I’m not sure this thread will get much traction, but thought I’d post anyway. A friend of mine and I were discussing various topics (much like we do on here) and the Yuan taking over for the dollar as the primary reserve currency came up. I hadn’t given it a whole lot of thought prior to this conversation and was curious what some of the more economically savvy thought of the topic.
Questions:
What are the chances that the Yuan becomes a reserve currency at all?
What are the chances the Yuan becomes the dominate reserve currency?
How does this effect the strength of the dollar and the U.S. economy?
I came across this debate and though it would be a good place to start.
China manipulates their currency too much for anyone to seriously consider them as a viable alternative to the World’s Reserve Currency. Although one could argue that the US is doing the exact same thing by printing money out of thin air with the QE. But While QE has weakened the perceived strength of the dollar and our debt and bubble economy are scaring many people, the rest of the world is just as fucked if not more so.
Not saying it won’t happen, but something drastic will have to happen to the dollar/US economy first. And if something drastic happens to the dollar/US economy, the rest of world is kinda fucked anyway, so it won’t really matter.
[quote]angry chicken wrote:
China manipulates their currency too much for anyone to seriously consider them as a viable alternative to the World’s Reserve Currency. Although one could argue that the US is doing the exact same thing by printing money out of thin air with the QE. But While QE has weakened the perceived strength of the dollar and our debt and bubble economy are scaring many people, the rest of the world is just as fucked if not more so.
Not saying it won’t happen, but something drastic will have to happen to the dollar/US economy first. And if something drastic happens to the dollar/US economy, the rest of world is kinda fucked anyway, so it won’t really matter.
IMO it is also worth considering the rising Chinese middle class which is projected to be about 634 million, about twice the current total population of the United States, by 2025 or so. This is a lot of buying power but also a big problem if the Chinese economy doesn’t grow as forcasted, they can’t find jobs, and start revolting.
China is also liberalizing, cutting down on corruption and moving towards greater freedoms for the people as a whole. They are still far from perfect, but Jinping is a reformer from my layman’s point of view.
All currencies are manipulated, and the West will not give up control of the international financial system easily. QE is one thing, but there are several more arcane methods by which this is done, few of which I totally understand. The price of a gold is a prime example. This is done in cahoots with the other central banks. It’s far from a free market economy and a lot of China’s moves have been towards devaluing their currency to maintain their export market which is dominated by trade with the US.
I don’t see it happening in 10 years, but the US dollar and economy is in for some rough times unless we can get our spending under control. If the trend continues, I’m taking even odds on the loss of the USD as the world’s currency within 30 years.
[quote]theuofh wrote:
IMO it is also worth considering the rising Chinese middle class which is projected to be about 634 million, about twice the current total population of the United States, by 2025 or so. This is a lot of buying power but also a big problem if the Chinese economy doesn’t grow as forcasted, they can’t find jobs, and start revolting.
China is also liberalizing, cutting down on corruption and moving towards greater freedoms for the people as a whole. They are still far from perfect, but Jinping is a reformer from my layman’s point of view.
All currencies are manipulated, and the West will not give up control of the international financial system easily. QE is one thing, but there are several more arcane methods by which this is done, few of which I totally understand. The price of a gold is a prime example. This is done in cahoots with the other central banks. It’s far from a free market economy and a lot of China’s moves have been towards devaluing their currency to maintain their export market which is dominated by trade with the US.
I don’t see it happening in 10 years, but the US dollar and economy is in for some rough times unless we can get our spending under control. If the trend continues, I’m taking even odds on the loss of the USD as the world’s currency within 30 years.
[/quote]
The rising Chinese middle class is definitely an interesting question. I think China is in for some serious growing pains as it relates to their middle class.
Chinese manipulation of the Yaun was my biggest point of contention. Like you said they purposefully devalue the Yaun, which they may or may not be able to get away with if it becomes a reserve currency. The only way I see this happening is if the Chinese government eases up on their control. From what I understand outsiders can’t trade / own Yuan (at least to a large extent). This would obviously be problematic for a reserve currency.
The Chinese are going to have an inflation problem at some point too.
I have Jim Rickards book “The Death of Money” on my list. He looks at this from a historical perspective, the financial system has died at least 3 times in the 20th century, the current state and mechanics of the international financial system, and what the next one could look like. I’m looking forwarding to finally getting a chance to read it.
[quote]theuofh wrote:
I have Jim Rickards book “The Death of Money” on my list. He looks at this from a historical perspective, the financial system has died at least 3 times in the 20th century, the current state and mechanics of the international financial system, and what the next one could look like. I’m looking forwarding to finally getting a chance to read it. [/quote]
Hmmm, I hadn’t heard of it. I might grab a copy myself.
The US Dollar will maintain its reserve status because it is competing with currencies that are far worse than it but its days are numbered.
It is unlikely that when the dollar fails there will be another fiat “reserve status” currency.
The problem is that government issued currencies will be forced to compete with trustless, digital currencies which will be more widely accepted at that point. Why be bothered with money that can be destabilized by bad politics?
[quote]LIFTICVSMAXIMVS wrote:
The US Dollar will maintain its reserve status because it is competing with currencies that are far worse than it but its days are numbered.
It is unlikely that when the dollar fails there will be another fiat “reserve status” currency. [/quote]
based on what?
[quote]
The problem is that government issued currencies will be forced to compete with trustless, digital currencies which will be more widely accepted at that point. Why be bothered with money that can be destabilized by bad politics?[/quote]
I know you’re the digital currency champion on here, but crypto-currency has / will have it’s own problems.
[quote]LIFTICVSMAXIMVS wrote:
The US Dollar will maintain its reserve status because it is competing with currencies that are far worse than it but its days are numbered.
It is unlikely that when the dollar fails there will be another fiat “reserve status” currency. [/quote]
Speculation that fiat currency will lose trust and people will prefer honest money in its place.
[quote]
The problem is that government issued currencies will be forced to compete with trustless, digital currencies which will be more widely accepted at that point. Why be bothered with money that can be destabilized by bad politics?[/quote]
[quote]I know you’re the digital currency champion on here, but crypto-currency has / will have it’s own problems.
Yes it has/will have problems but its advantages reduce costs so much that people will not want to deal with political money. Again, this is speculation and how I am planning for my own financial future.
[quote]theuofh wrote:
I have Jim Rickards book “The Death of Money” on my list. He looks at this from a historical perspective, the financial system has died at least 3 times in the 20th century, the current state and mechanics of the international financial system, and what the next one could look like. I’m looking forwarding to finally getting a chance to read it. [/quote]
Hmmm, I hadn’t heard of it. I might grab a copy myself. [/quote]
I think the one thing he gets into is these special drawing rights (SDRs) the IMF can print. If the US economy goes bust again, this is one of the more likely choices for a new reserve currency but it’s really a melting pot of several currencies. I still need to figure out the details.