Breaking: China calls for replacing $ as world currency
by bobswern, Mon Mar 23, 2009 at 07:21:37 PM EDT
The lead story in the world press tomorrow will be this:
(Remember, this is from the Wall Street Journal, so, to say it's biased is an understatement. This is very bad news for Americans, anyway you slice or dice it. It also throws a massive wrench into the Obama administration's efforts--or anyone's efforts for that matter--to get our economy up and running again. More on this below.)
China Takes Aim at Dollar
By ANDREW BATSON
BEIJING -- China called for the creation of a new currency to eventually replace the dollar as the world's standard, proposing a sweeping overhaul of global finance that reflects developing nations' growing unhappiness with the U.S. role in the world economy.
The unusual proposal, made by central bank governor Zhou Xiaochuan in an essay released Monday in Beijing, is part of China's increasingly assertive approach to shaping the global response to the financial crisis.
Mr. Zhou's proposal comes amid preparations for a summit of the world's industrial and developing nations, the Group of 20, in London next week. At past meetings, developed nations have criticized China's economic and currency policies.
This time, China is on the offensive, backed by other emerging economies such as Russia in making clear they want a global economic order less dominated by the U.S. and other wealthy nations.
The implications of this move are, in a word, stunning. Regardless of whether this occurs in the immediate future, or not, it's not good.
Fed Chair Ben Bernanke just poured over a trillion dollars into supporting our government debt in the world marketplace.
The already-greatly-diminishing demand for U.S. debt means that the buyer of it, of last resort (that's us, in case you didn't know this), will have to come to the table with more, sooner, than projected.
Our bailout just became much more costly than most here may now realize.
Think of it this way...let's say the Euro becomes the new global currency. This means that things like oil are bought, primarily, with Euros (once that happens), as opposed to dollars, which is what's used (primarily) today.
As the dollar continues it's rapidly-increasing devaluation against the Euro (and most other currencies), that means we have to pay much, much more for goods, commodities and services that are produced outside of our borders.
So, if gas increased this coming Summer like it increased this past Summer, and our currency is devalued at, say, 50% against the Euro, that means we'd have to buy $8.00 worth of Euros to buy that $4.00 gallon of gas that we bought last Summer in the upcoming Summer season.
Get the picture? And, that's just a part of how inflation goes through the roof.
With the dollar as the world's currency, we've been living in a world full of benefits that come along with that.
At best, that's going to diminsh greatly going forward, from now on. At worst, we could see massive hyperinflation unlike anything this country's ever witnessed. The end result, hopefully, will be something in-between...but we don't know what we don't know, do we?
And, we sure as hell no longer control our own destiny like we did in decade's past, either.
Perhaps that's the scariest reality of all.
We truly are witnessing the twilight of our country's power on the world stage. Tonight's announcement in Beijing is a major milestone.
More on this, from a perspective of almost a year ago (which I find quite interesting, from a chronological standpoint), is available from an article by Felipe Larraine from April 29th, 2008, via economist Nouriel Roubini's website: "The Future of the Dollar."
I'm expecting many good diaries from our resident expert on all this now! (Yeah, that's you, Charles!) Tell us (much) more about what this all means, please! (And, yes, we're lucky to have you here during this time; perhaps much more than some here might realize, too!)
Go for it!