What Happens if the Dollar is No Longer the Reserve Currency

[Guest Scott]

I have a question for one of you. What happens if the United States dollar is no longer the reserve currency of the world?

[Guest EnronEx]

That is an easy one. Our credit would dry up.

[Guest EGIII]

Well start worrying. Direct quote from Chinese President..........."the present US dollar dominated currency system a product of the past.

 

http://online.wsj.com/article/SB10001424052748703551604576085803801776090.html?mod=WSJ_hp_LEADNewsCollection

[Luke_Wilbur]

China has made a big move to expand its currency globally by offering Yuan denominated accounts at its bank branch in New York city.

 

http://www.bocusa.com

 

Edited January 17, 2011 by Luke_Wilbur

[Guest LAW]

The Renminbi Certificate of Deposit (RMB CD) is not the right place to invest. Investor beware.

 

http://www.bocusa.co...?id=652&lang=1&

 

Bank of China RMB Business Q&A

Personal Customers

 

1. RMB Deposit

 

(1) Is there a minimum balance requirement for setting up a RMB deposit account?

 

Yes. The minimum balance requirement for RMB accounts are the same as our regular USD accounts. The minimum balance for RMB Savings accounts is the RMB equivalent of USD500. The minimum balance of RMB time deposit accounts is the RMB equivalent of USD1,000. We offer RMB CDs in 6-month and 1-year terms.

 

(2) What are the required documents for account opening?

 

For customers who want to open a RMB deposit account with us, they need to complete the account application form, W-9 form, and the signature card. In addition, customers are required to provide their Social Security Numbers and two valid identification documents. At least one of the identification documents should be a government issued photo ID, e.g. Passport, Driver's License. Another supporting document could be a major credit card, employee ID or health insurance card, etc. International students need to fill out the W-8 form and provide a valid passport with I-20 visa and I-94, or the admission letter from their schools.

 

(3) Can I issue checks from my RMB account?

 

No. We do not offer RMB checks.

 

(4) How can I find my RMB account?

 

Customers can fund their RMB accounts by incoming RMB remittance or buying RMB from our bank. We do not accept RMB cash deposit at the moment.

 

(5) Can I withdraw RMB cash from my RMB account?

 

No. You can not withdraw RMB cash directly from your RMB account at this moment.

 

(6) Is my RMB deposit Federal Deposit Insurance Corporation (FDIC) insured?

 

Yes. Like other currencies, RMB accounts are covered by FDIC insurance.

 

(7) What is your customer service hotline and website?

 

Our customer service hotline is (212) 935-3101 ext. 313. Our website is WWW.BOCUSA.COM.

 

2. RMB Exchange

 

(1) Can I buy and sell RMB from/to your bank?

 

Yes, you can exchange USD for RMB or exchange RMB for USD at our bank.

 

(2) Is there a limit for how much I can exchange?

 

Yes. Our bank has the right to impose a limit on RMB exchange.

 

(3) Where can I get a quote of the RMB exchange rate?

 

Customers can get the quote through our customer service hotline.

 

3. RMB Remittance

 

(1) Can I wire transfer RMB to accounts in China (include Hong Kong and Macau)?

 

Yes. We offer RMB remittance service to accounts in China, including Hong Kong and Macau; however, according to the regulation, the daily limit could not exceed 80,000 Yuan, and the remitter and payee have to be the same person. If customers would like to send money to their friends and relatives in China, they should use our RMB pre-settlement remittance service.

 

(2) Can I or my relatives in China wire RMB into my RMB account at your branch?

 

Yes, we can deposit the fund into your RMB account at our branch, as long as the domestic branches in China have approved you remittance application. You should consult your domestic branch in China for the requirement of sending RMB to foreign countries.

 

(3) Am I required to open a RMB account at your branch in order to use your RMB remittance service?

 

Yes. The remitter must have a RMB account at our branch.

 

(4) What is the difference between your RMB remittance and your RMB pre-settlement remittance service?

 

RMB remittance is for customers who want to transfer RMB between their own RMB accounts at our branch and in China. According to the regulation, the name of the remitter and the payee has to be the same, and there are daily and annual limits of this practice. By using our RMB pre-settlement remittance service, you can transfer RMB to any payees other than your name, but you have to provide us the payee's identification number in China.

4. RMB Currency Exchange

 

(1) What are the maximum and minimum RMB currency exchange amounts?

 

There is no minimum amount for the currency exchange service.

 

For account customers, the daily limit is USD4,000 worth of RMB, and the annual limit is USD20,000 worth of RMB. For non-account customers, the daily limit is USD2,000 worth of RMB, and the annual limit is USD10,000 worth of RMB.

 

(2) Am I required to open an account to use the service? What kind of identification documents do I need to provide?

 

We offer RMB currency exchange service to both account customers and non-account customer. For customers who have accounts at our bank, they can exchange more than walk-in customers, and can directly credit/debit their accounts. Non-account customers need to provide their social security number and a government issued photo ID.

 

(3) Which branches of yours offer RMB currency exchange service?

 

Currently, only Chinatown Branch offers this service.

 

(4) Are the exchange rates offered by Chinatown Branch identical to the rates in China?

 

No. Exchange rate depends on many different factors, e.g. market supply and demand, shipping cost, insurance cost, administration cost, etc. Therefore, the rates offered by Chinatown Branch and the rates in China would not be the same. Chinatown Branch usually updates its exchange rates daily before the branch opens.

 

Both New York Branch and Chinatown Branch offer RMB services to personal customers. Service area is limited to Great New York Metropolitan Area.

Business Customers

 

1. RMB Deposit for Business Customers

 

(1) Q: What are the required documents for opening a business account?

 

A: Business customers must open a USD account first, if they have not already had one.

 

Required documents for account opening are the same as UDS accounts. Companies should complete the application form, W-9 form, Corporate Resolution Form, Signature Cards and Fax Agreement (optional). In addition, companies need to provide their Certificate of Incorporation, Filing Receipt, Articles of Incorporation, Employer Identification Number (EIN) notification letter issued by Internal Revenue Service (IRS), Financial Statement/Tax Return, and 2 valid ID of each authorized signor. All original documents must be presented and the bank will make photocopies of the document to keep on file. Besides, companies should also provide related documents that prove its trading background and transaction amount. In order to convert your USD into RMB, we require the exchange amount to be consistent with the transaction amount on your sales contract or related trade documents. If you are sending your application by mail, all require documents need to be notarized.

 

(2) Q: What kind of RMB accounts do you offer to business customers?

 

A: We offer RMB saving account, RMB demand deposit account, and RMB time deposit accounts to business customers.

 

(3) Q: What is the minimum balance requirement for these accounts?

 

A: The minimum balances required for RMB business accounts are as follows:

 

RMB Statement Saving account required a minimum balance of RMB equivalent of USD 5,000. RMB Demand Deposit account required a minimum balance of RMB equivalent of USD $3,000. RMB Time Deposit account required a minimum balance of RMB equivalent of USD $1,000.

 

2. RMB remittance for International Business

 

(1) Q: Where are the RMB Settlement Pilot Areas?

 

A: The Pilot Areas include 20 provinces: Beijing, Tianjin, Inner Mongolia, Liaoning, Shanghai, Jiangsu, Zhejiang, Fujian, Shandong, Hubei, Guangdong, Guangxi, Hainan, Chongqing, Sichuan, Yunnan, Jilin, Heilongjiang, Xizang, and Xinjiang.

 

(2) Q: What are the rules of RMB settlement business set by the People's Bank of China and U.S. regulators?

 

A: U.S. regulators have not had any special specific rule for this kind of business. For the related regulations about RMB settlement Pilot areas, please visit the website of the People's Bank of China for updated information.

 

(3) Q: Are there any penalties if the amount of remittance exceeds the prescript amount?

 

A: We will not process the transaction if the amount of remittance exceeds the prescript amount. The excess amount will be exchanged into U.S. Dollar in accordance with the minimum exchange rate. There is no extra commission charge.

 

(4) Q: How can business customers send RMB? How much is the fee?

 

A: Business customers can send their RMB by wire transfer. The amount should be consistent with the sales contract or invoice provided. The fee charged for each remittance transaction is USD20.

 

(5) Q: Can I open more than one account to transfer money?

 

A: One company can only open one RMB settlement account at our bank.

 

3. Currency Exchange for Business Customers

 

(1) Non-deliverable forward (NDF) foreign exchange

 

1) Q: Can a business customer use NDF to hedge the potential RMB exchange rate risk related to its import/export trade business?

 

A: Yes.

 

2) Q: Can the margin be held in a time deposit account?

 

A: Yes, your margin deposit can be held in either a time deposit account or saving account.

 

3) Q: In addition to opening a USD settlement account, does a business customer need to open Margin Account at the same time to conduct NDF transaction? Should the margin deposit be in RMB or in USD?

 

A: Yes, your company must have a Margin Account in order to conduct NDF transaction and the margin deposit can be either in RMB or in USD at your discretion.

 

4) Q: What are the required documents my company needs to provide before conducting NDF transactions with your bank?

 

A: Business Customers must provide valid trade documents such as sales contracts. In addition, related Agreements with the bank must be signed before the first transaction can be entered.

 

(2) RMB spot exchange

 

1) Q: Are business customers required to have international trading background?

 

A: Yes.

 

2) Q: Can the bank provide same day settlement?

 

A: Although the exchange rate and amounts can be confirmed on the trading day, the settlement date is T+2 (two business days after trading day).

 

3) Q: How can a business customer inquire about the exchange rate?

 

A: The customer can make the inquiry by phone or by visiting our branch in person.

 

4) Q: How will the bank send trading confirmation to customers?

 

A: We can send the confirmation to customer by mail, e-mail or fax according to customers' needs.

 

5) Q: What documents are required for spot transactions?

 

A: Generally, the spot transactions are conducted by the Banking Department of our bank. If a business customer has frequent transaction needs with large amounts, the customer may choose to conduct directly with our FX & Funds Department. Then the customer must provide valid sales documents and sign related Agreements with the bank.

 

4. Trade Finance

 

(1) What kind of trade finance services does your bank offer?

 

We offer Letters of Credit, Supply Chain Financing, Export Bill Purchase, Forfeiting, Export Two-factor Factoring, Import Bill Purchase, Outward Remittance Financing, Shipping Guarantee, Packing Loan, Export Discounting, Import Factoring and Invoice Discounting, etc.

 

(2) Q: what are the target customers of trade financing?

 

A: The target customers of trade financing include all Chinese-funded enterprises in U.S and U.S. local businesses. However, our trade financing and settlement services are not limited between China and the U.S. We also provide trade financing and settlement between U. S. and other countries. For detail procedure of these services please visit our website.

 

To open account in our branch, customers will needs to provide their trade documents.

 

(3) Q: Do I need to have lines of credit at your bank in order to use these services?

 

A: You may need a line of credit for some of our services, for examples, Letters of Credit and Packing Loan. Some other services like Export Factoring and Export Bill Purchase do not required to have a line of credit.

 

All New York Branch, NY Chinatown Branch and Los Angeles Branch offer RMB services to corporate customers. Services are limited to Great New York and Los Angeles Metropolitan Areas.

 

The above Information only and subject to change by the Bank at any time. All the requirements for opening account and conducting transaction will be subject to the most recent one set by the Bank on the day of transaction.

 

Bank of China USA

 

December 2010

[Guest Fedup]

We will not be the reserve currency if we keep our greed up. The world is pissed at us.

 

http://www.nytimes.com/2011/01/26/business/economy/26inquiry.html?_r=1

 

The 2008 financial crisis was an “avoidable” disaster caused by widespread failures in government regulation, corporate mismanagement and heedless risk-taking by Wall Street, according to the conclusions of a federal inquiry.

 

The commission that investigated the crisis casts a wide net of blame, faulting two administrations, the Federal Reserve and other regulators for permitting a calamitous concoction: shoddy mortgage lending, the excessive packaging and sale of loans to investors and risky bets on securities backed by the loans.

 

“The greatest tragedy would be to accept the refrain that no one could have seen this coming and thus nothing could have been done,” the panel wrote in the report’s conclusions, which were read by The New York Times. “If we accept this notion, it will happen again.”

[Guest andre]

I have a question for one of you. What happens if the United States dollar is no longer the reserve currency of the world?

[Guest Guest]

I felt the need to post this again because I think we are closer than you think to the end of the dollar's reserve status. I also believe we are not prepared for the pandemonium that will occur. Please read this and start making a plan with a good financial advisor.For a comprehensive answer to your question Visit http://realdealtalk.com/2011/01/21/when-the-dollar-loses-its-reserve-status/

[Guest EnronEx]

China is on a drive to have the yuan accepted as the world’s reserve currency and is amassing gold to improve foreign investor confidence.

 

http://www.mineweb.com/mineweb/view/mineweb/en/page32?oid=120776&sn=Detail&pid=92730

[Guest NIA]

China is so disturbed by the inflation being created by both the Federal Reserve and ECB, that they are looking to abandon both currencies and position the yuan as the next reserve currency. The biggest news of this past week, which conveniently got swept under the rug by the U.S. mainstream media, was news out of China that they will be allowing trades to settle in yuan instead of the U.S. dollar. China is simply responding to overseas demand from those who don't wish to hold on to large amounts of U.S. dollar reserves that are rapidly being debased by the Federal Reserve. By the end of 2011, Chinese exporters and importers will be able to settle cross border transactions in their own currency, instead of U.S. dollars. China is working to rapidly grow the yuan's role in international trade and NIA believes it will soon become the world's new reserve currency by default.

 

The fact is, if the Chinese abandoned the U.S. dollar, China would immediately have the world's largest economy as a result of the yuan strengthening in value. Over 70% of U.S. GDP is consumer spending and when Americans can no longer import cheap goods from China using money we borrow from them, consumer spending will fall off a cliff.

[Guest NIA]

Tsunami of Inflation to Hit U.S. with Japan Crisis

 

The earthquake, tsunami, and nuclear disaster that hit Japan this past week and the destruction that it caused is nothing compared to the tsunami of inflation that will soon hit the U.S. as a result of this crisis. A tsunami of inflation in the U.S. will mean a complete collapse of our monetary system, which could lead to millions of deaths due to a lack of food and heat. 44 million Americans are now dependent on food stamps, but when the U.S. dollar becomes worthless as a result of hyperinflation, the government will no longer have the power to support these Americans and many of them will simply starve to death.

 

Japan's citizens were smart enough to save up $885.9 billion in U.S. treasuries to spend in a situation like it finds itself in today. The U.S. has no such savings and is the world's largest debtor nation. Our ability to survive depends on our ability to print money that has purchasing power. The only reason the U.S. dollar still has purchasing power is the dollar's status as the world's reserve currency.

 

All Japan has to do is sell their U.S. treasuries and they will have the financial resources necessary to rebuild the parts of their country that were destroyed by this past week's disaster. However, U.S. Treasury Secretary Timothy Geithner said on Tuesday that he doesn't think Japan will unload their $885.9 billion in U.S. treasuries. It remains to be seen if Japan will do the right thing and sell their U.S. treasuries or if they will make the mistake of continuing to artificially prop up the U.S. economy.

 

The Central Bank of Japan (BOJ) in recent days has already been repeating many of the same mistakes the Federal Reserve made in the U.S. After this past week's disaster, the BOJ printed hundreds of billions of dollars worth of yen in an attempt to prop up their financial markets. Japan's central bank should be raising interest rates, which would encourage its citizens to increase their savings so that they have more resources to rebuild their country and invest into the production of clean energy. By printing trillions of yen out of thin air, the BOJ will cause prices to rise for the very building materials the Japanese need to purchase in order to rebuild.

 

Although the yen has been rising in recent days, it would be strengthening a lot more if it wasn't for the BOJ's actions. In fact, NIA believes that while the yen may continue to rise in the short-term, the yen is now likely to lose a substantial amount of its purchasing power over the long-term. Instead of allowing the yen to strengthen so that it is cheaper for the Japanese in import copper, iron, steel, oil, natural gas, and other commodities needed to rebuild, the BOJ's actions are actually hurting the Japanese and having the effect of propping up the U.S. economy in the short-term.

 

The mainstream media frequently talks about Japan's national debt and how it is 225% of their GDP. However, Japan owes most of their national debt to themselves. We have a much worse national debt crisis here in the U.S., where we owe half of our debt to foreigners. Not only that, but once you include America's unfunded liabilities for Social Security, Medicare, and Medicaid, along with its debts for Fannie Mae and Freddie Mac (which are now government backed entities), total U.S. debt obligations now exceed $76 trillion.

 

The Japanese economy reached peak consumer spending in 1990 and entered their "Lost Decade" of deflation with a balanced budget, high savings rate of 15%, low unemployment rate of 2%, and a net debt to GDP ratio of less than 20%. The average American peaks in spending at age 46 and the last babyboomer just turned 46 in 2010. This means the U.S. economy just passed peak consumer spending, similar to Japan in 1990. Instead of entering this decade from a position of strength, the U.S. has entered it with a real budget deficit of $4.3 trillion, a savings rate of only 4%, a real unemployment rate of 22%, and total debt obligations that are 5 times higher than GDP. We won't be so lucky to escape this decade with deflation, but will instead be faced with hyperinflation as the world loses confidence in the U.S. dollar and rushes to dump their dollar-denominated assets.

 

When Japan comes to their senses and realizes just how dire the fiscal situation is in the U.S., they will realize that they are much better off investing into their own economy and abandoning the U.S. economy. Just the fact that Geithner is now saying that he doesn't expect Japan to dump their U.S. treasuries, illustrates just how nervous the U.S. government is about the U.S. dollar and how devastating it would be for all Americans if the Japanese did dump their treasuries. No amount of tax increases and spending decreases will ever allow the U.S. to balance its budget. All the U.S. government can do is talk up a strong U.S. dollar, because they have absolutely no real way to keep it propped up.

 

All NIA members know that Geithner is perhaps the biggest liar in the U.S. government today. Geithner has long said that the U.S. will not monetize its debt, yet the Federal Reserve is now the buyer of 70% of U.S. treasuries being sold. Foreign central bank purchases of U.S. treasuries have fallen from 50% down to 30%. The days of the U.S. exporting its inflation to the rest of the world are now over.

 

The U.S. just reported a record budget deficit last month of $222.5 billion, a bigger deficit than the entire year of 2007. Up until today, the U.S. has been paying off its debts plus interest by selling larger amounts of U.S. treasuries to new buyers. This is effectively a ponzi scheme, although the U.S. government will never admit it. Even if Japan doesn't sell the U.S. treasuries they already own, that won't be enough for the U.S. to keep this ponzi scheme going. The U.S. needs Japan to keep buying U.S. treasuries, but not only that, they need Japan to buy larger amounts of U.S. treasuries than ever before. The odds of Japan increasing their U.S. treasury purchases during this time of crisis are close to zero, they simply don't have the financial means to do so.

 

If Japan doesn't step up its U.S. treasury purchases, who will pick up the slack, China? Geithner infuriated China last year by calling them currency manipulators and since then, China has been rapidly expanding the yuan's use in cross border transactions and is now setting up the yuan to be the world's next reserve currency. NIA believes China is likely to stop buying U.S. treasuries, and will instead loan money to Japan to help in their rebuilding efforts.

[Guest Adnan Darwash]

I have a question for one of you. What happens if the United States dollar is no longer the reserve currency of the world?

 

It will be better for many countries in the world if they hold Chinese Yuan or Brazilian Cuzeros since these currencies will be more stable than the Japanese Yen or the US$. The Americans have been losing their mighty Dollars to wars, bribing foreign goverments, expensive oil and gas or to the import foreign goods which they can easily produce at home. I am sure that the US Federal reserve will do just the same by holding in addition to gold a basket of crrencies dominated by the Yuan. A devalued US Dollar will help US export and foreign tourism. In Iraq we pray for the US Dollar to crash so it will be too costly for the americans to launch wars.

Adnan Darwash, Iraq Occupation Times

[Guest Ron]

Hey Adnan,

Does any Iraq currently manufacture any durable goods?

[Guest Honen]

For a very short time, roughly a century, America has been top dog. There's nothing to say that it will continue to be so and much to say that it will not.

 

Spain has been there, France, Imperial China, Ancient Rome, Persia, Britain - name your era and some country has been 'the most successful country in the world'.

[Guest Morbonzi]

Time is short.

 

China has revealed their plan to become the world's reserve currency. They have developed their own market platform software that will be completed in November. London Bullion Market Association bullion banks will not be able to compete with their fractional reserve system. The true price of gold will stress western currency markets. Many small gold bullion investors will lose their investment during the market correction. The Federal Reserve will begin to lose leverage to adjust the value of United States currency in the face of a China gold backed currency. China will force western businesses operating in China to use their yuan as payment. As western value goes down China will have a greater opportunity to dump US Treasury bonds for gold bullion. The US will be forced to sell hard assets to cover debt interest.

[Guest Luke]

This is a major step for China to become the reserve currency in Southeast Asia.

 

http://www.reuters.com/article/2011/10/20/us-china-economy-yuan-idUSTRE79J2JR20111020

 

"This will lay the foundation for the yuan to become a regional currency," the first source told Reuters, requesting anonymity because he was not authorized to speak to reporters.

 

China, the world's second-biggest economy, is keen to give the yuan a bigger international role and diversify its foreign exchange reserves -- the world's largest stockpile -- which rose by $4.2 billion in the third quarter to $3.2 trillion.

 

Once the deal is signed, China would then negotiate individually with ASEAN member countries and sign currency swap agreements, said the sources, allowing non-Chinese companies to settle their yuan-denominated transactions with banks in their own countries, rather than doing so through Hong Kong.

[Guest Drunk Economist]

Traders are going to start considering shorting the market. Europe has to meet reality. Printing money is not the answer. The selling pressure is getting bigger.

 

http://www.youtube.com/watch?v=JgqGEggTYck

 

Read "The Golden Rulers, by Dan Denning

 

Don't you think the Chinese would be happy to lend Europe some of the trillions of Euros it needs to recapitalise its banks, save Greece, and prevent a crisis in Italian and Spanish bonds... as long as the Europeans posted gold as collateral for the loan?

 

That's a no brainer for China. If Europe defaults China gets the gold. And he who has the gold gets to make the rules of the New World Order. China could back its currency with gold and by 2015 it might be ready to make the yuan freely exchangeable worldwide. It would take its place as the new world reserve currency.

 

http://www.dailyreckoning.com.au/the-golden-rulers/2011/10/26/

[Guest mr_Mister]

newamerika4.com america is doomed

[differentDemocrat]

the collapse of the entire world market economy and riots in USA

 

shame of it... this will probably happen