Hi Lorne,
<<How does the US$ being the worlds reserve currency affect how far China can go with its demands>>
I think it is exceedingly dangerous for either side to drag the capital market, or the trade into this stuff, unless either side is willing to go to the mattress. Some paths are very unpredictable once embarked upon.
China has US$ 160 odd billion (soon to be $200 bil) of reserve, Japan US$ 200 odd bil, Taiwan US$ 200 odd bil, HK US$ 180 odd bil. The reserves are all held in a mix of currencies, but I would imagine at least 50% could be but does not have to be in US dollars. These are the largest US$ reserve holders in the world.
Japan’s US$ portion of reserves are invests mostly in long US treasuries. China, Taiwan, and HK in short US treasuries. A shift away from or to US$ would affect exchange rates, the relevant treasury market yield/rate, and the equity markets. A shift into gold would affect the Gold shorts and bullion banks.
What can the US do, and what can China try to do? No, you and I do not want to go down that path, as it is strictly science fiction territory. Although some plausible scenarios will be max bullish for gold.
<<I believe that The USA has special powers or status (because of US$) not afforded other countries>>
… and therefore special obligations, else the privilege taken away rudely at a press of buttons.
<<What happens to all the modern military equip. that the USA gives to Taiwan when China takes over?>>
I would not worry about it, as there will be plenty of time to erase the disks and zero the dials. Weapons technology moves quite quickly.
<<PS. What does "Chugs" mean>>
... as in beer drinking at my college fraternity. |
