Fri Aug 21, 2009 1:34 pm 
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Originally posted Wed May 20, 2009 to the main site on forumup :

Based upon my research, Hyperinflation stems from a lack of confidence that a specific currency will still hold the same value tomorrow that it holds today. As such, while the US may be in either deflation or even mild inflation, it is not in Hyperinflation since there is still confidence in the US$ as evidenced by US Treasury Securities being purchased by non-US countries and Central Banks.

Some may argue that the decreasing volume of these foreign purchases can be read as a either a sign that there is a lack of confidence in the US$ or that the supply of available US Treasury Securities has exceeded current demand for the product.

The US Treasury is in the early stages of selling a historical volume of Securities and thus a few data-points showing a slow-down in purchases, when breaking new economic ground, are not enough to define intent which is an indication of confidence.

Since we can't read minds, we can only observe the actions of various market-players over the long-term to better understand their intent and thus gauge their confidence in the US$. Divining intent is easier when there is transparency into the moves and considerations that lead up to final decisions for action, but in the case of China, there is very limited transparency so all we have are after-the-fact actions.

China hints at what it is doing through the announcements of lower-level officials (February 11, 2009) and once you hear about it from the highest levels of government, the discussions are over, the decisions made, and the plan of action implemented.

On March 13, 2009, China's highest level of government openly announced its concern about the safety of its loans to the US (purchases of US Treasury Securities) and this highly unusual statement publicly shows that confidence in the US$ by China's leadership has decreased. How much it has decreased is unknown, but in the West such public comments are typically used as the starting point for real discussions between the parties, but in the case of China, it indicates that the opportunity for discussion has passed.

We still do not know China's true intent and thus can not measure its confidence in the US$, but we have seen the following actions/statements by China over the last few months:

- Purchases of raw material companies across the globe (May 19, 2009)
- Stockpiling of copper and other commodities (speculation being that Silver is the current focus) (May 18, 2009)
- Oil swaps (October 28, 2008)
- Currency Swaps (March 31, 2009)
- A secretive accumulation of gold reserves with a public announcement for at least part of these reserves (April 24, 2009)
- Proposing to use the Country's Gold reserves as a backing for the yuan (May 17, 2009)
- Public call for revising the world's reserve currency (March 23, 2009)
- The United States government should start issuing bonds in yuan, rather than dollars (June 07, 2009)
- China should buy gold as a hedge (June 25, 2009)
- China, Brazil Working on Trade Currency Arrangements (June 28, 2009)
- China Allows Trade Settlement in Yuan in Hong Kong (June 29, 2009)
- China Plans to Start Yuan Settlement With Asean Soon (June 30, 2009)
- China requests reserve currency debate at G8 -sources (July 01, 2009)
- Chinese officials call for end to dollar's global dominance (July 06, 2009)
- Shanghai Companies Sign First Yuan Settlement Deals (July 06, 2009)
- China Criticizes Dollar (July 10, 2009)
- HK urges China to relax rules on yuan business (July 10, 2009)
- “we are concerned about the security of our financial assets” (July 27, 2009)
- Ecuador set to receive $1 billion loan from China-report (August 17, 2009)
- China Landing Natural Gas Deals as Prices Plummet (August 28, 2009)
- PetroChina to take 60 percent stake in Athabasca Oil Sands for $1.7 billion (August 31, 2009)
- China alarmed by US money printing (September 6, 2009)
- It takes time for Renminbi to fully become int'l currency: Chinese Premier (September 12, 2009)
- Turkey to use national currencies in trade with Iran, China (October 28, 2009)
- Renminbi set to replace US dollar for trade in Asia Pacific (December 27, 2009)
- China Considers Yuan Trading Against Ruble, Won, Official Says (April 06, 2010)
- Hong Kong, China Central Banks Sign Pact to Spur Yuan Investment Products (July 19, 2010)
- China may switch to currency basket for forex rate (July 23, 2010)
- China Officially Enters The Gold Market (August 03, 2010)
- Banks back switch to renminbi for trade (August 26, 2010)
- Yuan Trading Against Russian Ruble Said to Start Within Weeks in Shanghai (September 08, 2010)
- Malaysian bond boost for renminbi (September 19, 2010)
- Yuan begins trading against the rouble (November 23, 2010)
- China aims to settle nationwide trade in yuan by 2011 (March 02, 2011)
- Fortescue now transacting in Chinese yuan (July 12, 2011)
- European Bailout Fund Could ‘One Day’ Issue Bonds in Yuan, Regling Says (October 29, 2011)
- US body sees renminbi as threat to dollar (November 16, 2011)
- George Osborne: Deal For London To Become Hub For Chinese Yuan 'Worth Billions' (January 16, 2012)
- Yuan to become major commodity currency - traders (April 26, 2012)
- China's Currency Rises in the US Backyard (October 21, 2012)
- Thanks, World Reserve Currency, But No Thanks: Australia And China To Enable Direct Currency Convertibility (March 31, 2013)
- Payments Using Chinese Yuan Continue to Surge as Currency Tops Russian Rouble in Popularity (May 01, 2013)
- New Zealand, China in Talks on Convertibility of Currencies (May 26, 2013)
- ECB Agrees on Swap Line With PBOC as Trade Increases (October 10, 2013)
- Yuan moves one step closer to global currency status (October 10, 2013)
- Guest Post: How China Can Cause The Death Of The Dollar And The Entire U.S. Financial System (November 8, 2013) (Summary to Date)
- China Fires Shot Across Petrodollar Bow: Shanghai Futures Exchange May Price Crude Oil Futures In Yuan (November 21, 2013)
- China to start interbank gold swaps trading (November 22, 2013)
- Chinese Yuan Surpasses Euro, Becomes Second Most Used Currency In Trade Finance (December 02, 2013)
- Yet Another Massive Nail In The Dollar's Coffin (December 14, 2013)
- "China Expected To Announce It Has More Than Doubled Its Gold Reserves", Shanghai Daily (January 19, 2014)
- China ties new gold ‘spot’ contract to the Yuan (January 21, 2014)
- 40 Central Banks Are Betting This Will Be The Next Reserve Currency (April 8, 2014)
- PBOC Pressures USD Hegemony; Starts Yuan-Denominated Gold & Oil Trading (April 25, 2014)
- "De-Dollarization" Continues - China Starts Direct Trade With UK (June 19, 2014)
- China plans investment bank to break World Bank dominance (June 26, 2014)
- Gazprom Ready To Drop Dollar, Settle China Contracts In Yuan Or Rubles (June 26, 2014)
- China's yuan 'a growing force in global finance' (July 10, 2014)
- The Number Of US Firms Willing To Trade in Chinese Yuan Has Tripled This Year (July 11, 2014)
- Big nations snub Beijing bank launch after US lobbying (October 22, 2014)
- The Dollar Decline Continues: China Starts Direct Convertibility With Asia's #1 Financial Hub (October 30, 2014)
- China: Turning away from the dollar (December 09, 2014)
- China Completes SWIFT Alternative, May Launch "De-Dollarization Axis" As Soon As September March 09, 2015
March 09, 2015
- The Petroyuan Cometh: Launch Of Renminbi-Denominated Oil Futures Contract Imminent (September 11, 2015)
- other? (please let me know and I will add)

I am not suggesting that these steps will automatically have the yuan replace the dollar, but when the Black Swan event does hit the US economy, China is slowly but surely placing the Yuan in all the strategic locations required for the International Community to easily switch from the US$ to Yuan.

Let me restate the previous sentence another way:

If the Black Swan event hits today, there is no fully vetted option in place for the International Community to continue conducting business except the US$ regardless of any opinion on the merits of the US Government creating more fiat currency. In essence, there is nothing against which confidence in the US$ can be measured since there is no other available option. (e.g., How do you know a Saltine is bland unless you have tried a Ritz?)

If the Black Swan event hits a month from now and China has announced between now and then the completion of other financial transactions that place the Yuan in financially strategic locations among the G20 nations, the International Community then has a choice which will allow them to reflect their confidence in the US$. This is where we will see the International Community's intent given form by actions and their confidence in the US$ is thus publicly measurable.

If the International Community does select the Yuan after a Black Swan event, then the US$ becomes the hot potato no one wants causing the United Sates plus all US$ dependent countries to quickly fall into Hyperinflation because these decisions will occur on an International level and not an individual consumer level. I have no idea how long this transition would take, but if China is currently working to place the Yuan in the remaining strategic positions similar to what has already been announced, then this could happen in the span of 24 hours to a week. It all depends upon what each country has in the way of something that can be used as a means of international exchange (gold, oil, food, raw materials, finished goods, etc.).

I am a US citizen, so I see things from a US-centric POV. I would love to read what others think about this hypothesis and how a sudden switch from the US$ to the Yuan will affect US$ dependent countries.

Thanks for reading and I will update this w/further cites and data points over time.

Comments are most welcome. :skeptical:


October 28, 2008:Russia Swaps Oil For Chinese Cash
http://www.forbes.com/2008/10/28/russia-china-oil-markets-econ-cx_ll_1028markets23.html

February 11, 2009: Luo Ping, a director-general at the China Banking Regulatory Commission
http://www.ft.com/cms/s/0/ba857be6-f88f-11dd-aae8-000077b07658.html?nclick_check=1

March 13, 2009: Chinese Premier Wen Jiabao
http://www.breitbart.com/article.php?id=D96T2TT81&show_article=1

March 23, 2009: Zhou Xiaochuan, Governor People’s Bank of China’s
http://www.ft.com/cms/s/0/7851925a-17a2-11de-8c9d-0000779fd2ac.html

March 31, 2009: China and Argentina in currency swap
http://www.ft.com/cms/s/0/eba6405c-1d7e-11de-9eb3-00144feabdc0.html

April 24, 2009: Hu Xiaolian, head of the State Administration of Foreign Exchange
http://www.chinadaily.com.cn/china/2009-04/24/content_7714124.htm

May 17, 2009: Zheng Lianghao, managing director of the World Gold Council's Far East division
http://online.wsj.com/article/BT-CO-20090517-704461.html

May 18, 2009: China’s Stockpiles Are New Sovereign Wealth Strategy, RBC Says
http://www.bloomberg.com/apps/news?pid=20601087&sid=a5yhtDZx75kw&refer=home

May 19, 2009: Chinese gold buying 'boosting Australian mining sector'
http://www.marketintelligence.gold.org/news/2009/05/19/story/12061/chinese_gold_buying_boosting_australian_mining_sector

June 08, 2009:Guo Shuqing, chairman of China Construction Bank
http://www.telegraph.co.uk/finance/financetopics/financialcrisis/5473491/Top-Chinese-banker-Guo-Shuqing-calls-for-wider-use-of-yuan.html

June 25, 2009: Li Lianzhong, head of China Communist Party Economic Department Research Office
http://uk.biz.yahoo.com/25062009/323/update-1-china-buy-gold-hedge-dlr-fall-researcher.html

June 28, 2009: China's Central Bank Governor Zhou Xiaochuan
http://www.cnbc.com/id/31600755

June 29, 2009: Hong Kong Monetary Authority Chief Executive Joseph Yam
http://www.bloomberg.com/apps/news?pid=20601087&sid=aVycB2HsRBxc

June 30, 2009: Nong Rong, vice secretary general at the China-ASEAN Expo
http://www.bloomberg.com/apps/news?pid=20601087&sid=ahO2orD9RszQ

July 01, 2009: China requests reserve currency debate at G8 -sources
http://www.reuters.com/article/usDollarRpt/idUSLAG00356720090701)

July 06, 2009: Li Ruogu, chairman of the Export-Import Bank of China
http://www.telegraph.co.uk/finance/currency/5761033/Chinese-officials-call-for-end-to-dollars-global-dominance.html

July 06, 2009: Shanghai Companies Sign First Yuan Settlement Deals
http://www.bloomberg.com/apps/news?pid=20601087&sid=a.VjgFi0enXQ

July 10, 2009: Dai Bingguo, Director of General Office of National Security Leadership Group of CPC Central Committee
http://www.telegraph.co.uk/news/worldnews/asia/china/5793308/China-criticises-dollar.html

July 10, 2009: Arthur Yuen, an executive director of the Hong Kong Monetary Authority
http://www.forbes.com/feeds/afx/2009/07/10/afx6639537.html

July 27, 2009: Zhu Guangyao, Assistant Finance Minister
http://www.bloomberg.com/apps/news?pid=20601087&sid=aGKZviKKdfB0

August 17, 2009: Ecuador set to receive $1 billion loan from China-report
http://www.reuters.com/article/bondsNews/idUSN1737545720090817

August 28, 2009: China Landing Natural Gas Deals as Prices Plummet
http://www.moneymorning.com/2009/08/28/china-natural-gas-deal/

August 31, 2009: PetroChina to take 60 percent stake in Athabasca Oil Sands for $1.7 billion
http://blog.taragana.com/n/petrochina-to-take-60-percent-stake-in-athabasca-oil-sands-for-17-billion-155439/

September 6, 2009: China alarmed by US money printing
http://www.telegraph.co.uk/finance/economics/6146957/China-alarmed-by-US-money-printing.html

September 12, 2009: It takes time for Renminbi to fully become int'l currency: Chinese Premier
http://news.xinhuanet.com/english/2009-09/12/content_12036333.htm

October 28, 2009: Turkey to use national currencies in trade with Iran, China
http://en.rian.ru/business/20091028/156617011.html

December 27, 2009: Renminbi set to replace US dollar for trade in Asia Pacific
http://www.risk.net/asia-risk/news/1566563/renminbi-set-replace-us-dollar-trade-asia-pacific

April 06, 2010: China Considers Yuan Trading Against Ruble, Won, Official Says
http://www.businessweek.com/news/2010-04-06/china-considers-yuan-trading-against-ruble-won-official-says.html

July 19, 2010: Hong Kong, China Central Banks Sign Pact to Spur Yuan Investment Products
http://www.bloomberg.com/news/2010-07-19/hong-kong-china-central-banks-sign-pact-to-spur-yuan-investment-products.html

July 23, 2010: China may switch to currency basket for forex rate
http://www.marketwatch.com/story/china-may-link-yuan-trade-to-currency-basket-2010-07-23

August 03, 2010: China Officially Enters The Gold Market
http://www.zerohedge.com/article/china-offically-enters-gold-market-full-release-pbocs-plan-expand-and-develop-chinas-gold-in

August 26, 2010: Banks back switch to renminbi for trade
http://www.ft.com/cms/s/0/182a2b70-b130-11df-b899-00144feabdc0.html

September 08, 2010: Yuan Trading Against Russian Ruble Said to Start Within Weeks in Shanghai
http://www.bloomberg.com/news/2010-09-08/china-russia-push-yuan-ruble-trading-to-diminish-dominance-of-u-s-dollar.html

September 19, 2010: Malaysian bond boost for renminbi
http://www.ft.com/cms/s/0/fecc16fc-c417-11df-b827-00144feab49a.html?ftcamp=rssl

November 23, 2010: Yuan begins trading against the rouble
http://www.chinadaily.com.cn/bizchina/2010-11/23/content_11594595.htm

March 02, 2011: China aims to settle nationwide trade in yuan by 2011
http://www.reuters.com/article/2011/03/02/china-economy-yuan-idUSBJA00246420110302

July 12, 2011: Fortescue now transacting in Chinese yuan
http://www.mineweb.com/mineweb/view/mineweb/en/page504?oid=131247&sn=Detail&pid=92730

October 29, 2011: European Bailout Fund Could ‘One Day’ Issue Bonds in Yuan, Regling Says
http://www.bloomberg.com/news/2011-10-29/european-bailout-fund-could-one-day-issue-bonds-in-yuan-regling-says.html

November 16, 2011: US body sees renminbi as threat to dollar
http://www.ft.com/cms/s/0/3befe674-1077-11e1-8298-00144feabdc0.html

January 16, 2012: George Osborne: Deal For London To Become Hub For Chinese Yuan 'Worth Billions'
http://www.huffingtonpost.co.uk/2012/01/16/george-osborne-deal-for-london-chinese-yuan-renmenbi_n_1208420.html)

April 26, 2012: Yuan to become major commodity currency - traders
http://www.mineweb.com/mineweb/view/mineweb/en/page67?oid=150194&sn=Detail&pid=92730)

October 21, 2012: China's Currency Rises in the US Backyard
http://www.piie.com/publications/opeds/oped.cfm?ResearchID=2245

March 31, 2013: Thanks, World Reserve Currency, But No Thanks: Australia And China To Enable Direct Currency Convertibility
http://www.zerohedge.com/news/2013-03-31/thanks-world-reserve-currency-no-thanks-australia-and-china-enable-direct-currency-c

May 01, 2013: Payments Using Chinese Yuan Continue to Surge as Currency Tops Russian Rouble in Popularity
http://www.cnsnews.com/blog/gregory-gwyn-williams-jr/payments-using-chinese-yuan-continue-surge-currency-tops-russian

May 26, 2013: New Zealand, China in Talks on Convertibility of Currencies
http://online.wsj.com/article/SB10001424127887323855804578506383781598470.html

October 10, 2013: ECB Agrees on Swap Line With PBOC as Trade Increases
http://www.bloomberg.com/news/2013-10-10/ecb-sets-currency-swap-line-with-pboc-as-euro-china-trade-rises.html

October 10, 2013: Yuan moves one step closer to global currency status
http://www.cnbc.com/id/101102163

November 8, 2013: Guest Post: How China Can Cause The Death Of The Dollar And The Entire U.S. Financial System (Summary to Date)
http://www.zerohedge.com/news/2013-11-08/guest-post-how-china-can-cause-death-dollar-and-entire-us-financial-system

November 21, 2013: China Fires Shot Across Petrodollar Bow: Shanghai Futures Exchange May Price Crude Oil Futures In Yuan
http://www.zerohedge.com/news/2013-11-21/china-fires-shot-across-petrodollar-bow-shanghai-futures-exchange-may-price-crude-oi

November 22, 2013: China to start interbank gold swaps trading
http://www.mineweb.com/mineweb/content/en/mineweb-fast-news?oid=219253&sn=Detail

December 02, 2013: Chinese Yuan Surpasses Euro, Becomes Second Most Used Currency In Trade Finance
http://www.zerohedge.com/news/2013-12-02/chinese-yuan-surpasses-euro-becomes-second-most-used-currency-trade-finance

December 14, 2013: Yet Another Massive Nail In The Dollar's Coffin
http://www.zerohedge.com/news/2013-12-14/yet-another-massive-nail-dollars-coffin

January 19, 2014: "China Expected To Announce It Has More Than Doubled Its Gold Reserves", Shanghai Daily
http://www.zerohedge.com/news/2014-01-19/shanghai-daily-china-expected-announce-it-has-more-doubled-its-gold-reserves

January 21, 2014: China ties new gold ‘spot’ contract to the Yuan
http://www.mineweb.com/mineweb/content/en/mineweb-africa?oid=226026&sn=Detail

April 8, 2014: 40 Central Banks Are Betting This Will Be The Next Reserve Currency
http://www.zerohedge.com/news/2014-04-08/40-central-banks-are-betting-will-be-next-reserve-currency

April 25, 2014: PBOC Pressures USD Hegemony; Starts Yuan-Denominated Gold & Oil Trading
http://www.zerohedge.com/news/2014-04-25/pboc-pressures-usd-hegemony-starts-yuan-denominated-gold-oil-trading

June 19, 2014: "De-Dollarization" Continues - China Starts Direct Trade With UK
http://www.zerohedge.com/news/2014-06-19/de-dollarization-continues-china-starts-direct-trade-uk

June 26, 2014: China plans investment bank to break World Bank dominance
http://rt.com/business/168620-china-world-bank-own/#.U6zGNWYLbnE.twitter

June 26, 2014: Gazprom Ready To Drop Dollar, Settle China Contracts In Yuan Or Rubles
[url]http://www.zerohedge.com/news/2014-06-26/gazprom-ready-drop-dollar-settle-china-contracts-yuan-or-rubles]June 26, 2014[/url]

July 10, 2014: China's yuan 'a growing force in global finance'
http://news.yahoo.com/chinas-yuan-growing-force-global-finance-172929413.html

July 11, 2014: The Number Of US Firms Willing To Trade in Chinese Yuan Has Tripled This Year
http://www.zerohedge.com/news/2014-07-11/number-us-firms-willing-trade-chinese-yuan-has-tripled-year

October 22, 2014: Big nations snub Beijing bank launch after US lobbying
http://www.gata.org/node/14605

October 30, 2014: The Dollar Decline Continues: China Starts Direct Convertibility With Asia's #1 Financial Hub
http://www.zerohedge.com/news/2014-10-30/dollar-decline-continues-china-starts-direct-convertibility-asia-1-financial-hub

December 09, 2014: China: Turning away from the dollar
http://www.ft.com/cms/s/0/4ee67336-7edf-11e4-b83e-00144feabdc0.html#axzz3LT5qMOKd

March 09, 2015: China Completes SWIFT Alternative, May Launch "De-Dollarization Axis" As Soon As September
http://www.zerohedge.com/news/2015-03-09/de-dollarization-encircles-globe-china-completes-swift-alternative-may-launch-soon-s

_________________
"The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks." - Lord Acton


Last edited by zyria on Sat Sep 12, 2015 4:19 am, edited 43 times in total.
addition of 1 link - 2015.09.11


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 Post subject: Re: Hyperinflation Hypothesis
PostPosted: Fri Aug 21, 2009 1:36 pm 
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Originally posted Fri May 29, 2009 to the main site on forumup:

Kodiakid wrote:
At the end of the 2000's the thought of the day is that China will rule the world through thier currency.They are buying up natural resources etc.

China's exports were off 25% in the first quarter.

They are BRILLIANT


kodiakid,

I remember the Japanese phase and they certainly took a bath on their Real Estate acquisitions as everything corrected. Since I was fairly young at that time, I don't recall all the details, but were the Japanese trying to position the Yen as an alternative currency at that time the way the Chinese are trying to position the Yuan? I'm not saying that they were trying to be the Reserve Currency, but were the Japanese trying to set up a situation where they could by-pass the dollar?

I've been thinking about this some more and based upon the increase in the Chinese M2 from US$ exchanges, (January 18, 2009 & May 11, 2009) I now do not see the Chinese actions as trying to actively position the Yuan as the Reserve Currency, but to control the growth of their M2 via by-passing the US$ for use with important trading partners. A side-effect of these actions is that it positions the Yuan as an alternative for other countries to use in international transactions in the event that the US$ takes a real fall.

Also, in line with what you have previously written, there are a number of underlying concerns that I believe will destabilize any long-term Chinese Yuan pre-eminence as the basis for the Reserve Currency. In no particular order:

- A country held-together by force: China invaded Tibet and Eastern Turkistan (a.k.a. Xinjiang).
- Unemployment of restless rural workers due to now idle factories and the end of State Run factories.
- Rampant copying of products by other Chinese companies as soon as a popular idea comes to market driving any innovation to commodity status.
- The Yuan currently pegged to the dollar (March 27, 2009)

These things don't lead me to believe that the Yuan has what it takes to maintain the status as the Reserve Currency for very long if at all. Please note, I'm not saying that the Chinese, or even other countries, will not try to use the Yuan as an Alternate Reserve Currency after a US$ Black Swan event, but that if they did, it would not have long-term stability. Also, we would be talking about fiat currencies bypassing another fiat currency and thus losing the basis for valuation that can be found when using a set Reserve Currency benchmark.

In the end, if the US$ tanks, then the rest of the world will still need a means by which to conduct business. If the Yuan is readily available in large enough quantities, and US$ denominated commodity prices are constantly increasing at a rate ill-suited for conducting international business, an alternative that is stable relative to an inflating US$ will be sought by the market. The recent moves by the Chinese Government make it appear as if that alternative may be available in the form of the Yuan irregardless of their intentions.

This is just a thought and comments are most welcome.

January 18, 2009 *****Hyperinflation will begin in China and destroy the dollar*****
http://www.marketskeptics.com/2009/01/h ... a-and.html

March 27, 2009 China Resumes Dollar Pegging On The Sly
http://www.forbes.com/2009/03/27/china- ... gging.html

May 11, 2009 China M2 up 26.0 pct, loan growth eases
http://www.xe.com/news/2009-05-11%2004: ... rentPage=4

_________________
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 Post subject: Re: Hyperinflation Hypothesis
PostPosted: Fri Aug 21, 2009 1:38 pm 
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Originally posted Sat Jul 04, 2009 to the main site on forumup:

All,

Having read a number of Hyperinflation articles and “When Money Dies: The Nightmare of the Weimar Collapse by Adam Fergusson”, I have boiled down it down to the key steps that will find The Currency in a Hyperinflationary state:

    1. The Currency is in widespread use and its value unquestioned

    2. Questions about the value of The Currency arise

    3. Loss of Confidence in The Currency occurs

    4. An Alternative Currency or Monetary Unit is immediately available for widespread use to settle business transactions and may even be used alongside The Currency to a lesser extent before a Loss of Confidence occurs

    5. There is increased use/acceptance of that Alternative Currency or Monetary Unit as the basis of business exchange

    6. Avoidance of The Currency where it is used/accepted only when no other option is available. Holders of The Currency try to pass it as quickly as possible in exchange for anything perceived by the holder to have value


There are two frames of reference in which this sequence of events may occur:

    1. External (Sovereign Governments)

    2. Internal (The People)


EXTERNAL (SOVEREIGN GOVERNMENTS)

The US$ is in the latter half of Step 3 Externally and, according to the series of links listed in the first post of this thread, there is a very real desire by certain Sovereign Governments to move to Step 4.

At the time of this writing, there is no Alternative Currency or Monetary Unit immediately available for widespread usage to settle International Business Transactions, but the aforementioned links show a pattern of frenzied actions by certain Sovereign Governments to work around this issue.

One thing to keep in mind is that the Sovereign Governments who have been publicly voicing concerns about the US$ are certainly not sitting idle. No one in a position of Sovereign Power publicly voices such concerns without already setting an alternative plan in motion. To not do so would be the military equivalent of leaving yourself defenseless.

What is that alternative plan and when will it be hatched? Will someone, somewhere partially back their currency with Gold and/or Silver? How about a commodity that holds an intrinsic value to modern societies such as Oil, Copper, Platinum or Palladium? (if we chose Coffee Beans or Cocaine, then Columbia would be the center of the economic world!)

Until this Alternative Currency or Monetary Unit materializes, the US$ is here to stay, but with Sovereign Governments that have significant power and authority publicly requesting it, we should start to see some movement towards such an alternative.

Once an Alternative Currency or Monetary Unit is in place, and there is active avoidance of the US$ by Sovereign Governments, will there be Hyperinflation?

That depends upon:

    1. The strength of Market Speculators for Key Commodities or The Currency

    2. Whether or not the Oil Producing Sovereign States are willing to accept payment in something other than the US$


In the case of Market Speculators, the US$ price of exports by those Sovereign Governments avoiding the US$ will increase as long as no alternative source for these same exports can meet current market demand.

If the Market Speculators start to play in these export categories, or even in The Currency itself, the markets will see an accelerating price increase that can lead to Hyperinflation.

In the case of Oil, since oil is the foundation of the modern global economy, there will be an almost instantaneous price increase which will rapidly evolve into Hyperinflation due to the actions of Market Speculators.


INTERNAL (THE PEOPLE)

The US$ is in the latter half of Step 2 Internally and again, there is no widely recognized Alternative Currency or Monetary Unit for use in settling business transactions among The People.

Many individuals will suggest that Gold or Silver are readily available Monetary Units, but since these Precious Metals are still denominated in US$/oz, how can any individual immediately place an agreed upon value per ounce that is unshackled from the US$? Written another way, both Precious Metals are denominated worldwide in a Fiat Currency in which users are losing faith and thus all prices denominated in The Currency are inflating causing great variability in the perceived value of an ounce of these Precious Metals.

Example: I have a box of 20 Remington 30-06 rounds. How much they are worth in ounces (or grams) of Gold or Silver WITHOUT referencing the US$. If you use value of Gold of Silver first defined in another Fiat Currency, like the Yen or the Euro, then which one? Why that one over the other? Will others agree?

Now repeat this exercise with things of immediate importance like eggs, sugar, flour, meat, etc.

Some may point to the days of the Weimar Republic where both Gold and Silver were used alongside other Foreign Currencies in business transactions within Germany, but at that time, Gold and Silver coins were commonly used by established Sovereign Governments thus providing Gold and Silver an intrinsic value as Money among The People as well as a value per ounce reference point, neither of which we have in this Age of Fiat Currency.

Some may point to the existence of Gold and Silver Eagle coins produced by the US Mint and are considered legal tender. Since these coins have a face value far less than the value of the Precious Metal content and are denominated in a currency in which The People no longer have faith, at what value would The People accept these coins?

Don’t get me wrong, I am long Physical Gold and Silver whenever my meager paycheck can afford it, but I am not seeing the rapid conversion to an Gold and Silver based economy in the United States among The People the way things stand as of today July 4th, 2009.

With respect to the United States, I do believe that there is a readily available Alternative Currency and that being the Canadian Dollar and here’s why:

    1. Canada is a stable Commodity Country allowing it to export goods desired by the world market and thus providing it with a stable economic foundation unlike the United States

    2. Canadian Society is very similar to US Society thus allowing a means by which to assign value to the production of various goods that are commonly used and manufactured in both countries

    3. Canada is a source of Gold and other necessary Commodities, so there is a means by which to represent an inherent value in these Commodities

    4. Canadian currency is currently in the pockets of millions of US Citizens in the form of pennies and quarters (most do not even realize it unless they really look)

    5. Canadian Banks are present in the United States with readily available reserves of Canadian Currency

    6. Canadian Currency uses the English language so it creates a level of comfort for United States citizens not accustomed to foreign languages


Another option is the Mexican Peso, but I believe this to be an Alternative Currency that will primarily be used along the United States' Southern Border and accepted as a Tertiary Currency after the Canadian Dollar.

One of the key lessons from the Weimar Hyperinflation is the power of Public Perception. Once interest rates started to move up rapidly, businesses had to increase prices so as to cover future replacement costs. It should also be noted that as Businesses increased these costs using the rationale of excessive inflation, they discovered a means by which to make higher than normal profits and thus had a incentive to perpetuate the situation.

These actions led the German Citizens to buy products today, and in larger quantities, instead of later when they may have needed them in a bid to reduce their own expenditures. This coupled with the already glum view of the Germany's situation after the War added to an air of despair and a Loss of Confidence that the situation was in control.

This Loss of Confidence by the German Citizens is what propelled inflation into Hyperinflation and why the Corporate and Banking Oligarchies managing the US Government are issuing non-stop Propaganda stating that the current situation is not as bad as some people think and that it is either correcting, or will be correcting soon.

This Propaganda is what keeping the United States in Step 2 for the time being, but as more of The People learn the truth of the current situation, we will start to see a greater shift to Step 3 Internally.


The purpose for writing this was to put form to the steps required for Hyperinflation to occur. This will allow the reader to weight current events and their contribution toward the initiation of Hyperinflation.

Thank you for taking your time to read this and as always, please let me know if you see flaws in my logic, or places where I can clarify things for easier reading. Hopefully someone will find this of value. :D

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 Post subject: Re: Hyperinflation Hypothesis
PostPosted: Wed Aug 26, 2009 2:23 pm 
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http://www.marketoracle.co.uk/Article12386.html

Required reading for all here.

I was always viewing the External Hyperinflation Vector as arising when a majority of Sovereign Governments prefer a singular Alternative Currency or Monetary Unit. It never occurred to me that they may just want to be paid in their own currencies by the world's largest debtor...

I now understand the comment made by the Japanese back in May, as well as in the past few weeks by the Chinese, for the US Government to issue debt denominated in a currency other than US$.

Who'd a thunk...? Knowing the animated piles of fecal matter running the country right now, I can see them doing it as it will still allow them to inflate away their debts... :steamed:

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 Post subject: Re: Hyperinflation Hypothesis
PostPosted: Wed Nov 14, 2012 11:47 pm 
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Note: Copied from the daily thread in the Gold forum

October 21, 2012: China's Currency Rises in the US Backyard
http://www.piie.com/publications/opeds/oped.cfm?ResearchID=2245

From the Hyperinflation Hypothesis Steps 4 and 5:
Quote:
4. An Alternative Currency or Monetary Unit is immediately available for widespread use to settle business transactions and may even be used alongside The Currency to a lesser extent before a Loss of Confidence occurs

5. There is increased use/acceptance of that Alternative Currency or Monetary Unit as the basis of business exchange


At the time I wrote that (July 04, 2009), I stated that Sovereigns were in Step 3 moving to Step 4. Based upon the article above, it appears that Sovereigns are in Step 4 moving to Step 5.

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"The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks." - Lord Acton


Last edited by zyria on Sun Feb 02, 2014 1:00 am, edited 1 time in total.
Make article subject bold


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 Post subject: Re: Hyperinflation Hypothesis
PostPosted: Sun Jul 07, 2013 7:05 pm 
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With official recognition by the current financial power structure we appear to be entering Step 5.

Bundesbank Warns China's Currency "On Its Way To Becoming Global Reserve Currency"

http://www.zerohedge.com/news/2013-07-06/bundesbank-warns-chinas-currency-its-way-becoming-global-reserve-currency

Quote:
According to Bundesbank Executive Board member Joachim Nagel, the Chinese currency is well on its way to becoming one of the future global reserve currencies. This potential stems from the renminbi’s increasing convertibility, he said at a conference of the Chamber of Industry and Commerce in Frankfurt.

He emphasised that although the US dollar is currently the most commonly used currency for settling trade with China, the significance of the renminbi has increased greatly over the last few years. He underlined this by referring to figures published by SWIFT, which indicate that the percentage of trading transactions settled in renminbi jumped from virtually zero to around 12% between 2010 and 2012 – and is likely to increase further. In view of this, he pointed out that the renminbi has already achieved the status of a trading currency.

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