The U.S. dollar has been the world’s reserve currency since World War II.
In March, China (and then Russia) openly attacked the greenback, calling for the dollar to be replaced as the world’s reserve currency. This call by China is particularly disturbing since China holds more U.S. debt than any other country—about $1.3 trillion—and the further the dollar drops, the less the value of the U.S. debt owed to China. If the dollar were completely replaced as the world’s reserve currency, the dollar would be quickly and dramatically devalued and the purchasing power of China’s $1.3 trillion in T-bills would be diminished by hundreds of billions of “dollars”.
Thus, by calling for replacement of the dollar as world reserve currency, China shows that it is willing to sacrifice much of the value of its hoard of US T-bills for the sake of overthrowing the U.S. dollar. This is not the simple economics of greed. Such enormous self-sacrifice is normally evidence of serious, economic warfare.
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