The dollar is dead - long live the renminbi

"Whatever happens at the G20, the days of Western dominance are at an end, says Jeremy Warner." Sometimes it takes a crisis to restore reason and equilibrium to the world, and so it is with the trade and capital imbalances that were arguably the root cause of the financial collapse of the past two years. To economic purists, the changes now under way in demand and trade are inevitable, necessary and even desirable. Even so, dollar supremacy and the geo-political dominance of the West are both likely long-term casualties. And: These trends – all of which pre-date the crisis but which, out of necessity, are being greatly accelerated by it – will eventually drive a move away from the dollar as the world's reserve currency of choice. As China takes control of its economic destiny, spends more and saves less, there will be less willingness both to hold dollar assets and to submit to the domestic priorities of US monetary policy. None of this will happen overnight. Depressed it might be, but US consumption is still substantially bigger than that of all the surplus nations put together. All the same, that the dollar's reign as the world's dominant currency is drawing to a close is no longer in doubt. Time will tell. From the Torygraph via the Instapundit

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