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This post was edited by abramicus at 2013-8-13 17:48|
Reserve currency status does not come with mere productivity, even if productivity does make one's currency a desirable reserve currency for other countries, because they can bank on exchanging it for something they need, or more importantly, they can use it to pay another third country for things they wish to import.
China is probably hoping that by sacrificing some of its currency reserves in bolstering the Yuan at a higher exchange rate than appropriate for its manufacturing industry, it can move from manufacturing goods to manufacturing an international reserve currency, one that would be worth more than all the exports China could ever produce, following in the footsteps of Britain in the early 20th century, and of America in the second half of the 20th Century and on. This is a pipe dream. Fiat currency for the world depends on establishing first, FIAT of rule, i.e., conquest, and nothing short of it. There never has been any international reserve or fiat currency without the issuer being also the conqueror of all. It is also particularly distressing, in that China is already sacrificing its manufacturing potential in order to achieve what this very same potential is supposed to achieve - international reserve currency status. This is what over-reaching means. China is standing on a pedestal high up in the hierarchy of economies, and in trying to reach for a higher ledge with its arms, it loses its footing on the edifice, and right now, has barely a toehold on its manufacturing potential, as the overvalued Yuan continues to force it off its secure footing, day by day, millimeter by millimeter, until Chinese manufacturing crashes.
In the meantime, foreign investors in China are repatriating their earnings like bandits, with loads of free dollars given to them by the PBOC, out of its futile hope that such largesse would earn it the right to print fiat money for the whole world. Not only is it an unattainable dream, it would end up being an intractable nightmare for China's economy, and could lead to its political destabilization, just as Perestroika destroyed Russia in the end.