Does the U.S. dollar automatically crash to nothing if it ceases to be the world's reserve currency?
If so, what in the WORLD was Barack Obama talking about tonight when he said the dollar was "extroidinarily strong"??
China’s central bank on Monday proposed replacing the US dollar as the international reserve currency with a new global system controlled by the International Monetary Fund.
In an essay posted on the People’s Bank of China’s website, Zhou Xiaochuan, the central bank’s governor, said the goal would be to create a reserve currency “that is disconnected from individual nations and is able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies”.
The International Monetary Fund is poised to embark on what analysts have described as "global quantitative easing" by printing billions of dollars worth of a global "super-currency" in an unprecedented new effort to address the economic crisis.
(Don't forget that CHINA owns much of the U.S.'s debt ALREADY)
watchful.....Yes they are. The "plan" is in motion IN PLAIN SIGHT.
michael n......"Take their comment as a complaint about spending. They want us to protect their investment, and we should."
How is printing trillions in new paper currency protecting their investment?? They seem like they're REALLY looking for other options.
- 1 decade agoBest answer
we have a fiat currency..meaning it is paper with implied monetary value. we had the gold standard back in the day, but nixon did away with that. now citizens may not own physical bullions of gold. it is against the law. what we have here is paper that is not backed by any commodity (gold silver what have you) so what will happen is the collapse of the dollar. the only reason we have avoided depression thus far is because the fdic agreed to back every deposit up to 150k. it is currently 250k temporarily because there was a run on money market accounts to the tune of 550 billion that would have crashed the market early one morning in sept 08. you can imagine if the world currency is not being set by us, the dollar is not worth the paper it is printed on- but the gold reserves. everyone will lose and lose big. banks will shut down as the run starts. any investments based in dollars like 401k will be destroyed. your savings, your money in the stock market, it will all be desimated. you will be worth a fraction of your current wealth. it is best to look into foreign markets..as they will be more resilient. they too will take a hit but it will not be as bad as the us. you can protect your personal wealth this way and will remain stable. also, should things get really bad here at home, it would not be a bad idea to have money waiting for you should you feel the need to leave.
what michael does not understand is that china is not asking to hold the world currency. if we go to a one world currency, dollars/to the new world currency will have to be negotiated. do not believe for a second that should the chinese get what they are asking for, that they will not first cash out of us dollars. they will want to cash out so they do not lose. do you know what that means for us? all those billions of dollars will come running home all at once. the chinese will buy up the US with our own dollars which will be catastrophic. it will collapse our economy and worse- they will own more of our great country than anyone in history
the dollar is the reserve currency for international trade:
The United States dollar is the most important reserve currency in the world today. Throughout the last decade, an average of two thirds of the total allocated foreign exchange reserves of countries have been in U.S. dollars. For this reason, the U.S. dollar is said to have "reserve-currency status", making it somewhat easier for the United States to run higher trade deficits with greatly postponed economic impact (see currency crisis). Central bank reserves held in dollar-denominated debt, however, are small compared to private holdings of such debt. In the event that non-United States holders of dollar-denominated assets decided to shift holdings to assets denominated in other currencies, there could be serious consequences for the U.S. economy. Changes of this kind are rare, and typically change takes place gradually over time; the markets involved adjust accordingly.
thats right- i just wiki you. now further your education before making claims
- 4 years ago
If it happens the effect will really be based on what currency if any replaces it; I say if any because it would be possible that a new standard currency could be designed but that would be difficult so the other thing would be to make it gold based and that could cause some major inflation depending on the futures trading there. Right now I think this is mostly talk to curb the US spending/deficit which China and others have already expressed concern about. One of those waut and see what happens then what the effect will be.
- Anonymous1 decade ago
It is not to china's advantage for there to be a new "world currency" at this point, so it's safe to assume they're just saber rattling. Remember, they're holding more US dollars than anyone! They want a new world currency for the NEXT recession, so they don't get caught with $12 Trillion that are losing value. Once they're invested in our money, the only thing they could do is try to sell it all. The risk they run is getting far less than they'd be happy with as other nations snatch up our debt.
Take their comment as a complaint about spending. They want us to protect their investment, and we should.
No economist worth their Investor's Business Daily subscription is predicting a "crash to nothing" of the US Dollar.
Printing trillions is not looking out for China, but it may be what's necessary for us to look out for ourselves. As much as it would be great to treat "our investors" right, if there's no US to invest in, everybody loses. As I explained in great detail to you before, the most recent $1T that's being "printed" will come back to us in the form of mortgage payments.
- The WiseguyLv 41 decade ago
The U.S. dollar is not the world's reserve currency. That being said, the dollar can be weak but it can gain stength. Obama doesn't know what he is talking about. China doesn't decide anything about the U.S. Dollar. or the British Pound, or the Japanesse Yen. China is just trying to flex it's political nonsense because they're not going to get paid in this lifetime. They did the math. The U.S. Dollar is backed by assets and resources. It's just going to take years to pay back all that money. Any Chinese kid with an abacus can figure that out.Source(s): I came up with this from the top of my head...Isn't that amazing?
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- RubyLv 61 decade ago
Without mentioning any names ...ahem ahem ... some answers ABOVE me seem to be from a different planet
... either that or he/she/they (you guess) don't have a semblance of a clue about how money works ....
Let me answer your question with a question .... what is keeping the dollar from crashing now .... is it growth in the economy ... or is it foreign investors keeping the dollar afloat ...
We might be especially concerned about the chorus call from from China .... Russia ... European union and others for the world to ditch the dollar as reserve.
...get your money out of dollars and into gold ... it seems that its time to shine is very near ...
- Anonymous1 decade ago
Yes, if the dollar ceases to be the reserve currency why would there be any demand for dollars. Our economy is a disaster and out manufacturing is a shell of its former self.
- 1 decade ago
Things are starting to get interesting now. It is a little quiet on the home front now. Bust this one out again during the day.
- curious21Lv 51 decade ago
I find it quite humorous that even when *things* are spelled out for the masses they remain oblivious and dubious of reality.