The prestigious magazine, The Economist, is running a debate on whether or not the Chinese Yuan will replace the U.S. Dollar as the world’s reserve currency within a decade. While most joining the debate say no, the very fact that there is a debate is worthy of attention. Just a couple of years ago the overwhelming consensus was that the dollar would retain reserve status for another 50 years or more.
If we start with the idea of “all other things being equal,” we would side with those who say no. It would be an extraordinary change for the dollar to be replaced in such a short period without external factors. In light of the issues we cover in this blog, however, the idea is clearly reasonable. In fact, it may not take 10 years.
You can monitor the debate at: http://www.economist.com/debate/days/view/751.
It will be interesting to see if any of those who post there will even acknowledge the PLA’s Unrestricted Warfare doctrine.
Take a look at the following cable released on Wikileaks:
“China increases its gold reserves in order to kill two birds with
one stone”The China Radio International sponsored newspaper World News Journal (Shijie Xinwenbao)(04/28): “According to China’s National Foreign Exchanges Administration China ‘s gold reserves have recently
increased. Currently, the majority of its gold reserves have been
located in the U.S. and European countries. The U.S. and Europe have
always suppressed the rising price of gold. They intend to weaken
gold’s function as an international reserve currency. They don’t
want to see other countries turning to gold reserves instead of the
U.S. dollar or Euro. Therefore, suppressing the price of gold is
very beneficial for the U.S. in maintaining the U.S. dollar’s role
as the international reserve currency. China’s increased gold
reserves will thus act as a model and lead other countries towards
reserving more gold. Large gold reserves are also beneficial in
promoting the internationalization of the RMB.”
Viable Opposition did an analysis of this cable. From their view, this clearly signals Chinese intentions to replace the dollar sooner rather than later.
The bottom line: It makes no sense to blindly put all faith in the U.S. Dollar.
All posts Copyright (c) 2011 Kevin Freeman, All Rights Reserved
