G-20: China Makes A Break For It

There's alot of discussion about what came out of the G-20, but so far I haven't seen anything good from the American-British v.s. the Continent debates. Of course, both crews have bad ideas, so an apparent Anglo victory isn't going to make me any happier than if Sarkozy had his pseudo-Napoleanic way. I doubt any major player is walking away surprised at the results.

But, after not getting enough takers for their brand new international reserve currency idea, China is now trying to turn their own currency into reserve currency. They've made deals with Argentina, Belarus, South Korea, Hong Kong, Malaysia, and Indonesia.

Globally speaking, competition good. It's questionable whether or not it'll be a good thing for China. There's little chance that they can offset the dollar risk they are already exposed to by doing this, but I think it would be an accurate assesment for them to assume they will already lose alot due to the coming dollar inflation, so why not position the Yuan as an alternative? Their currency's value will rise if they compete succesfully as the dollar becomes increasingly weaker.

In the long run, the Yuan is still fiat money controlled by a central bank, so it's not really better than the dollar, except perhaps the Chinese may be a bit less likely to respond like frightened little babies to every perceived panic. They might even allow a few 'too-big-to-live' banks to fail without trying to put them on life support. When this nation's economic policy is so bad that the President is on the T.V. promising warranties will be honored, like some used car salesman, it won't take much to provide a better product than the dollar.