Is the U.S. Dollar a “Legacy Currency”?
“China Urges New Money Reserve to Replace the Dollar”
—The New York Times (3/24/09)
Legacy: of, relating to, or being a previous or outdated computer system.
Here’s a tip: when someone refers to something as a “legacy [blank],” it’s not a compliment (or a good omen).
So it’s unnerving — at least to me — to see Treasury Secretary Tim Geithner refer to the toxic assets at the heart of the most recent bailout plan as “legacy loans” and “legacy securities.”
Oh . . and the Chinese, holders of more than $1 trillion in U.S. currency, are increasingly nervous (as well they should be).
Just two weeks after the Russians broached the idea of launching a new, international reserve currency, the Chinese are joining the chorus.
It won’t happen overnight; think of switching from U.S. dollars as analogous to supplanting English as the world’s predominant language. (A brand, new synthetic currency would then be the equivalent of Esperanto).
But it’s a potent signal when this country’s biggest creditor essentially utters a “no confidence” vote in our currency.
That’s especially so when you consider that China holds so many dollars, it can’t really sell them without destabilizing the market, leaving its holdings worth even less.