There is a rumor that China is planning to devalue the Yuan by as much as 30% within days!

Source:

http://www.tickerforum.org/cgi-ticker/akcs-www?post=74052&findnew#new

as far as emerging economies go, the bets (and earliest profits) are always on “potential”- what is already fully developed isn’t potential anymore, it’s part of profits reported which ultimately attract the later investors/bettors. Iguess the easiest way to see this is the very “industry” of venture capitalism – if it works out, it’s profitable. if it doesn’t work out, it’s a loss.

mind you, not saying that India doesn’t have problems; it has a huge array of problems, not least social, economic and political . Then again, so does China, to different extents of course. the question is can India emerge stronger from this crisis the way China had from 97/98. Will they take the opportunity to create a miracle?

2fish
nice invective against foreign loans and capital but does it ever work ? how much organic growth has there really been in China? The biggest question re: Korea is why? particularly after its horrendous experience in 97/98?

BTW, that korea and india comment and question in earlier posts werev made before the collapse yesterday, maybe that answered questions and vindicated answers – I’m still as dumb as ever unfortunately and not afraid to admit my dumbness!

To date, the carnage in EMFX is largely the result of the global liquidity squeeze, as the world’s ability to fund Dollar assets and service Dollar debts has gone to zero.

Note what happened in Brazil yesterday. USDBRL opened limit up on the local futures, trading around 2.52. The Brazilian central bank then announced the initiation of a $50bn (25% of their outstanding reserves) program of providing fx swaps to locals. The mechanism is a simple fx swa,p whereby the BCB will sell USD for spot settlement to locals, buying BRL, and simultaneously buy back those dollars for settlement at some future date. Nobody’s actual FX exposure has changed in this trade, but the locals have use of the Dollars for the term of the swap. USDBRL fell over 10% from the highs on the news, which to me is pretty good evidence these moves are not about FX exposure at all, but are instead rooted in teh global dearth of Dollar liquidity.

I believe you are correct, but that is not how I think about it. The objective of my schemes is for the US government to accommodate foreign countries’ use of the dollar in the way that is most advantageous for the US, rather than to accumulate US reserves per se. In China’s case, their declared objective is also not to accumulate reserves, it is to maintain a currency peg. Both of my suggestions (tax or extra debt sales) work partly by directly reducing import demand and hence the trade deficit with China (and thereby reduce their reserves accumulation), and partly by spending the extra government revenue on convertible foreign currency (and subsequently on foreign assets) to give the US a trade surplus (or at least a smaller deficit) with those countries. If China’s real objective was to accumulate a certain amount of reserves or maintain a trade surplus of a certain value, they would presumably respond by targeting a weaker renminbi/dollar exchange rate, and the US in turn would need to buy more non-renminbi reserves to accommodate them.

Anyway, I hope you agree that both schemes would work (economically if not politically).

In passing, note that another option which I did not mention on this occasion is that the US could import more durable goods from overseas (eg German trains) rather than financial assets, in which case its current account deficit would not fall as much, but it would have more domestic assets to produce resources to service its debt held by foreign central banks.

I think the TARP is easier to understand, because in that case it is not necessary to consider different currencies and countries. Here I think the source of confusion is that, as TARP has been regarded as a bailout, it is assumed that the assets are practically worthless so that the headline figure will indeed end up as expenditure rather than investment.

if not, harbor a guess?

do you think there has been any CDS market in Agencies and/or Treasuries?

since moldbug’s not here, thought i’d throw this out.

is the only way to fund the IMF at this point is through selling their a chunk of their gold reserves?

would china be a likely and/or willing buyer?

Guess who’s going to be importing a lot? How’s that for “architecture”?

http://www.sinodaily.com/2006/081024095652.8d53hio1.html

China, Japan and 11 other Asian nations agreed Friday on an 80-billion-dollar war chest to save beleaguered currencies in the most ambitious regional plan yet to cope with the financial crisis.
“We plan with our East Asia dialogue partners to launch (the fund) as soon as possible,” said Sultan Hassanal Bolkiah of Brunei, one of the 13 nations planning to take part in the fund.

Earlier in the day, Chinese and Japanese leaders reached consensus on the plan with their counterparts from South Korea and the 10 members of the Association of Southeast Asian Nations (ASEAN).