If the renminbi is as shaky and dangerous as Martin Wolf argues, why was it made part of IMF’s SDRs in October 2016?

Sir, Martin Wolf writes: “US policymakers should worry about China’s capital account, not its current account. That is where danger now lies… Given its macroeconomic imbalances, China could unleash considerable global mayhem… Capital would pour out, the renminbi would tumble and, in time, a globally unmanageable current account surplus would emerge…Today’s credit growth and consequent financial fragility are a direct consequence of the desire to prevent this from happening” “Chinese finance is storing up trouble” April 6.

Aha! And so what do we do? And so what does Martin Wolf suggest President Trump does when meeting his Chinese counterpart Xi Jinping in Florida this week?

Is all this just another excuse to lash out at Trump, in this case Trump’s concerns with the deficits in the trade account, those deficits that Wolf strangely seems to argue are totally disconnected to the capital accounts. In truth all this about “the macroeconomic imbalance” reads just like pure vintage Wolf. 

He for instance insists with a “China’s external accounts already played a significant role in the run-up to the financial crisis of 2007-08.” Significant perhaps but still much smaller than the role the distortions produced by Basel’s risk weighted capital requirements for banks played… like for AAA rated securities and Greece

But Sir, we should ask, where was Martin Wolf when, on October 1, 2016, the IMF made the renminbi part of its Special Drawing Rights… and thereby de facto awarding it a reserve currency status? Was that not a much more important moment for Wolf to step forward and opine, than a meeting at a Mar-a-Lago in Florida this week?

PS. Of course, Trump is Trump, and we should never completely ignore the possibility he will try to arrange a financial conference that could give to Mar-a-Lago the same type of historic fame that the Bretton Woods Conference awarded the Mount Washington Hotel. (What hotel owner would not love that?)

PS. Frankly, how can a country that blocks a search engine like Google has its currency included in IMF's SDRs?

Why is obvious crony statism referred to as crony capitalism?

Sir, I refer to Martin Wolf’s “Why Xi cannot succeed with his reforms” December 14.

In it, Wolf quotes the following from Minxin Pei’s “China’s Crony Capitalism”: “The emergence and entrenchment of crony capitalism in China’s political economy, in retrospect, is the logical outcome of Deng Xiaoping’s authoritarian model of economic modernisation… because elites in control of unconstrained power cannot resist using it to loot the wealth generated by economic growth.”

But “Capitalism” (at least according to Wikipedia), “is an economic system based on private ownership of the means of production and their operation for profit. Characteristics central to capitalism include private property, capital accumulation, wage labor, voluntary exchange, a price system, and competitive markets. In a capitalist market economy, decision-making and investment is determined by the owners of the factors of production in financial and capital markets, and prices and the distribution of goods are mainly determined by competition in the market.”

Sir, so why does it refer to “crony capitalism” when it is clearly much more a case of “crony statism”? Could it be that the “unconstrained power of the elites” also cover the terminology we are to use? Like for instance when references are made to our economies being under the yoke of “neo-liberalism”, all while bank regulators gladly risk-weigh Sovereigns with 0%, and We the People with 100%. Or like when intrusive and complex bank regulations are mentioned to have happened in a period of "deregulation".

PS. Here is the current summary of why I know the risk weighted capital requirements for banks, is utter dangerous nonsense.

@PerKurowski