T Nation

Yuan to Replace the Dollar


#1

"Central bank governor Zhou Xiaochuan was quoted by the South China Morning Post as saying: "The US dollar is unlikely to be stable next year and later."

a) Zhou thinks the dollar is going to become unstable because China is going to cut back on dollar purchases.
b) Zhou thinks the dollar's problems are so big that China won't be able to do anything about it.

I personally believe it is a combination of the two.

"And the likelihood of the United States issuing more money in the near future adds to the depreciation risk in US-dollar-denominated assets [China is worried about its massive holdings of US assets.] and trade settlements [Chinese exporters are worried about inking deals in a rapidly depreciating currency]."

http://www.marketskeptics.com/2008/12/chinese-central-bank-us-dollar-is.html

Someday, will our paychecks (if there are any) be in Yuan?


#2

"As a rising number of Americans sign up for unemployment benefits, many of the state-funded trusts that pay them are on the decline.

At least 12 of them are on the brink of insolvency. In 20 other states, the funds have lost value, even before the big job losses of the past two months.

While unemployed workers will get their benefits ? federal law requires it ? the trust fund woes are putting states into a peculiar squeeze. They're loath to raise taxes or cut services in a recession, so many are racking up new loans. That debt burden will affect residents for years to come."

http://www.alternet.org/workplace/114995/as_unemployment_soars,_some_states_on_brink_of_insolvency/?page=entire

All the more reason to flee from the dollar.


#3

Consider this. All countries value their money in part, on the American Dollar. If you sell the American Dollar, it loses value, so to these countries, they would lose, maybe even fall into bankruptcy.

All this means is that we are pigs, who have dominated the world through our financial system and if we go down, everyone else goes down first. We were the creators of the modern day system so we have the world, by the balls (no pun intended).

Best explanation of the world financial system ever..


#4

How many carrier battle groups do we have deployed around the globe?

I think we will be the reserve currency as long as we maintain military dominance.
Yes, the dollar will trend weaker for a time.
But, when the house is on fire who gets the call-the U.S. or the Euro Zone.

We are at the cross roads in this country.
People who think we can carry on business as usual have their heads in the sand.

Why not a reduction in payroll taxes and a high gas-tax until we change peoples behaviours? We need a new energy policy-stop sending the money over seas.

Our competitors will take us to the carpet at every opportunity.

We need to get lean and mean.


#5

No. Politics and economics are tightly interwoven. China doesn't have the political pull to take over the world's economy.

If you see a change, it will be a closer knit NAFTA unit with a monetary system similar to the Euro, and eventually a "western" driven world gov't that China, Russia, the Mid-East and others will either have to conform to or be blown to bits. And China's economy will just be one cog in the wheel.


#6

Refresh my memory: which currency has thousands of tons of gold backing it, and which doesn't?


#7

Um, the peso? No... the Yuan! That doesn't sound right... iraqi rubles? That would be oil though oil is ultimately controlled by gold...ah shit.

Which Ayn Rand book was this in again?


#8

"Capitalism, the Unknown Ideal".

You might find it interesting that Alan Greenspan originally wrote the article for "The Objectivist".

http://www.amazon.com/Capitalism-Ideal-Ayn-Rand/dp/0451147952


#9

The Amero will replace the US and Canadian dollar and the Mexican peso.


#10

I have followed Greenspan's ideas for many years and, strange as this sounds, I'm convinced that he thinks of himself as John Galt, the man in Atlas Shrugged who will 'stop the motor of the world'. Everything he did as Fed Chairman was for the purpose of collapsing the system.

When a person suddenly starts doing the very opposite of what they devoutly believed for many years, it calls into question their motives. Why? Why did he suddenly become part of a system he despised? He helped create the biggest speculative bubble in human history. Why?

Who is John Galt? Alan Greenspan.


#11

Certainly not ours, thats a big part of why our economy is going down. What alot of people dont realise is that the US keeps borrowing money from other countries that we cant pay back.We have no savings and we dont produce anything we only consume.Economies arent built on borrowing and consumption, they are built saving and production.


#12

Yup. And the biggest problem is that we've reached the 'debt saturation' point. Our economy is based on consumers taking on ever increasing debt. That's one reason the requirements to get a mortgage fell from 20% down to 0% down, to allow more and more people to take on debt.

Until this debt is eliminated, either through bankruptcy or inflation, it is simply not possible to grow our economy. Of those two, bankruptcy and the accompanying deflation is vastly preferable. History shows that deflation leads to recovery, hyperinflation to revolutions, destitution, and utter chaos.


#13

Hyperinflation is probably why the Weimar turned into the 3rd Reich.

Why do people still think that debt, and a consumer based economy is good thing? I have no formal training on the subject of economics and I think I have a better grasp on whats going on than most of the people who work on Wall Street.


#14

This is ridiculous. The Chinese have kept the value of the Renminbi has been kept artificially specifically for the purpose of driving up their exports while minimizing imports.

There is no way a currency that is practically worthless is going to replace the dollar.


#15

Sifu, how do you measure the worth of a currency?


#16

By the rate at which they are traded for other currencies.

The exchange rate for the Renminbi has been kept way below what it would trade for if it was allowed to freely float in the world currency markets.

http://www.corporateinformation.com/Currency-Exchange-Rates.aspx?c=156

12/31/2008 12/30/2008
U.S. Dollar / Chinese Renminbi 0.1461 0.1461
Chinese Renminbi / U.S. Dollar 6.8460 6.8460


#17

That doesn't sound like a worthless currency. It sounds like an undervalued one.


#18

I never said it was worthless. I said it is practically worthless.

People are not going to leave the dollar for another currency that is deliberately undervalued as much as the Renminbi is.

The Chinese are not going to allow it to reach it's true value because that will kill off their exports, a lot of which has been paid for in dollars.


#19

One of the best posts I have read here. Well said sir!


#20

So long as it still buys whiskey and Biotest takes it, I am cool.