Right, but there ways to mitigate that, without relying on the dollar and although they are not insignificant, they’ve surely considered them - the political benefits are huge for them.
there ways to mitigate that, without relying on the dollar and although they are not insignificant,
Sure, you can rely on other stable currencies like Euros or GBP. Alternatively you can rely on gold, but if you have the ability to trade your own currency to someone willing to accept it and give you sufficient gold, and that you can produce that gold on demand to buyers, you don't really need a fiat currency except to facilitate transactions easier. The problem is these countries aren't backing their currency with gold (or other precious metals).
The tradeoff to gold backing is that you can't grow your economy either. The amount of currency in circulation will always be limited by the ratio of gold you're backing your currency with. This is why the USA abandoned the gold standard, and it was the right decisions. Before doing this, if you wanted to borrow money, you had to FIND someone with money that would be willing to lend it. There were instances of limits in growth simply because all the folks that held the vast majority of the wealth (and thereby gold backed currency) weren't lending it, so loans couldn't occur in volume.
China would love for RMB to become a default reserve currency. There are strong accusations that China is a currency manipulator though. I'm not educated enough on the topic to have an opinion on it. However, countries choosing it as a reserve currency may be left holding the bag.
Right, but there ways to mitigate that, without relying on the dollar and although they are not insignificant, they’ve surely considered them - the political benefits are huge for them.
Sure, you can rely on other stable currencies like Euros or GBP. Alternatively you can rely on gold, but if you have the ability to trade your own currency to someone willing to accept it and give you sufficient gold, and that you can produce that gold on demand to buyers, you don't really need a fiat currency except to facilitate transactions easier. The problem is these countries aren't backing their currency with gold (or other precious metals).
The tradeoff to gold backing is that you can't grow your economy either. The amount of currency in circulation will always be limited by the ratio of gold you're backing your currency with. This is why the USA abandoned the gold standard, and it was the right decisions. Before doing this, if you wanted to borrow money, you had to FIND someone with money that would be willing to lend it. There were instances of limits in growth simply because all the folks that held the vast majority of the wealth (and thereby gold backed currency) weren't lending it, so loans couldn't occur in volume.
China would love for RMB to become a default reserve currency. There are strong accusations that China is a currency manipulator though. I'm not educated enough on the topic to have an opinion on it. However, countries choosing it as a reserve currency may be left holding the bag.
Awesome info thank you