There was an article in The UK Telegraph titled "China Aiming For 'De-Americanised World' WIth Renminbi Replacing Dollar". The renminbi is the official currency of the People's Republic Of China. The Telegraph article stated the following:
China has overtaken the US as the world’s largest oil importer and goods trading nation. Over the next five years, it will surpass the rest of the world combined in its consumption of base metals.
Given the scale of the country’s consumption of fossil fuels and raw materials, it is only a matter of time before the renminbi replaces the dollar as the primary currency for trading commodities and resources such as crude oil and iron ore.
The scale of China’s existing and forecast demand for resources almost makes any attempt by the US to maintain the dollar’s status as the world’s primary trading currency for resources entirely nugatory [of no meaning].
China has overtaken the USA as the world's largest manufacturing country, and that lead is widening:
Over the last two years, China’s manufacturing sector has made strong gains, while the U.S. has been mired in economic and political doldrums.
“In 2011, China’s manufacturing output surged by 23 percent while manufacturing output in the U.S. only increased by 2.8 percent,” the American Enterprise Institute explains.
While America remains the world's largest economy, it's lead is dwindling, and America has become increasingly propped up by massive debt, consisting of $17 trillion in federal debt and the Federal Reserve buying up another trillion a year in bonds (QE) to prop us up. China does not have the same problem, and is in fact the single largest outside purchaser of American debt. We owe China well over a trillion bucks. China is one of the world's largest creditor nations, while America is the world's largest debtor nation. Here is a brief summation of the effects of America selling debt to China and others:
The U.S. allowed China to become its biggest banker because the American people enjoyed low consumer prices. Selling debt to China allows the U.S. economy to grow by funding federal government programs. It also keeps U.S. interest rates low. However, China's ownership of U.S. debt is shifting the economic balance of power in its favor.
In other words, America is selling itself out for a temporary band-aid provided by our massive debt runup. The last five years in particular have seen us go on a historic debt spree. Here are the debt figures as of each of the last five fiscal years ending on Sept. 30th:
As of yesterday, with the debt ceiling suspended, our federal debt shot up to $17,075,590,107,963.57, meaning it has increased another trillion dollars since the end of fiscal year 2012. President Obama, he of the alleged gifted tongue, magically transformed this grim reality into “our deficits are now falling at the fastest rate since the end of World War II. I want to repeat that. Our deficits are going down faster than anytime since before I was born.” Only a political slickster like our current Prez could turn a trillion dollar debt increase over a year into a pro-Obama talking point. Shouldn't we demand better from our leaders ? An American President should be ashamed of a trillion dollar debt increase in a year. Instead, Obama brags about it. We are on pace to accumulate more debt in 8 years under Obama's so-called leadership than we did under all other presidential administrations COMBINED. Brag about that, Barry.
Anyone with basic math skills should realize America's fiscal path is not sustainable. What happens if our debt runup continues, which we have every reason to believe it will, and what happens if China overtakes our economy, or China and other countries tire of our fiscal irresponsibility ? What if they stop buying our debt ? This leads to the real question - what happens if the dollar is replaced as the world's reserve currency ??? I'd change the question to, what happens WHEN the dollar is replaced as the world's reserve currency ?, because it's a foregone conclusion if we continue on our current path. I still hope against hope that we get some real leadership to lead us out of this mess, but...have you seen what passes for leadership in D.C. ? In these upside-down days, anyone who preaches fiscal responsibility ends up being reviled by both parties (see: Tea Party). It's the damnedest thing I've ever seen. Maybe we should ban guns, because America is aiming one at it's own head and threatening suicide. Eventually, and probably sooner rather than later, our currency and bond markets will collapse due to our own foolishness. It will be like the 2008 financial crisis, only worse. A lot worse. A WHOLE lot worse.
Here's what will happen when the dollar is replaced as the world's reserve currency - we'll have to start paying our bills. We will no longer be our own bank that can print money other people around the world will accept. Gasp !!! Say what ?!?!?! America...pay her bills ??? Inconceivable !!!...and because the rest of the world would no longer lend us cheap money, our interest rates will skyrocket, as will the interest payments on our mountain of existing debt. That would cause a tsunami of economic pain for the American people that we are wholly unprepared to deal with. It would be like Greece times a million. Taxes would have to double virtually overnight to pay for all the commitments of our wonderful, helpful politicians, and that would happen at the same time as our economy was imploding in the de-Americanized world. Can you say "Great Depression II ?" I hope so, because this is our likely future if things do not change.
Think about these things when considering the much-maligned Tea Party, whose platform espouses - "eliminate the national debt, eliminate deficit spending, reduce the overall size of government, eliminate excessive taxes", and other such proposals. Are these Tea Partiers really the radical people in America, as our current non-leaders are trying to tell us, or could it be that our CURRENT leaders are the true radicals ? The question is pretty easy for me to answer, because I know whose policies are driving America over the cliff. It doesn't get much more radical than that.
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