China's central bank still wants to replace the US Dollar!

More good news coming out of China!

http://news.bbc.co.uk/2/hi/business/8120835.stm

The report from the People's Bank of China (PBOC) said a "super-sovereign" currency should take its place.

Central bank chief Zhou Xiaochuan has loudly led calls for the dollar to be replaced during the financial crisis.

"An international monetary system dominated by a single sovereign currency has intensified the concentration of risk and the spread of the crisis," the Chinese central bank said.

The dollar fell after the report was released. The US currency dropped 1% against the euro to $1.4088, and declined 0.8% versus the British pound to $1.6848.

Russian President Dmitry Medvedev recently joined Mr Zhou in saying it was time to consider an alternative benchmark currency for international debt.

This is much less a political issue, and an issue of survival for the United States. Our current stance on spending is not going to help with this issue.

The United States dollar has long been the majority currency of Global trade. The dollar is used as the reserve currency by a majority of the worlds governments. Because of this the Dollar is the "unit of world trade" items traded globally are priced in dollars. If the United States is in a position where its debt exceeds what the country can produce or pay out, then the United States becomes insolvent, and with it all of the currency which is gauged on the value of the dollar. China is making a valid point.

China is voicing concern that the U.S. dollar might fall too low, and offset the values of currency worldwide. What should the United States do to address this issue? What can the United States do to decrease its deficit?

I can't say that I have the answer, but I know that the answer doesn't involve borrowing more money. The debt currently being racked up by the U.S.is unimaginable. There is no logical reason for this acquisition of debt. There also is no historical justification to make such large spending increases - with the hope of buying our way out of a recession.

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