China rising: Yuan in the IMF currency basket

Posted: December 2, 2015 in Uncategorized

The Chinese currency , Yuan, entered the IMF Special Drawing Basket (practically it is now an acceptable reserve currency).

While it is not a short term revolution…it is a long term revolution.

The IMF was set up in Bretton Woods in 1944 as a sign off of the new world power, the USA. The US Dollar practically became the world reserve currency and, togheter with its military might, it set up the US as world superpower.
In short now China entered this elite club with a unique attribute: it is not a US ally (other in the club are UK Europe and Japan).
Everybody knows that a reserve currency status is immensely powerful – the US would not have been able to escape the 2008 crisis without it.

The US could have vetoed China, but China already created the Asian Infrastructure Bank signalling the US…if you do not let me in…I will create my own.

So, the US had to agree. Not really happy as you can see that the space for the new currency came at the expenses of Euro, British Pound and Yen mainly).

This change will not wreck havoc in the short term, but no empire in history lasted more than its dominant currency. So it is a space to watch.

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