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Background |
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The global financial crisis was caused by one
group of people who did, and continue doing one thing: That group
consists of the unworthy Americans who have stopped paying their
mortgages, equity lines, student loans, credit cards, and other
financial obligations. |
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Those obligations were packaged, securitized, and
purchased around the world as investments. Those securitized
investments are now faltering, causing people everywhere to lose
money. |
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If that group of Americans had met its
obligations by paying according to the contracts they signed, there
would be no global financial crisis. |
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The world sees this fact and understands
that United States' potency to function has been undermined and
disrupted by this group. The US is wounded and the world has lost
confidence and respect for it. |
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The longer the US administration dithers
and tosses around recovery plans that are likely to fail, the world
will continue to lose confidence in the US. |
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The world that the US caused to suffer
will offer little sympathy. Instead, perceiving a wounded US, it
will work to replace the dollar as the global reserve currency. The
dollar, that symbol of once-great, enviable American integrity &
strength, will be attacked while vulnerable. When a replacement
mechanism is positioned, genuine flight from the dollar will be
unstoppable. |
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A Leading Indicator |
| China
is becoming more vociferous and more frequent in its
calls for a new international
reserve currency. This indicates China's
concern regarding the
US dollar weakness and China's plans
for a leadership role within
the Group of 20. |
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China's Central bank Governor
Zhou Xiaochuan urged the
International Monetary Fund to create a "super-sovereign
reserve currency". This
follows just days after the US dollar weakened
following the Federal Reserve
Bank's announcement that it
will buy Treasuries
concomitantly with the US government's
plan to buy illiquid bank assets. |
| China
is concerned over potential
further US dollar decline as the US
works out attempts to stimulate
the economy. |
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The unusual, but more frequent attempt of a
Chinese official to reframe
international debate indicates China's efforts to
become more potent in the currency
stability relationship. |
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The central Banker's comments also
display ambitions for the yuan to
gain a more significant role in the global
economy. China's central bank
recently signed a currency swap
agreement with Indonesia.
This compliments its recent agreements with South Korea, Hong
Kong, Malaysia and Belarus. China is
preparing for trade settlement in the Chinese currency with Hong
Kong, Macau and the Association of Southeast Asian Nations. |
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China's highest officials are concerned and
frustrated with China's
large liability
to US dollar-denominated financial assets. |
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Analysis courtesy of
UnderstandingMarkets |