as long as the Yuan is pegged to the dollar, how it it any different??? they will have to unpeg and they don't want to do that...
Posted on 12/27/2011 7:47:43 PM PST by JohnKinAK
The assumption among the majority of Americans is that the US dollar as the world’s reserve currency will maintain America’s political, financial and economic hegemony around the world for decades to come. But, if there’s one lesson to be taken from economic history, it’s that no currency survives the test of time.
As the economic crisis continued to deepen and affect nearly every nation on earth, many world leaders – from Europe to China – began discussing the replacement of the US dollar as the world’s monetary unit of trade. Dismissed by some as all talk, it should now be clear that the Russians, Arab nations, Japanese and especially China are actively moving towards reducing the dollar’s influence on global economic affairs, and in the case of China and Japan, replacing it altogether:
BEIJING — China and Japan have agreed to start direct trading of their currencies, officials announced during a visit here on Monday by Japan’s prime minister, Yoshihiko Noda.
…
China is the world’s second-largest economy while Japan is the third largest, and the currency agreement is part of a move away from using dollars. Chinese officials have said recently they would like to broaden the global use of the renminbi, also known as the yuan, and want to see more countries move away from relying on dollars as the worldwide currency.
They hold the world’s largest foreign-currency reserves — China has about $3.2 trillion, while Japan holds $1.3 trillion — and any moves to reconstitute the makeup of those holdings could change the global currency map.
“Chinese officials have made it clear that they believe the international economy is too heavily dominated by the dollar,” said Charles A. Kupchan.
Source: NYT
The United States has enjoyed reserve currency status for nearly a century, but our time may be quickly coming to an end. Some of the world’s previous reserve currencies survived for hundreds of years, so some may argue that the US dollar still has some staying power. However, the very same reasons responsible for the collapse of the aureus (Roman gold), dinarius (Roman silver), solidus, gulden and pound will be responsible for the downfall of the dollar.
(image via Zero Hedge and Classical Numismatic Group)
It’s simply, really. When governments spend more money than they bring in via taxation they are forced to devalue, sometimes very slowly, their currency. The Romans did it by reducing the silver content of their coinage, with some 95% of the precious metal being stripped from their coins by the time the empire collapsed in the 4th century.
From a Historical Perspective: The US Dollar vs. The Roman Denarius:
Does the above chart look somewhat familiar?
It should:
What took the Romans nearly three centuries to accomplish, our Federal Reserve has done in less than one hundred.
Historical performance, of course, is not a true indicator of future results, but given that our nation’s central bank refuses to change its policies of quantitative easing and monetary expansion, and considering that the Chinese are attempting to completely discard the US dollar as a tradeable instrument, the dollar’s demise as the dominant global currency will come sooner than later.
On top of that, the United States has some $200 trillion in liabilities over the course of the next thirty years, making it the largest debtor in the history of the civilized world.
The fall of currencies and empires throughout history is a constant.
It is no different this time. Our fate, it seems, is sealed. In fact, the US dollar vs. Silver Dinarius chart comparison above suggests that a currency collapse is not some event that will take place in the future; it’s happening right here and now.
While we may not have yet reached a waterfall event in which the world as we know it comes to an abrupt end over a period of days or weeks, it’s really only a matter of time before complete confidence in the system is lost.
When that happens, expect the unexpected. A rapid meltdown of the US dollar will lead to an economic crisis never before experienced in the modern world, and will likely result in our worst fears coming to pass. Things like food shortages, interruptions to the normal flow of commerce, a breakdown in law enforcement and emergency response services, political upheaval and widespread social strife are unavoidable in such a scenario. As unlikely as it sounds, it is quite possibly the way it will all go down. Look again at the charts above. Do you think there is any way to avoid such an outcome?
The collapse of nations, especially super-powers, is never a pleasant affair.
When the Dollar loses it’s reserve status, we will be so hosed.
And we aren't dead in the water quite yet.
Tell me again when silver pesos aren't being cut up by Texas Rangers for stars to wear on their chest.
You did know that's where that came from, right?
/johnny
as long as the Yuan is pegged to the dollar, how it it any different??? they will have to unpeg and they don't want to do that...
there are many economic crises brewing.
NK full melt down famine, government melt down.
China - banks, large financial, local gov sponsored businesses are bankrupt. The first wave of delayed loan repayments have hit ad will only get much worse. R/E bubble make our look small. prices off 20% this year and will continue collapsing. industrial output falling. They have all but admitted they’re in recession.
Euro- must fail soon or all 27 countries will lose their sovereignty to germany, 4th Reich?
Thats just a start, chavez has crapped his country, syria and thus iran are now likely to fall, even the Muslim brotherhood is making squeaky noises to try to continue to get us aid.
All in all lots of problems, but if we had competent leadership it could be navigated, now we have to hope he french will do the right thing.
I’m not happy one bit with what our government has done to the dollar. At some points, it really gets to be disconcerting. You start to think all manner of bad things about our dollar’s status.
There are things to be concerned about, no doubt about it. The luck of the draw has the dollar being challenged by the Euro, China’s currency, or an as yet to be named currency.
The dollar will remain the haven of choice for the time being, and should we get someone in the White House whose head doesn’t reside in their posterior, the dollar will remain strong for a number of decades, perhaps a century to come.
I agree with your 2012 outlook, but the EURO or RMB will not be replacing the USD anytime soon. Both regions have far worse long term economic problems than we do.
The USD has been steadily dropping against the RMB - and just hit a new low.
so it is no longer pegged then?
yup it is, why don't they let the Yuan trade on the open market without the peg???
“so it is no longer pegged then?”
If I remember correctly, it’s been nearly a year.
marker
it still is, just down from 8 to the dollar The People's Bank of China (PBOC) pegged the exchange rate of US dollar against Chinese yuan at 6.3167, higher than 6.3209 last Friday and close to 6.3165, a historic high. The Chinese yuan had appreciated 4.1% against the US dollar since the beginning of this year, pointed out market observers, attributing the appreciation to the first 10 months of the year, when the country tried to rebalance the trade and fight against the inflation with exchange rate.
Ah, ok. It seems like I remember reading about it being depegged (maybe just lowered, as you mentioned), early in the year. I’m not well versed in international exchange of currencies, so by no means take my word for it. After I said that, I did a search, and there was a lot of talk about the peg being loosened late fall of last year, so that must be what happened. I also remember a discussion with another FReeper at that time who said that while that had officially “de-pegged” from the dollar, that they were maintaining a de facto peg by manipulation to keep it at a similar rate, without it officially being so. Is that correct?
Does this look pegged?
One has only to look around oneself and think a little to understand where all this must ultimately lead.
uumm the majority of Americans are more concerned about what those Krazy Kardashians are up to that they can't be bothered with figuring out what complicated things like "reserve currency" and "hegemony" even mean, never mind have any type of assumption.
it still is, just down from 8 to the dollar The People's Bank of China (PBOC) pegged the exchange rate of US dollar against Chinese yuan at 6.3167, higher than 6.3209 last Friday and close to 6.3165, a historic high. The Chinese yuan had appreciated 4.1% against the US dollar since the beginning of this year, pointed out market observers, attributing the appreciation to the first 10 months of the year, when the country tried to rebalance the trade and fight against the inflation with exchange rate.
They certainly seem to move that peg quite a bit... Doesn’t make it much of a peg at all, does it?
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.