patrick.net

I can't help but think that this is an indicator that the Yuan RMB is or will soon be at bubble levels.

The conventional wisdom is that the RMB is undervalued. What if the truth is the opposite?

Once the China housing bubble bursts, and I think it will burst in a most spectacular fashion (barring massive intervention, mind you), it seems likely that RMB will DROP in value, just like USD did when our bubble burst, and perhaps even more permanently so.

I wonder what the motivation of People's Bank of China is with respect to opening branches in the US? They want US citizens to be able to hold deposits in RMB? This will increase demand for USD-->RMB exchange in the short term, and make RMB more expensive. This is the opposite of what is good for China as an exporter, and in fact is what the US/Obama/Congress have been demanding for severals years now.

The mind boggles. somewhat. Not investment advice, buyer beware.

justme says

I wonder what the motivation of Bank of China is?

The bank of china is the government of china. Goals are: Short term, keep congress off their backs. Long term, become the world's reserve currency.

Goal is to diffuse criticism of closed capital markets.

It's a shitty deal. The interest paid is well below their inflation rate. I'll take 1% on my USD thank you very much.

It's still an EXTREMELY closed, controlled economy. Outsiders can't own land, or most stocks or bonds. The only reason China can own so much treasury debt is we let anybody buy it. China does not offer the same openness.

SF ace says

The rate of interest for savings is so paltry vs. inflation and peer that the Chinese have no choice but to chase after stocks and homes. If you can’t gain 30-40% with substantial investment base a year minimum, you are falling behind relative to others.

This is the same as what happened in the US, but amplified by a factor of 3 or 4.

There is no chance this will end well for China.

Anyone here can invest in Chinese yuan right now through two ETFs (exchange traded funds). These are --

CYB = WisdomTree Dreyfus Chinese Yuan
CNY = Market Vectors Chinese Renminbi

These trade just like stocks, although they are structured like a mutual fund, without the associated fees. All you pay is buy and sell commissions to your broker. You can set stop and limit orders on these, too.

You may also walk into most US banks and exchange your US dollars for yuan as long as you have an account there. This will require you to pay a commission/fee to the bank for this service, and you will be limited in the amount you may transfer at any one time. You will need to call your bank for details, and to pre-arrange your order for yuan.

The Renminbi (RMB) (sign: ¥) is the official currency of the People's Republic of China (PRC). Renminbi is legal tender in mainland China, but not in Hong Kong or Macau. It is issued by the People's Bank of China, the monetary authority of the PRC. The primary unit of renminbi is the yuán. One yuan is subdivided into 10 jiǎo, which in turn is subdivided into 10 fēn. Renminbi banknotes are available in denominations from 1 jiao to 100 yuan. Coins are used infrequently compared to banknotes, and have values from 1 fen to 1 yuan.

I trade the ETFs mentioned above in my self-directed Roth IRAs, traditional IRAs, and taxed accounts.

bob2356 says

Long term, become the world’s reserve currency.

Paul Krugman just wrote a blog post about the perceived and supposed but ultimately not-so-real advantages of being a reserve currency.

Among other matters, he points out that there are multiple countries that are able to support a high debt/GDP ratio WITHOUT being the issuer of a generally perceived reserve currency.

He also points out that before the 1990 burst of the Japan bubble, there was widespread discussion that Yen should become the new reserve currency. This did in fact not occur, and this should be food for thought as well.

http://krugman.blogs.nytimes.com/2011/01/17/the-role-of-the-dollar-who-cares/

Another sign that China is going badly:

Forged "commercial paper" (short term commercial loan contracts) in China

http://market-ticker.org/akcs-www?post=177673

I find it interesting that the three obvious alternatives to the US dollar are perpetually murdered in the mainstream media and on the mainstream blogs.

Gold and silver = The bubble is always about to burst. Been that way for 10 years now...
Chinese yuan = The Chinese bubble economy is always about to burst.
US real estate and land = The bubble is still bursting.

Time is ripe for a US dollar crash right about now. Sure would make for a fine wealth transfer of the US middle class, wouldn't it?

Anyone feeling trapped yet? How about lied to?

SF ace says

RMB have plenty of room to gain in relation to the USD so it’s a safe play. Many believe 1 USD for 3-4 RMBS is parity. I would love to see this opp in SF.

The rate of interest for savings is so paltry vs. inflation and peer that the Chinese have no choice but to chase after stocks and homes.

So, for a Chinese person, Yuan deposits are so lousy that they have no choice but to invest elsewhere, but for me it's a "safe play"?

Hmmm. I don't buy it. Sure, the Renminbi is below what it would be if they weren't buying US treasuries, but there is no guarantee that will stop, and no guarantee the Chinese economy won't stumble badly, and most importantly, there are indications their banking system isn't sound (bad loans)

MarkInSF says

SF ace says

RMB have plenty of room to gain in relation to the USD so it’s a safe play. Many believe 1 USD for 3-4 RMBS is parity. I would love to see this opp in SF.
The rate of interest for savings is so paltry vs. inflation and peer that the Chinese have no choice but to chase after stocks and homes.

So, for a Chinese person, Yuan deposits are so lousy that they have no choice but to invest elsewhere, but for me it’s a “safe play”?
Hmmm. I don’t buy it. Sure, the Renminbi is below what it would be if they weren’t buying US treasuries, but there is no guarantee that will stop, and no guarantee the Chinese economy won’t stumble badly, and most importantly, there are indications their banking system isn’t sound (bad loans)

When you are fully denominated in a currency (USD) that is controlled by a central bank that seeks to dilute the currency (USD) endlessly, any other currency backed by a country GDP of double-digit growth (China) seems like a great idea. Better than sitting in USD-based cash or money market funds. Volatile, manipulated (PPT and FSB) equity markets that defy fundamentals are not generally comforting unless you use technical analysis regularly, and swing trade only.

Chinese yuan is no longer pegged to USD, though the Chinese govt continues to keep them in synch. This will eventually end. When it does, the USD will likely be obliterated soon after that.

If you trust what you read in the financial media (and paid-for blogs) you are trusting the fox in the henhouse. Raw market data such as the COT report (large speculators) is far more dependable (long positions in USD currently outweigh puts, 2 to 1). For most, it's easier to pay attention to the mainstream financial media which tells you what they want you to hear (info specifically designed to help you transfer your wealth without you realizing it).

BTW, the Chinese govt has been telling its citizens to buy gold, instead of sitting in yuan. Not everyone everywhere has the same opportunity or same economic situation. You cannot apply one method to all people globally.

Billy Jack says

BTW, the Chinese govt has been telling its citizens to buy gold, instead of sitting in yuan.

That sounds fishy. Do you have a reference for that?

justme says

Billy Jack says

BTW, the Chinese govt has been telling its citizens to buy gold, instead of sitting in yuan.

That sounds fishy. Do you have a reference for that?

I've read it a few times from different sources, including from Chinese news sources. Found a quick one for you without spending time on this, using Google News...

http://www.telegraph.co.uk/finance/personalfinance/investing/8260049/Anthony-Bolton-Gold-is-the-only-commodity-to-buy.html

"Chinese investors have also started to take an interest in gold, he said, where previously they were buying American bonds."

Finding a reference to Chinese govt telling citizens to buy gold was a little harder to run across. Did read it though. If you aren't checking who controls or owns the news source for everything you read, and researching their affiliations with commercial banks, thinktanks, the UN, etc. then not sure why this would matter.

Billy Jack says

When you are fully denominated in a currency (USD) that is controlled by a central bank that seeks to dilute the currency (USD) endlessly, any other currency backed by a country GDP of double-digit growth (China) seems like a great idea. Better than sitting in USD-based cash or money market funds. Volatile, manipulated (PPT and FSB) equity markets that defy fundamentals are not generally comforting unless you use technical analysis regularly, and swing trade only.

Chinese yuan is no longer pegged to USD, though the Chinese govt continues to keep them in synch.

I disagree. yuan/usd is allowed to trade in a narrow range, but is still tightly controlled by the Chinese central bank, which just prints new yuan to buy dollars when yuan gets too strong. China is far more guilty of seeking to dilute it's currency endlessly than the US. They're the ones with rampant inflation. The Fed is just trying (unsuccessfully) to rekindle private lending. Yeah, the Chinese growth story is great, but it's not clear to me that investing in their currency is a good way to ride it.

There are lots of stories about how the Chinese are buying gold. You find them from the same sources that advertise on Beck and Hannity.

You found similar stories 20-30 years ago with Japan in place of China.

Every time someone tells me how great the chinese economy is, I tell them that we should have the federal government take ownership of all of our largest industries, throw all environmental and workplace regulation out the window, eliminate the free press, bar foreign companies from competing domestically, and filter the internet.

Because, you know, that would be so much better than America today.

Kevin says

There are lots of stories about how the Chinese are buying gold. You find them from the same sources that advertise on Beck and Hannity.
You found similar stories 20-30 years ago with Japan in place of China.
Every time someone tells me how great the chinese economy is, I tell them that we should have the federal government take ownership of all of our largest industries, throw all environmental and workplace regulation out the window, eliminate the free press, bar foreign companies from competing domestically, and filter the internet.
Because, you know, that would be so much better than America today.

The news **sources** for the articles covering Chinese citizens buying gold have been varied. Please try not to confuse or manipulate people with blanket statements that seek to generalize. You seem interested in claiming that these stories do not exist. Look them up for yourself before jumping to the generalizations, please.

I do not disagree with most of the posts in response to my posts. The Chinese people are experiencing inflation, which is primarily why they are interested in gold. My point ultimately is that the yuan is a much more stable currency that the USD. The Chinese economy is tightly controlled, as is their currency.

You really think their central bank is anti-Chinese, in the same way our central bank is fulfilling, verbatim, the goals laid out in United Nations (i.e., World Bank) hard documents such as the "Agenda for the 21st Century"? The World Bank plan is clear regarding the need to reduce developed economies to achieve world financial stability (and purportedly, world peace -- hence the participation of high-profile "Club of Budapest" members).

Here's a site summarizing the goals of the World Bank. Everything written there is sourced in a bibliography. Most of the sources are UN documents that are publicly available, or memoirs of the visionaries behind the UN.

Find it at http://www.green-agenda.com (site managed by someone who performs land-use audits on behalf of the United Nations)

Once you understand the plot line, the pieces fit together nicely. The mainstream media and perhaps quite a few paid-for bloggers or blog commenters seem bent on ensuring no one understands the plot line (anyone who talks about it openly is automatically a "tinfoil hat conspiracy theorist"), despite that it's already well documented for anyone to read.

It's quite efficient to simply kill the plot line rather than allow open discussion of it, since people might get a little pissed once they figure out what's going on. If you are unable to follow my train of thought, it's because I no longer pretend the plot line does not exist.

Billy Jack says

Once you understand the plot line, the pieces fit together nicely

What is the "plot line"? Help me understand. Please don't post links to other sites--just in your own words.

Billy Jack says

Find it at http://www.green-agenda.com

LOL. If find bizarre that those that think human caused climate change it a complete hoax are always of the opinion that the Chinese currency is more sound than the USD. The two have absolulely nothing to do with eachother, but from what I've seen the correlation is perfect.

Nomograph says

A huge pool of impoverished workers only gets you so far because there will eventually be a labor movement.

Actually it's already happening, and the government is more or less on the workers side.

MarkInSF says

Billy Jack says

Find it at http://www.green-agenda.com

LOL. If find bizarre that those that think human caused climate change it a complete hoax are always of the opinion that the Chinese currency is more sound than the USD. The two have absolulely nothing to do with eachother, but from what I’ve seen the correlation is perfect.

You obviously can't digest sourced documentation. Your opinion sure seems important though.

Jason M. says

MarkInSF says

Billy Jack says

Find it at http://www.green-agenda.com

LOL. If find bizarre that those that think human caused climate change it a complete hoax are always of the opinion that the Chinese currency is more sound than the USD. The two have absolulely nothing to do with eachother, but from what I’ve seen the correlation is perfect.

You obviously can’t digest sourced documentation. Your opinion sure seems important though.

When I read 10 minutes into the Agenda 21 it was pretty clear this was written by starry eyed idealists that have no power whatsoever.

I don't understand how you can fear of some authoritarian, anti-freedom government by invisible elites, and yet at same time think a communist government run by invisible elites has better answers to economic and monetary questions than the USA.

tatupu70 says

Billy Jack says

Once you understand the plot line, the pieces fit together nicely

What is the “plot line”? Help me understand. Please don’t post links to other sites–just in your own words.

Perhaps you would love to see me write the plot summary and skip the supporting documentation, which is its soul? Thanks for the invitation to do so -- I decline.

You're cunning, like Bahomet in heat.

c3600974 says

tatupu70 says

Billy Jack says

Once you understand the plot line, the pieces fit together nicely

What is the “plot line”? Help me understand. Please don’t post links to other sites–just in your own words.

Perhaps you would love to see me write the plot summary and skip the supporting documentation, which is its soul? Thanks for the invitation to do so — I decline.
You’re cunning, like Bahomet in heat.

No--how about you summarize the plot and then include the links to supporting documentation. Or references to supporting documentation.

You understand how noone can believe you if you can't even explain your theory, right?

Crazy ranting is fun and all that, but the fact is that China's economy is not some capitalistic system that is comparable to the western world. The Chinese government is the largest corporation on the planet, by far. It is a conglomerate with several very large wholly owned subsidies.

You can't really make arguments about economics and what is going to happen while that fact remains, because traditional economics simply do not apply.

China figured out how to make socialism work, at least for a quarter of its population. The real wild card is what happens after another 10 years where the other 800 million people are still living in squalor? Most of these people were better off when they had superior land near fresh water sources to raise their crops on.

China didn't make socialism work. China is a mercantilist economy that showed the world just how long people are willing to accept substandard living and working conditions by allowing their standard of living to slowly rise. Every other capitalist revolution was accompanied by swift lifting of the masses out of poverty in a short amount of time. China has used mercantilism to try to stretch that process out over a 30 year period. It's going to backfire on them. Their actions have resulted in ridiculous imbalances in global trade and external debt obligations. China should have let their currency float freely over a decade ago. China's growth model is hopelessly dependent upon using a large trade surplus to make up for their governments irresponsibility & central planning. As soon as the trade surplus disappears, the unwinding of their export dependent economy will be ugly. Furthermore, the massive default on the debt obligations they hold from the rest of the world is going to be a kick in the nuts. This is the type of stuff wars are made of.

theoakman says

Every other capitalist revolution was accompanied by swift lifting of the masses out of poverty in a short amount of time.

What capitalist revolutions are you talking about? What 30 year period? China was a mess 30 years ago, totally destroyed by the cultural revolution. I would think that raising the standard of living as much as they have for almost billion people in only 30 years is a pretty good trick.

bob2356 says

theoakman says

Every other capitalist revolution was accompanied by swift lifting of the masses out of poverty in a short amount of time.

What capitalist revolutions are you talking about? What 30 year period? China was a mess 30 years ago, totally destroyed by the cultural revolution. I would think that raising the standard of living as much as they have for almost billion people in only 30 years is a pretty good trick.

Not really. Those people were dying by the millions. In nearly every other case where the masses lifted themselves out of poverty through capitalism, it took a few years. China deliberately slowed the process to try to maintain a steady rate of growth rather than an fast rate of growth. It was a stupid move and it will hurt them in the long run.
Had China let their currency float in the 90s, they would easily have a higher standard of living than they do today and they wouldn't be vulnerable to an unwinding of an economy heavily reliant on exports. They wouldn't be vulnerable to the fallout of a default on debt obligations they own. They also wouldn't have the inflation problem they do today. In my opinion, they should have simply followed the traditional model for economic prosperity. Mercantilism has never ended well.

No–how about you summarize the plot and then include the links to supporting documentation. Or references to supporting documentation.
You understand how noone can believe you if you can’t even explain your theory, right?

For those of you who can see past the antics of the paid-for professional provocateur/disinformation agent I am engaging with, here are the sourced links again --

http://www.green-agenda.com
http://www.newswithviews.com/Veon/joanA.htm
http://www.crossroad.to/text/articles/la21_198.html
http://nikiraapana.blogspot.com/ (a blog worth bookmarking)

Sourced and very well documented, all of it. But when someone still wants to refute documents coming straight out of the United Nations, what does that make that person? Paid for, perhaps? This provocateur is aggressive in that he wants to lump all of this information in a mental package he wants you to throw away upon little or no examination, whatsoever. If people here are smart, this is the information they will be most interested in, above all else.

Your antics here tip people off to the fact that what I am stating here must be pretty important for you to continue denigrating it in the way that you have been doing.

theoakman says

China didn’t make socialism work.

Sure they did. The government owns all of the major industries, and they let private investors think that they have a say in some businesses:

http://en.wikipedia.org/wiki/List_of_the_largest_companies_of_China

Every single one of the top 10 are state owned.

China managed to accomplish what no other socialist economy accomplished in over 100 years of trying. Some countries have a single success in a single industry, but China has managed to make it work for all of their major industries.

They did this by fooling capitalists into thinking that they, too, were capitalists. The reality is that every dollar given to any of these companies, be it investment or purchase, is a dollar given to the chinese government.

Now, it's true that they used mercantilism (specifically, trade protectionism) as a way to accomplish their socialist agenda, but that doesn't change the fact that the end result is a successful socialist model.

theoakman says

As soon as the trade surplus disappears, the unwinding of their export dependent economy will be ugly. Furthermore, the massive default on the debt obligations they hold from the rest of the world is going to be a kick in the nuts. This is the type of stuff wars are made of.

Or revolutions. It may happen again. Who knows.

theoakman says

In nearly every other case where the masses lifted themselves out of poverty through capitalism, it took a few years.

What are these other cases? How do they compare to China?

Bill Jack says

But when someone still wants to refute documents coming straight out of the United Nations, what does that make that person? Paid for, perhaps?

I'm not refuting anything. Because you haven't presented your case yet. All you are doing is posting links. For something this important, I would think you could take the time to write a couple of paragraphs explaining what is going on...

Read this interesting article...

http://www.businessweek.com/news/2010-12-21/sec-probes-chinese-reverse-mergers-and-their-u-s-auditors.html

Dec. 21 (Bloomberg) -- The Securities and Exchange Commission, as part of a broader probe of China-based companies listed on U.S. stock exchanges and their auditors, sanctioned a California audit firm for signing off on fraudulent financial statements made by a Chinese energy company.

Moore Stephens Wurth Frazer & Torbet LLP of Orange County is one of several firms that have fallen under the SEC’s scrutiny for signing the financial statements of China-based firms accessing U.S. capital markets through so-called reverse mergers. In a reverse merger, a closely held company acquires a publicly traded company and can then sell shares without an initial public offering.

if they let yuan float you can make a really good return. but its a huge gamble.

More places to buy the yuan coming to the US I've heard. Has anyone seen it places where yuan accounts can be opened?

If I had a lot of money to preserve, I would buy Swiss Francs and/or a gold ETF based on physical gold. (ZKBGF)
If I have money I wish to invest to appreciate capital, I would buy stocks.
If I have money I wish to get income from, I would buy bonds.
If I were rich, I would have a house in Carmel, and I would visit China to have fun Have no doubt, the average person in China is a poor slob wondering how to achieve a decent life, in a game that is stacked against him.
I guess I wandered off the subject. I would in theory like to make currency trades, but I am too afraid and lazy to learn the ropes.

"China made socialism work", this is incorrect. There is actually NO social safety net in China. The Chinese government has decided that building infrastructure and growing the economy is preferable to spending gazillions on welfare, health programs, etc. Europe and Mexico are socialist, not China. Chinese are well aware there is no social safety net for them, it's every man for himself.

This boost may help the yuan:

http://www.marketwatch.com/story/china-to-boost-yuan-to-fight-inflation-rhodes-2011-04-12

http://seekingalpha.com/article/264555-china-revaluation-certainly-on-the-table?source=yahoo

tatupu70 says

Bill Jack says

But when someone still wants to refute documents coming straight out of the United Nations, what does that make that person? Paid for, perhaps?

I’m not refuting anything. Because you haven’t presented your case yet. All you are doing is posting links. For something this important, I would think you could take the time to write a couple of paragraphs explaining what is going on…

I have to agree with Tatupu on this one. I find it a little bit frustrating that you seem to believe strongly in some position, but all you are willing to do is post some links and profess how incontrovertible your position is. I did go (start) to read your links, and after about 5 minutes I was still asking myself "what's is the position?" I'm trying not to dismiss it out of hand, but you aren't helping.

A good example to follow would be Troy on these forums. He holds some non-mainstream ideas, and is more than willing to produce sources and other references, but he also willingly (and intelligently) engages in dialogue (if one-sided and heavy-handed at times). This does two things, for me. One, it helps by distilling a position into an accessible and concise read...two, it demonstrates that the person pushing the position can actually think and is willing to discuss (and defend) their claimed position.

If you want to be taken seriously, you need to ante up.

-s

This story in about Hong Kong:

http://www.marketwatch.com/story/soaring-yuan-deposits-in-hong-kong-2011-05-15

I would prefer to have Swiss Francs but I don't believe there is a problem having a bunch of Yuan if you have already lots of capital to preserve. I believe there is a Chinese bank in the USA somehwere and you can have Yuan on deposit there?
But, why let capital sit idle and not make either 1. interest 2. dividends 3. appreciate?
If I were very rich, I'd have a Swiss Franc account to preserve some of my wealth. The rest I would buy bonds and dividend paying stocks. For fun I'd buy a growth stock or two.