What Is The Background Of RMB Depreciation?

Recently, the discussion on devaluation of RMB has been bubbling with excitement. Most people feel that this will affect China's economy to a certain extent. Today, Xiaobian has compiled some deep reasons for the devaluation of RMB.

The impact of exchange rate policy on the economy, if not standing in the long term, is likely to be invisible to Taishan. In the past two years, besides the United States, the global competitiveness will be endless.

It is this kind of thing (of course, part of it is passive depreciation). I call it "drug abuse". Competitive devaluation currency is equivalent to deliberately selling off one's own labor, making the export industry "prosperous", stimulating employment and so-called economic growth.

What is the purpose of a country's exports?

We need to think a few times on this simple question. Maybe you won't be fooled by all kinds of fallacies again.

The purpose of our export is not dedication, not service, not just knowing that we do not know how to enjoy it. The real purpose of exports is to exchange, that is, exporting A products that are good at production in China. It is to exchange B products which are good at producing in other countries. The two countries are equal exchange relations and have no mutual contributions.

If a country maintains a favorable balance for a long period of time in the trade relations between the two countries, the other country will maintain a deficit for a long time (that is, overdraft), which will eventually become the former's dedication to the latter, in order to maintain the distorted production between the two countries.

The relationship requires two countries to use two forms of paper money printing and IOU to support the intervention for a long time. The surplus resources of the surplus countries are allocated to net export capacity too much, while the overdraft countries are allocated to production capacity too little. At the same time, this is also the fundamental reason why the surplus countries' debts (foreign exchange reserves), the passive printing of the central bank's purchase of foreign exchange and the rising external debt of overdraft countries.

The United States is the largest overdraft country in the world, and its debt has continued to skyrocket. How will it eventually pay its debts? With its products and services, its capacity has shifted a lot in the long run, or it will not be a long-term deficit. Eventually, the so-called "repayment" must be printed at zero cost. Since 2008, the three rounds of QE in the United States are just like that. Is this the result of the hard work of exporting? As for the United States as the world's largest overdraft, and other countries as a devotee, it is necessary for readers to see the "Desert Island Story" of Peter.D. Schiff in just a few hundred words.

The debt burden that the US continues to climb will eventually be stuck on the banknote printing machine. A Albert Edwards, a French analyst who is out of line with the mainstream view of the investment banking industry, has also said a very vivid saying: "the next time the Federal Reserve is QE, you can hear money printing on Mars."

The logic is very simple, but why do we still compete to be a devotee? This is the drug effect. For example, China has been surplus to the US for many years. That is to say, many of our social resources are misallocated in the capacity of net exports to the US. If we want to change this distortion, the mismatched net export capacity will have to be pferred to bankruptcy. This will naturally impact the economy in the short term, causing unemployment problems such as unemployment in the export industry, but this is necessary for economic normalization and also a wise "stop loss" behavior.

If the exchange rate is deliberately depreciated, the mismatch capacity will be maintained or even expanded, that is, to continue to be a devotee and maintain "

False appearance, that is typical drug abuse.

Quote from my previous article: "almost all the countries in the world, especially the export-oriented countries, are constantly stimulating or even stimulating exports. At this time, we need to have a strong vision for the global economic trend and a sober understanding of the crisis.

Whether to reduce or increase stimulation is actually a simple answer. It is either suffering from moderate pain now, gradually stopping the loss, reducing the depth of pain in the future, or continuing to self anesthetized and eventually falling into the abyss of pain. In other words, it is painful to reform and to drink poison to quench thirst.

The global competitive currency depreciation has been described as a "currency war" in fact not appropriate, because if it is "war", naturally it wants to gain long-term benefits, and now, how can it be regarded as a "devotee"? I compare them to two kinds of competitions: "drug competition" and "pick the ugly competition".

Why does the United States not take the initiative to depreciate the US dollar? This is because the United States is an overdraft, not a devotee, and its consumption is far greater than its exports. Therefore, to maintain its monetary purchasing power, it is best to maintain the "illusion of prosperity", while the strong dollar's impact on its export industry is placed in a secondary position.

The devotee actively devalued the money was drug taking, while the overdraft was unreasonable to maintain or even take the initiative to revalue the currency. It was just the positive and negative sides of a coin, so it was funny that the two kinds of drug demand of the devotees and overdrafts were just in line with each other.

That is why we can see that Wall Street has been belittling the euro, and Europe's investment banking circles have echoed the weird scene.

The debt of the United States can not be finally paid back, even though the three dollar QE pays only a small part of its debts. The key is that its debt is rising. Therefore, the US dollar bubble is doomed to break.

In the past two years, the United States has constantly publicized and speculations on the increase in interest rates, and has made an increase in drug use, thus making the risk of the dangerous rock rolling to a higher level.

There are long-term and short-term factors that affect the exchange rate. The government intervention (including exchange rate intervention and printing money to maintain internal distortions) is taken away from drug use needs. In the context of marketization, the biggest determinant is the current account (the main content is the balance of trade), while the short-term impact is mainly international capital flows.

In the past two years, the US dollar has increased its drug use. In the case of its large current account deficit, the main reason is that the international capital movement has pushed us to raise interest rates. The whole world has already believed that the US economy is healthier than other countries.

As I have said, the United States is unlikely to substantially raise interest rates before inflation rises. Even if the show rises one or two, it will soon be forced to stop, and then it will be a roaring QE printing.

So, this short-term influence factor is doomed to be short-lived, we will wait and see.

When I returned to the central bank's exchange rate adjustment, I judged that the devaluation was not to stimulate exports by drug abuse, but mainly because of the cumulative impact of international capital flows, which increased the cost of intervention by the central bank and adopted a one-off adjustment.

If you want to take drugs, one will not take this jump. Two, in the past year when the dollar has increased drug abuse, in other countries competing to devalue drugs, the central bank will not be so calm to stabilize the exchange rate to the United States, forming a substantial appreciation of most other currencies, which is equivalent to initial drug rehabilitation. If the drug is deliberately devalued at this time, the results of the former drug addiction will be wasted.

If we want to cure drugs, the pain is inevitable. The pfer of our net exports will only begin. The trade surplus is still very large, especially for the US surplus. Others are still taking drugs, but the pace of our drug addiction can not stop.

Although judging the starting point of exchange rate adjustment is not for drug use, this adjustment also exposes a major problem in our exchange rate mechanism, that is, the RMB is still linked to the US dollar. If it does not change as soon as possible, it will be an unbearable burden in the future.

The US dollar bubble and the global economic distortions will all be broken. This is a global crisis that you have never seen before, and it will go far beyond any time in history.

For economic distortions and crisis response, I can refer to my article, the truth of the economic crisis and the key to China's economic pformation.

The global exchange rate will enter the age of the roller coaster that fluctuates greatly. For the small profit export industry, hedging exchange rate risk through various foreign exchange tools should become a daily job. Don't gamble. Your judgement is likely to be wrong.

For export enterprises which mainly supply the US market, we should be sober and guard against it. Because if the US dollar breaks down, the purchasing power of the United States will drop substantially, and our country should quickly turn a large amount of foreign exchange reserves into all kinds of foreign resources, including mineral resources, advanced technology and even various kinds of physical assets such as farms and ranches, and increase the gold reserves.