China’s future role in the global financial system

Brad Setser: Follow the Money reports about China's future role in the global financial system.

(emphasis mine) [my comment]

Different conceptions of China's future role in the global financial system
Posted on Friday, May 15th, 2009
By bsetser

Discussions of China's role in the world that aren't dominated by economists often end up focusing on China's willingness to act as a "responsible stakeholder" in the global system. That is diplomatic code for China to do more to support the current international financial and political order that it has — in this view — helped support China's rapid development.

This framing though assumes something that I am not sure is true, namely that there is a deep consensus on what constitutes a stable international financial order and thus consensus on what China needs to do if it wants to integrate more fully into this order.

The current order, after all, isn't really defined just by existing institutions like the IMF; the key questions go far beyond China's willingness to contribute more to the IMF in exchange for a few more votes.

To put it concretely, is a stable international financial order one defined by large-scale Chinese financing of the US, in dollars, to sustain a large US current account deficit — whether one that reflects a large deficit among US households or a large US fiscal deficit?

Or is a stable financial order marked by floating exchange rates among the world's major economies, limited build-up of reserves and modest current account deficits (and surpluses)?

In the first conception of global financial order, China should continue to peg to the dollar, adopt policies that restrain domestic demand growth to avoid domestic inflation if the dollar is weak and run up large dollar reserves. That policy mix would produce large current account surpluses — and allow China's government to continue to provide large amounts of financing to the United States. Call it Bretton Woods 2 bis. China's current $1.5 trillion or so dollar portfolio would double over the next four years, to about $3 trillion — and keep on rising after that. The current crisis doesn't — according to this view — signal that there is anything fundamentally wrong with a world where a poor country like China finances a rich country through the United States as a result of a policy of holding its exchange rate down to support its export sector. See Michael Dooley and Peter Garber
[click on this link for a dose of absolute Keynesian stupidity] for a forceful statement of this view combined with plenty of sharp criticism of those who have criticized Bretton Woods 2.

In the second conception of global financial order, China should allow its currency to appreciate, offset the drag from slower growth of exports with aggressive policies to stimulate domestic demand (including the rapid implementation of a broad social safety net, even if this produces sustained budget deficits) and bring its current account surplus down. China's government would no longer steadily accumulate large quantities of dollar reserves. More balanced trade flows would allow the RMB to eventually float — allowing China to direct domestic monetary policy toward stabilizing China's own economy rather than stabilizing its exchange rate.

The US would get less subsidized financing to be sure — but according to this view, large inflows from China and other emerging economy central banks have proved to be a mixed blessing. Dollar pegs prevented a necessary adjustment in the dollars' value relative to a host emerging economies, keeping the trade deficit up.
That changed the composition of US output, as the US shifted out of the production of tradable goods and services — and instead specialized in home construction and creative financial engineering [Sad, but true]. And, well, the US financial sector wasn't able to effectively intermediate large inflows from the world's central banks. US financial institutions — and European ones running large offshore dollar balance sheets [via London (See *****European Banks Desperate To Avoid Recognizing Losses On Their 8 Trillion Us Holding*****)] — were stuck with a lot of credit risk from lending to increasingly indebted American households, as the world's central banks were far more willing to take currency risk than credit risk. And now — as Martin Wolf likes to note — there is a risk that a new buildup of dollar (and euro) reserves will finance an unsustainable buildup of government debt in the US (and Europe).

The apparently cheap credit that the US obtained from the world's central banks over the past few years — in my view — came at a high price: it masked the buildup of vulnerabilities in the US economy, and likely prevented some natural circuit breakers from kicking in and cutting the housing boom off at an earlier stage. As superstar economist and pop culture sensation Nouriel Roubini* notes in the New York Times, "A system where the dollar was the major global currency allowed us [the US] to prolong reckless borrowing."

Of course, non-reserve currency countries also sometimes engage in a bit of reckless borrowing. But during the last boom, private creditors abroad generally speaking weren't willing to provide the US with the low-cost dollar-denominated financing needed to sustain a huge boom in an interest-rate sensitive sector like housing.
Over the past several years, net private demand for US assets from the rest of the world fell well short of what the US needed to sustain its external deficit, creating an equilibrium that — in my view** — could only be sustained so long as the world's central banks provided the US with large amounts of financing.

Nouriel Roubini's article in the New York Times
[article is below] suggests that China might have a third — and rather different — conception of a stable global financial order in mind. According to this view, China's basic problem is not that it is running a large current account surplus and accumulating financial claims on the world. Rather, its problem is that those financial claims are denominated in dollars and euros rather than in China's own currency. If China was lending to the US — and Europe — in renminbi, China could continue to run large current account surpluses without taking on as much financial risk as it is now. If the US was required to pay China RMB, not dollars, China wouldn't need to worry about a bout of inflation in the US that led the dollar to depreciate — or for that matter a dollar depreciation that wasn't the product of a rise in US inflation. All China needs to do then, is to convince the US to start selling it RMB denominated Treasuries and Agencies — or, for that matter, find other borrowers willing to sell China RMB denominated debt to finance their trade deficit.

That conception of global order though isn't one that appeals to the US. It implies that US borrowers would need to take on the risk of dollar depreciation that China now assumes. That would make sustained US deficits — and the associated buildup of US external debt — far more risky.

That highlights the ambiguities the United States' faces in a world where emerging markets want to hold huge amounts of reserves — and where most of those reserves are in dollars.

The scale of their demand for dollars potentially creates problems for the US — as the external surpluses that often generate large reserve growth imply larger US external deficits than are really healthy. Rapid reserve growth has gone hand in hand with a very rapid large buildup of US external debt. It also implies that much of that debt will be held by states, not by private creditors — which also isn't a necessarily a positive. A deficit financed by a diverse group of small creditors is different than a deficit financed by a few large states.

But the fact that this debt is denominated in dollars is an enormous advantage for the US [Agreed]. The US also benefits from a world where the dollar generally rallies in times of financial — and geopolitical — turbulence. The current financial crisis would have posed more acute dilemmas if it had been accompanied by a dollar crisis. A geopolitical crisis that resulted in a massive dollar selloff also would challenge the US in new ways, as over the past fifty years the US has generally benefited from safe haven flows in times of global political stress.

China's evident discomfort with its dollar exposure could push China to accept a stronger RMB and a smaller current account surplus. That would limit the buildup of dollar risk at China's central bank — and at China's sovereign fund. China would still hold a large dollar portfolio, but its dollar portfolio wouldn't need to grow. The US dollar would remain the world's leading reserve currency. But the stock of global reserves wouldn't grow at the same incredible pace as it did in the past five years. A world where central banks are adding $75-150 billion a year to their dollar reserves — and providing the US with modest amounts of financing — is rather different that a world where central banks are providing the US with $750 billion (or more) in dollar financing.

Once China's population discovered the risk associated with holding huge sums of foreign assets, they weren't all that happy. The core trade off associated with Bretton Woods 2 — accepting low yields, and likely large losses in RMB terms, on a huge and growing stock of dollars and euros in order to spur China's export sector — doesn't seem to command much political support in China. China, not surprisingly, seems to have concluded that it would like to support its export sector at a lower cost to itself by accumulating RMB rather than dollar and euro claims on the world.

Same Chinese surplus, but less financial risk for China. It isn't hard to see why that is a vision that appeals to China's leadership.

The problem of course is that is that China's own choices more than anything else constrain the renminbi's ability to serve as a global reserve currency. China's currency isn't freely convertible and its capital account is heavily managed. And China's government doesn't exactly welcome foreign inflows of any sort — and it certainly doesn't want to increase its dollar holdings to allow other countries to increase their stock of renminbi denominated reserves. Letting other central banks hold RMB means letting other central banks speculate on RMB appreciation ...

That said, it isn't clear that the US has the ability to prevent the formation of an Asian reserve currency.
If say Thailand decided that it wants to hold renminbi-denominated debt as part of its reserves and China was willing to sell Thailand renminbi-denominated debt, the US can hardly stop the transaction. [exactly]

At the same time, the US shouldn't welcome a world where Asian countries try to maintain undervalued currencies — and thus run large, sustained external surpluses — while minimizing their risk by running up renminbi and yen denominated claims on the US, Europe and potentially a host of emerging economies.

Here the interest of debtors and creditors are not aligned.
Debtors want their debts to be denominated in their own currency, and to carry a low interest rate. Creditors would rather lend in their own currency. The implicit pre-crisis bargain was that the US — the debtor — borrowed more than it should have, but the creditor —China — also accepted more currency risk than it should have. I don't see how China can start lending in its own currency without calling the overall bargain into question.

The best solution, it seems to me, is moving toward a world where trade and ca pital flows are more balanced. Then there would be no sustained need for the governments of the major Asian economies to buildup huge claims on the rest of the world.

One thing is clear:
Some big questions about the shape of the post-crisis global financial order have yet to be resolved.

The New York Times reports about The Almighty Renminbi.

The Almighty Renminbi?
By NOURIEL ROUBINI
Published: May 13, 2009

THE 19th century was dominated by the British Empire, the 20th century by the United States. We may now be entering the Asian century, dominated by a rising China and its currency. While the dollar's status as the major reserve currency will not vanish overnight [Agreed, it will take a couple of months], we can no longer take it for granted. Sooner than we think [by the end of this year], the dollar may [will] be challenged by other currencies, most likely the Chinese renminbi. This would have serious costs for America, as our ability to finance our budget and trade deficits cheaply would disappear.

Traditionally, empires that hold the global reserve currency are also net foreign creditors and net lenders. The British Empire declined — and the pound lost its status as the main global reserve currency — when Britain became a net debtor and a net borrower in World War II. Today, the United States is in a similar position. It is running huge budget and trade deficits, and is relying on the kindness of restless foreign creditors who are starting to feel uneasy about accumulating even more dollar assets. The resulting downfall of the dollar may be
[is] only a matter of time.

But what could replace it? The British pound, the Japanese yen and the Swiss franc remain minor reserve currencies, as those countries are not major powers. Gold is still a barbaric relic whose value rises only when inflation is high
[Can you believe this nonsense is coming from Nouriel Roubini, a professor of economics at the New York Stern School of Business? Modern economics has become warped by worthless Keynesian thinking.]. The euro is hobbled by concerns about the long-term viability of the European Monetary Union [Again, this is pure nonsense. Unlike the dollar, the euro is not headed for a total collapse]. That leaves the renminbi.

China is a creditor country with large current account surpluses, a small budget deficit, much lower public debt as a share of G.D.P. than the United States, and solid growth. And it is already taking steps toward challenging the supremacy of the dollar. Beijing has called for a new international reserve currency in the form of the International Monetary Fund's special drawing rights (a basket of dollars, euros, pounds and yen). China will soon want to see its own currency included in the basket, as well as the renminbi used as a means of payment in bilateral trade.

At the moment, though, the renminbi is far from ready
[close] to achieve reserve currency status. China would first have to ease restrictions on money entering and leaving the country [which it is doing], make its currency fully convertible for such transactions, continue its domestic financial reforms [all lending restrictions have been removed and Chinese banks are now diving headlong into financial innovations] and make its bond markets more liquid [China is allowing banks to trade bonds]. It would take a long [very short] time for the renminbi to become a reserve currency, but it could [will] happen [this year]. China has already flexed its muscle by setting up currency swaps with several countries (including Argentina, Belarus and Indonesia) and by letting institutions in Hong Kong issue bonds denominated in renminbi, a first step toward creating a deep domestic and international market for its currency.

If
[when] China and other countries were to diversify their reserve holdings away from the dollar — and they eventually will — the United States would suffer [Agreed]. We have reaped significant financial benefits from having the dollar as the reserve currency. In particular, the strong market for the dollar allows Americans to borrow at better rates. We have thus been able to finance larger deficits for longer and at lower interest rates, as foreign demand has kept Treasury yields low. We have been able to issue debt in our own currency rather than a foreign one, thus shifting the losses of a fall in the value of the dollar to our creditors. Having commodities priced in dollars has also meant that a fall in the dollar's value doesn't lead to a rise in the price of imports.

Now, imagine a world in which China could borrow and lend internationally in its own currency. The renminbi, rather than the dollar, could eventually become a means of payment in trade and a unit of account in pricing i mports and exports, as well as a store of value for wealth by international investors. Americans would pay the price. We would have to shell out more for imported goods, and interest rates on both private and public debt would rise. The higher private cost of borrowing could lead to weaker consumption and investment, and slower growth.

This decline of the dollar might take more than a decade
[is happening this year], but it could happen even sooner if we do not get our financial house in order. The United States must rein in spending and borrowing, and pursue growth that is not based on asset and credit bubbles. For the last two decades America has been spending more than its income, increasing its foreign liabilities and amassing debts that have become unsustainable. A system where the dollar was the major global currency allowed us to prolong reckless borrowing. [it is far too late for the US dollar to avoid losing its reserve status]

Now that the dollar's position is no longer so secure, we need to shift our priorities. This will entail investing in our crumbling infrastructure, alternative and renewable resources and productive human capital — rather than in unnecessary housing and toxic financial innovation. This will be the only way to slow down the decline of the dollar, and sustain our influence in global affairs.
[There is nothing at this point which can prevent "the decline of the dollar" or "sustain our influence in global affairs."]

The New York Times reports about China's changing view of the dollar.

What many don't remember is that for years, there was either a shortage or a feared shortage of American dollars. In the 1980s, for example, the government required everyone to convert dollars into the Chinese currency, the renminbi, which literally means "people's money." As a result, American gold [ie: US dollars] became a status symbol. Despite the mandatory conversion into renminbi, many people held onto their dollars, or bought them at inflated exchange rates, if they could find a seller at all.

No one knows for sure when the tide started to turn, or the exact moment when
American gold started its slow but seemingly irreversible loss of luster. But now, many shops in China no longer accept dollar-based credit cards issued by foreign banks (the customer pays in dollars, but the shopkeeper is paid in renminbi) and foreigners cannot convert American dollars into renminbi beyond a given quota.

In the past, people held dollars for no immediate purpose.
Today, they are more likely to keep them only if they need them to send their children abroad for school, travel or to do business in another country. Over all, the government is becoming more worried about the safety of its investments in the United States, which are largely in Treasury bonds and quasi-sovereign securities issued by Fannie Mae and Freddie Mac.

Beijing recently called for a greater role in international trade for the special drawing rights currency of the International Monetary Fund. But China is also fully aware that the United States can veto an I.M.F. decision. China's call was more meant to sound an alarm to the United States.

Many Chinese people increasingly fear the rapid erosion of the American dollar. The United States may want to consider offering inflation-protection measures for China's existing investments in America, and offer additional security or collateral for its continued investments. America should also provide its largest creditor with greater transparency and information.

My reaction: China has lost confidence in and is moving rapidly away from the US dollar.

1) Dollar pegs prevented a necessary adjustment in the dollars' value relative, and this lead to a change in the composition of US output: the US shifted out of the production of tradable goods and services and instead specialized in home construction and creative financial engineering.

2) Once China's population discovered the risk associated with holding huge sums of foreign assets, they weren't happy. A recent Chinese bestseller called "currency wars" is evidence of this displeasure.

3) US can't stop the formation of an Asian reserve currency.

4) I wouldn't say that the next century will be dominated by Asia, but China will definitely play a much more prominent role (and the US will play a much less prominent role).

5) When China and other countries diversify their reserve holdings away from the dollar, the United States will suffer drastically.

6) China has already taken many steps towards making the yuan into an international currency:

China Opening Its Capital Markets And Currency To The World
Yuan trade settlement gets the nod

7) Thirty years ago, the dollar was a s tatus symbol in China.

8) Today,
Chinese people increasingly fear a rapid erosion of the American dollar.


Conclusion: Because the yuan is so undervalued, virtually every country in the world is running a trade deficit with China right now. Since trades with China are settled in dollar, nations running these trade deficits need dollar reserve fund them. So right now, China's trade surplus is supporting the dollar. If China starts settling trades in yuan, that support will be gone, and the dollar isn't strong enough to survive losing it.

In summary, a move by China to settle all trades in yuan, like discussed in the articles above, spells doom for the US dollar.

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14 Responses to China’s future role in the global financial system

  1. Martijn says:

    I would argue that the article you refer to as "a dose of Keynesian nonsense" is that incorrect:

    In our view, a far more plausible argument is that the crisis was caused by ineffective supervision and regulation of financial markets in the US and other industrial countries driven by ill-conceived policy choices.
    Not entirely true, but loose regulation etc. are very present in the current system. Even worse: regulation is flawed to benefit some parties at the expense of others. Although one could argue that this loose regulation resulted from easy money policies (very likely) it remain an important negative factor in todays markets.

    When markets recover, the key lesson is that the industrial countries need to focus on moral hazard, public and private..
    Also true.

    If capital inflows did not directly cause the crisis...
    Also true.

    We have argued that the decisions of governments of emerging markets to place an unusually large share of domestic savings in US assets depressed real interest rates in the US and elsewhere in financial markets closely integrated with the US.
    Also correct, those governments should not have done so. What the author however lacks to tell us is that those government were restrained from a lot of other potential investments by the US.

    The alternative hypothesis is that an effective deregulation of US markets driven by government-dictated social policy, especially in mortgage origination and packaging, allowed the ever-present incentive to exploit moral hazard to flourish.
    I would not argue against this remark either.

    The current conventional interpretation is that low interest rates and rising asset prices generated an environment in which reckless and even dishonest financial transactions flourished. One version of this story is that rising real estate prices led naďve investors to believe that prices would always rise so that households with little income or assets could always pay for a house with capital gains on that house. Moreover, households could borrow against these expected capital gains to maintain current consumption at artificially high levels. This pure bubble idea does not provide much guidance for reforming the international monetary system.
    Also correct.

    The problem was not financial innovation but the failure of regulators to recognise that innovation generated new ways to exploit moral hazard. Even more, it was the wilful ignorance of policymakers in often overriding the instincts of regulators and financial institutions in order to implement a desired flow of funds to uncreditworthy borrowers.
    Correct again.

    To the contrary, it seems clear to us that the bankers that used these innovations to exploit moral hazard knew very well what they were doing and why.
    Once again correct.

    hese are the dollar as the key reserve currency with US Treasury securities as the ultimate safe haven, the integrity of the euro, and the global monetary system as defined by the Bretton Woods II view. Attacking the latter as a major cause of the crisis and seeking its end is, at the end of the day, an attack on the basis of the international trading system. It is a sure way to metastasise the crisis in the global financial system further into a crisis of the global economic system.
    Isn't that exactly the point? That the current financial system is flawed? And that it should indeed be reformed from it's root?

    Generally I would argue that the authors are quite right as far as the role of loose regulations and their impact is concerned. The author does ignore however the very root of the crisis: the loose money policies. As a former Fed and IMF member that should not come as a surprise.

  2. Bowtie says:

    Great article - I love the dollar decline "this year" call. I have not seen anyone else give a time frame. I am not so sure it will happen this year, I think it will be a slow decline, but you know more about this stuff than I do. I am sitting on alot of cash, any advice as to how to protect it?

  3. Anonymous says:

    copy-paste

    GATA has a great article on how China is diversifying from US bonds.
    e.g
    China have $1trillion USD bond paying them 4%
    Use it as collatoral to borrow more
    $1 trillion USD loan paying interest at say 3%

    Use the new borrowed money to buy hard assets. When T-bill collapse. They could either sell their asset to pay their debt or even better, simply default on it. Their debters will have the useless t-bills and China will have all the hard assets
    This switches the risk from China to US

  4. Anonymous says:

    just wondering, why isn't anyone recommending we buy remmimbi if its so undervalued, instead of gold/silver

  5. Dudeman says:

    Can someone remind me why it was so important to build up China and destroy our manufacturing base?

  6. Martijn says:

    Why did gold get hammered so much today in such a short time period?

  7. Jimmy says:

    I am wondering, too, why gold and silver got hammered today. Especially silver, which is an industrial metal as well, is still 34% off its last year's high. If the economy is truely recovering (I doubt), we will need silver for industrial growth. I can only think of manipulation on COMEX.

  8. Anonymous says:

    Of course the monetary metals are manipulated, just as peoples' minds are by the likes of these two establishment shills.

    I for one do believe Asia will dominate this century, if only for the huge percentage of energy resources contained therein. Any doubts should be dispelled by our current military adventures there precipitated by the 9-11 scam.

  9. stibot says:

    Anonymouse (GATA): i suspect some weak point of theory you mentioned can be there is not enough wealth around the world which can be effectively bought by trillions of US$.

    Because debt was created within tens of years but no permanent wealth was created as well.

  10. Anonymous says:

    It doesn't need to be trillion dollar to exactly cover their t-bill total. It could be 500 billion or even 100 billion worth of assets. Because if t-bill collapse. Whatever hard asset they have will x2 or x10 the value they bought at, which will cover for whatever lost they had in t-bills

  11. Anonymous says:

    Why build up China and destroy our manufacturing base??????
    ----------
    Someone thinks the old trick could work forever, just sitting there printing money and swaps what he needs. He doesn't produce real things, but just plays financial tricks. Finally, he's got trapped in his own tricks.

  12. Anonymous says:

    http://www.leap2020.eu/English_r25.html

    They have forecasted for dollar collapse this year too.

  13. Pak says:

    I believe there are two points missing from this analysis:

    1) 'Reserve currencies' are being used not only as a store of wealth, but for transactional purposes as well. This is no small thing. There'll be plenty of disarray if you can no longer trade oil, copper, corn, cars and TV's in USD. If the greenbuck can no longer do the job, it would be unrealistic to think that EVERYONE will just agree to accept RMB instead; instead, every nation would prefer to denominate its exports in its own currency! Result: chaos. Can we use gold? In theory, of course, even a few grams of gold (if atoms could be quntified) would be enough to settle accounts, but in practice few people can IMAGINE that happen - in which respect Roubini's article (Roubini is a mainstream media-economist after all) is characteristic.

    Few people would want to disorganize international trade at this time.

    2) It is equally unrealistic to think that everyone in the world will readily accept to give the Chinese the advantage of being the issuer of reserve currency. If I had a vote, I would vote 'no'. To put economic fortunes of the world in the hands of the CPC's Politburo? If that doesn't scare you, I don't know what does.

    Therefore, most likely the USD will retain its status, but an international agreement will be made which would severely limit the liberty of the US to decide on its monetary and fiscal policies - to the extent of the US economy being actually run by a receivership committee of creditor nations (it won't be named that way, of course, but that's what it will be).

    "Moving toward a world where trade and capital flows are more balanced" is a great thing, but for US leaders, moving in that direction means conceding policy failure, intellectual bankruptcy and moral corruption. It is therefore pereversively rational for the US to go ahead with its current monetary and fiscal policies, commit economic suicide by means of USD collapse, and blame everything on the "free market". Then, G8+China would 'save' the world from ensuing 'panic' by instilling some sort of 'multilateral' monetary system. Gold will not be part of the system, central bankers across the world would HATE that idea.

    Agree that instead of a long and slow devaluation we will more likely see a rapid and sudden USD collapse. We are now in a 'reflate or die' mode, and we have liquid currency markets which work like huge discounting machine. The moment a consensus is formed that the greenbuck will lose, say, 80% of its value in 5 years - the news would be discounted IMMEDIATELY, and the USD will lose those 80% TOMORROW.

    Many economists think you can manage inflation expectations the way you steer a car. No way! People are not stupid, at least not as stupid as central bankers assume. Market will respond to a trend formation much faster than you can respond to its response.))

  14. Martijn said...
    I would argue that the article you refer to as "a dose of Keynesian nonsense" is that incorrect:

    While the article does make some good points, it is Keynesian nonsense. Look at what is writen at the beginning of article:

    This column argues that current account imbalances, easy US monetary policy, and financial innovation are not the causes to blame for the global crisis.
    Global imbalances and the crisis: A solution in search of a problemAnd what is written at the end:

    In this crisis, three macro-financial institutional arrangements remain to hold the financial system together. These are the dollar as the key reserve currency with US Treasury securities as the ultimate safe haven, the integrity of the euro, and the global monetary system as defined by the Bretton Woods II view. Attacking the latter as a major cause of the crisis and seeking its end is, at the end of the day, an attack on the basis of the international trading system. It is a sure way to metastasise the crisis in the global financial system further into a crisis of the global economic system.
    Global imbalances and the crisis: A solution in search of a problem("Treasury securities as the ultimate safe haven" = Keynesian thinking. The true "ultimate safe haven" is gold/silver)

    My view is best summarized in the article above, where Brad Setser writes:

    "Dollar pegs prevented a necessary adjustment in the dollars’ value relative to a host emerging economies, keeping the trade deficit up. That changed the composition of US output, as the US shifted out of the production of tradable goods and services – and instead specialized in home construction and creative financial engineering"
    Also, I am not attacking "the basis of the international trading system". I don't need to. The "international trading system" is based on flawed keynesian thinking and, like the titanic, is sinking. More bluntly, the ""international trading system" as it exists now cannot be saved, as there is no force on earth which can prevent the collapse of the dollar.

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