China suggests switch from dollar

China's central bank has called for a new global reserve currency run by the International Monetary Fund to replace the US dollar.

Central bank governor Zhou Xiaochuan did not explicitly mention the dollar, but said the crisis showed the dangers of relying on one currency.

With the world's largest currency reserves of $2tn, China is the biggest holder of dollar assets.

Its leaders have often complained about the dollar's volatility.

China has long been uneasy about relying on the dollar for trade and to store its reserves and recently expressed concerns that Washington's efforts to rescue the US economy could erode the value of the currency.

His speech was, unusually, published in both Chinese and English, signalling it was intended for an international audience.

"The outbreak of the crisis and its spillover to the entire world reflected the inherent vulnerabilities and systemic risks in the existing international monetary system," said Mr Zhou in an essay on the People's Bank of China website.

--snip--

On Tuesday, the dollar weakened against most major currencies following the announcement of a US plan to buy up toxic debt.

'Light in tunnel'

Mr Zhou said the dollar could eventually be replaced as the world's main reserve currency by the Special Drawing Right (SDR), which was created as a unit of account by the IMF in 1969.

--snip--

"This confirms that China intends to play fully its role of global economic and political power at the next G20 summit," said Sebastien Barbe, an analyst at French financial service firm Calyon in Hong Kong.BBC Economics Pages

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There's a saying "if America sniffs, the world catches a cold" - so maybe this is the first attempt to disctance the world from the upheavals of the US and its currency. Certainly we followed the US into the disaster of sub-prime mortgages and when that crashed many non US firms that had hitched a ride got caught out really badly.

This "essay" is also prior to the G20 meeting to be held soon, China is starting to flex muscles and it should be an interesting summit.

Not going to happen.

Not at the forthcoming G20, no: but in 25 or so years? China is still projected to become the world's biggest economy sometime soon so it would make sense from their point of view of having some form of global currency or exchange that wasn't tied to the US alone.

American said:

Not going to happen.

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Look at the policies that the Congress and the President are attempting to push to "solve" the economic crisis. How much confidence do you have in the dollar, with this nonsense going on?

Infinite Chaos said:

There's a saying "if America sniffs, the world catches a cold" - so maybe this is the first attempt to disctance the world from the upheavals of the US and its currency. Certainly we followed the US into the disaster of sub-prime mortgages and when that crashed many non US firms that had hitched a ride got caught out really badly.

This "essay" is also prior to the G20 meeting to be held soon, China is starting to flex muscles and it should be an interesting summit.

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It's not so much our currency, it's our consumerism. And changing currency will not give someone a good control over our consumer habits. In the end, I think that China is sitting on a lot of our debt, and our debt is written in our dollar and they're figuring out that it was not the best of deals. But whatever, the dollar will not go away.

Ikari said:

-- the dollar will not go away.

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I don't think anyone is implying that - here or in China.

Even if China becomes number one and India reaches number 2 - the US will still be a major player as Japan and Germany are still nowhere near overtaking the US.

An international currency run by the IMF?

If that happens, I'm buying gold bullion and living in the mountains.

Korimyr the Rat said:

Look at the policies that the Congress and the President are attempting to push to "solve" the economic crisis. How much confidence do you have in the dollar, with this nonsense going on?

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Lots more than in Chinese currency that has never ever been a standard because they cheat on its value. The Chinese are really full of **** when you think about it. Let me give you an analogy. The rock bands that have any longevity are those that write their own music. Well the same goes for world powers, those that develop their own technology, and don't just steal and copy are the ones that last. The US and Russia did this throughout the Cold War. China was never a player.

Infinite Chaos said:

I don't think anyone is implying that - here or in China.

Even if China becomes number one and India reaches number 2 - the US will still be a major player as Japan and Germany are still nowhere near overtaking the US.

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Wow think of that, and how great an accomplishment of our legislators driving us down to #3 :roll:

I guess it could be worse as some would expect the US to be sliding to the equivalent of a third world nation by the time "they" are done sucking the life out of our wealth, economy and value of our country. At least once we are a nation of the working poor wages will be low enough to start manufacturing here again, and with the rise of various foreign countries in their own wealth there will be plenty of buyers.

Actually I can not believe no one else picked up this.

Why do we all so easily accept that our prosperity and future has been sold out from under us? WTF is wrong with everyone?

Korimyr the Rat said:

Look at the policies that the Congress and the President are attempting to push to "solve" the economic crisis. How much confidence do you have in the dollar, with this nonsense going on?

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Nonsense?

Do you mean all the billions being thrown on top of previous billions thereby raping the future of our country and people in a futile attempt to stabilize the investment of the Chinese government in the US?

Lets not discount the very fact that the whole basis of the bailouts was to protect those who supplied millions in political campaign donations (why only certain specific corporations were bailed out), and help to stabilize not only the global economy but mainly foreign investments in our debt, period.

Track the money, and find that before all our political leaders found their own opportunity to steal from the American taxpayer in uncountable pet projects (aka more payback to contributors) all the money was going towards ways to get the dollars out of the country.

It is not too hard to figure out, and with all the power and might we have helped to finance overseas in places like China it is easy to understand their control of our leaders being strong enough to pull this all off.

The NWO is coming, and we may be in for a very rough ride.

American said:

-- those that develop their own technology, and don't just steal and copy are the ones that last. The US and Russia did this throughout the Cold War --

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This is OT but you can't really be suggesting we never stole secrets and technology from the Russians and they never stole from us? Certainly I'm guessing they stole more and used more from us than we ever did from them. "Concordski" being a great example.

LennyD said:

Wow think of that, and how great an accomplishment of our legislators driving us down to #3 :roll:

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Wouldn't you say industry made the decision to move production to the cheapest labour market available? Anway, industry was only reacting to a demand for cheaper goods anyway. Legislators had very little to do with that. We have a company here in the UK that shipped production of fine embroidered shirts off to India where kids made the clothes for wages of less than a $ a day. There's no way the US or any EU countries could compete at that level - unless the moral argument of child labour was raised.

Infinite Chaos said:

Wouldn't you say industry made the decision to move production to the cheapest labour market available? Anway, industry was only reacting to a demand for cheaper goods anyway. Legislators had very little to do with that. We have a company here in the UK that shipped production of fine embroidered shirts off to India where kids made the clothes for wages of less than a $ a day. There's no way the US or any EU countries could compete at that level - unless the moral argument of child labour was raised.

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I

I understand the basics behind your thinking, but there is a whole lot more to do with this than the cost reductions sought by industry.

Even though many of those running our corporations may not like to hear it etc their relationship with our legislators and their campaign managers specifically have had a great affect by the changes over time to make it an even larger benefit to move manufacturing out of their home country.

I will not bore you with too many details (I do not have the time anyhow) but many have continued to enjoy various perks that were offered in years past for different manufacturing companies even though they no longer made anything there etc. This could include property tax reduction or elimination, reduced payroll, state, and federal taxes, and a whole lot more.

Also there is apparently much confusion on import duties levied in the US for incoming products, as well as certain incentives, and even just how many products hitting our shores are subsidized by the government of the products manufacturer who are selling at insanely low prices in order to open up the markets.

There are countries that do not pay any duty, but yet others who will see this above 50% on certain products.

Before I was involved my industry was over 90% domestic manufactured, and now it has been estimated at only 20%. Still many of the products that are being imported are faced with much higher tariffs than others, and some specifically are charged a dumping fee for selling the products of a certain type too inexpensively.

Would you believe that the UK is among those being hit with fees? Some of those charged to Germany are the highest, and how about that China no matter what (far as I know anyhow) gets a free ride?

I know those are only two examples, but basically if it is an established country with a quality product and reasonable labor costs they are going to be at a disadvantage to those countries where the labor is irrelevantly low, and it will not only be from the labor costs.

No matter how you slice it or even spin it you can not deny the fact that our corporations had the wishes and support of our legislators (if not the direct control of them) while sourcing new ways to remain competitive and profitable without having to bear the burden of actually paying for American labor even though this was the very people who needed to be able to buy their products.

I guess that did not matter much since there was such a large opportunity to take advantage of foreign third world labor costs that they would actually profit more while having to sell to people who had less earnings and buying power before having to find new positions in fast food.

I hope you were able to follow etc.

American said:

Lots more than in Chinese currency that has never ever been a standard because they cheat on its value. The Chinese are really full of **** when you think about it. Let me give you an analogy. The rock bands that have any longevity are those that write their own music. Well the same goes for world powers, those that develop their own technology, and don't just steal and copy are the ones that last. The US and Russia did this throughout the Cold War. China was never a player.

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The bolded part is patently false. Not only are Chinese banks nationalized like in most developed nations, the Chinese yuan is backed by the nation's capital assets. Unlike the United States, China's money is backed by actual stuff, and money isn't simply printed from nowhere by a private company (the Federal Reserve). China's GDP is growing at a rate of 10% per year. This is not artificial growth. It is real, capital growth. It doesn't need to fake its money, its money has all the assets necessary to back it.

American said:

Not going to happen.

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It will happen in my lifetime

Orius said:

The bolded part is patently false. Not only are Chinese banks nationalized like in most developed nations, the Chinese yuan is backed by the nation's capital assets. Unlike the United States, China's money is backed by actual stuff, and money isn't simply printed from nowhere by a private company (the Federal Reserve). China's GDP is growing at a rate of 10% per year. This is not artificial growth. It is real, capital growth. It doesn't need to fake its money, its money has all the assets necessary to back it.

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Understood, but that does not stop them from manipulating the values.

It's almost as if China is secretly controlling the world and our politicians just say the things they need to say to appear on our side. And time is the only thing that will slowly change as we creep into our brave new world *brandishes tinfoil sword

Actually, from the standpoint of other nations, a basket of currencies makes good sense, and a number of countries are already doing this. Like the saying goes, don't put all your eggs in one basket.

One very important factor in the value of chinese currency is the fickle american consumer. They know that, their factories are closing down by the dozens due to our spending less on non-essentials.
Even when our economy recovers, there will likely be a large percentage of us who spend less for a long, long time.