The dollar is not plummeting, much less will continue to plummet. How is anyone supposed to take you seriously when you say silly shit like this?
Poor choice of words on my part. The point I'm trying to make is that it's not hard to see what China's trying to do. Part of their goal with this initiative, especially the creation of the Asian International Infrastructure Bank, is to have the Yuan replace the dollar as the world's top currency. If that happens, then the value of the dollar will fall. I'm not a fortune teller, so I don't know if that will happen or not. But given what China is trying to build and the international support they've received so far, even from our allies, it is a possibility; especially when you factor in how much of our debt that they currently hold.
So what? The value of the dollar rises and falls based on many factors. What makes it an international currency is the stability of the US economy. China has not demonstrated such a stability. But china is a major player in the world economy and would like to see its currency seen as an international currency like the dollar, the euro and the yen. It might be a good thing. China does not let the yuan rise and fall in value as most currencies do. They rigidly control it rather than let the market decide on its value. For the yuan to become an international currency it must have a more market-determined exchange rate, interest-rate liberalization as well as strengthening of financial regulation and supervision. If they do this, then it is an example of China trying to become more of a free market economy, which is good for everybody. But not even the yen or the euro can match the dollar for international confidence and use. It gives them a huge incentive for the US dollar and the US economy to remain strong and dependable. They bought that debt for a reason . . . a reason that we encourage . . . it is the safest investment in the world.
Good points @red55 in addition to the incentive you gave, China faces much risk if they dump our debt. They hold billions of dollar denominated debt including U.S. Govt debt, cash, stocks etc. They couldn't dump it quickly enough to avoid major losses and possible instability. To do something like that is an act of war as overt as armed invasion. They aren't fools enough to do so. IF they can manage to continue growing into a true first world economy then at some point the Yuan may overtake the dollar as the dollar did the pound. If so it really won't hurt us if we act smartly.
Theoretically it's possible, but China hitched their wagon to the US many moons ago. Their financial fortunes are closely tied to ours.
Fair point, but do you really you really think we'll ever be able to pay it all back anyway? I'm not so sure.
