No. of Recommendations: 8
"And we learn, perhaps, the oddest thing: no matter how bad we think we have screwed up, the rest of the world is still more screwed up than us. I mean, theoretically it seems that at some point we could kill the golden goose, or at least choke it with legalized corruption and crazy theories of social justice and libertarianism, but so far we have not."
This!!!!
As much as other countries don't want to be beholden to the dollar, where else are they going to turn? The Yuan? The currency of a country where its leaders decide who gets rich and who doesn't? Where the leaders literally manipulate the price of their currency? Many people have a really hard time investing in China due to their lax rule of law protecting their investments. Given that, how is their currency going to replace the dollar? Do you really want the value of your currency holdings to be at the whim of the Chinese Communist Party? Besides, decades of a one-child policy has China facing a huge demographic wall in the coming years that will end up being a huge economic headwind to their continuing rapid growth. I won't be surprised if they end up trying to stealthily inflate their way to show continued growth. What happens to the Yuan when that all comes crashing down?
What is going on between China, India, Brazil, etc (I forget what other countries they were including. South Africa?) will sure make headlines and may get somewhat off of the ground and work for a while, but the moment one of their economies hits a rough patch and that country is forced to turn on the printing press or lower rates or whatever, each of their partners will bear some of the brunt of it and ask themselves why they got into bed with the others. So I am sure the Saudis might keep a nominal amount of their holdings in Yuan in the near future, but that amount will absolutely pale in comparison to their dollar denominated assets.
Right now a person can fill their wallet with crisp new U.S. $100 bills and then go anywhere in the world and with just a little bit of effort that person will be able to use those $100 bills to find food, shelter, and clothing from local citizens. Try filling your wallet with Yuan and doing the same. Not happening.
