Earlier this week, Russia issued a radical call for the eventual replacement of the dollar as an international reserve currency, and its replacement by a new, fiat currency to be created by a global regulator. The prospects for agreement on this at the G-20 summit in April, to put it politely, did not look promising.
But now another voice has been heard from: China. And their reaction has been surprising. With their vast holdings in dollar-denominated securities, you would think they would oppose anything that would weaken the dollar. But Reuters is now reporting:
China and other emerging nations back Russia’s call for a discussion on how to replace the dollar as the world’s primary reserve currency
And China’s ideas are slightly clearer than Russia’s vague proposal. The Chinese envisage:
the International Monetary Fund’s Special Drawing Rights (SDRs) being first assigned a role of a clearing currency on some transactions and then gradually becoming the main global reserve currency
The odds against this happening are still overwhelmingly long: the Russians suggest it would take 30 years to create this new currency. A lot will happen in the next 30 days, never mind 30 years. But the Chinese reaction suggests the idea can no longer be simply laughed off. It’s time for the Obama administration to wake up. The German publication Der Spiegel suggests that there is still a “residue of uncertainty” about what the U.S. will proposal. That’s putting it politely.
There’s not much uncertainty about what the Europeans want. A two-day EU meeting in Brussels repeated the now-familiar demands: a doubling of the IMF’s resources, no new stimulus packages, and a massive increase in supranational control of all financial institutions, so as to “[converge] international financial regulation to the highest level” – with “highest level” being a code word for a European straight-jacket.
No new stimulus packages is a good idea: the Obama administration should get behind it. The rest of the ideas are unfree and illiberal. But what is most disturbing right now is that the Russians, the Chinese, and the Europeans are making all the running. Who’s minding the store in Washington?
Fiduciary irresponsibility of the US government fails to make an argument in favor of continued use of dollar as a reserve currency.
The best way to help keep the dollar as the reserve currency is for China and other to stop buying treasury bonds and demand higher interest rates. Monetizing debt by the Feds will lead to inflation, perhaps hyper inflation.
"With their vast holdings in dollar-denominated securities, you would think they would oppose anything that would weaken the dollar"
In other words, China should continue ading and abating in the pyramid scheme that is the U.S. dollar.
As we have learned in the past few months, all pyramid schemes will inevitably fail.
I find this ridiculous. Of course the rest of the world is worried and upset. The US is spending, spending, spending, and printing more and more money. And as long as they dollar is the main currency, this puts them all at risk. Why should the world continue to let us act this way? Of course they are going to try and find another solution.
The Euro isn't working out, so Russia should keep its rupple(sp), China its yen, and the USA its Dollar.
Its hard enough at this time to keep faith in our own Nation without adding the World to our problems.
Its like the "new"way of teaching 'fairness' to children, "It doesn't matter who wins or loses, it just matters that you all get to play."
If that were really so, why do they keep score? My seven year old grandson asked me that, and he was right!
Hozro
we are losing time,it may be to late now.better to die on our feet than our knees.open the silos,rein hellfire on russia,china,north korea and iran.pay off all our debts at one time.bring the world to their knees.better to be feared than loved.or we could just get a 1/2 gallon of cherry garcia ice cream and sit in front of the tv and watch reruns of leave it to beaver and feel good.i may have to get me a fat wife to stay warm next winter.or 3 dogs.
If this isn't proof enough that we are going down the socialist path of failure,nothing is! Even the foreign countries see that this spending is sending America off the deep end! They are not going to simply wait until it's too late,even they know better!Just wait and see,if something isn't turned around in the near future, look for the next world war…a monetary war! I hope the Obamanites aren't too scared to fight! This one they cannot blame on Bush!
Which of Our great Politicians wants to speak on
this,with any knowledge and Experience?
This is exactly what the Obama administration and socialists in America want, the destruction of the dollar. A global currency is the first step to a global government. Who will make monetary policy? Who will determine interest rates? With that under their belts the next steps are much simpler.
The simple fact is we cannot avert the fall of the United States; it's a giant boulder rolling downhill and it has unstoppable inertia. The only question for me is what comes out of the ruins?