Ufo propu engine, closed loop

[ltseung888]

Tseung, the USA strategy is to have the USD as the dominant or only Settlement and Reserve Currency.  If China behaves according to US wishes, USA can call off the attack.  Or it may even loan US dollars to China to defeat the Currency Speculators.

If the Foreign Reserve of China is depleted, China may have to beg the World Bank or IMF (and behave according to US wishes).

The rules are written by the West.  No matter how hard you work.  No matter how fast your GDP grows. If you lose the currency war, you will suffer badly.  No bullets need to be fired.  No bombs need to be dropped.   

There is merit in the Malaysia Ringgit example. Retreat from the Settlement and Reserve Currency Position. Climb out from the trap. There may be a loss of face but a proper explanation will solve it. If the Foreign Reserve were depleted, the consequence will be catastrophic. Such failures toppled many governments.
The West will not admit to attack via Currency War. They will say that China was in terrible debt, property bubble, corruption and inevitable failure of Communism.

Remember the art of war from 孫子 . Go for Super Democracy and Mutual Credits.

[ltseung888]

Daring Ptoroposal

Tseung, the main Reserve Currency is the US Dollar. The Dollar has value because the USA Government is behind it. There is no viable alternative at present.

When China is the main trading partner with most Nations, the trade can be done via Mutual Credits or Currency Swap without involving the Dollar. China can then take the position of Reserve Currency. Other currencies can be pegged to it. China can pledge to defend the Currencies of these other Nations. As the Reserve Currency, China can print the necessary thin-air money to do so.


USA allowed the Hedge Funds to attack the financial stability of other Nations. (If USA defended Thailand in 1997, the Asian Financial Crisis would not have happened.) Developing Nations can focus on Meaningful Economic Activities rather than fearing another attack by the Hedge Funds.

Let me use the following analogy that may offend many people.
(1)    Person A got very rich via unfair means such as selling drugs and robbing others. He stopped doing bad things and got on with legitimate businesses. At the back of his mind, he is afraid that those whom he hurt might revenge. He protects himself with high fences, security guards and acts as "policeman". When he sees Person B getting rich, his first reaction is – does that post a threat to his wealth? Would Person B revenge? He might deliberately suppress or destroy Person B – treating Person B as a potential enemy.

(2)    Person C got very rich via innovation and does legitimate businesses from the very beginning. Person C does not feel that he has any enemies. He is happy to share the secrets of his wealth. He may still have high fences to safeguard his wealth but he is happy to invite others to share his happiness.

(3)    The tactic used by Person A is to keep the "poor" away and even keep them poor by any means available. The tactic used by Person C is to get the "poor" wealthy.

I think I have already offended many. But the Internet allows anyone to post his thoughts...

[ltseung888]

One comment:


What happens if all Nations pegged their currencies rigidly to USD?  Are all effectively Reserve Currencies?

[ltseung888]

One comment:

What happens if all Nations pegged their currencies rigidly to USD?  Are all effectively Reserve Currencies?

Tseung, the major stake holder, USA, will not allow it. The strategy I can think of is the Malaysia Ringgit example. Make trading of Ringgit outside Malaysia illegal.

When another Nation trades with Malaysia, the settlement will be in Malaysia. The exchange can be rigidly pegged to the UD Dollar. Or a Mutual Credit (Currency Swap) deal can be used. This avoids the attack by the Hedge Funds or Currency Speculators.

The "weapons" of the Speculators are too powerful. It was like the Eighteenth Century when the West used guns against the Native Americans. It was up to the West when to attack. The West could offer a few feathers to claim New York, the Natives had no choice but to accept. The Currency War Weapon allowing trading of Currencies is one-sided. If you cannot think of a solution, the Central Bankers are unlikely to think of a solution. The Central Bankers in Britain, USSR, Asian Tigers could not. Hoping that the Central Bankers in China has a solution is just a hope or wishful thinking.

In trade, a merchant has an option of not selling his goods to a particular customer. In Currency War, the Forex transactions are so numerous that identifying the "customer" is virtually impossible. Loaning to another Bank for normal business transactions is a necessary element of International Trade. But how can one be sure that "this other Bank" is not loaning to Speculators to attack the Currency. Malaysia took the "extreme" position of making the Ringgit trading illegal outside Malaysia.

One Question raised was - why are many Countries not afraid. The answer was similar to the Eighteenth Century, it was up to Britain to choose to attack. Now it is up to USA. USA can detach itself by allowing its Hedge Funds to do the dirty work and claim that it is Market Forces. (U.K. claimed that it never sold opium, it was their Merchants.)

[ltseung888]

Tseung, a market exists if there are willing buyers and sellers. Such a market will satisfy the needs of both and thus is a win-win.


When a Market is totally biased to one side, that is an unfair Market. In the Forex, if the Speculators gang up to push a Currency down, the Central Bank had no choice but to become the ONLY buyer. That will deplete the Foreign Currency Reserve. It is not Market Force at work. It is WAR - to destroy the stability of that Nation.


The Malaysian Example is to retreat away from the War. The PLUS is preservation of Currency Reserve and restore stability. The MINUS is not following the rules and possibility of diminished trade. China should avoid WAR (real or Economic). Retreating is an option. Forget about losing face...