Thread: Debt Ceiling: China Calls for World to Be De-Americanised 'Pax Americana' has failed

October 13, 2013

China wants a 'De-Americanized' world

Rick Moran

I suppose if I had a couple of trillion in dollar denominated bonds, I'd be a little worried too.

But really, "De-Americanize" the world? Just how does one go about doing that?

IBT:

China's official news agency has called for the creation of a "de-Americanised world", saying the destinies of people should not be left in the hands of a hypocritical nation with a dysfunctional government.
Heaping criticism and caustic ridicule on Washington, the Xinhua news agency called the US a civilian slayer, prisoner torturer and meddler in others' affairs, and said the 'Pax Americana' was a failure on all fronts.
The official news agency of China, which is seen as the pretender to the world's superpower crown, then rubbed in more salt, calling American economic pre-eminence just a seeming dominance.
"As US politicians of both political parties are still shuffling back and forth between the White House and the Capitol Hill without striking a viable deal to bring normality to the body politic they brag about, it is perhaps a good time for the befuddled world to start considering building a de-Americanised world," the editorial said.

It asks why the self-declared protector of the world is sowing mayhem in the financial markets by failing to resolve political differences over key economic policy.
"... the cyclical stagnation in Washington for a viable bipartisan solution over a federal budget and an approval for raising debt ceiling has again left many nations' tremendous dollar assets in jeopardy and the international community highly agonized," the agency said.
It is not the first time Chinese leadership and newspapers have criticised Washington over a policy paralysis that threatens to devalue its dollar assets.
According to US Treasury Department data, China is the biggest foreign owner of US Treasuries at $1.28 trillion as of July. Besides, China also holds close to $3.5 trillion of dollar-denominated assets.
A US debt default and consequent credit downgrade would significantly erode the value of China's holdings.
As the first step in creating a de-Americanised world, all nations must try to shape an international system that respects the sovereignty of all nations and ensures the US keeps out of the domestic affairs of others, Xinhua said.

Sure. Just like China keeps out of the domestic affairs of Burma and Tibet, to name two. No matter. This is just silliness from Beijing. Removing America and her $15 trillion economy from the world, not to mention our vast cultural dominance where the planet can't get enough of our music, TV shows, and movies is not possible. It would be like trying to remove the air we breathe or the water we drink.
As baseball pitcher Dizzy Dean once said, "It ain't braggin' if you can do it." We hardly need to hear criticism from Communists who oppress their own people.

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http://www.americanthinker.com/blog/...zed_world.html

The U.S. Has REPEATEDLY Defaulted

Posted on October 14, 2013 by WashingtonsBlog

It’s a Myth that the U.S. Has Never Defaulted On Its Debt

Some people argue that countries can’t default. But that’s false.
It is widely stated that the U.S. government has never defaulted. However, that is also a myth.
Catherine Rampbell reports in the New York Times:

The United States has actually defaulted on its debt obligations before.
The first time was in 1790, the only episode Professor Reinhart unearthed in which the United States defaulted on its external debt obligations. It also defaulted on its domestic debt obligations then, too.
Then in 1933, in the midst of the Great Depression, the United States had another domestic debt default related to the repayment of gold-based obligations.

(Update.)
Donald Marron points out at Forbes:

The United States defaulted on some Treasury bills in 1979 (ht: Jason Zweig). And it paid a steep price for stiffing bondholders.
Terry Zivney and Richard Marcus describe the default in The Financial Review…:

Investors in T-bills maturing April 26, 1979 were told that the U.S. Treasury could not make its payments on maturing securities to individual investors. The Treasury was also late in redeeming T-bills which become due on May 3 and May 10, 1979. The Treasury blamed this delay on an unprecedented volume of participation by small investors, on failure of Congress to act in a timely fashion on the debt ceiling legislation in April, and on an unanticipated failure of word processing equipment used to prepare check schedules.

The United States thus defaulted because Treasury’s back office was on the fritz in the wake of a debt limit showdown.
This default was temporary. Treasury did pay these T-bills after a short delay. But it balked at paying additional interest to cover the period of delay. According to Zivney and Marcus, it required both legal arm twisting and new legislation before Treasury made all investors whole for that additional interest.

Many consider Nixon’s decision to refusal to redeem dollars for gold to constitute a partial default. For example, University of Massachusetts at Amherst economics professor Gerald Epstein notes:

Forty years ago this month, on August 15, 1971, President Nixon “closed the gold window”, refusing to let foreign central banks redeem their dollars for gold, facilitating the devaluation of the U.S dollar which had been fixed relative to gold for almost thirty years. While not strictly a default on a US debt obligation, by closing the gold window the US government abrogated a financial commitment it had made to the rest of the world at the Bretton Woods Conference in 1944 that set up the post-war monetary system. At Bretton Woods, the United States had promised to redeem any and all U.S. dollars held by foreigners – later limited to just foreign central banks — for $35 dollars an ounce. This promise explains why the Bretton Woods monetary system was called a “gold exchange standard” and why many believed the US dollar to be “as good as gold”. When Nixon refused to let foreign central banks turn in their dollars for gold, and encouraged the devaluation of the dollar which reduced the value of foreign central bank holdings of dollars, the Nixon administration effectively “defaulted” on the United States’ long-standing obligations ending once and for all the Bretton Woods System.

James Grant says in the Washington Post:

The U.S. government defaulted after the Revolutionary War, and it defaulted at intervals thereafter. Moreover, on the authority of the chairman of the Federal Reserve Board, the government means to keep right on shirking, dodging or trimming, if not legally defaulting.
Default means to not pay as promised, and politics may interrupt the timely service of the government’s debts.
***
Things were very different when America owed the kind of dollars that couldn’t just be whistled into existence. By 1790, the new republic was in arrears on $11,710,000 in foreign debt. These were obligations payable in gold and silver. Alexander Hamilton, the first secretary of the Treasury, duly paid them. In doing so, he cured a default.
***
But in the whirlwind of the “first hundred days” of the New Deal, the dollar came in for redefinition. The country needed a cheaper and more abundant currency, FDR said. By and by, the dollar’s value was reduced to 1/35 of an ounce of gold.
By any fair definition, this was another default. Creditors both domestic and foreign had lent dollars weighing just what the Founders had said they should weigh. They expected to be repaid in identical money.
Language to this effect — a “gold clause” — was standard in debt contracts of the time, including instruments binding the Treasury. But Congress resolved to abrogate those contracts, and in 1935 the Supreme Court upheld Congress.
The “American default,” as this piece of domestic stimulus was known in foreign parts , provoked condemnation in the City of London. “One of the most egregious defaults in history,” judged the London Financial News. “For repudiation of the gold clause is nothing less than that. The plea that recent developments have created abnormal circumstances is wholly irrelevant. It was precisely against such circumstances that the gold clause was designed to safeguard bondholders.”
The lighter Roosevelt dollar did service until 1971, when President Richard M. Nixon lightened it again. In fact, Nixon allowed it to float. No longer was the value of the greenback defined in law as a particular weight of gold or silver. It became what it looked like: a piece of paper.

John Chamberlain argues at the Mises Institute that the U.S. defaulted on its:

• Continental Currency in 1779

• Domestic debt between 1782 through 1790

• Greenbacks in 1862

• Liberty Bonds in 1934

States Have Defaulted Also

States have also defaulted. The Wall Street Journal notes:

Land values soared. States splurged on new programs. Then it all went bust, bringing down banks and state governments with them. This wasn’t America [today], it was America in 1841, when a now-forgotten depression pushed eight states and a desolate territory called Florida into the unthinkable: They defaulted on debts.

And Catherine Rampbell explains:

There were two episodes when a spate of American states defaulted on their debts, in 1841-42 (nine states) and 1873-84 (10 states). The havoc wreaked by these state-level defaults is part of the reason that so many states now have constitutional balanced-budget requirements.

China Alleges that the U.S. Has Already Defaulted By Weakening the Dollar

James Grant argues:

If today’s political impasse leads to another default, it will be a kind of technicality. Sooner or later, the Obama Treasury will resume writing checks. The question is what those checks will buy.
***
This is the unsustainable conceit of the world’s superpower-cum-super debtor. By deed, if not audible word, we Americans say: “The greenback is the world’s great monetary brand. You have no choice but to use it. Like it or lump it.” But the historical record of paper currencies is clear: Governments always over-issue it. The people finally do lump it.”

(Indeed, the average life expectancy for a fiat currency is less than 40 years.)
And our creditor – China – has said that America has already defaulted by printing too many dollars. For example:

A Chinese ratings house has accused the United States of defaulting on its massive debt, state media said Friday, a day after Beijing urged Washington to put its fiscal house in order.
“In our opinion, the United States has already been defaulting,” Guan Jianzhong, president of Dagong Global Credit Rating Co. Ltd., the only Chinese agency that gives sovereign ratings, was quoted by the Global Times saying.
Washington had already defaulted on its loans by allowing the dollar to weaken against other currencies – eroding the wealth of creditors including China, Guan said.

That might be Chinese propaganda. But the point remains that the U.S. might not be able to print money forever without facing consequences from its creditors.


http://www.washingtonsblog.com/2013/...defaulted.html

China Calls for New World Order & Moves to Replace U.S. as World’s Reserve Currency

Monday 14 October 2013
BY DAVID ICKE



‘We assume it is a coincidence that on the day in which we demonstrate China’s relentless appetite for gold, driven by what we and many others believe is the country’s desire to have a call option on a gold-backed reserve currency when the time comes, just posted in China’s official press agency, Xinhua, is an op-ed by writer Liu Chang in which he decries the “US fiscal failure which warrants a de-Americanized world” and flatly states that the world should consider a new reserve currency “that is to be created to replace the dominant U.S. dollar, so that the international community could permanently stay away from the spillover of the intensifying domestic political turmoil in the United States.”

Of course, if China were serious, and if the world were to voluntarily engage in such a (r)evolutionary reserve currency transition, then all Magic Money Tree theories that the only thing better than near infinite debt is beyond infinite debt, would promptly be relegated to the historic dust heap of idiotic theories where they belong.’

Read more …

George Osborne to give the ok for Chinese nuclear power stations to be built in the UK



‘Under the agreement to be signed in China, the Chinese General Nuclear Power Group (CGNPG) would team up with France’s EDF for a new plant at Hinkley Point in Somerset.

Britain would also back plans for CGNPG to build and help operate a reactor in the UK and recommend Chinese nuclear technology is approved by regulators.’

Read more …

China and the EU agree to swap currencies




China Buyout: Beijing firms snap up European industries



Show respect and stop treating China like a sweatshop, says Osborne

‘Britain must show more respect for China and stop treating the country like a “sweatshop on the Pearl River”, George Osborne has said.

Chinese leaders are determined to tackle corruption and organised crime and Britain must take advantage of their booming economy, Mr Osborne said, as he announced a radical relaxation of visa rules intended to boost the number of Chinese business travellers and tourists to Britain.

Under plans revealed by the Chancellor in China today, Chinese visitors will be able to apply for a British visa using the same form as that used to enter the EU’s ‘Schengen’ zone. Currently visitors have to fill in a lengthy separate application and have their fingerprints taken.’

Read more …



http://www.davidicke.com/headlines/c...erve-currency/

Obama Continues To Use Nazi Germany As His Template For Socialist Victory In America

Obama’s Groundhog Day nightmare for the American people

For four years now, we have been telling you and telling you, over and over, the astonishing parallels between the rise of Adolf Hitler and the rise of Barack Obama. We mapped out 13 similarities between Hitler and Obama that make our case clearly and concise. Now Bloomberg today puts out a story that Obama’s government would be the ONLY nation since Nazi Germany to declare default. Are you surprised…not even a little? Didn’t think you would be. Germany’s past is America’s future.

Like the Germans and Jews of 1933 Germany did with Hitler, we today in America are watching the rise of Barack Obama’s machine. The only question is, did we learn anything from history or are we it’s next victims?

From Bloomberg: Reneging on its debt obligations would make the U.S. the first major Western government to default since Nazi Germany 80 years ago.

Germany unilaterally ceased payments on long-term borrowings on May 6, 1933, three months after Adolf Hitler was installed as Chancellor. The default helped cement Hitler’s power base following years of political instability as the Weimar Republic struggled with its crushing debts.

“These are generally catastrophic economic events,” said Professor Eugene N. White, an economics historian at Rutgers University in New Brunswick, New Jersey. “There is no happy ending.”

The debt reparations piled onto Germany, which in 1913 was the world’s third-biggest economy, sparked the hyperinflation, borrowings and political deadlock that brought the Nazis to power, and the default. It shows how excessive debt has capricious results, such as the civil war and despotism that ravaged Florence after England’s Edward III refused to pay his obligations from the city-state’s banks in 1339, and the Revolution of 1789 that followed the French Crown’s defaults in 1770 and 1788.

Failure by the world’s biggest economy to pay its debt in an interconnected, globalized world risks an array of devastating consequences that could lay waste to stock markets from Brazil to Zurich and bring the $5 trillion market in Treasury-backed loans to a halt. Borrowing costs would soar, the dollar’s role as the world’s reserve currency would be in doubt and the U.S. and world economies would risk plunging into recession — and potentially depression.

Senate Talks
Senate leaders of both parties are negotiating to avert a U.S. default after a lapse in borrowing authority takes effect Oct. 17, even as senators block legislation to prevent one and talks between the White House and House Republicans have hit an impasse. Democratic lawmakers said Oct. 12 that the lack of movement may have an effect on financial markets. After Oct. 17, the U.S. will have $30 billion plus incoming revenue and would start missing payments sometime between Oct. 22 and Oct. 31, according to the Congressional Budget Office.

Serial Defaulter
Germany, staggering under the weight of 132 billion gold marks in war reparations and not permitted to export to the victors’ markets, was a serial defaulter from 1922, according to Albrecht Ritschl, a professor of economic history at the London School of Economics. That forced the country to borrow to pay its creditors, in what Ritschl calls a Ponzi scheme.

“Reparations were at the heart of the issue in the interwar years,” Ritschl said in a telephone interview. “The big question is why anyone lent a dime to Germany with those hanging over them. The assumption must have been that reparations would eventually go away.”

While a delinquent corporation may go out of business, be broken up, sold to a competitor, or otherwise change its shape, sovereign defaulters are different. Weimar Germany deferred payments, stopped transfers, reformed the currency and wrote down debt, wringing a series of agreements from its creditors before the Nazis repudiated the obligations in 1933.

It took until the 1953 London Debt Agreement to lay to rest the nation’s reparations difficulties, essentially by postponing any payments until after reunification in 1990 of East and West Germany, according to Timothy Guinnane, Professor of Economic History at Yale University in New Haven, Connecticut. The U.S., eager to ensure Germany was a bulwark against communism, pressured creditors to agree to debt relief, according to Guinnane.

‘Economic Strain’
“The U.S. was not being generous or magnanimous in the London Debt Agreement, it rarely is,” Guinnane said in an e-mail. “Rather, it understood that if Germany was forced to repay all the debts it technically owed, it would put the new Federal Republic under intolerable political and economic strain.”

Payments on about 150 million euros ($203 million) of bonds issued to fund reparations ended in October 2003, according to the Associated Press.

After sovereign defaults and before a nation is allowed to borrow again, some sort of repayment is typically made, Carmen Reinhart and Kenneth Rogoff wrote in their 2009 book on sovereign bankruptcies “This Time Is Different.” While Russia’s Bolshevik government refused to pay Tsarist debts, when the country re-entered debt markets it negotiated a token payment on the debt, according to the book.

Germany, France
Germany and France have both defaulted eight times since 1800, according to Reinhart and Rogoff. While Germany was sufficiently big and strategically important to be helped to peaceful prosperity by its creditors, default typically doesn’t end well for smaller nations.

Serial defaulters Argentina and Greece have retained political, if not economic independence. The Latin American nation failed to meet its commitments five times since 1951 and in 2001 gained the record for the largest-ever restructuring, a distinction it held until overtaken by Greece in 2012. Argentina’s bondholders are still pursuing the nation through the courts.

Including 2012, Greece has defaulted six times since 1826, three years before it gained independence, and has spent more than half the years since 1800 in default, according to Reinhart and Rogoff.

The biggest emerging-markets defaults in the past 15 years illustrate the cycle of contagion that typically marks sovereign debt crises.

Russian Restructuring
Russia halted payments on $40 billion of local debt in 1998 after oil, its main export, plunged 42 percent amid a global economic slowdown triggered by the Asian financial crisis. By the time it devalued the ruble and defaulted that August, the government had drained about half its foreign reserves and made an unsuccessful bid to increase the $22.6 billion international aid package it had received.

Russia’s debt restructuring prompted investors to pull out of emerging markets, plunging Argentina into recession. By December 2001, when the South American country halted payments on $95 billion of bonds, the economy had contracted three successive years, cutting into tax revenue and pushing foreign reserves down to almost a six-year low.

Those defaults took place because events had rendered the nations insolvent, something that doesn’t apply to the U.S., said the LSE’s Ritschl. “The only situation that really parallels the U.S. situation at present is the U.S. situation,” he said. “There’s really no doubt about the solvency of the U.S. Treasury.” source – Bloomberg


http://www.nowtheendbegins.com/blog/?p=15385

http://www.alipac.us/f19/chinese-professor-266454/

China Calls for Collapse of US Dollar

Posted by: Kevin Wixson Posted date: October 14, 2013 In: News

BAD NEWS BOMBSHELL—China’s Xinhua news agency announced the Central government was calling for a collapse of the US Dollar. China is the single largest debt holder for the United States, the US Dollar of which has for several decades, served as the reserve currency on the international scene. With the government shutdown steamrolling towards the Oct.17th default deadline, China has positioned herself to become the new world power on the international currency exchange market.

Pulling no punches, and sparing no consequences to US/China relations, the Xinhua news agency fired plenty of barbs at the current American administration, and signaled that they are growing even more displeased with the possibility of not receiving interest payments on the debt tokens they hold.

IBTIMES:

“China’s official news agency has called for the creation of a “de-Americanised world”, saying the destinies of people should not be left in the hands of a hypocritical nation with a dysfunctional government.

Heaping criticism and caustic ridicule on Washington, the Xinhua news agency called the US a civilian slayer, prisoner torturer and meddler in others’ affairs, and said the ‘Pax Americana’ was a failure on all fronts.”

China is a far more serious threat to the United States than Russia ever thought of being. They are a nation with a serious population problem, totaling close to 1.35 billion at last count. As our nation’s largest debt holder, they stand to receive the most damage by an American government default, and some suggest they are already planning an invasion on U.S. soil.

IBTIMES:

“As US politicians of both political parties are still shuffling back and forth between the White House and the Capitol Hill without striking a viable deal to bring normality to the body politic they brag about, it is perhaps a good time for the befuddled world to start considering building a de-Americanised world,” the editorial said.”

More and more we are seeing significant international powers, as well as small members of the international community, taking a very different approach to how they view America. We are no longer being give credit as a World Super Power.

IBTIMES:

“According to US Treasury Department data, China is the biggest foreign owner of US Treasuries at $1.28 trillion as of July. Besides, China also holds close to $3.5 trillion of dollar-denominated assets.

A US debt default and consequent credit downgrade would significantly erode the value of China’s holdings.

As the first step in creating a de-Americanised world, all nations must try to shape an international system that respects the sovereignty of all nations and ensures the US keeps out of the domestic affairs of others, Xinhua said.

It also called for an end to the use of the US dollar as the international reserve currency, a step that would ensure the international community could maintain a safe distance from the side-effects of domestic political turmoil in the United States.”

Surviving the upcoming collapse of the American economy might be the least of our worries, learning Mandarin by next March is going to be a little harder to swallow.



http://freepatriot.org/2013/10/14/ch...b_source=pubv1

How Much Longer Will the Dollar Be the World’s Reserve Currency?
October 14, 2013
PATRICK BARRON





Editor’s note: China’s official press agency on Sunday called for ending the U.S. dollar as the world's reserve currency.In an English-language editorial, China’s Xinhua news agency said the world should consider a new reserve currency “that is to be created to replace the dominant U.S. dollar, so that the international community could permanently stay away from the spillover of the intensifying domestic political turmoil in the United States."
China is the largest foreign holder of U.S. government debt, with about $1.3 trillion of Treasury bonds in its portfolio. China also is a huge buyer of gold. Some analysts believe China’s government is building gold reserves to create its own gold-backed currency.
This news makes the following commentary, posted Oct. 12 at the Mises.org Web site, especially timely.

By Patrick Barron
October 31, 2012

We use the term “reserve currency” when referring to the common use of the dollar by other countries when settling their international trade accounts. For example, if Canada buys goods from China, it may pay China in U.S. dollars rather than Canadian dollars, and vice versa. However, the foundation from which the term originated no longer exists, and today the dollar is called a “reserve currency” simply because foreign countries hold it in great quantity to facilitate trade.
The first reserve currency was the British Pound Sterling. Because the pound was “good as gold,” many countries found it more convenient to hold pounds rather than gold itself during the age of the gold standard. The world’s great trading nations settled their trade in gold, but they might hold pounds rather than gold, with the confidence that the Bank of England would hand over the gold at a fixed exchange rate upon presentment.
Toward the end of World War II the U.S. dollar was given this status by international treaty following the Bretton Woods Agreement. The International Monetary Fund (IMF) was formed with the express purpose of monitoring the Federal Reserve’s commitment to Bretton Woods by ensuring the Fed did not inflate the dollar and stood ready to exchange dollars for gold at $35 per ounce. Countries had confidence that their dollars held for trading purposes were as “good as gold,” as had been the Pound Sterling at one time.

U.S. Called to Account
However, the Fed did not maintain its commitment to the Bretton Woods Agreement, and the IMF did not attempt to force it to hold enough gold to honor all its outstanding currency in gold at $35 per ounce. The Fed was called to account in the late 1960s, first by France and then by others, until its gold reserves were so low that it had no choice but to revalue the dollar at some higher exchange rate or abrogate its responsibilities to honor dollars for gold entirely.
To his everlasting shame, President Richard Nixon chose the latter and took the U.S. “off the gold standard” in September 1971. Nevertheless, the dollar was still held by the great trading nations, because it still performed the useful function of settling international trading accounts. There was no other currency that could match the dollar, despite the fact that it was “delinked” from gold.
There are two characteristics of a currency that make it useful in international trade: One, it is issued by a large trading nation itself; and, two, the currency holds its value vis-à-vis other commodities over time. These two factors create a demand for holding a currency in reserve.
Although the dollar was being inflated by the Fed, thus losing its value vis-à-vis other commodities over time, there was no real competition. The German Deutsche mark held its value better, but German trade was a fraction of U.S. trade, meaning that holders of marks would find less to buy in Germany than holders of dollars would find in the U.S. So demand for the mark was lower than demand for the dollar. Of course, psychological factors entered the demand for dollars, too, since the U.S. was seen as the military protector of all the Western nations against the communist countries for much of the post-war period.

Other Monies Being Used
Today we are seeing the beginnings of a change. The Fed has been inflating the dollar massively, reducing its purchasing power in relation to other commodities, causing many of the world’s great trading nations to use other monies upon occasion.
I have it on good authority, for example, that DuPont settles many of its international accounts in Chinese yuan and European euros. There may be other currencies that are in demand for trade settlement by other international companies as well. In spite of all this, one factor that has helped the dollar retain its reserve currency demand is that the other currencies have been inflated, too. For example, Japan has inflated the yen to a greater extent than the dollar in its foolish attempt to revive its stagnant economy by cheapening its currency. So the monetary destruction disease is not limited to the U.S. alone.
The dollar is very susceptible to losing its vaunted reserve currency position by the first major trading country that stops inflating its currency. There is evidence that China understands what is at stake; it has increased its gold holdings and has instituted controls to prevent gold from leaving China. Should the world’s second-largest economy and one of the world’s greatest trading nations tie its currency to gold, demand for the yuan would increase and demand for the dollar would decrease. In practical terms this means the world’s great trading nations would reduce their holdings of dollars, and dollars held overseas would flow back into the US economy, causing prices to rise. How much would they rise? It is hard to say, but keep in mind that there is an equal number of dollars held outside the U.S. as inside the U.S.
President Obama’s imminent appointment of career bureaucrat Janice Yellen as Chairman of the Federal Reserve Board is evidence that the U.S. policy of continuing to cheapen the dollar via Quantitative Easing will continue. Her appointment increases the likelihood that demand for dollars will decline even further, raising the likelihood of much higher prices in America as demand by trading nations to hold other currencies as reserves for trade settlement increases.

Perhaps only such non-coercive pressure from a sovereign country like China can wake up the Fed to the consequences of its actions and force it to end its Quantitative Easing policy.


http://news.heartland.org/newspaper-...serve-currency

China's Official Press Agency Calls For New Reserve Currency, And New World Order

Submitted by Tyler Durden on 10/13/2013 14:32 -0400

We assume it is a coincidence that on the day in which we demonstrate China's relentless appetite for gold, driven by what we and many others believe is the country's desire to have a call option on a gold-backed reserve currency when the time comes, just posted in China's official press agency, Xinhua, is an op-ed by writer Liu Chang in which he decries the "US fiscal failure which warrants a de-Americanized world" and flatly states that the world should consider a new reserve currency "that is to be created to replace the dominant U.S. dollar, so that the international community could permanently stay away from the spillover of the intensifying domestic political turmoil in the United States."
Of course, if China were serious, and if the world were to voluntarily engage in such a (r)evolutionary reserve currency transition, then all Magic Money Tree theories that the only thing better than near infinite debt is beyond infinite debt, would promptly be relegated to the historic dust heap of idiotic theories where they belong.
Some of China's (which as a reminder is the single largest offshore holder of US Treasury paper, and the second largest of all only second naturally to the Federal Reserve whose $85 billion in monthly monetizing "flow" is what is keeping rates from exploding higher) thoughts as captured in the Xinhua Op-ed:

• Reform of the world’s financial system should include the introduction of a new internatonal reserve currency to replace the U.S. dollar
• The international community could thus permanently stay away from the spillover of intensifying domestic political turmoil in the U.S.
• Fiscal impasse in the U.S. is a good time for “befuddled world” to start considering building a “de-Americanized world”
• Impasse has left many nations’ dollar assets in jeopardy and the international community agonized
• Other cornerstones should be laid to underpin a de-Americanized world, including respect for sovereignty, recognizing authority of UN in handling global hotspot issues and giving developing and emerging market economies more say in major international financial institutions
• Purpose of such changes is not to “completely toss the United States aside,” rather to encourage Washington to play a much more constructive role in addressing global affairs

Of course, if and when the day comes that the USD is no longer the reserve currency, kiss America's superpower, or any power, status, which is now based purely on the USD's reserve currency status, and the ability to fund half the US budget deficit with debt promptly monetized by the Fed, goodbye.
Finally, as a reminder...

From Xinhua:
U.S. fiscal failure warrants a de-Americanized world
As U.S. politicians of both political parties are still shuffling back and forth between the White House and the Capitol Hill without striking a viable deal to bring normality to the body politic they brag about, it is perhaps a good time for the befuddled world to start considering building a de-Americanized world.
Emerging from the bloodshed of the Second World War as the world's most powerful nation, the United States has since then been trying to build a global empire by imposing a postwar world order, fueling recovery in Europe, and encouraging regime-change in nations that it deems hardly Washington-friendly.
With its seemingly unrivaled economic and military might, the United States has declared that it has vital national interests to protect in nearly every corner of the globe, and been habituated to meddling in the business of other countries and regions far away from its shores.
Meanwhile, the U.S. government has gone to all lengths to appear before the world as the one that claims the moral high ground, yet covertly doing things that are as audacious as torturing prisoners of war, slaying civilians in drone attacks, and spying on world leaders.
Under what is known as the Pax-Americana, we fail to see a world where the United States is helping to defuse violence and conflicts, reduce poor and displaced population, and bring about real, lasting peace.
Moreover, instead of honoring its duties as a responsible leading power, a self-serving Washington has abused its superpower status and introduced even more chaos into the world by shifting financial risks overseas, instigating regional tensions amid territorial disputes, and fighting unwarranted wars under the cover of outright lies.
As a result, the world is still crawling its way out of an economic disaster thanks to the voracious Wall Street elites,while bombings and killings have become virtually daily routines in Iraq years after Washington claimed it has liberated its people from tyrannical rule.
Most recently, the cyclical stagnation in Washington for a viable bipartisan solution over a federal budget and an approval for raising debt ceiling has again left many nations' tremendous dollar assets in jeopardy and the international community highly agonized.
Such alarming days when the destinies of others are in the hands of a hypocritical nation have to be terminated, and a new world order should be put in place, according to which all nations, big or small, poor or rich, can have their key interests respected and protected on an equal footing.
To that end, several corner stones should be laid to underpin a de-Americanized world.
For starters, all nations need to hew to the basic principles of the international law, including respect for sovereignty, and keeping hands off domestic affairs of others.
Furthermore, the authority of the United Nations in handling global hotspot issues has to be recognized. That means no one has the right to wage any form of military action against others without a UN mandate.
Apart from that, the world's financial system also has to embrace some substantial reforms.
The developing and emerging market economies need to have more say in major international financial institutionsincluding the World Bank and the International Monetary Fund, so that they could better reflect the transformations of the global economic and political landscape.
What may also be included as a key part of an effective reform is the introduction of a new international reserve currency that is to be created to replace the dominant U.S. dollar, so that the international community could permanently stay away from the spillover of the intensifying domestic political turmoil in the United States.
Of course, the purpose of promoting these changes is not to completely toss the United States aside, which is also impossible. Rather, it is to encourage Washington to play a much more constructive role in addressing global affairs.
And among all options, it is suggested that the beltway politicians first begin with ending the pernicious impasse.

http://www.zerohedge.com/news/2013-1...serve-currency