China's Monetary Chess Board

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Rising out of the ashes of WWII, the American economy soared in an unprecedented fashion. The creation and consumption of wealth became the driving forces behind the explosion of consumerism in the United States.

Their insatiable appetite became one of the principal forces that dominated global trade and commerce. Along the path to prosperity, evolved the broad base leverage of the Greenback (the popular term used for the powerful U.S. currency). The American dollar soon established itself as the most fluid and acceptable currency in the world.
 
Within the wide range of international monetary policies, the Greenback stepped in and, rather than offered, imposed solutions. Economic prosperity was measured by sufficient quantities of the Greenback inside the assets of a given nation. It established itself as a ‘Safe Haven’. This was then, when the U.S. could afford to enjoy the dominant role, as it stood firmly on a strong economy.
 
Since mid 2008, the U.S. economy has quickly deteriorated in a rapid downturn. The weakening U.S. dollar only adds to the nation’s inability to serve as an asylum in wake of the worst global financial crisis in history. As the crisis intensifies and the woes of the Greenback continue to mount, so do global frustrations over the U.S. currency.
 
In light of the current global condition, the recent Chinese proposition to create a new currency begins to appear not at all unfounded. Given that their economy is one of the fastest growing, they obviously have a lot at stake. Most of their amassed wealth is denominated under the Greenback’s belt. Their proposal is simple; they want to usher in a new independent currency that will be international and not associated with any particular nation’s monetary unit. This would essentially eliminate any risk to any individual nation’s currency in regards to any financial problems that the nation suffers. Russia has also voiced its support for this system, but with a different angle that is. Yet this is not just the result of Sino-Russian anxiety, because if the Greenback fails to regain its ability to provide safe asylum, as it once did, then quite likely more propositions similar to the ones provided by this odd couple, will follow.
 
Greenback set aside, the closest proposition to becoming an international currency is the Euro. An international currency, unattached to any one particular country or even group of countries, is yet to be created. The successful development of an acceptable mechanism that determines the value of this international currency would require a very long and complicated process, if in the unlikely event that a consensus was reached in the first place.
 
Meanwhile nothing should be ruled out, especially after the fast paced drama that unfolded into a full blown financial crisis that still dwells fresh in our minds. Let’s assume China’s economic growth continues to increase to the point that having accumulated enough fiscal strength, it will not only influence but also dictate terms. With the emergence of new economic powerhouses, their sheer might will become critical in redefining conventions in the global financial arena. Unlikely as it may sound in the short term outlook; let us not rule out the possibility of the Chinese Yuan earning a household nickname in the future. And on that note how about, the ‘Redback’?

Edited by Pamela Castillo