China.org posted an article about the recent pact between Russia and China to use their own currency for trade rather than the dollar, long the reserve currency for international trade. There have been other rumblings of other countries making such a threat, Iran, Iraq under Saddam for example. This is a long term threat to the Dollar because it is the fact that it is a reserve currency. Once that status is removed the US dollar will be about is valuable as valuable as the Jamaican dollar (1:86)
Our esteemed comrade in arms from the Deskrat Chronicles has valuable commentary on the matter:
"The fed ploy of dumping that additional $600 billion into the Us economy has backfired badly --apparently the straw that broke the camel's back --but you know this option was quietly on the table a long time ago between china an...d Russia. How soon will other nations start to make the switch away from the dollar to conduct trade between themselves?
The Saudis still need the protection of the Us military umbrella and the house of Saud will likely remain loyal to their pledge of oil sales only in dollars --but what's clear is that nothing is written in stone anymore.
The euro is in trouble because of the bailouts of Ireland and Greece and potential bailouts of Portugal and Spain . It may be too weakened to compete for the dollar's old position as world's reserve currency. the Germans are also loudly pissed at the Us over this devaluation of the dollar by the fed.
In Portugal,the workers were said to have shut the country down with a type of general strike today over the bum economy . The French are pissed because their retirement age got raised due to economic woes. And the 'European debt crisis' just seem to worsen daily.
Back to the China, Russia deal, the Yuan is in a stronger position than the ruble and after this deal will emerge as more of a world currency to begin openly rivaling the dollar-- likely more among the Asian economic community first, then later among the rest of the world.
Putin in Russia no doubt, still bitterly remembers how the Us busted the ruble back in the 90s and looted Russia when they went 'free market' shortly after 'the fall of communism'. He's also pissed about the expansion of NATO and the proposed 'missile defense shield' supposedly to protect Europe and the Us against Iran --a nation which is Russia's neighbor and trading partner and no credible or logical military threat to Europe or the Us.
Putin and Russia still rely on oil production and selling other natural resources for hard currency, and the old Russian military sector and the selling of weapon systems to the rest of the world are still the mainstay of Russia's economic muscle--but how long can that situation last?
He's got to modernize his infrastructure and present the image of an more democratic environment, safe for business and individual rights to lure more investment funds into Russia. He's also got to crush the mafiya and at least appear to be rooting out all the corruption if he wants to draw in more outside capital to do business in Russia--also his labor force though highly educated and skilled is still being siphoned off by the lure of higher wages and opportunity over seas. Russia's population has been shrinking.
Of course it's china that's clearly the power in this Russo/Chinese play.
The Chinese were grumbling about issuing a gold backed yuan a few years ago to challenge the dollar ,and compared to the Us, the Chinese have been building hi-speed rail lines and modernizing economic infrastructure like-- a national with the objective of soon leading the world economically .
Meanwhile over here Obama can't even give away money to republican governors to build hi-speed rail and new infrastructure projects to unravel existing transportation knots and relieve key transport bottlenecks and lessen the Us over dependence on air and highway travel.
China is playing the game with skill, while the Us is performing like a drunk trying to play chess . It makes no economic sense at all the way the Us has sold out the best interests of its own economy and people --screwing up the most powerful engine of production that the world has ever seen.
In terms of Us interests and nationalism it makes no sense what they have done to their own country in the name of cheap labor and quick profits .
That 'hissing' sound you hear is the Us slowly sinking in the west."
I will add to this that the only reason that China has not pulled the run out from under the US is because it would have a disasterous effect on their holdings. To that end the Chinese have been reported diversifying their currency portfolio as to not me so heavily dependent upon the US dollar. Secondly, China still needs the US consumer to buy it's manufactured goods. Their home market and the "emerging markets" abroad have not matured to the point that they can give the US consumer the finger but there are far more people outside the US than in the US, eventually they are going to be the consumers that matter most. When that time comes, as my boys and I used to quip:
"Then yuh will know!"