What Would Happen to NuBits and NuShares in Case of a USD Devaluation?

[crypto_coiner]

There are many researchers talking about the reset of the fed and/or devaluation of the USD vs BRICS currencies.
This scenario is probable (and even highly likely) any time from July 2015 up to November this year.
What would happen if, over night, the USD is devalued by say 30% against the CNY>

• to the NuBits peg
• to the NuShares market

A little bit of history:

In 1940, an agreement with the U.S.A. pegged the pound to the U.S. dollar at a rate of £1 = $4.03. (Only the year before, it had been $4.86.)[26] This rate was maintained through the Second World War and became part of the Bretton Woods system which governed post-war exchange rates. Under continuing economic pressure, and despite months of denials that it would do so, on 19 September 1949 the government devalued the pound by 30.5% to $2.80. The move prompted several other currencies to be devalued against the dollar.
In 1961, 1964 and 1966, the pound came under renewed pressure since the exchange rate against the dollar was considered too high. In the summer of 1966, with the value of the pound falling in the currency markets, exchange controls were tightened by the Wilson government. Among the measures, tourists were banned from taking more than £50 out of the country, until the restriction was lifted in 1979. The pound was eventually devalued by 14.3% to $2.40 on 18 November 1967.

Source: Pound sterling, wikipedia

[mhps]

What would happen if, over night, the USD is devalued by say 30% against the CNY

China will not let its powerful export sector lose 30% competitiveness over night.
British pound was not the dominant international trade currency in 1949 for the USA. USD is for China.

[Ben]

What would happen if, over night, the USD is devalued by say 30% against the CNY>- to the NuBits peg- to the NuShares market

It depends on the point of context used. The nominal exchange rate of USD versus other fiat currencies changes all the time, but the exchange rate of USD versus NBT isn’t affected.

If the USD/CNY nominal exchange rate rapidly changed 1 NBT would still be worth $1.00. The buying power of that same 1 NBT would change, but that change would shift at a slower rate as producers adjusted their output in response.

In many ways the current structure of liquidity operations in NBT/crypto pairs deals with this already. It certainly isn’t optimum, but I feel it’s an appropriate benchmark for “what if?” scenarios.

[cryptog]

Well while it seems that China has been artificially devaluing Yuan against the dollar to make exports cheaper, if at the end you get dollars in exchange of your goods in a context where the global economy has less and less confidence in the dollar because the US has a huge trade deficit (import >> export), you would start to review your monetary policy.
It is rumored that the USD would be devalued (probably over 3 installments to makes things gradual) over the next 20 months or so.
The good thing is f that happens, suddenly US-manufactured products would be cheap and it would stimulate tourism for the US, overall reviving its economy…
At the same time, you must be aware that there are in fact 2 dollars: the international dollar 1) and the local dollar used in the USA. 2)
The one that would be devalued is said to be the latter one, 2).

Anyway, even after the revaluation, the US would remain a big economy (the second biggest one).
So pegging to the USD would still be useful, imho.
Now I have a question: to which dollar is Nubit pegged ? 1) or 2)

[Ben]

Now I have a question: to which dollar is Nubit pegged ? 1) or 2)

If the majority of the funds used to purchase NBT to date come from individuals (rather than institutions) I expect the simple answer to that question is “a NuBit is pegged to 1 local USD”, but an economist would have a better, more nuanced answer.

[cryptog]

Right. It seems the natural answer for now.
Perhaps in the future, institutional money (coming from centralizing corporate entities) might get in but it looks incompatible with the decentralized nature of Nu, imho.

[mhps]

there are in fact 2 dollars: the international dollar 1) and the local dollar used in the USA. 2)

Unless capital control (to cross the border) is in place i can’t see how can there be a dual track system.

[cryptog]

less capital control (to cross the border) is in place i can’t see how can there be a dual track system.

It seems the way it is controlled is very simple. Just check the printing number of the bill.
Beyond a certain figure, the bill won t be accepted by overseas banks.
I am not talking from personal experience though. I am just trusting a source.

EDIT: typo

[mhps]

M2 has no number.
There are a lot of doom and gloom thoughts floating around.

[cryptog]

M2

What is M2?

Besides, it is not doom and gloom. I am not residing in the US so I cannot talk as someone living within the US economy but if the US wants to boost their exports, a devaluation is needed.
And it would not be the first time.
The Plaza accords devalued the USD compared to the JPY by more than 50% back in 1985 within 2 years!

Devaluing the dollar made U.S. exports cheaper to purchase for its trading partners, which in turn allegedly meant that other countries would buy more American-made goods and services.

The exchange rate value of the dollar versus the yen declined by 51% from 1985 to 1987.

[mhps]

What is M2?

I should have said money supply in general has no numbers.

[cryptog]

I see but some 100 usd bills are part of M2 since M2 includes saving accounts and since you can go to an ATM and withdraw a 100 usd bill from your saving account. Am i mistaken?

EDIT: typo

[Ben]

You can tap your savings accounts if you have them hooked up, but I don’t know of any ATMs in the US that provide withdrawals in $100 bills. Las Vegas may have a few.

[cryptog]

Right. My mistake. So let us say 20 usd bills.

[leka]

It seems the way it is controlled is very simple. Just check the printing number of the bill.Beyond a certain figure, the bill won t be accepted by overseas banks.I am not talking from personal experience though. I am just trusting a source.

I live outside the States and I can say that I’ve never had any issues with local banks accepting bills that I received from US banks/regular US stores, or US banks accepting bills that I received from local banks.