Slowly but surely, the reserve currency status of the United States dollar is transitioning into a lesser role, at least for China. As early as June, the AP reports, the Yen and Yuan will begin direct trading without the use of the USD as a “cross-currency” intermediary. This means that the USD will no longer be involved in setting the rates between the Japanese Yen and the Chinese Yuan.
The aim here is to encourage bilateral trade and investment between China and Japan (the world’s second and third-largest economies, remember), and, some speculate, the risks involved with the USD and costs associated with extra exchange transactions. Scholars of history will take special note for several reasons, one of which is that it is the first time China has allowed the Yuan to trade directly with any currency besides the US dollar.
Zero Hedge posted an excellent chart as a reminder that over the centuries, major reserve currencies have come and gone several times, just as empires never last – neither does the predominant currency of global trade. Portugal, Spain, the Netherlands and France have all been world-dominant economies at earlier points in time. Does the average American even know what this means?
It’s a very good time to begin learning Mandarin, if you have not already.-