JayAtl
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- Nov 18, 2010
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It won't happen any time soon. China may want the yuan to be the world currency, but she doesn't want other to speculate and profit off the country in the progress.
The last country to be in this position was Japan, and what happened was that the Yen was allowed to appreciate so fast (partly due to US pressure), that it resulted in a massive speculation bubble...everyone bought the Yen and Japanese investments but the country does not have the fundamentals to support it. It resulted in 2 lost decades of Economic growth for the country.
If China learned anything from that she would probably just keep letting Yuan into the world financial system a bit at a time while appreciating the currency by like 3% a year so that it won't be worth it to speculate in the currency for profit.
Its far better to accept slower growth and devalued US dollars (and more expensive oil/commodities) for now, rather than risking the same thing as Japan.
although parts of what you stated are right. you've assumed that China can take that slot if so desired- it's fundamentally impossible- pigs would fly first because the fundamentals are not in place period. it cannot stand up to that test period.
Most commentators on this thread have zero clue- hell 99% of them have no clue that the fundamentals in place -will not, shall not and cannot see the yuan as anything but a regional currency trade in some cases. India also uses local currency in international and in fact did so 6 months earlier in the very oil market this thread spoke to.