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Thoughts On “RMB Meets Criteria For SDR Inclusion”
Link To Earlier Post
Dane Congratulations JC and PoM! The fruit tastes so much better when it’s allowed to ripen on the branch doesn’t it? JC you must really be emotionally torn with the layoffs and suffering industry around you and now this excitement with the IMF announcement.
Man so much so fast its hard to keep up. Where we watching for bond sales to create liquidity? If so this may be interesting.
“Announcement of the Auction for Enhanced-liquidity
[Provisional Translation] November 13, 2015 Ministry of Finance
1. Auction Date November 20, 2015
2. Issue Date November 25, 2015
3. Eligible Issues
Issue No.312-339 of outstanding 10-year JGBs
Issue No.48-127 of outstanding 20-year JGBs
Issue No.1-4 of outstanding 30-year JGBs
4. Offering Amount About 500 billion yen”
Dottie Derewicz Thank you JC for your many contributions and always being a step ahead of everyone on issues of macroeconomics.. I read another article this morning with the announcement of the RMB inclusion.
It will be interesting to watch this unfold. The article did say that even though the RMB will be as they put it..”anointed” on November 30th, the actual final step to inclusion will be October 2016.
I slept little last night thinking about the Paris tragedy. My heart goes out to those families affected by this horrendous act. I am glad I know who I am in Christ..and I know that is not the belief of all on this site, but it is my strength and power that is within…
ole butler same here
Alan Hi JC, I am a product of this website :)
I love researching. No matter which direction I take in my PoM research, it seems to all be coming back to the utmost importance of a substitution account and gold.
ANALYSIS OF RECENT IMF REPORT ON SDR ADJUSTMENTS (FREEPOM)
I have previously stated that China could be planning to place a large amount of gold on deposit with the IMF for a new allocation of SDR, and to subsidize, or underwrite, the exchange of USD held in its foreign reserve account with SDR.
This exchange would take place through a substitution account, and was thoroughly covered in the post Will China Transfer American Debt to the IMF.
At this point of my research I truly believe that the value of a substitution account is underrated.
TRADE AND DEVELOPMENT REPORT October 2015
Page 14 & 15 “…To further reduce exchange-rate volatility that might occur by moving out of official dollar denominated reserve assets into SDR-denominated reserves, the diversification could be managed through a so-called “substitution account”, as suggested in the debate on IMS reform during the 1970s.
This would be under the auspices of the IMF and used by member States’central banks and governments to deposit some or all of their dollar reserves, obtaining in exchange claims denominated in SDRs…”
Without the infrastructure available for a substitution account before the US Fed acts to normalize monetary policy is one thing, but for the IMF’s substitution account to not be available after the implementation of the AEC could be disastrous, could it not?
I really hope those that can consider and implement such things are considering the analysis of this website. In my research and understanding a substitution account under the auspices of the IMF is paramount for a smooth global rebalancing of current account imbalances.
If gold is available for use by countries with large current account surpluses in conjunction with this substitution account – then there is NO way we will see higher gold prices in the short to medium term.
I don’t want to consider what will happen to the global economy without an IMF substitution account for US dollar denominated holdings by foreign entities/actors. Thanks JC, Godspeed.
Alan could the IMF’s Plan B be the announcement of a substitution account?
Alan is the reason the US Congress hasn’t ratified the 2010 IMF Reforms because they are unwilling to adopt the usage of a substitution account along with a depreciating US dollar? [sorry :( my brain is just firing off so many questions about IMF substitution accounts right now]
Dane Hello Alan. I’ve been thinking about this for a couple days and keep walking away with more questions than answers. lol. Or “I figure it out” only to find a weakness in the theory later… :)
All I can say is my mind is mush….. :) Onward though!
“China’s top legislature on Wednesday ratified the Asian Infrastructure Investment Bank (AIIB) agreement, which establishes the legal framework for the bank.”
“With China being the largest shareholder, the ratification is a significant step closer to the AIIB’s formal establishment slated for the end of 2015.”
“With an authorized capital of $100 billion, the AIIB will finance infrastructure projects like the construction of roads, railways, and airports in the Asia-Pacific Region.
BRICS members China, India and Russia are the three largest shareholders, with a voting share of 26.06 per cent, 7.5 per cent and 5.92 per cent, respectively.
Among the bank’s 57 prospective founding members, 54 had signed the agreement as of last month, and the other three are expected to sign before the end of this year.
All prospective members should have their legislatures ratify the agreement before the end of 2016 to formally become founding members.
As long as at least 10 signatories, with capital contribution no less than 50 per cent, obtain legislative approvals, the agreement will become effective, Finance Minister Lou Jiwei told lawmakers.
Lou said Myanmar, Singapore and Brunei have received legislative approval, adding China’s ratification, with more than 30 per cent in capital contribution, is crucial to the bank’s timely operations.”
The AIIB is supposed to be ready by the end of 2015 but the prospective members need to have their legislatures ratify each member instance by the end of 2016 to be founding members.
Isn’t these dates uncannily similar to the time frames of the RMB being added to the SDR basket of currencies and then its official implementation in October of 2016.
What if the AIIB is the plan B?
In addition what happens if China uses $100bn in USD to seed their portion of the AIIB? And could this be a reason the US is not a member of the AIIB?
Dane If this could work China would probably want the USD to be as strong as possible for the deposit wouldn’t they?
This would maximize their deposits value then they could loan it out as fast as possible before the USD drops in value or comes into balance with the rest of the world.
And if TPP is passed in December then it would give a year almost for US companies to secure the infrastructure construction contracts before the USD drops in value.
Okay I think I’ve kicked this can down the road far enough. :)
shawn Michael It almost seems like the situation where an adult child is trying to take the keys and decision making authority from a parent because of their age and a medical condition. Probably not the best analogy, but it certainly seems that the old stubborn version of Uncle Sam, who used to be “The Guy” is resisting the new reality.
I wish he would just accept his dad bod, and live and let live. Not being the global bully any longer doesn’t mean you are reduced to irrelevancy.
I think the real reason the IMF 2010 reforms were not adopted is because those in the US government knew there would be a certain amount of pain involved in the transition and didn’t want it to happen on their watch.
There may very well be other explanations, but when it comes to government self-interest seems to be the common denominator. Hope everyone is well SM
Jenifer Lytle Russian President Vladimir Putin and IMF Managing Director Christine Lagarde during their meeting on the sidelines of the G20 summit in Antalya, Turkey, November 15, 2015
Putin offers Ukraine 3-year extension to pay off debt
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