The Taipan Publishing Group’s editorial director, Justice Litle, sent around an article this morning with the subject line, “Uh-oh.”

And what I read was pretty scary. I’m posting it here with a link to the original article and invite your comments…

China wants dollar replaced as reserve currency
By Jamil Anderlini in Beijing

Published: March 23 2009 12:16 | Last updated: March 23 2009 14:22

China’s central bank on Monday proposed replacing the US dollar as the international reserve currency with a new global system controlled by the International Monetary Fund.

The goal would be to create a reserve currency “that is disconnected from individual nations and is able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies,” Zhou Xiaochuan, governor of the People’s Bank of China, said in an essay posted in Chinese and English on the central bank’s website.

Although Mr Zhou did not mention the US dollar, the essay gave a pointed critique of the current dollar-dominated monetary system.

“The outbreak of the [current] crisis and its spillover to the entire world reflected the inherent vulnerabilities and systemic risks in the existing international monetary system,” Mr Zhou wrote.

Read the full article here, and then come back and post some comments…

I’d like to draw everyone’s attention to a recent article in Taipan Daily, our free daily newsletter.

One of the recent themes we’ve been talking about is if the U.S. dollar will have the strength to remain the world’s reserve currency. Our editorial director, Justice Litle, wrote specifically about this in an article called, “President Obama Can’t Save the Dollar.”

Our belief is that the U.S. dollar has been appreciating only because investors are fleeing to “safety” which creates a sudden demand for the dollar. There is no fundamental economical aspect to the greenback to suggest this appreciation will be sustatinable.

Just the opposite, in fact. With a mad-cap printing Federal Reserve chaired by spineless leader Ben Bernanke, the dollar is a phoenix… inches away from being crisped to ashes.

It doesn’t help that we’ve got a more than $680 billion debt burden to China alone, who today got a strongly-worded statement by new U.S. Treasury Secretary, Timothy Geithner.

But what happens if China doesn’t want to hold U.S. dollars any more, or calls up that $680 billion debt? I remember a couple years back when there was talk of China changing its dollars for gold. People brushed it off, and it hasn’t happened yet.

Yet… That’s a scary word. If you knew that the asset you were holding was going to be worthless in a year or two, would you keep holding it?

Only if somebody made it worth your while. I think this whole China situation bares watching, and closely. If we get a spike in oil prices that start to put inflationary pressure back into play, I wouldn’t be surprised to hear renewed talk of moving away from the dollar.

And it wouldn’t be just China calling for a change… Watch the Middle East, too.

I was surfing my regular news sites this morning, when I came across the following article on BBC News:

“Obama speech censored in China.”

Authorities didn’t like Obama’s references to communism and silent dissent, according to the article. And certain parts were omitted from Chinese translations, like the following:

In “Recall that earlier generations faced down fascism and communism not just with missiles and tanks, but with sturdy alliances and enduring convictions,” the word communism was removed for Chinese translations.

And “To those who cling to power through corruption and deceit and the silencing of dissent, know that you are on the wrong side of history.” This sentence was deleted entirely.

It’s hard not to take offense to China deleting whole sections of our new president’s first speech. But it also serves as a blunt reminer…

As the world becomes an ever-flatter place, and emerging markets gain ground and find an equal spot at the table, it’s easy to forget that there are real differences in ideology in the world… And that those differences aren’t just limited to religious fanatics hunkered down on the border of Afghanistan and Pakistan; or a lone group of political reformists on some secluded compound in Montana. They’re engrained in the policies of some of our biggest trading partners, and some of the biggest economies in the world.

China is the largest holder of U.S. debt in the world, with $681.9 billion by the end of November 2008. That’s an increase of 48.6% over November 2007’s debt.

In fact, our debt to all other countries jumped by 32.2% in that same timeframe. But our debt to oil exporters jumped 43.5%…

As President Obama takes office, will the world work through these differences? Or will they lead to an increase in strained relations? There is no doubt that we are dealing with fundamental differences in entire systems… It will take compromise without compromising on our values.

Is that even possible?

I welcome your comments, and also, since I’m not a fan of censorship, here’s a link to President Obama’s speech, and here’s a translator for our Chinese friends… Choose English to Chinese in the drop-down menu.

The first night of the Tango Festival was very beautiful…

The streets are lines with white Christmas lights, and four separate stages, each with a mini-orchestra, were playing well into the night. There were seats out in front for the crowds to watch the professional dancers on stage, who were magnificent, but the real view was behind the seats.

Crowds gathered in a large circle, and in the middle, couples - married for ages or complete strangers - danced the sultry tango. Continue Reading »