Why the Dollar Still Rules the World – And Why the Renminbi Isn’t Ready to Take Over

This is a very deep and thorough monetary history that slams the ignorance of Churchill and provides evidence China is now like the USA in the 19th Century.

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Of course, after talking about the dollar, let’s also talk about the renminbi. A lot of people nowadays think that once the dollar collapses, the renminbi can immediately step up and become the new world dominant currency. To that I can only say, you are thinking a bit too much. Overall, the gap between the renminbi and the dollar is still very large.

The reason the dollar became the world’s dominant currency, besides all historical opportunities, comes down to five key factors: America’s strong economic power; the investment returns and the safety of dollar assets; the sense of responsibility shown by the Federal Reserve; America’s economic structure of running high trade deficits; and the global consensus that the people have about the dollar. All five are indispensable.

What does China have? You could say that on these five points, China only comes close to America in terms of economic strength. That’s the one area where it can put up a fight. The investment returns on renminbi assets—that is, China’s A-shares—are like night and day compared to America. The safety of the renminbi—that’s even more laughable. In a country that lacks the rule of law, tomorrow your assets could all be frozen and you wouldn’t even have a place to complain.

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