Comments by "looseycanon" (@looseycanon) on "laowhy86"
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I wouldn't be talking about de-dollarization just yet. Look at how huge the USD is some 40% of all trade? That will take a while to fall from. A really long time and with Saudis abandoning the Petrodollar, I'd say, that de-dollarization may well be in it's initial stages. Assuming that true, there are two questions, neither good for China. 1) Is this irreversible? And two, assuming a new currency will indeed overtake USD,which will it be? I don't really think, it will be Yuan, given they don't have strong enough domestic market, to attract people willing to sell enough into it, especially since the CCP can arbitrarily change quotas and tariffs, and they don't really need to look at the economic effect on their country... they can't really be voted out over it. In my opinion, given in how many countries it is used or has other currencies pegged to it, the Euro is in the best position for this. But what ever the case, it will take decades for effects to become intelligible.
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Well, it doesn't necessarily need to be more expensive, to use local currencies, under the condition, that there is a lot of bi-directional trade. Say there's a company in Romania that also has a daughter company in Egypt, which produces some semi-product for them and does assembly of final products for non-EU markets. For such a company, trading in RON, EGP or EUR, based on how much income they have in which currency would be benefitial. Say they also export secondary product to Egypt, which is consumed there, then, they'd have competetive advantage, if they accepted Egyptian Pounds and imported something that they need to completely evade conversion. Or they only had income in RON and, then, they would strictly trade withthis daughter company in RON and simply up the ante with each business cycle. Finally, if they traded heavily with the EU, they'd trade in EUR, because that is their primary income currency. The problem with this, is how companies get more and more specialized, there is less space for such trade constructs.
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@markusgorelli5278 Yeah, it depends... you could say, that money preserves value, just like stated in mainstream economics and you'd be mostly right the way you phrase it. Or you could diverge and argue,, that currency itself doesn't hold any value, only displays it, or that risks in all currencies other than your home currency are too great (I'm inclined to the former), in which case, you could argue, that Euro is actually even better currency to trade in, because it simplifies access to more markets, all be it somewhat harmonized and smaller ones, making it more flexible currency around.
To illustrate, let's take Egyptian trading company, that wants to have EGP at the end of the trade, because it is it's home currency. This trade company could buy or even mine natural gas in Egypt and export it to Germany, who needs it for industrial applications and heating, while importing French heavily subsidized agriculture products to feed the growing population of a nation, that already had limited access to arable land and now on top of that their water nicked by Ethiopia. Because Euro is native currency for both Germans and French you don't undergo extra risk, stemming from third party currency fluctuating against both currencies involved in trading. The fact, that the Eurozone is not quite as homogeneous economically as the US, is in my opinion an advantage, because you can more easily integrate production steps of production chain. If you were to try this with any other currency (except CFA Frank, which is fix pegged to Euro), you'd fail, because you'd run into national currencies with not as diverse product base to trade export market currency for at home sellable goods. Bonus? Germany and France have very different view of natural gas, meaning, because the currency is shared between them, policy difference doesn't threaten this kind of deal as much, but would complicate if not prevent such trade from happening, because the one who has suitable return goods might not accept a third party currency, if the trade were to take place strictly in local currencies and Germans still had Marks and French Franks.
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