The Chinese renminbi could soon be the new international reserve currency, as China makes two serious moves to make this happen: 1) China is issuing foreign bonds in its own currency to offshore investors; and 2) China has signed an agreement to buy $50 billion in notes denominated in Special Drawing Rights from the International Monetary Fund.

This challenge to the dollar should come as no surprise. The Federal Reserve’s printing of billions of dollars that are then dumped onto the market has caused considerable worry across world markets. The Treasury Department prediction is that the national debt will rise by more than $9,000 BILLION over the next decade as the United States continues to run up huge trade and budget deficits. This, reports MSNBC, is "more than the sum of all previous deficits since America's founding."

Beijing is not impressed with this. In fact, they are savvy enough to know that the present administration’s monetary policies will erode China’s $2,100 billion in foreign exchanges, the majority of which is in U.S. government bonds.

Their savviness admittedly comes from having learned a thing or two from Westerners and their monetary policies. At a monetary policy gathering at Lake Como, Italy, one Cheng Siwei, a Chinese official, said that it is a mistake for central banks to target retail price inflation all the while they ignore their assets. "This is where Greenspan went wrong from 2000 to 2004," Cheng said. "He thought everything was alright because inflation was low, but assets absorbed the liquidity. The US spends tomorrow's money today. We Chinese spend today's money tomorrow.”

Cheng blames the United States for the present world financial debacle. "If they [the Federal Reserve] keep printing money to buy bonds it will lead to inflation, and after a year or two the dollar will fall hard. Most of our foreign reserves are in US bonds and this is very difficult to change, so we will diversify incremental reserves into euros, yen, and other currencies," adding: "He who goes borrowing, goes sorrowing." (Funny, they’ve even picked up on a Benjamin Franklin maxim.)

With a view to establishing an offshore bond market, they will be selling 6 billion Rmb or Renminbi ($879 million) in Hong Kong on September 28, just for starters. In the past year they paved the way for a better currency status by creating currency swaps with several countries — Argentina, Belarus, Indonesia, South Korea, and Indonesia — that allow China to receive renminbi for its exports to those countries, not dollars.

China has also now signed a formal agreement with the IMF, buying $50 billion in notes denominated in Special Drawing Rights (SDR), the IMF's "synthetic currency." According to the Wall Street Journal, China favors SDRs "as an alternative to the dollar as the world’s reserve currency." The paper also noted that this is "the first such agreement in the history of the IMF."

This move gives the IMF a considerable boost as well. China’s deposits combined with $10 billion in note buying from Russia and Brazil, brings the grand total of SDR outstanding stock to $317 billion, which is the fifth-largest reserve in the world.

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danwhitehead1

September 10, 2009

173.74.213.85

Votes: +0

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To repeat an earlier question - - -

- - - how long will it be before our vile fedgov starts taking orders from China? Perhaps Obama will be our last president? Wouldn't it be fun to jerk all the governors of the Federal Reserve out of their offices and PUBLICLY tar and feather them?

Muhammad Yaseen

September 11, 2009

59.103.197.228

Votes: +0

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Dollare / Renminbi

I am interested regarding U.S dollar and Chinese Yuan (Renminbi) please provide me more and latest reports about it
thanx

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