

China, UK and others' plan to replace the dollar as global reserve currency - falsestprophet
http://experts.foreignpolicy.com/posts/2009/04/22/reserved_for_china

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phoxix2
So on one hand, no country should ever take its currency's favor status for
granted. But if you've ever spent a fraction of your life looking at the rules
and regulations behind currency trading by central banks, you'll see two rules
everywhere:

1 - Every central bank will trade its own currency.

2 - Every central bank will trade in USD.

(Even if they hate the USD with a blinding passion.)

The USD is the global standard not because of some diabolical scheme by the
US, but rather because it is liquid beyond liquid. EVERYONE IS WILLING TO
TRADE IT!!

Can the same be said about the Mexican Peso ? Nope, even some of its
neighboring central banks are not willing to trade it.

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dantheman
The reason USD is standard is because the US used to be gold backed.

So all the countries in continental europe inflated like crazy and got off the
gold standard. That left England and America which became the standard. Then
England inflated, so it was down to America. America got off the gold in
standard in 1971, but there was no one else to go to. America could then
inflate its currency essentially taxing all holders of US Dollars, many of
which are over seas.

This is the cause of the current economic problem. By removing all ties to
gold the FED was able to inflate the currency causing malinvestment & seeking
risky returns to stay ahead. The final play out of this is either a tough
recession or hyper-inflation; what's going to happen isn't exactly clear -- it
depends on how much money they continue to print.

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carterschonwald
Not quite whats going on. It sounds more like they just want to create some
sort of international currency instrument which is a blend of %44 dollar, an
the rest being a mix of euro, pound and yen. The idea being (cf normal
investing) that a blend of these will be more stable than any single one.

~~~
dantheman
None of them will be stable if you want something stable it has to be based on
some sort of real asset, so that they can't print as much money as they want.

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mblakele
The title is unfortunate: it doesn't reflect the tone of the article; the UK
government isn't plotting against the dollar's reserve status; and the phrase
"dollar as global reserve currency" implies a monopoly that does not exist
(<http://en.wikipedia.org/wiki/Reserve_currency>).

[http://www.economist.com/finance/displaystory.cfm?story_id=1...](http://www.economist.com/finance/displaystory.cfm?story_id=13447239)
has more information on what special drawing rights are, and some of the
politics involved.

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csbartus
Russia, Iraq, Iran and Venezuela are already using as much EUR as USD for
their reserves.

