Was letting the mind run free the other day, thinking on the "current state of the world" (yes, I know - dangerous!) and a thought stuck its head up.
We all know China is stacking gold (and probably silver). In fact, China and its citizens have just purchased lots of physical gold. They're selling some back as Pandas and Lunars and other coins and the mintages on those have been increasing, showing an increasing capacity to stamp pretty designs on pretty metals.
What if the Chinese have decided to split their economy into domestic and international, using gold and silver money for domestic (call it Good Yuan) with a varying exchange rate for the international (call it Junk Yuan) that they use to trade with the rest of the world?
They can "revalue" the internal currency, smacking inflation and debts down, while still keeping the Junk Yuan weak to help their trade. The control over the exchange rate between the two means inflation can't be imported. AND they can print as much Junk Yuan as they want without stuffing up the internal economy or accept as much USD as necessary (thus reducing the impact of Uncle Ben's presses on their internal economy).
They can't unilaterally introduce a gold-backed currency for international trade because Gresham's Law would apply. They could introduce it into trade between themselves and Brazil et al but, again, there'd be problems.
Naturally, the export (or removal from the PRC) of Good Yuan would be an economic crime against the People with the death penalty as the sanction for being caught.
What does the Stacker community think? Is it possible? Feasible?
We all know China is stacking gold (and probably silver). In fact, China and its citizens have just purchased lots of physical gold. They're selling some back as Pandas and Lunars and other coins and the mintages on those have been increasing, showing an increasing capacity to stamp pretty designs on pretty metals.
What if the Chinese have decided to split their economy into domestic and international, using gold and silver money for domestic (call it Good Yuan) with a varying exchange rate for the international (call it Junk Yuan) that they use to trade with the rest of the world?
They can "revalue" the internal currency, smacking inflation and debts down, while still keeping the Junk Yuan weak to help their trade. The control over the exchange rate between the two means inflation can't be imported. AND they can print as much Junk Yuan as they want without stuffing up the internal economy or accept as much USD as necessary (thus reducing the impact of Uncle Ben's presses on their internal economy).
They can't unilaterally introduce a gold-backed currency for international trade because Gresham's Law would apply. They could introduce it into trade between themselves and Brazil et al but, again, there'd be problems.
Naturally, the export (or removal from the PRC) of Good Yuan would be an economic crime against the People with the death penalty as the sanction for being caught.
What does the Stacker community think? Is it possible? Feasible?
