Comment by pcthrowaway
7 days ago
> until the US collapses and/or another power rises to displace it, which really means the same thing at this point. That might ultimately be China but it's not yet
I imagine the Euro is a contender also even though the EU it's not one homogenous power.
> and the Chinese yuan is wholly unsuitable to be a global reserve currency currently.
Curious why you say this? I was considering holding some EUR and CNY in the event that one of those becomes a replacement for USD
The euro isn't a contender for two main reasons:
1. Europe is still dependent upon the US military and, as a consequence, is beholden to US foreign policy; and
2. No unified fiscal policy.
As for the unsuitability of the yuan, there are several reasons:
1. The yuan was once pegged to the US dollar. It's now pegged to a basket of currencies instead. This, by definition, makes China a currency manipulator because you wouldn't need to peg the currency otherwise;
2. The yuan is undervalued by this manipulation. It should really be more expensive, making China's exports more expensive. China does this to maintain their export competitiveness. If anything, increased demand for the yuan would be unwelcome as it would increase the pressure to appreciate the yuan;
3. China runs a trade surplus. It's basically inevitable that the country with the reserve currency will run a deficit;
4. The US running a government deficit is actually kind of a good thing for maintaining a reserve currency. China, for example, holds trillions in US government bonds. Do you really think they want to upset that apple cart?