Beijing strikes in currency war as Argentina to use yuan instead of US dollars in trade with China

[gulfcoastliberal]

Source: The Australian

CHINA and Argentina have agreed to swap $14.5 billion of their currencies to enable South America's second-largest economy to avoid using US dollars in trade between the nations, as Beijing ratchets up the pressure on Washington.

In a bid to force the US to relax its grip on global financial institutions, China yesterday announced a deal allowing Argentine businesses to buy Chinese imports directly in yuan. Usually, international trade is conducted in US dollars, which Argentine companies have to buy with pesos.

The currency swap with Argentina is the first between China and a Latin American, but follows similar deals to bypass the dollar recently concluded by Beijing with South Korea, Indonesia and Malaysia - driving growing expectation that Asia will steadily be transformed into a "yuan bloc".

snip

Concerns are growing, especially in China, the biggest international holder of US dollars, that the US may finance its huge stimulus packages by printing more money, triggering a fall in the dollar and of the currency's denominated assets in general.

Read more: http://www.theaustralian.news.com.au/business/story/0,28124,25271461-36418,00.html

[theoldman]

1. Can you blame them?

Generally when too much money is printed, it's value is reduced. The US is in between a rock and a hard place. At present the Chinese control the money.

[Idealism]

2. China isn't much better, they've been manipulating the value of their currency

to prevent inflation against the US dollar. They have $2 trillion in treasury bonds from years back, yet they have deflated their currency about 30% against their reserves. What this means is that if the yuan becomes a regional reserve currency like China wants, the value would go up significantly because they could no longer artificially keep the value low. The $2 trillion in t-bills would soon become worth 2/3rds less.

[Frank Booth]

3. Isn't the yuan still partially pegged to the dollar?

If the dollar falls in value so will the yuan, which should help China's exports.

[Prometheus Bound]

14. Yes it is. And more so currently to keep the yuan from falling. Here's a good article.

China: Return Of The Dollar Peg?
3.31.09, 03:55 AM EST
For all the brouhaha about currency manipulation, Beijing appears once again to be linking its yuan to the greenback.

China may be intent on taking the U.S. dollar down a peg, but it has once again essentially hitched the value of its currency to the dollar, a policy it formally abandoned in 2005 in favor of using multiple currencies as reference points. And, for all of Washington's fretting about the apparent halt in the yuan's appreciation, economists say that China actually has taken made this move to keep the yuan from falling against the dollar since the onset of the global financial meltdown.
http://www.forbes.com/2009/03/31/china-yuan-dollar-markets-currency-pegging-g20.html

[KoKo]

4. Well...that's an interesting development...along with Russia wanting to use Gold Standard...

We will have to see how it all turns out. When I heard that "Mustard Seed promoting/Supply Sider Shill" Larry Kudlow on CNBC earlier today carrying on about liking to see a "little gold" backing our currency...I figured something was up. :eyes:

[msongs]

5. the REAL legacy of George W Bush nt

[KakistocracyHater]

6. China has not agreed with the Neocons & "other right"

Asia is not post nation/state. Will our leaders wake up to reality?

[DRoseDARs]

7. So the new One World Currency will be the Yuan? Looking forward to Lou Dobbs exploding tomorrow...

...in a puff of red-white-and-blue glitter.

[tomm2thumbs]

8. I Yuan To Know Why!

To be Franc, I have a Yen to know... or I will Pound a Doll hair - Mark my words, Euro jerk if you Peso little attention.

egad, that was horrible

[dipsydoodle]

9. I'da gone for

I Yuan Be Loved By You : http://www.youtube.com/watch?v=WQIvhotZSUw

However - compliments for your clever play on words. :)

[tomm2thumbs]

10. wow, that outfit she is wearing sparkles in all the right places

(wiping brow...) tanks for that!

[Ghost Dog]

11. The rest of S. America will do the same; Australia too,

naturally.

[pinniped]

12. There's no need to print more money. The US has about 500 quadrillion dollars in reserve....

to pay for the TARP shit, nation building, and financing other global ventures.

that the US may finance its huge stimulus packages by printing more money

[steven johnson]

13. Accoridng to the LA TImes: "China positioning its currency for a run at world supremacy"

China holds about half in U.S. Treasury bonds and other government-backed debt so weakening the dollar by replacing it with the yuan would erode the value of those investments. But it's a sign of the Chinese asserting their right to be a global superpower.

In a series of what might be called baby steps, Chinese officials recently have moved to globalize the yuan and promote its influence overseas, with Shanghai designated as command central.

Since last December, China has signed deals with six countries, including South Korea, Malaysia and most recently Argentina, for currency swaps that would inject Chinese money into foreign banking systems. That would allow foreign companies to pay for goods they import from China in yuan, bypassing the dollar -- the currency that dominates international trade and finance, including foreign exchange reserves.

Daley and other experts say it would take years for the yuan to supplant the dollar; the Chinese currency is currently tightly controlled and not even freely tradable in international markets. It will take time for the yuan to gain international acceptance and for China to reform its capital markets and diversify its economy, crucial preconditions before the Chinese can elevate their currency to rival the dollar.

But given the risk of inflation diminishing the value of the dollar, and neither the euro nor the Japanese yen viewed as attractive alternatives, Chinese and Western analysts say they can envision the yuan becoming the dominant global currency by 2020. That's when Beijing expects the yuan to have been fully liberalized, institutional arrangements and rules to have been set, and Shanghai to be firmly established as an international financial center.

China positioning its currency for a run at world supremacy

[Chemical Bill]

15. We invaded Iraq because they were selling oil for Euros...

How long before we invade China? It might be a little tougher invading a nuclear superpower with far more people to fight, but those Wall Street yahoos who lead this country don't have to tight a grasp of reality.

Bill