written by reader Yuan IMR

By Anonymous Questions, July 6, 2015

In light of a interview I watched tonight of Steve Sjuggerud’s forecast on the Yuan becoming the next IMR, I found some challenges to Steve’s interview and would like a comment or rebuttal. These challenges were in the Wall Street Journal: ”To be sure, even if the yuan is recognized by the IMF as a reserve currency, there’s little chance of it dethroning the dollar as king. Currently, the greenback represents more than 60% of all global currency reserves. Even optimistic economists say it could take a decade or two for the yuan to reach just a fraction of that level.” Steve made it sound like China would quickly (within a couple of years – not 10 yrs. would surpass US as the major IMR. Another comment: ”A reserve currency is the same thing as international money. Money to be money must perform 4 basic functions: 1. a medium of exchange (people use it when they buy or sell); 2. store of value (people save their wealth in it); 3. a unit of account (people price t
heir products in it); and a standard for deferred value (people use it in their debt contracts). At present, the Yuan does 1 and 3 at a level well below the presently recognized world currencies. You don’t ask for this type of status; you earn it. Maybe China will get there…but we have no long term evidence that China will actually reach or maintain this level of performance. To the contrary recent evidence shows China manipulates its exchange to punish speculators; and its own citizens are seeking safer alternative currencies to store their wealth.” How would Steve answer this last statement? If China’s citizens are seeking SAFER alternative currencies to store their wealth, then what is China doing to combat their problems with punishing spectators by manipulating the exchange? Is there any evidence that China is being held accountable to following some type of ethical rules with citizens and outside investors?
Thank You…

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lpribble
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lpribble

Looks like your comments are right on the money. Devaluing the Yuan by 2% today doesn’t seem to indicate a desire to “store value”