RMB vs Dollar

China is calling for a new global currency to replace the dominant dollar now!
“One is wealthy not because of his much RMB,but for dollars in his bag.” a slogan Chinese used to preach in decades after the opening of China. Dollar is famous for the value it owed. For decades, the dollar has been the world’s most widely used currency. Many governments hold a large portion of their reserves in dollars. Crude oil and many commodities are priced in dollars. Business deals around the world are done in dollars.People could get anything they wanted by it.
Now, things have changed! The financial crisis has highlighted how America’s economic problems — and by extension the dollar — can wreak havoc on nations around the world. China has long been uneasy about relying on the dollar for the bulk of its trade and to store foreign reserves. Premier Wen Jiabao publicly appealed to Washington this month to avoid any response to the crisis that might weaken the dollar and the value of Beijing’s estimated $1 trillion in Treasuries and other U.S. government debt.
Subsequently,actions have been taken! Holds vastly U.S. government bonds and then adds pressure to overhaul a global financial system dominated by the dollar and Western governments. That shows a growing assertiveness on revamping the world economy ahead of next week’s London summit on the financial crisis.To better insulate countries from the ills of one country or one currency, Zhou said the IMF should create a “reserve currency” based on shares in the body held by its 185 member nations, known as special drawing rights, or SDRs.
China’s proposal would greatly expand the use of an obscure type of currency created by the International Monetary Fund in 1969 known as “special drawing rights,” or SDRs. The SDR was originally pegged to the dollar but is now based on the value of four different currencies. But under China’s proposal, the SDRs would have a much broader role and would be used for international trade, commodities pricing, and other functions.
For the idea to work, the IMF would have to decide how much more of the SDRs would be created, a process that could be easily politicized. In addition, using the SDRs for international trade and commodities pricing would require that private companies accept the new currency. That is “a huge hurdle to overcome”.
It is brushed down by several leaders planning to attend G20 conference. President Barack Obama described China’s proposal as unnecessary during a prime-time news conference.The idea of a creating a new global reserve currency isn’t new. But analysts say the proposal isn’t likely to gain much traction because it faces major obstacles. It would require acceptance from nations that have long used the dollar and hold huge stockpiles of the U.S. currency.
More than that,the creation of a new supra-national global reserve currency to supplant the U.S. dollar would likely lead to a complete collapse of the greenback, of which trillions are held in in foreign exchange reserves by foreign countries such as China and Japan.

Related posts

• Neighbors (0)
• China,the leading role in Crisis? (0)
• Bank of America Fully Implementing Treasury’s Making Home Affordable Plan (0)
• Ancient time mechine: Candle Clocks (0)

Tags: China, crisis, currency, Dollar, financial, RMB

This entry was posted on Monday, March 30th, 2009 at 10:19 am and is filed under ec.. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.