newbitech
Member
- Joined
- Nov 30, 2007
- Messages
- 8,847
I am pretty sure we already have a 1 world currency called Special Drawing Rights (SDRs), but it just hasn't become the reserve currency yet. Meaning transactions are not yet priced in SDRs. I believe what China and to a lesser extent Russia is pushing for is for greater funding of the SDR basket. In order for China to consider adding more of their currency to this basket, they are wanting greater clout and more weight in the SDR of their currency.
By increasing funding of SDR it gives the instrument greater viability and lessens the clout of the dominating currency the USD. This will of course give countries a conduit for dumping their dollar holdings en masse with limited to no impact on their exposure to US debt. In other words, rather than the US owing China and other foreign countries, the risk will be spread out internationally including to the US. Means the US treasury will have to find other sources to fund its debt, which is probably why the FED is increasing its balance sheet. Any decision by the g20 to increase funding of SDRs by a significant amount, and more importantly a revaluation of the Chinese currency as weighted against the SDR will cause the USD to plummet.
Its not about creating a one world currency, we already have that. Its about stripping the USD of its reserve status and that is all but inevitable. The only question is which fiat will become the new reserve or more likely what will the clout of that basket of SDR look like in 1 month?
By increasing funding of SDR it gives the instrument greater viability and lessens the clout of the dominating currency the USD. This will of course give countries a conduit for dumping their dollar holdings en masse with limited to no impact on their exposure to US debt. In other words, rather than the US owing China and other foreign countries, the risk will be spread out internationally including to the US. Means the US treasury will have to find other sources to fund its debt, which is probably why the FED is increasing its balance sheet. Any decision by the g20 to increase funding of SDRs by a significant amount, and more importantly a revaluation of the Chinese currency as weighted against the SDR will cause the USD to plummet.
Its not about creating a one world currency, we already have that. Its about stripping the USD of its reserve status and that is all but inevitable. The only question is which fiat will become the new reserve or more likely what will the clout of that basket of SDR look like in 1 month?