Currency Rift With China Exposes Lost Clout of U.S.

The deterioration of investment and loss of production in the United States to emerging economies is more complex than a simple adjustment to floating or fixed currency exchange rates. There’s an old saying that whoever controls the world’s money controls the world. The hard part is maintaining control over the world’s money. Unsound debt and fiscal management often leads to currency depreciation or debasement (reduction of precious metals content in coins). Currency depreciation, in turn, inevitably redefines what people will accept as the world’s money. Generations of citizens accustomed to the illusion of prosperity despite gross mismanagement, like their fore fathers, will return to the safety of gold as the world’s acceptable money. History is repeating. The only problem is that monetary history is not America's best subject.

“We have come to the end of a model where seven advanced economies can make decisions for the world without the emerging countries,” said one European official involved in the weekend talks. “Like it or not, we simply have to accept it.”

The shifting dynamics have most drastically affected the United States, which pushed more forcefully than its counterparts for stronger pressure on China but has been unable to persuade them to stand with it at the forefront of the debate.

Source: finance.yahoo.com