Wednesday, June 03, 2009

Not welcome...

The reserve status of the dollar is a lynchpin for the global economy, and any attempt to deviate from this understanding invites more instability, both of the political and financial types.

However, the below trial balloons are merely more mercantilist saber-rattlling.  The world is not ready for a weak dollar.

Malaysia, China Consider Ending Use of Dollar for Trade

BEIJING -- Malaysia's prime minister said China and his country are
considering conducting their trade in Chinese yuan and Malaysian
ringgit, joining a rising number of nations thinking of phasing out
the dollar.

"We can consider whether we can use local currencies to facilitate
trade financing between our two countries," Malaysian Prime Minister
Najib Abdul Razak told reporters at a briefing Wednesday after meeting
with China's premier, Wen Jiabao.

"What worries us is that the [U.S.] deficit is being financed by
printing more money," Mr. Najib said. "That is what is happening. The
Treasury in the United States is printing more notes."

China has been promoting the idea of replacing the dollar as the
global currency, suggesting that a basket of currencies less linked to
the fate of one economy would make more sense. It also has been
talking about using the yuan for trade settlements, starting gradually
in the region and then expanding farther abroad.

On Monday, U.S. Treasury Secretary Timothy Geithner urged China to
move toward a more-flexible exchange rate for the yuan. If the yuan
were to strengthen, that would increase China's domestic buying power
and reduce the country's dependence on exports.

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