The “Almighty Dollar” Is Becoming Less So

U. S. companies are joining the worldwide trend away from the dollar and toward the Chinese yuan (also called the renminbi), reports the Wall Street Journal.

“If China in the long run is interested in having the renminbi challenge the dollar as a reserve currency, given the size of the U.S. economy, U.S. firms will have to get on board,” said Mark Wu, a former World Bank economist who teaches at Harvard Law School. American firms are doing just that.

Americans trading in yuan marks a milestone on the path away from the dollar as the world’s reserve currency. Another milestone will be when internationally traded commodities, such as oil (which has been priced exclusively in dollars since the 1970s), are traded in something other than dollars.

Americans have no idea how being the world reserve currency has shored up American prosperity, and how losing that status will hurt.So far, “the dollar remains the favorite reserve currency because it has stability along with assets such as U S Treasury security that have both scale and liquidity.” (The Economist reported in 2010, as quoted in Wikipedia.)

If China plans to dominate world trade, it’s best strategy would be to have the yuan adopted as the world reserve currency.