Andy Xie: Euro to replace U.S. dollar

Between a Crutch and Walking Stick

A long and good article, but here's the conclusion:
Supporting the euro is in China and Japan's best interest. They hold more dollar assets than anyone else and have a strong vested interest to safeguard the dollar's value. The only viable alternative to the dollar is the euro. If it is discredited, the Fed will be emboldened to print more money.

Down the road, China and Japan should work with OPEC countries to prepare for the post-dollar world. The three hold most dollar assets in the world. If they don't prepare an alternative, they are always at the Fed's mercy. When the Fed stimulates the economy by printing money, it dilutes their wealth. If they prepare a credible alternative, the Fed will have to think twice before it starts the printing press.

The key step for replacing the dollar is for oil to be priced in a different currency. For now, the euro is the only possibility. China, Japan, and the OPEC should begin discussions on trading oil in euros. Oil is mostly traded in London and New York now. Euro-denominated trading systems could be created in Dubai, Shanghai and Tokyo.

It's time to prepare for the post-dollar world.

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