International Law

Another Prediction of Chinese Currency Supremacy

A Columbia University economist known for his extraordinary conclusions -- some right -- evidently knows something everybody else does not.

The Chinese yuan is preparing to overtake the US dollar as the world's reserve currency, economist Nouriel Roubini has warned.

Read his article and several comments here. Frankly, it doesn't look like anything more than an educated guess. What support is there for such an extraordinary statement? Certainly none in the article itself. And the RMB isn't even fully convertible -- and I don't believe will ever become so. Convertibility -- essentially, the making of a truly internationalized currency -- has been a subject of discussion and prognostication for 30 years, ever since China used foreign exchange certificates in the early days after the initial economic reforms of 1978. How is it in the interests of the Chinese government and Chinese commerce to make it fully convertible? This is a question that no one seems to address.

Already, some are hitching on to a star in the hopes of its ascending to the extraordinary heights. I well remember the reports and predictions of the supremacy of the Japanese yen in the 1980s.

As proof of this gentleman's economic wisdom, writers consistently cite his previous prediction of financial collapse. But then again, I know quite a few non-economists who predicted the same thing!

Full post as published by Asia Business Intelligence on May 15, 2009 (boomark / email).