Global Money

First it was Russia, now China is talking about a new global currency. The idea here is to create new currency and then exchange their monumental exposure to the antics of the U.S. for nice crisp bills of the new ephemera.

Make no mistake about it, this new currency would exist solely to keep various world governments propped up for another few years. Most governments have been pursuing growth policies and they still want to value their assets at boom prices. The new currency is a way to do that. I also think they hope the reserve currency would protect them from future inflationary risk. It would in the short term, because then the U.S. would reap the whirlwind of inflation without the rest of the world to act as a windbreak, but most of the world still plays the same game. The reserve currency would end up being inflationary too or else quickly become a check on government activities; I doubt world governments will put up with that.

Remember the internet bubble? There were plenty of little companies that went public. The stock would be offered at some ridiculous price, but there would be enough buzz about the stock to make it go higher at first. Meanwhile, all big investors would sell within the first weeks and make a lot of money. By the time rank and file investors got in, it was often already obvious the business had no real business plan and no plans to be profitable for the foreseeable future.

This is what world governments want to do with a new global currency.