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What Can Go Wrong: China
If it is not too much of an intellectual stretch to say that China is part of the monetary union that is called the United States—the 51st state, if you will —
then it is not too much of a stretch to say that what can go wrong is that China decides—or is forced—to secede.
Paul McCulley, June 2007
China has kept its currency, the yuan, tied as closely as possible to the value of the U.S. dollar because that makes China’s exports more competitive. But in doing this, China has essentially ceded the control of its monetary policy to the Federal Reserve, in the same way that all the 50 states in the United States have.
In such fiat currency regimes, the sovereign has the ability to choose one of two goals for its central bank:
stabilizing either the domestic purchasing power of the currency or the foreign exchange value of the currency.
The sovereign can stabilize the domestic purchasing power of the currency by having its central bank target a domestic price for the currency, which is done by raising or lowering interest rates, or by having the central bank target the quantity of its currency, which is done by having the central bank set a growth rate for the domestic money stock or money supply.
The sovereign can stabilize the foreign exchange value of the currency by having its central bank target the price of the currency in the foreign exchange market, letting currency reserves rise and fall as necessary as a consequence of foreign exchange intervention activities.
By the laws of central bank plumbing, a fiat currency country’s central bank can peg only one of these three policy targets; once one of the variables is pegged, the other two become market-determined, unless constrained by regulatory structures.
China will secede at some point.
Svaret kan man hämta i en liten elegant text av Nils-Eric Sandberg (DN 18/9 1987):
"Både teori och erfarenhet säger att staten kan styra bara en av de tre variablerna, ränta, inflationstakt och växelkurs.
Staten kan fritt välja ut vilken av de tre ska fixeras, men bara en.
Ty två av dessa variabler blir i längden alltid en funktion av den tredje.
Om staten fixerar växelkursen får man ta den ränta och den inflationstakt som blir följden.
Om man fixerar räntan till en viss nivå kommer inflationstakt och växelkurs att anpassas efter det. Etc."
Läs mer här
Kommentar av Rolf Englund:
Häri ligger grunden för katastrofen 1992. Riksbanken kunde inte höja räntan för att
minska överhettningen i slutet av 1980-talet
(om räntan höjdes blev det än mer lönande att räntearbitragera).
Inte heller kunde riksbanken sänka räntan, när det behövdes i början på 90-talet, för räntan skulle
sättas på en nivå som gjorde att växelkursen blev den som regeringarna, ledda av Ingvar Carlsson och Carl Bildt,
hade bestämt.
Elementärt, min käre Watson.
Mer av Rolf Englund om kronkursförsvaret.