A New Reserve Currency

China Calls for a "De-Americanized World"

Written by Daniella Nicole
Posted October 18, 2013 at 1:51PM

Economic downturn, sequester, tapering talk, standoff, and shutdown. All of these things have impacted the country and the way the world sees U.S. financial and political stability.

weakened dollarThough the shutdown and standoff are over for now – no budget is in place and funding is only through January – the sequester is ongoing, and we are not nearly as far along in a recovery as some would have us believe, ergo the rationale behind postponing tapering the stimulus program.

We're in trouble, and as the Fed continues to print more worthless money to pay our bills, many are worried about how much longer the dollar can survive.

Debt Ceiling, Default, and De-Americanizing the World

During the standoff in Congress, there was a lot of talk about the United States defaulting on its debt. Money was still coming in to the government, and the Constitution demands that the bills be paid, so the likelihood of the interest on our debt not being paid – despite the agenda-driven fear-mongering of some – was low. To choose to default would be a malicious and impeachable offense.

However, the fear-mongering and speculation ran rampant, and the world economy is deeply affected not just by what really happens, but by what people fear will happen. With an out of control government running the world's reserve currency, it is understandable some would begin calling for that currency to be replaced. That is something that had been whispered about before but is talked more loudly about now. The world is creeping up to a downright unified shouted demand for it.

As the U.S. moved closer to the debt ceiling deadline, China responded by openly stating a need to build “a de-Americanized world,” according to the L.A. Times. Though others are in agreement, for now, the world economy is too deeply entrenched in the American dollar for a replacement currency to be an easy or quick fix.

This buys the U.S. time to get its financial house in order, but that time is only of benefit if those elected by the people to put and keep the nation's financial house in order actually follow through with their duties. Therein lies the rub.

The Senate has not passed a budget in years, thus the reason why we go through this piecemeal funding, default, and debt ceiling drama every few months. It serves no purpose other than to further political agendas.

With a budget, the whole world could breathe easier, and the dollar could begin to stabilize. Without a budget, bullying, threats, and political game-playing can ensue. Is there really any question as to who it is our elected serve? It certainly isn't this county's best interest or the best interest of her people.

A New World Order

Meanwhile, China has also called for “a new world order” in which all nations would be on equal footing and even the smaller, poorer countries would have a larger role in IMF and World Bank operations. While China brings on the heat in its call for a replacement to the U.S. dollar (which until recently has been considered to be the most stable monetary unit in the world), it is also building up its own yuan, clearly with the hope of it becoming the replacement currency for world trade.

But there is a growing rumbling across the world, since about “two-thirds of the world's foreign currency reserves are held in dollar assets,” according to the Economic Times. The paper goes on to call the U.S.'s policy making “erratic” and quotes Charles Dallara, former Institute of International Finance head, as well as a former Senior Treasury official (under Reagan and George H.W. Bush), who asked:

“How can the United States preserve its financial and security leadership role when it conducts itself with such ineptitude and such disregard for the consequences for the world?”

Indeed.

American Privilege: the Beginning of the End?

The rumbling from the world includes that against “American privilege” in matters financial. As the New York Times notes:

“. . . no one gets a better deal than the United States. The United States borrows in its own currency, and it borrows at extremely low interest rates. It also borrows under its own laws, an often overlooked advantage.”

Though some would claim the U.S. is doing just fine because it can print more money if need be – and the New York Times actually goes on to make that claim – doing so lessens the value of the dollar, and doing so is one of the problems the rest of the world sees with our financial house. Putting on blinders and buying the lie does nothing but further political agenda.

Though the risk of the United States acting so foolishly is one “the lender accepts” when loaning us money, it does not have to. To say we are okay because they have accepted our irresponsibility in the past is ludicrous. Just because they have until now does not mean they will continue to do so, nor does it mean that we should continue to be reckless with our currency and its value.

There are consequences for actions, and if the U.S. continues on this path – though the dollar may not be quickly or easily replaced – make no mistake, there will be consequences. The world will not continue to extend us so much “American privilege” nor be so willing to loan us money without some way to recoup it.

 

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