Fifteen countries in West Africa want to launch a single currency: "ECO". The news caught the world's attention. Of course, this is not the first time that european countries in the past, represented by Germany and France, have also carried out monetary unification. Everyone is familiar with the euro, which we know as well.
▲ Euro
The unification of currencies will make it easier and closer for countries to trade with each other, which will certainly be a boost to the overall economy for many countries in West Africa. Then in this case, they no longer need to exchange dollars as a medium. This will also weaken their role for the dollar, the dollar has always been an international currency, they not only dominate in the currency, but also be able to use their own currency in the face of economic crisis, a large number of printing money, the debt to other countries, and even through the devaluation of the currency, their debt becomes less, it can be said that because of the status of the dollar, so that the development of their entire country has more advantages.
USD RMB 1:1
For example, in the past few years, in order to get rid of the impact of the epidemic on the economy, the United States has printed a large number of banknotes, and through the purchase of treasury bonds, a large number of them have been thrown to the financial market, among which the mainland renminbi has also appreciated and become 6.47. For the appreciation of the renminbi, many people have expressed their willingness to see such a situation, and even some people believe that if the value of our renminbi can be fully equal to the dollar, then for the overall economy of our country, there will be a great improvement. But is that really the case?
▲Exchange rate
This question, of course, needs to be viewed dialectically. The renminbi has become more valuable, which means that the dollar is constantly depreciating. So what are the drawbacks for the mainland?
Impact of exports on foreign trade
People's internal purchasing power has increased, but for people abroad, their purchasing power has also weakened. This is not good news for our export trade. This means that the competitiveness of mainland exports will be greatly weakened. In the past, the yen was not without such an operation, and the appreciation of the yen directly made the export competitiveness very weak, and finally had to burst the housing economic bubble and develop other real industries, even now, Japan has not been able to completely dissipate because of the impact it suffered at that time. The current situation on the mainland simply cannot burst the housing economic bubble at all, which will have a huge impact on the entire financial market. Not only that, many people in the mainland have jobs precisely because of a large number of overseas orders, overseas orders have disappeared, so can those industries continue to operate? Do those people still have jobs?
▲Japanese yen
inflation
The second is that for the mainland's foreign exchange reserves, the renminbi appreciates, then the mainland's foreign exchange reserves are depreciating, which does not mean that the value of those money has shrunk? Isn't this just working for others in vain?
The last point is inflation, the appreciation of the renminbi, a large amount of money will flow into China, then we need to give the same value of the renminbi, then the central bank must put a large amount of base currency into the financial market, and finally people's purchasing power will decline, and eventually inflation will occur.
▲Inflation
Conclusion
Obviously, the appreciation of the renminbi is not as everyone thinks, and it is possible to have a house in each hand. Whether the renminbi is excessively depreciating or unilaterally appreciating, the impact is very large. So whether it is appreciation or depreciation, it is not as simple as imagined.