Well China's now the world's largest economy by PPP GDP [1] so it makes some kind of sense. I'm not sure how freely convertible the Yuan is though.
[1] https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)
[1] https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)
https://www.washingtonpost.com/news/wonk/wp/2018/01/11/the-c...
That is a more relevant data point of its buying power right now, and potential impact it would have on other economies, if China decides to use its market as a weapon.
Haven't you ever wondered how it is that the US is going deeper and deeper into debt, how we increased the US Monetary Base 400% since 2008 [1] with no economic consequences, how we 'printed' (not really) trillions of dollars in quantitative easing, or more generally how now we're only paying off old debts by taking on even greater levels of new debt with no reversal anywhere in sight? If a private organization was doing that, it'd be called a Ponzi Scheme. Yet we engage in all of this with minimal to no economic consequences.
But none of this matters because the USD represents access to oil. Oil is the most in demand resource in the world. And when the price of oil is pegged to the dollar, it makes USD the most in demand currency in the world. But China recently has been making huge strides in getting nations to swap to the yuan for oil. Rather than give any links go search for 'china oil yuan' and you'll get countless articles all within the past couple of months about what China has been doing. In particular China is attempting to even get Saudi Arabia to start pegging their oil to the Yuan, which would be an enormous blow to the US. If they succeed here, it may mean that the USD will need to stand on its own weight. And at that point, we may have to answer for our own economic decisions.
So people will lend to the US as it had a lot of income, assets and a reputation for paying. Compare that to the country with the world largest oil reserves, Venezuela.
By contrast, imagine all oil producing nations suddenly stopped exporting any oil tomorrow. Once domestic reserves of countries ran out the entire world would grind to an incredibly rapid halt. Electricity, transportation, shipping, and everything would stutter and then come to a near complete stop. And society itself would likely break down in very short order. It's not about the dollar value of oil, but about its relevance to society. You'd think those two would be strongly correlated, but they're not.
This is why oil and the petro-dollar have so much inherent value. Without oil society collapses, and USD is the gateway to oil. That 'is' may be changing to 'was.'
The entire world economy was deleveraging at an enormous rate and essentially destroying tons of money in the process. Fractional reserve banking essentially lets banks create money; when everyone is busy running for the exits of course the Fed can increase the base by 400% and we would merely be treading water.
What is the explanation for Japan? They don't have oil and they have greater debt than the us (relatively), yet they haven't been met with anything worse than stagnation.
Even then, I think you have keep things in perspective. 'Just stagnation' understates the situation here. In the late 80s many thought Japan was literally going to take over the world economically. Their GDP today is now lower than it was 2 decades ago. And ultimately there is still no clear path for them out of this decline.
Until people around the world can speculate freely on the yuan, and yuan denominated futures like people can with QA and CL, I don't see this having much impact.
Speculators will make up most of the daily volumes, and most never want to take physical delivery of the "gold convertibility" yuan denominated oil futures on expiry, and most certainly want to be able to take their profits out of the yuan to whatever asset of their choosing. Without the the yuan floating, this will be a relatively non liquid market.
>In particular China is attempting to even get Saudi Arabia to start pegging their oil to the Yuan, which would be an enormous blow to the US.
Yeah, I don't see the Saudi's buying Chinese weapons and US weapons without the US giving it's approval [0], because they certainly don't have the same capacity as the US for their citizens buying Chinese goods.
If the EU was actually serious about more trade with China, they should drop a lot of the anti dumping restrictions they have now on trade ;)
[0] https://foreignpolicy.com/2014/01/30/why-did-saudi-arabia-bu...
Feel free to elaborate
Currency inflates due to inflated supply -> foreign countries take more of the currency out of supply -> inflation decreases. And it doesn't end there. The additional revenues from the oil producing nations are then invested into US securities and taken completely out of circulation. The vast majority of money is not brought into circulation through printing, but leaving the specifics of creation aside, this -in part- helps buffer any harm caused by the excessive 'printing' of money.