G20: divisions over debt and currency reform

[rooster59]

G20: divisions over debt and currency reform

By Catherine Hardy

The G20 summit has got underway in China.

The gathering unites finance ministers and central bank bosses from the world’s biggest economies.

The G20 meeting – 4 things to takeaway

Monetary policy alone cannot provide balanced growth
Economic risks, including the “Brexit” highlighted
No sign of agreement on coordinated stimulus
Policymakers divided over the role of debt and negative interest rates

“Myriad concerns and policy frictions”

A draft of the communiqué to be issued at the end of the two-day meeting in Shanghai reflects myriad concerns and policy frictions exacerbated by economic uncertainty and market turbulence.

Geopolitics figures prominently.

Risk and vulnerability have increased amid rising numbers of refugees and migrants, downgraded prospects for global growth and widespread talk of a Brexit.

However, there is no sign of coordinated stimulus spending to spark activity, as some investors have been hoping in the wake of the market turmoil at the beginning of 2016.

Divisions over debt

Divisions emerge over the reliance on debt to drive growth

Germany has made it clear it is not keen on a fresh stimulus drive. Finance Minister Wolfgang Schaeuble says the debt-financed growth model has reached its limits.

Chinese whispers

China has sought to reassure global finance ministers about the state of its slowing economy.

Officials say the country is able to tackle the pressures it is currently facing.

Currency reform

G20 host China rules out another devaluation of the yuan after the first last August.

Japan urges China to reform its currency and come up with a structural plan and timeframe.

US encourages China to shift to a market-orientated exchange rate in “an orderly way”.

The G20 in 3

Based on GDP, the G20:

covers 86% of the world’s economy
accounts for two-thirds of the world’s population
accounts for 75% of global trade

What they are saying

“The global recovery continues, but it remains uneven and falls short of our ambition for strong, sustainable and balanced growth.” – draft communiqué from summit.

“We are always in support of the European integration process and we are willing to see the EU play a bigger role internationally. We also hope Britain and the EU can appropriately handle the relevant issue.” – Chinese Foreign Ministry Spokesman Hong Lei.

“It is even causing new problems, raising debt, causing bubbles and excessive risk taking, zombifying the economy,”_ – German Finance Minister Wolfgang Schaeuble says the debt-financed growth model has reached its limits.

“China must refrain from policies that would be destabilising and create an unfair advantage.”- US Treasury Secretary Jack Lew encourages Beijing to shift to a more market-oriented exchange rate.

-- (c) Copyright Euronews 2016-02-28

[Gsxrnz]

Typical committee outcome. Hurry up and do nothing.

[terryp]

With $1.4 Quidrillion in worldwide derivatives that are about to go belly-up this group are crappping themselves ..get ready for BAIL-INS, QE4 and Significant currency De-valuations that will be announced over the next 2 weeks

Keep your eye on the Yen …the carry trade is over, traders are now having to buy Yen to settle contracts!!!

[Publicus]

Schaeuble is correct that the debt driven growth model is kaput, maxed out which everyone knew would occur but not when or at what levels of debt. Now everyone knows.

So It becomes foreseeable that the USD would need to be revalued and the world return to the gold standard. USD = $10,000 per ounce of gold, no problem. It's not difficult for the world to agree and to accept it. Working it through to restructure, revalue, reschedule existing debt is not difficult.

US possesses 70% of the world's gold so he who has the gold makes the rules. The new global order. Meet the new boss, same as the old boss. Get used to it. Everyone keeps the current currency and life goes on.

It's between now and whenever then would be, several years no doubt at the least.

CCP Boyz in Beijing have screwed themselves whether in the present or going forward, if forward is the word to use concerning the Boyz.

Still, their $28 billion debt is almost all internal. So they can continue to play with their RMB monopoly money by the monopoly party-state and their personal People's Bank of China monopoly which pretends to be the central bank.

No currency is more vulnerable than the RMB/yuan. George Soros, Jim Chanos and other currency vultures are moving against the yuan and the PBoC much to the fury of Xi Jinping. Xi is now convinced Soros and the currency speculators with corporate America have decided to ably assist the CCP economy to go under.

CCP is spending $100 billion monthly since July to support the yuan. Speculators money says CCP by the summer will be dangerously low on forex reserves due to the ongoing interminable 'reserve reversal' as they call it. Alternative is to freely float the yuan which will bring down the CCP house or to impose total capital controls which will bring down the CCP house.

One trillion bucks in capital outflows in 2015 says there's a bad moon rising and it's gonna hang there throughout 2016 and for a long time after, up to ten years or more. Deflation took hold last year yet CCP China is nowhere near as wealthy as is Japan which can sustain the economic status quo indefinitely.

Treasury Sec Jack Lew reiterated the US official position that the currency float is Washington's preferred position. CCP teaches in the schools and in its mass media to never believe a foreign devil, to never listen to a foreign devil, to never ever accept anything said by a foreign devil. Time however for a 100% reversal of that cultural dogma or the whole thingy going on there is kaput.

[NeverSure]

There's one little problem with that model. There hasn't been enough gold mined since it was discovered to come close to backing the USD, even if the US had all of it.

Oh, another thing. Gold is a commodity. It's worth what the world market says it's worth and no more or no less. The US can't control the value of the dollar and the value of gold at the same time.

Econ 101. You can control the value of one thing, but if you do you can't control the supply. Or, you can control the supply of something but if you do you can't control the value. Example.

If I owned all of the beer in the world I could sell just a little at a time and the price would go way up. I couldn't predetermine what that price would be because the market would decide. If one day I didn't like the price result I would have to adjust the supply. So just one thing or the other at a time is all I can do to meet whichever is my target - supply or price.

I could also decide what I wanted the price to be and set it, but then I couldn't control the demand. The market might want lots of it at that price or it might want none of it. Eventually I would have to either adjust the supply or the price depending on what I wanted to target.

There will be no gold backed currency again ever unless the whole world crashes and we have a new system. The reason the US went off the gold standard was that it couldn't control the value of money. The money would go up and down depending on the value of gold. Originally they tried to have a $20 gold coin that would be dependably worth $20 but when gold got higher than that people started melting it for gold. When they then tried to make it paper that was backed by gold, the value of that paper would fluctuate with the commodity - gold.

When the USD was last backed by gold, gold was $20 an ounce and a $20 gold coin or bill was worth an ounce of gold or $20. Now look at what an ounce of gold is worth and see what that would do to a $20 gold piece. 1930's it was IIRC.

We won't see it.

Cheers.

[Ulic]

I am always left scratching my head with the RMB. On one side you hear the Chinese

government devalues the currency to keep a trade manufacturing edge, on the other you

hear the value is grossly inflated and the likes of George Soros are betting heavily against it.

My simple mind is very, very, confused by it all.

Either way I don't trust the Chinese government one bit.

[elgordo38]

Typical committee outcome. Hurry up and do nothing.

Babylon speaking in tongues chasing their tails. China offering a cocktail of "we know what we are doing" A dark world economy at best.

[elgordo38]

Schaeuble is correct that the debt driven growth model is kaput, maxed out which everyone knew would occur but not when or at what levels of debt. Now everyone knows.

So It becomes foreseeable that the USD would need to be revalued and the world return to the gold standard. USD = $10,000 per ounce of gold, no problem. It's not difficult for the world to agree and to accept it. Working it through to restructure, revalue, reschedule existing debt is not difficult.

US possesses 70% of the world's gold so he who has the gold makes the rules. The new global order. Meet the new boss, same as the old boss. Get used to it. Everyone keeps the current currency and life goes on.

It's between now and whenever then would be, several years no doubt at the least.

CCP Boyz in Beijing have screwed themselves whether in the present or going forward, if forward is the word to use concerning the Boyz.

Still, their $28 billion debt is almost all internal. So they can continue to play with their RMB monopoly money by the monopoly party-state and their personal People's Bank of China monopoly which pretends to be the central bank.

No currency is more vulnerable than the RMB/yuan. George Soros, Jim Chanos and other currency vultures are moving against the yuan and the PBoC much to the fury of Xi Jinping. Xi is now convinced Soros and the currency speculators with corporate America have decided to ably assist the CCP economy to go under.

CCP is spending $100 billion monthly since July to support the yuan. Speculators money says CCP by the summer will be dangerously low on forex reserves due to the ongoing interminable 'reserve reversal' as they call it. Alternative is to freely float the yuan which will bring down the CCP house or to impose total capital controls which will bring down the CCP house.

One trillion bucks in capital outflows in 2015 says there's a bad moon rising and it's gonna hang there throughout 2016 and for a long time after, up to ten years or more. Deflation took hold last year yet CCP China is nowhere near as wealthy as is Japan which can sustain the economic status quo indefinitely.

Treasury Sec Jack Lew reiterated the US official position that the currency float is Washington's preferred position. CCP teaches in the schools and in its mass media to never believe a foreign devil, to never listen to a foreign devil, to never ever accept anything said by a foreign devil. Time however for a 100% reversal of that cultural dogma or the whole thingy going on there is kaput.

A good read. Schaeuble is finally starting to make sense. The growth driven model is kaput as is the rest of the useless crap they are throwing at the problem nothing is sticking or working. The money outflows in China is worrying and you could be correct on its outcome.

[elgordo38]

I am always left scratching my head with the RMB. On one side you hear the Chinese

government devalues the currency to keep a trade manufacturing edge, on the other you

hear the value is grossly inflated and the likes of George Soros are betting heavily against it.

My simple mind is very, very, confused by it all.

Either way I don't trust the Chinese government one bit.

Nobody else should trust them either. The markets should be interesting next week. I wonder if investors will swallow all the crap the G20 is trying to spoon feed them especially China. China is still the mystery it was a 100 years ago no transparency only Communist retoric and dogma.

[Publicus]

There's one little problem with that model. There hasn't been enough gold mined since it was discovered to come close to backing the USD, even if the US had all of it.

Oh, another thing. Gold is a commodity. It's worth what the world market says it's worth and no more or no less. The US can't control the value of the dollar and the value of gold at the same time.

Econ 101. You can control the value of one thing, but if you do you can't control the supply. Or, you can control the supply of something but if you do you can't control the value. Example.

If I owned all of the beer in the world I could sell just a little at a time and the price would go way up. I couldn't predetermine what that price would be because the market would decide. If one day I didn't like the price result I would have to adjust the supply. So just one thing or the other at a time is all I can do to meet whichever is my target - supply or price.

I could also decide what I wanted the price to be and set it, but then I couldn't control the demand. The market might want lots of it at that price or it might want none of it. Eventually I would have to either adjust the supply or the price depending on what I wanted to target.

There will be no gold backed currency again ever unless the whole world crashes and we have a new system. The reason the US went off the gold standard was that it couldn't control the value of money. The money would go up and down depending on the value of gold. Originally they tried to have a $20 gold coin that would be dependably worth $20 but when gold got higher than that people started melting it for gold. When they then tried to make it paper that was backed by gold, the value of that paper would fluctuate with the commodity - gold.

When the USD was last backed by gold, gold was $20 an ounce and a $20 gold coin or bill was worth an ounce of gold or $20. Now look at what an ounce of gold is worth and see what that would do to a $20 gold piece. 1930's it was IIRC.

We won't see it.

Cheers.

Econ 101. You can control the value of one thing, but if you do you can't control the supply. Or, you can control the

Et cetera et cetera it's a shame a certain number of people here never got beyond or past Econ 101. The headcount of those present who studied it know it hasn't any bearing on the discussion of the USD in the extant global economy or on a gold standard in today's international markets or finance.

I'd been hesitant to mention it in the context of the CCP economy going down but it does relate, given CCP has Middle Kingdom delusions to make the RMB/yuan the global reserve currency and the currency of trade. It risks the CCP fanboyz (certainly not you) trotting out silly and meaningless data about CCP currency swaps and trade in yuan with Russia and a bunch of other screwed up governments, the IMF inclusion of the yuan in the SDR basket and so on. Just quickly, yuan constitutes 2.7% of global currency reserves and is used in a tiny volume of trade with other loser governments and countries, to include Russia.

There will be no gold backed currency again ever unless the whole world crashes and we have a new system.

You got it. That's where things are going on both counts. You and I should book a flight to Berlin to have a private chat with Minister Schaeuble. But then why do that when we can post here and say these things elsewhere.

I'd stated previously the fact there isn't enough gold in the universe to support a gold standard in familiar historical terms of political economy. And that if there were all of that gold God would be a happy Man (instead of abused by Republicans in the USA).

However, there is a G-20 that never existed and a long standing G-7. There's the IMF, World Bank, the UN, WTO and numerous regional and sub regional organisations and forums.

Before a global collapse hits they're going to have to deal with it, i.e., a gold standard and everyone knows it, or should know it. Revalue at $10,000 an ounce with everyone in agreement is not a great challenge, particularly considering the alternative which no one to include your post has ever presented. Revalue the USD whether it's at $9000 an ounce or $15,000 an ounce. As long as everyone agrees which means it gets done of mortal necessity.

CCP and also Putin in Moscow have been buying gold the past six or seven years as if it were, well, gold. Everyone expected the price to increase, beyond $2000 but it never has. The common explanation is that it's being bought below the radar during all these years which is holding/driving the price down. More than a few people suspect the Fed or the US Treasury. Me, I really don't know. I can only guess.

It's not guesswork however to know the present models of global economy and finance are spent. Same as the old gold standard got eventually to be exhausted. Necessity continues to be the mother of invention. A lot of people say the CCP economy nosediving and tearing at the seams is the global economy's canary in the coalmine.

[up2u2]

I have given this considerable thought and it turns out the solution is quite straight forward and simple.

A drone strike on Davos.

[stevenl]

I have given this considerable thought and it turns out the solution is quite straight forward and simple.

A drone strike on Davos.

Might as well just nuke the whole of Switzerland.