Renminbi slide may prompt change to Chinese foreign exchange regime

The Renminbi, on Tuesday of last week, fell by the most in a single day since 2012, raising expectations of an imminent change to China’s foreign exchange regime. The move in the onshore exchange rate followed five days of intense selling in offshore markets, where the Renminbi fell 1.2 per cent against the dollar. Though a small move by international standards, the Renminbi has not experienced such a large swing since late 2012.

Onshore Renminbi, known as CNY, must trade within a prescribed band. Each day the People’s Bank of China sets a rate against the dollar around which the CNY is allowed to fall or gain by a maximum of 1 per cent. The offshore Renminbi, or CNH, can trade freely and is the focus for international investors. Both versions of the currency are now trading at their weakest levels against the US dollar since early October.

Analysts believe the drop in the Renminbi, which hit record highs in the final week of January, is being engineered by the country’s central bank in a bid to remove the currency’s label as a one-way bet.

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Time for central banks to step back – finally a discussion on the true issues!

This is big news! It is rare that the flaws of the world’s financial system are discussed as openly and accurately as in a recent commentary by George Magnus of the Financial Times.

Central banks have been on the back foot recently. The Federal Reserve has been criticized for its tapering strategy. Forward guidance in the US and UK has become a little discredited. Higher policy rate expectations are played down but are no longer an academic issue. The European Central Bank’s unused lender-of-last-resort policy tool for sovereign governments may have been rendered unusable.

Controversially, perhaps, we should welcome these developments. They could help us to stop obsessing about the capacity of central banks alone to address our economic challenges, and, more generally, to focus on building a more robust financial system.

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Bitcoin moving into a new – much more regulated – phase?

Trading was suspended on Tuesday on Mt Gox, the troubled Bitcoin exchange, as rumors swirled online about the fate of the once-leading company. At noon in Tokyo, the company’s website was taken offline shortly after a prominent group of Bitcoin promoters posted a statement denouncing Mt Gox chief executive Mark Karpelès.

In the hours that followed, a document circulated online saying that the exchange had lost 744,000 Bitcoins – equivalent to almost 6 per cent of the 12.44m coins in circulation. Calls and emails to Mt Gox were not returned.

This is only one of several episodes that have led to a call for more regulation to make Bitcoin applicable for the “mainstream” – surprise, surprise. So the question is whether Bitcoin’s days of “freedom” are numbered. Bitcoin founders and aficionados stand before a choice – purist idealism and freedom, or growth, success and possibly lots of money? Generally, one can expect the money to win.

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A few level-headed answers to Swiss immigration vote questions

When Swiss voters decided on February 9 to re-introduce immigrant quotas, they raised not only the blood pressure of European Union politicians but also many questions. Under the following link, a collection of questions and answers will help you better understand some of the facts and figures – important, in a time when polemic fear-mongering and emotional nonsense from all parties involved are widely present.

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OECD Sets Global Standard for Automated Tax Information Exchange

FATCA goes global!

Last week, the Organization for Economic Cooperation and Development (OECD) announced that it has created a worldwide standard through which countries and jurisdictions can automatically furnish tax information with each other, so authorities can find people cheating on their taxes.

Sparked by a mandate from the Group of 20 countries, and inspired in part by the U.S. Foreign Account Tax Compliance Act, or FATCA, the OECD will present the global standard to the G-20 finance ministers when they meet later this month in Sydney.

“Globalization of the world’s financial system has made it increasingly simple for people to make, hold and manage investments outside their country of residence,” said Angel Gurría, secretary general of the OECD, in a statement. “This new standard on automatic exchange of information will ramp up international tax co-operation, putting governments back on a more even footing as they seek to protect the integrity of their tax systems and fight tax evasion.”

What about the rights to privacy, property and freedom? They do not exist in an increasingly regulated world, one governed by large (indebted) governments, large multi-national institutions and millions of overzealous bureaucrats. Do the People agree? Are citizens being asked? No, because they apparently wouldn’t understand. Democracy, in all places except Switzerland, has been degraded to a nameplate fig leaf with no meaning.

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Have the Swiss gone insane?! How could they!?…

No, the Swiss have not gone insane. Switzerland is not part of the EU. It is not (or should not be) reigned and directed by the centralist bureaucrats in Brussels, although at times – and certainly after this latest vote – the language from EU functionaries such as Barroso would indicate the contrary…

The Swiss people, true to their direct democracy principles, have voted. They, contrary to other European countries, have the right to enforce their preferences by vote on a regular basis. A lot of other Europeans – not the politicians and bureaucrats of course – envy and respect Switzerland for this.

The Swiss want to keep their independence and self-determination – with any and all potential implications, problems and responsibilities that might come with it. It is called freedom. It is never for free. Jacques Rousseau once wrote “Free people, remember this maxim: we may acquire liberty, but it is never recovered if it is once lost”. 

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