# Global Reserve Currency to Replace the Decrepit Dollar



## ringledman (27 Jun 2010)

The days of the dollar's world reserve currency status are ending. 

Fundamentaly flawed economy with 600% total debt to GDP.

New world reserve currency required, only one option - 

The Chinese Yuan





> The US dollar is no longer what it used to be. The logic behind the Bretton Woods system that first established the greenback as the international reserve currency, and thereby certified America's dominance in the global economy, no longer exists. Hence, it is time that the US dollar is shunned as the international reserve currency and replaced with an appropriate alternative. And the only currency that fits the bill is the Chinese yuan.
> 
> The American economy, having been mauled by the recent economic downturn, is struggling to get back on track. Though the Obama administration's financial stimulus has managed to stop the bleeding, there is still quite a long way to go before the American economy is restored to robust health. On the other hand, the economic downturn has resulted in a shuffling of the global order with Asian economies such as China and India emerging stronger than before.
> 
> There is no doubt that the Chinese economy today is the strongest in the world. Despite the global economic crisis, it posted an amazing 8.5 per cent growth in 2009. Beijing holds as much as $2 trillion in reserves and recently took a meaningful step towards greater monetary flexibility by letting the yuan appreciate vis-a-vis the greenback a move that could very well see the renminbi float free in the near future. It has also taken significant steps towards greater currency convertibility by undertaking currency swaps with several central banks such as those of Argentina, Hong Kong, Indonesia, etc. In such circumstances, holding on to a decaying greenback is absurd. It simply doesn't reflect reality. The global economy needs a strong currency to act as a stabilising force. With the dollar losing its heft, the world should consider the yuan as an alternative.


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## darag (27 Jun 2010)

ringledman said:


> There is no doubt that the Chinese economy today is the strongest in the world.


Allow me to doubt.  The Chinese economy makes up less than 10% of the worlds GDP while the US constitutes about 25%.


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## ringledman (27 Jun 2010)

darag said:


> Allow me to doubt. The Chinese economy makes up less than 10% of the worlds GDP while the US constitutes about 25%.


 
How on earth does the size of an economy represent the strength of its economy???

The USA's economic size represents past economic power not future.

Wealth is moving East. It will take 20-40 years to complete. 

Get with the times.

USA's 'fundamentals' awful. China's fundamentals excellent.


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## darag (27 Jun 2010)

ringledman said:


> How on earth does the size of an economy represent the strength of its economy???


It's so obvious, I don't even know where to begin.



> The USA's economic size represents past economic power not future.
> 
> Wealth is moving East. It will take 20-40 years to complete.


Sure.   And if Ireland's and Germany's GDP growth of the late 90s had continued for 30 years Ireland's would have surpassed Germany's economy in ABSOLUTE size in 30 years.

1 or 2 year economic predictions are almost impossible.  40 year predictions are ludicrous.


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## ringledman (28 Jun 2010)

darag said:


> It's so obvious, I don't even know where to begin.
> 
> 
> Sure. And if Ireland's and Germany's GDP growth of the late 90s had continued for 30 years Ireland's would have surpassed Germany's economy in ABSOLUTE size in 30 years.
> ...


 
Poor argument comparing a nation of 4.4M population providing reasons why its GDP won't match that of a nation with 82M population. 

Of course there is a limited of GDP output when one has 19 times less population, regardless of better growth rates. 

Why don't you run your analysis comparing USA's 307M population against that of China's 1325M population (of which 300 Million are now middle class consumers) and then rethink the possibility of who will have the world's reserve currency in 20-30 years time.

The USA is sitting on a time bomb of 600% debt to GDP. They are past the point of return of ever paying off this debt through any course but default, debasement or inflation. 

Hyperinflation here we come and with it the dollar's global reserve currency status.


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## ringledman (28 Jun 2010)

The fine economic fundamental underpinning the dollar and USA's economy - 

[broken link removed]

Or how about the one underpinning the Yuan and Chinese economy- 




Economic history shows every time that- 

savings and production creates wealth and power, not debt and consumption.


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## darag (28 Jun 2010)

ringledman said:


> Poor argument comparing a nation of 4.4M population providing reasons why its GDP won't match that of a nation with 82M population.


You completely missed the point.  It wasn't a comparison - it was a demonstration of what sort of ludicrous conclusions are possible if you make the basic error of extrapolating current economic trends decades into the future.

As a method of providing any sort of clue of the where the economy will be in decades, it has proven to be worse than useless; reading tea leaves or tarot cards has a better record.


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## ringledman (28 Jun 2010)

darag said:


> You completely missed the point. It wasn't a comparison - it was a demonstration of what sort of ludicrous conclusions are possible if you make the basic error of extrapolating current economic trends decades into the future.
> 
> As a method of providing any sort of clue of the where the economy will be in decades, it has proven to be worse than useless; reading tea leaves or tarot cards has a better record.


 
So Darag, back to the point then, do you think the USA's economy is 'fundamentally' sound?


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## Sunny (29 Jun 2010)

ringledman said:


> So Darag, back to the point then, do you think the USA's economy is 'fundamentally' sound?


 
It is a fundamentally sound as China. China has as much problems trying to rebalance their economy away from a dependence on foreign consumption and improving their domestic economy as the US does with curing their deficit.


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## ringledman (2 Jul 2010)

Sunny said:


> It is a fundamentally sound as China. China has as much problems trying to rebalance their economy away from a dependence on foreign consumption and improving their domestic economy as the US does with curing their deficit.


 
So 600% debt to GDP and a nation that produces little for the world; is better than a nation with massive foreign reserves to tie them over for many years and has no debt, who's fault is they do not consume much?

I don't think so.


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## Sunny (5 Jul 2010)

ringledman said:


> So 600% debt to GDP and a nation that produces little for the world; is better than a nation with massive foreign reserves to tie them over for many years and has no debt, who's fault is they do not consume much?
> 
> I don't think so.


 
I don't expect you to agree with me. Plenty of my economist colleagues don't. China is a booming economy but people who think it is some sort of economic nirvana are deluded. This obsession that people have with foreign reserves is funny. Of course they have large foreign reserves. They manipulate their currency. 

You seem to think that the US is on the brink of bankruptcy while China will continue to be an economic powerhouse. Guess what about 66% of those foreign reserves that you love so much consist of. Oh yes, USD assets. Guess who China's largest trade partner is. Why yes, the US. And for a Country that is reliant on foreign consumption, that is an important factor. It's China's own fault for the imbalances in their economy. A country shouldn't be hugely reliant on foreign consumption anymore than it should fully rely on domestic demand. 

Both countries are in bed together. They will sink or swim together. Both countries face huge challenges albeit coming from different directions.


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## darag (5 Jul 2010)

ringledman said:


> So Darag, back to the point then, do you think the USA's economy is 'fundamentally' sound?


Not really.

But that's not the point.  Without sounding too superior, I think the situation is more nuanced and complicated than your shrill headlines suggest.

Running a huge trade surplus for long periods of time is neither sustainable or even desirable, in my opinion.  This seems obvious to me even without appealing to macro-economics.  On an individual level, the ability to delay gratification is generally a beneficial personality trait but going to your grave having accumulated a huge amount of wealth by working every minute, scrimping and saving your whole life is without a doubt the absolutely worst mistake you could possibly make.


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## csirl (8 Jul 2010)

If there is a new reserve currency, it will be the Euro. Already happening.

It will not be the Chinese Yuan. The capitalist system is not going to pick a currency that is at the whim of an unelected dictatorship. Too risky. Also the risk that it will be worthless if the regime falls.


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## MoneyIsFunny (2 Nov 2010)

Have there been any new developments on this? I agree that a new world reserve currency has unofficially been in place already - and yes, its the Euro. Having said that I think it would be a good idea to finally introduce an official, open global currency. Whatever happened to Medvedev's coin from the G8 summit?


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