tag:blogger.com,1999:blog-6704573462403312459.post8359942747291510523..comments2024-03-28T06:53:23.473-04:00Comments on Moneyness: Freshwater macro, China's silver standard, and the yuan pegJP Koninghttp://www.blogger.com/profile/02559687323828006535noreply@blogger.comBlogger13125tag:blogger.com,1999:blog-6704573462403312459.post-42084932198153700332015-08-29T23:59:34.872-04:002015-08-29T23:59:34.872-04:00Ha. Chinese RGDP data is murky enough in 2015, let...Ha. Chinese RGDP data is murky enough in 2015, let alone 70 years ago.<br /><br />Friedman had a point.Davehttps://www.blogger.com/profile/11877699517690934530noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-69794732218850527502015-08-09T20:44:38.943-04:002015-08-09T20:44:38.943-04:00"The Fed can tighten without changing the qua..."The Fed can tighten without changing the quantity of the base, say via forward guidance." <br /><br />In theory yes, but is it purely a coincidence that the dollar and 1-year rates all started rising about the same time the monetary base peaked?<br /><br />"So I'm not sure how useful it is to correlate the quantity of US base money to China's RER."<br /><br />Evidently that's moot since, as I pointed out above, there is no correlation. <br /><br />However in the age of ZIRP the US monetary base (in combination with the fed funds rate and foreign monetary bases and overnight rates) performs quite well as a predictor of the real exchange rate of foreign currencies in terms of the dollar.Mark A. Sadowskihttps://www.blogger.com/profile/08259309059705236763noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-29442419485147243432015-08-09T10:12:29.568-04:002015-08-09T10:12:29.568-04:00That's ok, I quote myself all the time.
The F...That's ok, I quote myself all the time.<br /><br />The Fed can tighten without changing the quantity of the base, say via forward guidance. So I'm not sure how useful it is to correlate the quantity of US base money to China's RER. JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-28141723526325677652015-08-09T07:52:48.785-04:002015-08-09T07:52:48.785-04:00Is it reluctant to do so? You could argue that it ...Is it reluctant to do so? You could argue that it has already devalued. The CNYUSD rate is lower than it was in early 2014:<br /><br />https://www.google.com/finance?q=cnyusd&ei=Gj7HVeHCCYKQmAHup62ICQ<br /><br />And in 2010, Sumner argued that a standstill, like the one in 2008-10, was effectively a devaluation. (See link in post).JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-62731335992293905452015-08-09T07:47:36.605-04:002015-08-09T07:47:36.605-04:00Yes, this was written with Glasner's Insane Ba...Yes, this was written with Glasner's Insane Bank of France in mind. It's pretty much the same mechanism, except silver instead of gold. JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-47389941193485112682015-08-08T17:42:07.623-04:002015-08-08T17:42:07.623-04:00Pardon me if I quote myself:
"A good place t...Pardon me if I quote myself:<br /><br />"A good place to start is by considering the relative weights of the currencies in TWEXBPA.<br /><br />The three currencies with the greatest weights are the Chinese renminbi (21.3%), the euro (16.4%) and the Canadian dollar (12.7%). To estimate the real exchange rate (RER) of each of these currencies in terms of the US dollar I computed the ratio of the Bank for International Settlements (BIS) Real Broad Effective Exchange Rate for each currency area divided by the BIS Real Broad Effective Exchange Rate of the US. I term these ratios RERCHUS, REREUUS and RERCAUS.<br /><br />The next thing I did was check to see if the US monetary base Granger causes the RER of these currencies in terms of the US dollar during the period from December 2008 through May 2015.<br /><br />Not only does the US monetary base not Granger cause RERCHUS, the p-value for the non-causality test is an amazingly high 99.15%. Of course the IMF has classified the exchange rate arrangement of China as a “crawl-like arrangement” (page 6) with a “de facto exchange rate anchor to the US dollar” (see footnote) since 2007.<br /><br />The Granger causality test result supports this classification, and in light of it, perhaps the exchange rate arrangement of China should really be termed a “crawl-like peg”.<br /><br />In any case, to do further analysis of RERCNUS I would need to know China’s monetary base and overnight repo rate, and personally I find the website of the People’s Bank of China even less user friendly than the Bank of England’s web site used to be. So I’ll leave it until a later date, and for now, based on the near 100% value of the above p-value, I’ll assume that the outcome of my efforts will end up in grim defeat anyway."<br /><br />https://thefaintofheart.wordpress.com/2015/07/14/the-monetary-base-and-the-exchange-rate-channel-of-monetary-transmission-in-the-age-of-zirp-part-2/Mark A. Sadowskihttps://www.blogger.com/profile/08259309059705236763noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-32098520946299419702015-08-08T10:45:44.922-04:002015-08-08T10:45:44.922-04:00"and then by buying up mass quantities of sil..."and then by buying up mass quantities of silver starting in 1934"<br /><br />reminds me somewhat of David Glasner's recent account of the French accumulating gold leading up to the depression<br /><br />comparable global pressures on the respective standards?JKHhttps://www.blogger.com/profile/06322177539880818556noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-85714160969084664082015-08-05T09:07:39.919-04:002015-08-05T09:07:39.919-04:00You're probably right about that. Had I more t...You're probably right about that. Had I more time and resources, I'd consider it. Alas, this is a mere blog.JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-10170541101318240982015-08-05T09:04:12.911-04:002015-08-05T09:04:12.911-04:00Thanks for the links.Thanks for the links.JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-1486627977632976452015-08-05T05:23:54.175-04:002015-08-05T05:23:54.175-04:00To really understand this you will have to know so...To really understand this you will have to know someone who is familiar with the Sinology literature. The best is probably written in Japanese (yes Japanese). This literature is historically very well informed and meticulous. The other good news is that there are no models - ie no artificial construct, fiction a la ISLM , New-Classical or New-Keynesian related nonsense gadgets or gimmicks. This is knowledge built up entirely by observing the facts.<br /><br />Your first port of call should be your Sinology department.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-40881335933888609292015-08-04T10:32:39.469-04:002015-08-04T10:32:39.469-04:00There has been a bit of recent literature on the C...There has been a bit of recent literature on the Chinese silver standard, such as:<br />https://ideas.repec.org/a/eee/exehis/v50y2013i3p446-462.html<br /><br />http://www.runtogold.com/images/3Lai68.pdfLorenzohttps://www.blogger.com/profile/00305933404442191098noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-47756317674148105372015-08-04T09:08:33.625-04:002015-08-04T09:08:33.625-04:00Yep, should be growth.Yep, should be growth.JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-67619678213115031772015-08-04T05:16:09.128-04:002015-08-04T05:16:09.128-04:00JP: "Chinese GDP continues to fall to multi-d...JP: "Chinese GDP continues to fall to multi-decade lows..."<br /><br />Should be GDP *growth* ?<br /><br />(Though it's not surprising that GDP growth should fall *slowly* over time, diminishing returns and all that, due to the "catch-up effect" playing out.)Nick Rowehttps://www.blogger.com/profile/04982579343160429422noreply@blogger.com