What ramifications might the adoption of a universal currency have on global trade and national economies in general?
– R.Z., New York The Chinese proposal for a single global currency was part of Beijing’s effort to take a more prominent place among world powers at the recent G20 meeting. And they have legitimate reason to float the idea of replacing the dollar as the “reserve” currency – the medium of exchange used for the majority of financial transactions around the world. As the holder of some $2 trillion in dollar-denominated savings the Chinese government has reason to be concerned about the long-term strength of the dollar. One time-honored method of reducing large government debt is to gradually inflate the currency to reduce the real value of that debt. That would also devalue that big pile of Chinese savings. The dollar’s role as a reserve currency also gives the United States a dominant role in the global economy. That also means other countries are subject to U.S. fiscal and monetary policies over which they have no control. So it’s no surprise that China would like to see another entity
