How to Maximize Gains from Currency Depreciation
Windson Liu
Hello all, I'm from eChina, currently an ally of eUSA.
I'm here to talk about a proposition that may be interesting and profitable to you folks. And no, it's not an MLM scheme or Nigerian bank account thing.
Due to self-evident reasons, currencies worldwide have crashed against gold in the past few months. However, some currencies have crashed more than others.
For example: The Chinese Yuan(CNY) is currently trading at 1 Gold=518CNY.
This creates a very profitable discrepancy, in which an eUSA merchant can exchange dollars for gold, and use that gold to purchase CNY, to finance certain investments. When exchange rates fall below 1G=335CC,it makes economic sense to build Q4 raw material firms instead of Q5 raw material firms.*
However for big merchants, 10 health points may make it worth it to own and work in 2 Q5 raw material firms instead of 3 Q4 raw material firms. Yet this is still a profitable proposition for those in early stages of capital accumulation. How so?
Assuming rates are at 1G=350USD=518CNY, assuming 1FRM=1WRM=0.23USD=0.34CNY (deviations are unlikely to persist due to arbitrage),say a 10 work skill person builds a Q4 raw material firm after buying a piece of land with 8500USD. His production is 210 units of RM or 48.3 USD. Omitting food costs, his rate of return on capital is 0.56%.
However, if he could realize the same rate of return with 8500 CNY, or 5743 USD. Which turns out to be a rate of return of 0.84%, 50% higher.
The main obstacle to this is citizenship, but I think both countries can resolve to fix this issue and set up a framework under which this can be done, as this is a win-win situation for both nations.
Write to your local congressman today and urge him to figure out a framework under which this can be done and get going!
*For people taking remedial maths(just kidding...maybe not), this is calculated by (7500+1000)*3G>(35*335+1000)*2G hence G>335CC
If you are interested, pm http://www.erepublik.com/en/citizen/profile/3038393
Head of Branch of Central Bank(Branch of Pboc)
Comments
nice article, dunno if this could work though
I would like to add that this is only a temporary exchange of citizenship, not a permanent one.
I like it
i did not read it!
Interesting article, Windson. You know your stuff and I hope the appropriate people take the time to consider and act on this.
Good to see you!
interesting
v+s
Buy Commodities with liquid markets. You can always adjust for inflation and preserve wealth (ie: Q5 Food)
Why citizenship? I can buy or sell Chinese currency through the money market or get a licence for trade (20 G),which covers all markets(food weapons,RM's etc.). But thanks for the info....
excellent
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