China and Australia to say goodbye to U.S. dollar

China and Australia to say goodbye
to U.S. dollar

China, in collusion with Australia, is preparing to deal a
blow to the sluggish and fragile U.S. economy. China is preparing to enable
direct currency exchanges with Australia, in what many believe is a pilot
program to see if the U.S. dollar can be ousted as the world's reserve
currency.


More
Yuans, less dollars is the plan for the future.

LOS ANGELES, CA (Catholic Online): The Chinese and Australian move to oust
the U.S. dollar as the world's reserve currency gained full steam over the
weekend with Australian officials agreeing to start making direct currency
exchanges with China.

This will ultimately harm the U.S. economy,
although only slightly in the short term. In the long run, as other countries
join Australia, it could unseat the U.S. dollar as the world's reserve currency.


The U.S. dollar has been the world's reserve currency since the end of
World War II, when it was made such by deliberate international agreement. As
reserve currency, most international exchanges are made with the U.S. dollar.
This requires foreign traders to convert their money to U.S. dollars to enter
the market. When cashing in their profits to spend at home, traders must usually
exchange their dollars back into their native currency.

Each exchange
costs a fee, which is usually passed along to the final consumer in the form of
higher prices. American consumers normally enjoy a break on prices because U.S.
merchants don't have to exchange their currencies, meaning the cost of doing
business is lower.

Large countries tend to get better exchange rates
too.

However, China and Australia are major trading partners, and
cutting the U.S. dollar out of their deals means less money for the United
States. Furthermore, it could establish a long-desired trend to oust the dollar
as the world's reserve currency.

It is uncertain which currency could
replace the dollar, if any. Certainly the euro is a contender, but Eurozone
instability continues to block significant progress for the euro. The Yuan could
also be a contender, given the increasing global presence and economic dominance
of China.

It could also happen that world economies dispense entirely
with the notion of a reserve currency and all exchanges start happening
directly. However, such a system would be much more complex and powerhouse
nations will compete to place their currency as the international reserve.


Australian and Chinese businesses stand to save a lot of money over the
years by abandoning the U.S. dollar. If both economies benefit and grow as a
result, China could then invite others to trade directly with the Yuan instead
of the dollar, which would increase China's economic vitality while reducing
that of the United States.

While consumers may not see much change in
the near-term, major traders and currency speculators have a lot to watch as two
of the world's largest economies start dumping the U.S. dollar once-and-for
-all.