Backing by gold sounds good. But if the Chinese are holding the gold reserves, you still have to trust the Chicoms. I dunno if the world is going to do that. What do you guys think?
What do I think?
Well, they asked for it. That’s what I think.
Time to cut them off from their biggest market and set sanctions on any American company doing business in China. If nothing else it is time to start treating them like the adversary that they are and install tariffs on their imports.
They are now implementing their master plan to devastate the US.
It sounds hyperbolic, but this is tantamount to an act of war.
The real fact is, does anyone want to trust the Chicoms with their money?
They are not exactly a law based country. They don’t exactly allow for conversion of the Yuan at market rates and they have a nasty habit of killing their political adversaries.
Do you honestly think that the other major powers or any country, would store their reserve gold for exchange with China?
The best that could be said of such schemes is that they could permit China and the US to monetize their large stockpiles and ongoing production of gold. The drawback is that such innovations would tend to devalue the ordinary, non gold-backed versions of the yuan and dollar. The result would be pressure on the corresponding national economies and a diminished value and credit-worthiness for debt instruments denominated in the non gold-backed currency. For China especially, this would likely make it harder to access international debt markets except in the gold version of the yuan.
Moreover, China's gold yuan will have limited appeal because China cannot duplicate the dollar's place within a set of benign and reliable rules and economic, political, and military alliances that the US created after WWII. Using the dollar and becoming part of the international dollar system more less guarantees that the US has your back and can be counted on in times of trouble.
When a friendly nation that uses the dollar as its primary trade and reserve currency gets in trouble, it can usually rely on the United States for help -- and not just dollar loans, but up to and including having American armored brigades and aircraft carriers come to the rescue. Thus the oil rich and dollar reliant Kuwaitis were pulled out of the clutches of Saddam Hussein in the first Gulf War. Absent a similar capability and willingness by China, it is hard to imagine Kuwait or any other vulnerable nation embracing the yuan even if it is backed by gold.
In concept, China could try to construct a position for itself in a rival international system that parallels that enjoyed by the US. In practice though, China bullies its neighbors and is uninterested in coming to anyone's aid. China aims to be a world hegemon, with other countries treated as vassals or enemies. Few countries will want to sign on to relying on to the gold yuan and advance such ambitions.
I wouldn’t trust them as far as I could throw Hillary.