US Dollar collapsing

[Lawrence of Arabia]

In other words, people want to buy more RMB than those who want to sell it so China is left with a surplus of US$20 billion.

but if more people want to buy then sell, then you have a shortage, not a surplus. my point is im trying to figure this out.

[Urban Ranger]

Originally posted by Oerdin
They tradeed their fake second currency for dollars is what they did. China needs to get rid of the RMB and just stick with Yuan.

Uh, the Yuan is the same as RMB.

[Tingkai]

Originally posted by Oerdin
It does make conparission shopping easier for people on the border.

Which I think is minor, particularly compared to the problems of pegging one currency to another.

Didn't we have this conversation before?

And what happened to Neo?

[Dinner]

When did they do that? So the RMB is totally gone and now just the Yuan remains?

[Dinner]

I don't believe we have had this conversation before. Maybe you were speaking to someone else.

I got bored of Neo and the first 8 avatars I tried were all to large so I finally settled on this one. It's a stop gap measure until something better comes along.

[Tingkai]

Originally posted by Lawrence of Arabia


but if more people want to buy then sell, then you have a shortage, not a surplus. my point is im trying to figure this out.

For simplicity sake, let's say 1 rmb = 1 us.

Start with US companies wanting to buy 1 billion rmb of Chinese goods. The companies go to a Chinese bank, trade US$ for RMB, buy the chinese goods and ship it to the US.

So now the bank has US$1 billion and the chinese companies have 1 billion rmb.

The Chinese companies want to buy American goods so they go to the Chinese bank and trade in the RMB for US$. Note that there is simultaneous trade where the individual Chinese bank take the US$ and trades it to the China central bank for RMB.

If there is a trade balance then the Chinese companies are trade in their 1 billion rmb and get US$1 billion. We're back to where we started.

But let's say the Chinese companies only want to buy US$800 million of US goods (A trade deficit for the US, a trade surplus for China). In this case, the bank is left with US$200 million in its vault while the Chinese companies have 200 million RMB.

That extra 200 million RMB will get spent in China while the US$200 million ends up in foreign reserves.

What China does is essentially force individual banks to buy government bonds which essentially sucks excess rmb out of the economy.

[Tingkai]

Originally posted by Oerdin
When did they do that? So the RMB is totally gone and now just the Yuan remains?

I think it happened back in 1993.

Before that time there were two currencies, one for the domestic market and one for international trades.

[Lawrence of Arabia]

ok i get it now, thanks

[Urban Ranger]

Originally posted by Tingkai
Before that time there were two currencies, one for the domestic market and one for international trades.

No. There has always been one currency, which is the RMB. That's the name, just like USD. A standard unit of the RMB is called the Yuan, just like the Pound is the standard unit of the UK currency.

As for what you said, there was a period of time where foreign exchange was strictly limited. You cannot exchange RMB directly for any foreign currencies, you must buy something called a "Foreign Exchange Bill," which has the same unit as the RMB, but was strictly regulated and can be used to buy foreign currencies.

[Tingkai]

The "foreign exchange bill" looked like money, right?

I seem to remember there were two currencies when I went into China back in 82. Tourists could only get one type of currency and it could only be spent in "friendship stores" hotels and tourist places. But maybe I'm thinking of something different.

[Dinner]

I remeber to the early 1990's when alot of the business magazines were reporting the Chinese Yuan was noconvertable (at least officially) and they didn't want to make it float as then the government couldn't keep the Yuan artificially low thus a second currency was introduced which would only be used by banks. This second one was called the Renumbi and the Yuan could only be converted into Renumbi and then Renumbis sold for dollars, Yen, or what not.

[Kidlicious]

Simply put, you can't just buy some rmb to speculate with, at least not on an exchange.

[Kidlicious]

Originally posted by Kidicious
Simply put, you can't just buy some rmb to speculate with, at least not on an exchange.

edit: you can't buy or sell them

[Wezil]

Originally posted by JimmyCracksCorn
Parity would only make sense if wages and the cost of living were the same on both sides of the border. Which they're not.

Agreed, and I continue to contend excessive taxation/spending policies by successive governments (don't worry, I blame Mulroney as well) have led to this situation.

What did we do the last time our dollar was consistently on par with that of the US? Did the legions of unemployed sit on their thumbs and wait for the pogey cheques to arrive? Actually, no. The unemployment rate was consistently a good percentage point below today's level. Who would have thunk it?

The Canadian economy is far more complex than just T-shirt makers in the suburbs of Montreal. Some industries actually benefit from a higher dollar.

[Spec]

Re: Re: US Dollar collapsing

Originally posted by JimmyCracksCorn


I don't get why some Canadians seem to like this idea.

Canada is an exporter country! More precisely, Canada is a "exporter to the US" country. A high loonie no good.

I am an importer. My company imports Car parts from the U.S. mostly.

So that should explain the ''YAY!''.

Spec.