China devalues currency then tells the U.S. they want involved in dollar policy changes

After a subsidiary of the Chinese state purchased the J.P. Morgan HQ building directly across and connected to the New York Federal Reserve a few years ago, it was rumored that China not only held a large stake in the bank itself, but are also now a partial shareholder with ties directly to America’s central bank.

The significance of this had not been fully been seen in the public view yet, but something happened on May 27 that could change that scenario entirely.

Earlier this week, China devalued their currency on a scope not seen since 2011.  And the primary reason behind this was that several Federal Reserve regional Presidents were going public to jawbone the dollar higher, and making vague promises of a rate hike next month at the June FOMC meeting.  Like with the European Central Bank, Fed officials know they don’t actually have to institute actual policy to move the markets in a direction of their choosing, since the HFT Algo’s will do their work for them based on their language.

China’s Yuan currency remains pegged to the dollar for the time being, and this has been the one big secret that Wall Street, the mainstream media, bought and paid for tool economists, and the central banks have refrained from ever talking about… that because the dollar is the sole global reserve currency, monetary policies initiated by the Fed do not just affect the U.S. markets, but every other global currency, and with them, their own economic consequences.

Ie…. where do you think the Arab Spring came from?  When the dollar became so strong that commodity prices shot up into bubble territory, it exported inflation across the globe and made it nearly impossibly for nations such as Egypt, Yemen, and others to afford to buy dollars so they could buy food stuffs on the open market.

Thus the Fed to the world is like the now defunct E.F. Hutton to investors… when they talk, sneeze, or initiate policies, the world not only listens, but runs for cover to deal with the aftermath of what those words and actions do within their own markets and economies.

And now it appears that because of the Fed’s blatant ignorance of what their words last week did to currencies such as the Yuan, China has finally decided to act and are now not only demanding up front notice before the Fed makes any future moves on interest rates on the dollar, but perhaps even to now become involved in helping to create these policies.

Mainland China’s monetary authorities are hoping to coordinate policy efforts with the US Federal Reserve, as expectations regarding the Fed interest rate and the latest devaluation in the effective renminbi FX rate have rocked the markets, a development both sides would like to avoid in the future.

Annual negotiations will commence in June, Chinese officials said, with Beijing interested in determining whether a June or July Fed fund rates hike should be expected. Meanwhile, the US Department of the Treasury put the Chinese renminbi on their new currency watchlist as potentially hazardous to market stability, given the unpredictable FX rate fluctuations.

In May, the renminbi’s effective FX rate dropped 1.2% as Beijing has been trying to spur its slowing economy via attempts to regain a competitive edge in international trade. Meanwhile, as the US FRB gears up for the next round of tightening in monetary policies, the disruptive appreciation of the dollar entailing the move is stirring concern regarding a more dramatic potential slowdown in the Chinese economy. Both the US and China are interested in preventing sudden policy moves on either side, and a policy coordination deems necessary; the People’s Bank of China (PBOC) is willing to negotiate.

”The Chinese side will argue that the US should tread cautiously as it tightens monetary policy and avoid any surprises,” Mark Williams of London-based Capital Economics said. “The Federal Reserve will make its decision solely on what it deems best for the US economy, but it is clear that concerns about China have influenced its thinking about the balance of risks facing the US.”

— Sputnik News

The Chinese government has already shown that they will no longer accept a future based on a singular global reserve currency, and especially one controlled solely by the United States.  And over the past four years China has initiated their own duplicate financial infrastructures to counter dollar hegemony and have even forced their way into the IMF’s SDR currency program.

Until the past few years, no nation or economy was strong enough to stand up to Washington or the Fed to demand that they pay attention to the consequences of their monetary policies, and how they would come to affect economies in the rest of the world.  But as dollar hegemony wanes in the global financial system, and nations once beholden to servitude under the dollar are finding new alternatives to divest themselves of the currency entirely, it is perhaps the perfect time for China to come to the table with sufficient power behind them to not only question the central bank’s future policies, but demand a seat at the table in creating them.

4 comments

  1. From the last quote in this excellent article…….. "The Federal Reserve will make its decision solely on what it deems best for the US economy, but it is clear that concerns about China have influenced its thinking about the balance of risks facing the US.”

    "Solely based on what it deems necessary for the US economy"………..and just ‘what & who’ defines the US economy these days? Clearly elites & banksters……..

    You can’t give away your real production without suffering the aftershocks. Currency warfare though clearly more important than equity warfare, will eventually succumb to hard asset & natural resource warfare. With victory for those that capitalize on the everlasting bull market therein.

    Great great analysis in the first few paragraphs by Mr. Ken Schortgen Jr. ……. And, yes you read my comment right there is a never ending bull market in natural resources & hard assets, with cycles of up & down. It is always a bull, bears need not apply. The only thing that can turn it into a bear is the stupidity of war, and the destruction of human life, and thus the never ending demand side of the equation. The west has forgotten the simple concept to take advantage of what God has provided. A return on investment that can’t be stopped, bay any paper instruments.

    Great great great article one of the best I ever read, with short and sweet brilliant analysis. Wish I could be short & sweet even my comments are long winded.

    Wolf Gray

    1. Because ultimately human civilization depends on natural resources for making stuff to fulfil people’s needs and then the idea of an economy is measured on the numbers of manufacturing and production. This is why our next goal should be to acquire resources from other planets or moons

      The rest is speculation on the ups and downs and by themselves are of little worth but were an attempt to make the profits of real manufacturing and production look a lot bigger and it was a matter of time before nominal values diverged greatly from real values.

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