Funny you seem to have ignored the word "unified" in the sentence. It is clear from the article that there were two exchange rates, one "official" and one actual, before 1994. The "official rate" at the time only applied to foreign tourists to China who wanted to exchange US $ into RMB at certain government agency, say, China Travel Agency. The actual market rate at the time was totally a different rate, and the market rate applied to everything else outside tourism. Even at Bank of China, the exchange rate was $1 = 8.7 RMB if you had a Chinese friend and asked him/her to help you. The former Soviet Union also had an official exchange rate, in which one US dollar= 1 Rb. Of course, they could only enforce it on foreign tourists. Again, please ask a Chinese from mainland China about the actual exchange rate before 1994 if you know one.
That's a whole lot of rubbish given the fact that markets are not "zero sum" in any way. Why you do not understand this at all ? These kind of flawed ideas are what make ET pretty stupid sometimes. And you'll go on and on with your flawed theory, expanding on it at will, without ever understanding your basic premise is just plain wrong. It's like the Coin Flipping thread. A whole lot of bs masquerading as intellectual debate. Again, basic fundamental premise wrong.
The issue at hand isn't what the market rate in China was for the purposes of your friend and his anecdotal evidence. The question at hand is whether this devaluation affected the region and was a precipitating factor in the later Asian currency crisis. The balance of the evidence, according to this paper, suggests that it was. The follow-up to the quote cited: I'm familiar with black market rates in Third World countries, and how most transactions get done at that rate rather than the official rate. But if the black market rate was also depreciating 40% in the run-up to the official devaluation, then the effect on the rest of Southeast Asia would still have been severe.
Again, please ask a Chinese from mainland China about the actual exchange rate prior to 1994 if you know one, instead of blindly believing some fed reserchers in SF whose experience with RMB, if any, was probably only with the official exchange rate. Anecdotal evidence is still better than imaged ones.
Market rates fluctuate, while official rates don't. That's generally what happens in Third World countries. Also, the tendency is for the black market rate to fall relative to the official one, else why would there be an official rate in the first place? These things are commonplaces in poor countries. So the Fed's point, as I quoted it, is probably correct. It would actually be unusual if it weren't. Anyway, you could always ask your friend. As for me, I'll be seeing some folks who emigrated here from the mainland during the week. We'll see if any of them can remember that far back.
Nice - What started out as the typical ET slug fest has proven to be pretty informative. I had always assumed that the Asian contagion had been precipitated by a Japanese pull back in investment in emerging markets. The comments about China's devaluation really help put this into perspective. The core issue for emergent markets in Asia was their exposure to debt service (in Yen) with depreciating currencies. The hard lesson being to keep "hot money" out of the economy if it can't really be absorbed / put to work in a meaningful way. The zero sum context is a bit hard to grasp because it's really framed in pure economic terms based on idealized models. We all intuitively know that the short run governs most policy / business decisions, not long run models. I do like the Austrian schools take that it is pretty hard to accurately model / predict an economic interaction. It dovetails nicely with Soro's view that many relationships (including market relationships) have a "reflexive" component which causes them to indeterminate at times. Economic models are useful abstractions, but their limitations are probably not grasped until the sh-- hits the fan. Examples are all over the place where models make underlying assumptions which prove to be in accurate. Market Failure is something no one seems to plan for - Ask any financial rocket scientist Long Term Capital Management Housing Bubble - Banking System - Securitization Derivative Market Failure Good Luck Traders - This week will be interesting
No I am not from India and neither have i "lived" there. However, i have been to the region a couple of times and am deeply interested in Hindu and Buddhist philosophy.
Is he is "so profitable" then why is he banning withdrawals from his fund? Because he had SEVERE losses. Newbies: They don't want you to know the FACT that he banned all withdrawals. Most ponzis ban withdrawals in their later stages, just before the fall. Google about this withdrawal banning. The inconvenient truth they don't want you to find out.