IMF to add yuan to SDR basket today; yuan to become reserve currency

[Zippyjuan]

Reread my post above. The way I read their side note is that the 11% weighting is a preliminary figure and is subject to day-to-day changes based on currency valuation fluctuations once it takes effect Oct 1 2016. IOW, the weighting becomes floating instead of static.

The total amount of say dollars in the SDR may change over time as currency exchange rates change but their total percent of the value of the SDR basket is kept the same.

The following weights based on the new formula will be used to determine the amounts of each of the five currencies in the new SDR basket that will take effect on October 1, 2016:

U.S. dollar 41.73 percent (compared with 41.9 percent at the 2010 Review)
Euro 30.93 percent (compared with 37.4 percent at the 2010 Review)
Chinese renminbi 10.92 percent
Japanese yen 8.33 percent (compared with 9.4 percent at the 2010 Review)
Pound sterling 8.09 percent (compared with 11.3 percent at the 2010 Review)

The amounts of each currency in the revised basket will be calculated on September 30, 2016, in accordance with the above-listed weights. The calculation will be made on the basis of the average exchange rates for these currencies over the three months ending on that date, in a manner that ensures that the value of the SDR will be the same on September 30, 2016 under the current and revised valuation baskets. The IMF will publish illustrative currency amounts in the weeks leading up to October 1, 2016.

If the value of the dollar goes up against the other currencies, the total number of dollars will be reduced but they will still account for 41.73% of the total basket. China's share will stay at 10.92% of the basket. The balances are adjusted to account for changes in the exchange rate, but their share stays the same.

 

[devil21]

That doesn't compute to me. The amount of currency in percentage form loses most of it's relevance if the value of each currency were to change dramatically. Hypothetically, 41% of extremely devalued dollars could be less valuable than 11% of highly valued yuan, yes? The weighting numbers seem like obfuscation, especially since the yuan has been unpegged from the dollar. I guess we will see! It'll get really interesting when the yuan is declared gold backed...also noted that the new rmb note has gold print and is the same max denomination of 100 as the dollar. Strikes me as foreshadowing parity between yuan and dollar and that yuan will be declared gold backed.

 

[Zippyjuan]

It'll get really interesting when the yuan is declared gold backed.

You keep talking about a gold backed yuan but China has given zero indications they would even consider doing that. Or do you have any links showing they are considering it?

Their new 100 rmb note has "golden to green color changing ink" but not actual gold on it. They have had a 100 yuan note since 1980. Many countries have 100 as their highest denomination bill- nothing of significance there.

http://www.scmp.com/news/china/soci...sue-updated-100-yuan-banknote-design-november

 

[devil21]

I said gold print, not gold. Symbolic, no? I think all currencies (for as long as actual paper currencies continue to exist) will eventually be declared gold backed again, including the dollar. The yuan will be the first though. Not everything has a link, sorry. Not everything is put out for the masses.

 

[Zippyjuan]

Not everything is put out for the masses.

I see. You have some sort of secret inside sources telling you they will do it. Or you think they should so therefore eventually they will.

 

[Krugminator2]

People are always sour on the United States and at the same time think China is doing something wonderful and is just about best the United States. China is a mess. They spent a zillion dollars on infrastructure boondoggles. That $28 trillion number above doesn't even include local Chinese debt, which is estimated at $20 trillion.

What's funny (and also bad for the world economy) is that all of these countries that probably read Zero Hedge thought the dollar was doomed so they bet against the dollar by buying their debt dominated in US dollars and they are getting their balls squeezed. Also the United States has enough to gold on hand right now to establish a gold standard TODAY if we wanted to.

It will be another 100 years before China could even possibly catch up to the United States.

China is at 280% debt to GDP. They have built their economy on a house of cards. http://www.economist.com/news/finan...tripping-economic-growth-deleveraging-delayed

 

[DFF]

And it's official. Yuan is a (the?) new global reserve currency. IMF just announced the addition. Gonna be an interesting week.

China's not ready yet for prime time. The USD will continue being the world's reserve currency for the foreseeable future.

 

[Danke]

People are always sour on the United States and at the same time think China is doing something wonderful and is just about best the United States. China is a mess. They spent a zillion dollars on infrastructure boondoggles. That $28 trillion number above doesn't even include local Chinese debt, which is estimated at $20 trillion.

What's funny (and also bad for the world economy) is that all of these countries that probably read Zero Hedge thought the dollar was doomed so they bet against the dollar by buying their debt dominated in US dollars and they are getting their balls squeezed. Also the United States has enough to gold on hand right now to establish a gold standard TODAY if we wanted to.

It will be another 100 years before China could even possibly catch up to the United States.

China is at 280% debt to GDP. They have built their economy on a house of cards. http://www.economist.com/news/finan...tripping-economic-growth-deleveraging-delayed

But they are buying tons of gold, for what reason?

 

[DFF]

But they are buying tons of gold, for what reason?

As a Put option against their US Treasury holdings. Just in case Washington decides to do a selective default and not repay foreign holders of US debt.

 

[devil21]

I see. You have some sort of secret inside sources telling you they will do it. Or you think they should so therefore eventually they will.

I do live in a city crawling with bankers And it's not really a secret. It's just not very publicized.

China's not ready yet for prime time. The USD will continue being the world's reserve currency for the foreseeable future.

Chinese authorities are furiously working to monetize their inhabitants through birth registration requirements as was done to inhabitants of the US, that resulted in the dollar becoming the global reserve currency. The game is the same, it's just being moved to the next planned superpower. The removal of the single child restriction and efforts to turn China into a consumption economy instead of an export/agrarian society are also signs of what is to come. Once you know the banker's games, it's not hard to "predict" the future.

 

[Pauls' Revere]

http://www.nytimes.com/2015/12/01/business/international/china-renminbi-reserve-currency.html?_r=1

The I.M.F. decision also says a lot about the waning influence of Europe: The renminbi is mainly replacing part of the euro’s role in the special drawing rights. Assessing currencies for the accounting system, the fund put a greater emphasis on their different roles in international finance. The dollar still dominates in finance and trade, while the renminbi is quickly gaining ground on the euro.

The United States Treasury said it “supported” the I.M.F. decision.

Besides its symbolic weight, the I.M.F. label, which will take effect at the end of September next year, carries specific benefits. The renminbi will become one of the currencies used in the disbursement and repayment of international bailouts denominated in the fund’s accounting unit, like Greece’s debt deal.

 

[devil21]

http://www.nytimes.com/2015/12/01/business/international/china-renminbi-reserve-currency.html?_r=1

The I.M.F. decision also says a lot about the waning influence of Europe: The renminbi is mainly replacing part of the euro’s role in the special drawing rights. Assessing currencies for the accounting system, the fund put a greater emphasis on their different roles in international finance. The dollar still dominates in finance and trade, while the renminbi is quickly gaining ground on the euro.

The United States Treasury said it “supported” the I.M.F. decision.

Besides its symbolic weight, the I.M.F. label, which will take effect at the end of September next year, carries specific benefits. The renminbi will become one of the currencies used in the disbursement and repayment of international bailouts denominated in the fund’s accounting unit, like Greece’s debt deal.

The "money quote" is bolded.