Interesting post from Marshall Gittler of ACLS Global:
First off, there is no “Petro Yuan.” They have simply listed an oil futures contract in yuan. Maybe that will mean less oil futures trading in New York or London as Chinese traders keep their business at home, but it will have absolutely no impact on the dollar’s position as a reserve currency whatsoever. None. Zero.
Secondly, the big secret that none of those conspiracy web sites you’re apparently reading know, understand or are willing to talk about, is that China doesn’t want the yuan to become a major reserve currency. A reserve currency means capital inflows (as other countries buy financial assets denominated in that currency). That reduces your current account surplus. It means less exports and more imports. In the context of China, that means unemployment, the ensuing loss of legitimacy of the CPC, and maybe revolution. It means free capital markets, which prevents the government from controlling interest rates and the allocation of capital, with big implications to China’s powerful state-owned enterprises and banks. It’s just not possible at this point in China — too many vested interests opposed to it.
Third, nobody understands the implications of what I just said. The implications are that being the world’s major reserve currency isn’t a privilege for the US, it’s a burden. It’s a burden that no other country is willing to take on. The fact that the US is the world’s major reserve currency is probably the main reason why the US has had a current account deficit for some 30 years. If the US weren’t in this position, our exports would be greater, our employment would be greater, and our tax take would therefore be greater so then our fiscal position would be better, too. This is why nobody else wants this role. This is why other countries fight against capital inflows. This is what the so-called “currency wars” were all about a few years ago — countries trying to avoid this burden.
China and Russia don’t like the idea that the dollar is at the center of the world’s financial system, but so far nobody I’ve heard of has a better idea. Neither of these countries would like to take over the role. As for this destroying the dollar… give me a break. What nonsense. If anything, this would be an enormous boon to the US economy as exports rose.
Please don’t get your economics from RT.