Arvind Subramanian at PopTech:
...he explains that China’s ascendance is not approaching but already upon us. The country’s growing dominance will be more imminent, broader in scope and greater than previously imagined. He asks us to imagine a world with, not the G20, nor even the G2, but the sole G1: the reality is that China will rule the world. What does this mean for an increasingly vulnerable United States?More recently he reaffirmed that the days of the dollar as the worlds reserve currency are numbered:
...the US problem leading to investor uncertainty and mistrust is not a one-off breakdown but a structural problem of ongoing dysfunctional politics. Even though the United States has averted (just about) a debt default this time around, the Great Menacing Farce that we have just witnessed will be replayed a few months down the road and perhaps many times thereafter.More here
As Michael Clasey, arguing for a downgrade of the US credit rating, put it: “Triple-A credits do not behave like this.” Only a change in the underlying politics can restore the attribute that China does not currently have but that the United States is squandering away.
The bottom line is that, for two years now, China has burnished its credentials and the United States has undermined them from a reserve-currency perspective. And if the dollar’s loss is the renminbi’s gain, my prediction is looking more not less likely to be realized.