By David Chapman
''Monetizing debt is just another way of defaulting. China understands this and that is why China is cutting back on its holdings of US Treasury debt and is now in the process of challenging the US$ as the world’s reserve currency. China has questioned why the US$ is still the world’s reserve currency when the US runs budget deficits of over $1 trillion every year and also runs trade deficits of over $500 billion every year.
There is a long history of reserve currencies changing. The world has moved from the Greek silver drachma to the Roman silver denarius to the Roman gold solidus to the Byzantine gold solidus and the Islamic gold dinar to the Florentine gold Fiorina and the Venetian gold ducat to the Dutch silver gulden to the Spanish silver dollar to the British gold pound and finally to a gold-backed US$ and then to a fiat US$ -- the only fiat currency to be a reserve currency in all of history.
Yet all of the previous ones in both gold and silver eventually disappeared. What chance does a paper currency stand?''
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