Posted by: Dirk | July 22, 2009

Dawn of the dollar?

According to the FT China will use parts of its foreign reserves to invest abroad:

In an interview published in state-controlled media, the chairman of China Development Bank said Chinese outbound investment would accelerate but should focus on resource-rich developing economies.

“Everyone is saying we should go to the western markets to scoop up [underpriced assets],” said Chen Yuan. “I think we should not go to America’s Wall Street, but should look more to places with natural and energy resources.”

If the Chinese government is serious about this, it will be the beginning of a long slide of the US dollar. This policy will erode the US dollar’s ability to store wealth – which is equal to constant purchsing power in international markets – which would put the status of world reserve currency in acute danger.

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