Sunday, April 12, 2009

TBAR: Texas, China, and a New Currency, Part 1

China has called for a new currency to replace the US Dollar in international trade. The proposal, made by central bank governor Zhou Xiaochuan was reported in the Wall Street Journal.

Mr. Zhou's idea is to expand the use of "special drawing rights," or SDRs -- a kind of synthetic currency created by the International Monetary Fund (IMF) in the 1960s. Its value is determined by a basket of major currencies.

The Chinese need to see this done. Clearly, the Federal Reserve, the US Treasury, and Wall Street are in the process of driving down the value of the US Dollar. Americans are stuck with the result, but the Chinese only need international agreement to change international arrangements that make the US Dollar an international reserve. They have to ditch the dollar to maintain their wealth.

This could work to the advantage of Texas.

A synthetic currency is just book keeping and I'll discuss later how Texas could profit by being the international banker for a new synthetic currency.

Robert Canright

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