When the dollar loses it's reserve status it's value will halve within a short while, causing the price of all imports to double.
Wages in America will remain roughly static - there will still be an over supply of basic labor.
This will cause economic carnage - Americans will no longer be able to afford to buy imported goods.
History is littered with examples of a country's currency halving in value in a short period of time.
It has always caused high price inflation, mass unemployment, mass poverty and economic carnage.
Other countries will no longer accept payment for their goods (imports) in increasingly worthless US Dollars - they will demand payment in Gold or some other hard asset (e.g. America's oil reserves longer term).
The current circa $600bn trade deficit that America currently has with the rest of the world, will have to adjust to zero within a short period - America does not have enough Gold to run a trade deficit for very long.
If the government continues to live beyond it's means and the Federal Reserve's printing presses continue to roll, there will be hyper inflation - as per the recent case of Zimbabwe and the case of the Weimer Republic after WW1.
So basically the U.S. government can choose to live within it's means now, to prevent the loss of Reserve Status, or it will be forced to do so after the rest of the American economy has been devastated.
$328bn has already been added to the National Debt on the day after the debt ceiling deal was struck.
This is the reversal of the "emergency measures" in place since May, whereby the government borrowed money from other funds, e.g. the Federal Employee retirement fund.
Other money is being spent too - like $1.6bn in new "aid" to Pakistan, that has just been announced.
The longer that QE goes on for, the larger the Federal Reserve's losses will eventually be from buying $1tn of debt a year at record high prices.
The Federal Reserve private bank will eventually try and charge these multi trillion dollar losses to the taxpayer.
The debt ceiling deal, the extremely high levels of government spending and deficits, and QE printing all help China in it's medium term aim to replace the US Dollar as Reserve Currency.
All of these issues are relatively easy to solve but neither party wants to tackle them - they would hurt the profits of their crony Corporate sponsors in the short term.
The first step is to stop spending $1.3tn a year on Corporate Welfare.
China has already taken multiple steps towards ending the U.S. Dollar status as Reserve Currency over the last 2 years.
These are it's latest moves :-
China downgrades U.S. credit rating
http://www.france24.com/en/20131017-chinese-agency-downgrades-us-credit-rating
China announces a new $60bn currency swap deal with the Euro.
China is wooing the Euro in order to further marginalize and isolate the US Dollar.
http://www.cnbc.com/id/101102163#_gus
China Calls For New Reserve Currency, And a "De-Americanized World"
http://www.globalresearch.ca/china-agency-calls-for-new-reserve-currency-and-new-world-order/5354190
Global Reserve Currencies have limited life spans - there have been several reserve currencies since 1450.
The US Dollar is just the latest example.
China has already embarked on discussions with the other BRICS about setting up a "BRICS bank".
The goal of this new bank is to eventually replace the Federal Reserve as the world's leading influencer of global monetary policy and to replace the World Bank and the IMF in international loan agreements.
The BRICS have already agreed to take the initial steps to create this new bank (at their meeting in South Africa March 2013), but so far the amounts are extremely small - around $10bn each.
China has announced it will bolster the amount of funds in this new bank by issuing it's own Yuan denominated international loans in order to further it's own international trade agreements and to further marginalize the dollar.
It is not only the BRICS that are involved in these new agreements to avoid using the dollar in international trade.
Japan, Australia, Chile and the Eurozone are signing deals too - as well as China, Russia, India, Brazil and South Africa.
Half of Africa is interested in signing non US dollar trade deals with China as well.
Even Germany is considering it's options.
It is in discussions with China to set up direct Yuan denominated trade deals to bypass the dollar.
The latest $60bn Euro swap deal with China, just announced, is the latest iteration of this process.
Germany has asked for it's gold to be returned from storage at the Federal Reserve bank in New York.
It has also asked France to return all of Germany's gold from Paris.
China has already conducted surveys to determine the rough value of America's natural resources, farmland and water assets.
It is not known what total value China has put on these assets.
Other commentators have put the total value of America's oil, coal, gas, gold, other minerals and farmland etc. at around $250tn (minus the cost of getting these assets out of the ground).
$100tn to $240tn is roughly the value of America's current unfunded liabilities (with current policies) plus it's National Debt.
China is expecting a fire sale of America's natural resource assets at some point in the medium term future.
It has already taken some initial steps to be ready for this eventuality.
It has bought 3 smallish retail bank chains in America - to get a foot in the door in American banking and finance.
It has bought a sizable chunk of Idaho farmland in order to get a foot in the door of owning American land and real estate.
OPEC is the current major influence on dollar denominated trade and in keeping the dollar as the global reserve currency.
The deal with Saudi Arabia for all of OPEC to only sell oil in dollars was made in 1971 when Nixon took the dollar off the gold standard. The US Dollar is known as the petrodollar for good reason.
There have been two or three fairly recent major push backs against all oil being sold in dollars.
Saddam Hussein threatened to price Iraq's oil in Euros in 2000 and called for all of OPEC to do the same.
Colonel Gaddafi in Libya was having some success in promoting the Gold Dinar for international trade, especially amongst some of the Gulf Oil States and black Africa.
We all know what happened to them.
Iran is now selling oil in something other than US dollars to China and India.
Either by direct trade in gold or by barter arrangements with India.
When the U.S. called for India to impose stricter sanctions on Iran a couple of years back, India's response was to ignore the U.S. request and to broaden it's initial barter arrangements and buy more of Iran's oil.
U.S. threats and intimidation against the BRICS are no longer seen as credible by the BRICS.
This is a sea change in global relations that has only happened very recently.
Other countries will become more emboldened to act against U.S. interests, by conducting more trade in something other than US Dollars.
Meanwhile China is wooing the lynchpin of OPEC - Saudi Arabia.
China has signed a joint venture to build a huge refining and export facility in Saudi Arabia.
Saudi Arabia has difficulty in selling more of it's oil to the rest of the world because of the lack of global capacity to refine it's heavy, sulfur rich oil.
This joint venture is aimed at addressing this issue and to sell more of Saudi Arabia's oil to China.
China was also in discussions for a joint venture to build a trans Saudi Arabian rail line, but I have seen no further recent news on this.
Watch for further news on Chinese trade deals with other OPEC members.
Nigeria could become the next battleground.
There have been battles for several years in South America to maintain US Dollar denominated oil trades - in Venezuela and Ecuador for example.
Syria is already a battleground.
A deal was signed in July 2013 by Iran, Iraq and Syria to build a large capacity pipeline from Iran's South Farsi gas field (the world's largest) to the coastline of Syria or Lebanon for onward export to Europe.
Saudi Arabia and Qatar want to build their own gas pipeline through Syria and Turkey to Europe.
N.B. it looks like America has already lost control of the puppet government it set up in Iraq, with the signing of the gas pipeline deal with Iran and Syria.
Both America and the UK are having trouble in trade relations with India.
David Cameron (UK Prime Minister) visited India earlier this year to try and sell more UK manufactured weapons to India, but no new arms deals (or any other new trade deals) were announced as a result of the visit.
Meanwhile China continues to do numerous natural resource deals throughout Africa.
It would be a natural extension of these deals if some of them were to start being conducted in something other than US Dollars.
Meanwhile America's politicians continue on their current path to America's economic self destruction, with crony Corporatism and unsustainable levels of spending, deficits, debt levels and unfunded liabilities.
A collapse in the dollar and economic ruin at some point in the future is inevitable with the current policies of both parties.
Federal spending is expected to almost double to $6tn by 2023.
The Federal deficit is expected to be $3tn+.
The National Debt is expected to rise to $40tn+ or 250% of GDP.
Unfunded liabilities continue to grow at around $5tn a year. Current estimates of unfunded liabilities are anywhere between $80tn and $220tn depending on how far into the future you look.
Providing the rest of the world has not already called foul by 2023 and has already refused to accept payment of America's $600bn a year trade deficit in newly printed US Dollars.
Yes, the Chinese have their own major problems.
They have their own fall out from bad loans from their own collapsing property bubble.
They have major over capacity in a number of industries.
They have built ghost towns - they are ghost towns because of lower than expected GDP growth and dire centralized economic planning.
There is increasing social unrest due to less than required jobs growth.
China is suffering the fall out from a slowdown in exports due to the economic slowdown in Europe and America.
China's GDP growth has officially fallen to 6% (from 9 or 10% previously).
In reality China's GDP growth is now probably 3% or less.
China's problems are nowhere near as great as Europe's or America's problems.
China's leaders do plan long term (unlike the West) and despite the numerous mistakes that they make, they and South East Asia are in prime position to take over the world economically.
Chinese politicians make fewer mistakes than the totally idiotic politicians and policies of America and Europe.
The Neocons tried to take over the world militarily (they are still trying - neither party is talking about drastically cutting America's current astronomical levels of military spending- 8% of GDP in 2013).
The Chinese are trying to take over the world economically, the Chinese are only spending 2% of GDP on their military.
Guess who's winning.
America's share of global GDP was already down to 21.5% at the end of 2011.
America's strategic decline accelerates with the Corporatist neocon agenda (of both parties).
America now ranks only 16th for the best country to be born in, from 1st in 1988
http://ian56.blogspot.com/2013/01/americas-strategic-decline-accelerates.html
References
The greatest threat to US National Security is a new Global Reserve Currency.
The details of non US Dollar trade deals and other Chinese and BRICS actions towards replacing the US Dollar as the Global Reserve Currency taken over the last 2 years.
http://ian56.blogspot.com/2012/02/the-greatest-threat-to-us-national.html
The unsustainable increase in government spending from $1.5tn in 2000 to $3.5tn now.
But it's going to get FAR Worse, by 2023 :-
Spending will be $6tn a year
The deficit will be $3tn+
The National Debt will be $40tn+ or 250% of GDP.
CBO projections of future GDP growth rates, deficits and the National Debt are pure fantasy
http://ian56.blogspot.com/2013/09/the-unsustainable-increase-in-govt.html
The frightening path that the government and the Federal Reserve has set out upon.
The future multi trillion dollar losses that the Federal Reserve private bank will try and charge to taxpayers.
http://ian56.blogspot.com/2013/02/there-is-no-way-out-for-federal-reserve.html
The current unsustainable path of increasing debts and unfunded liabilities that America is currently on.
What is required to turn things around, to create jobs and prosperity once again and to get Federal spending and unfunded liabilities back under control.
http://ian56.blogspot.com/2013/10/the-disastrous-fiscal-cliff-backroom.html
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