This is the underlying reason for Washington’s concern over the creation of the AIIB:
1. Allowing the yuan to flourish will hit the international standing of the US dollar as the world’s reserve currency of choice.
2. China, Russia and other BRICS countries are moving away from the dollar, preferring to trade among themselves in their own currencies.
3. Not only will this reduce foreign exchange risks associated with the dollar, it will also promote the use of their own currencies.
4. Washington cannot afford to let a new international foreign exchange regime come into being.
5. With a budget deficit of $1 trillion a year, the US needs to finance its debt with borrowing.
6. If the dollar’s credibility is questionable, fewer countries and funds will want to become the US’s creditors by buying US bonds.
7. The dollar will be dumped. Interest rates will rise, hurting the economy and the financial markets.
8. The chain reaction will bring another round of the financial crisis.
And the US is due for another financial crisis right about now, since they occur every 5-10 years.
Mr. Godfree Roberts is one of the frequent contributors for The 4th Media. He can be reached at <godfree@gmail.com>.