More chinks in the armor…US starts to lose footing in finance

Real quick note for those who know about the potential impacts of these events…

A commission recently found that New york City may be losing ground as an international finance hub (read that here).
also, china, one of the largest holders of American dollars, has begun a move to diversify their currency reserves (read that here). another sign of dollar decline, here.
Any reader out there who can better explain the implications of this, please feel free.

for my part, I will just say that the diversification of China’s currency reserves could potentially affect the country’s massive debt and trade deficits. essentially, right now, the us government is funded by foreign loans. we buy more than we produce and finance this by “selling” american dollars on currency markets. as long as the global markets have faith in the stability of our currency, foreign governments (a) stockpile US dollars and (b) trade the vast majority of their goods using us dollars.

you see (if i got this right), the value of currency is based on global trading i.e. investor confidence and demand. if china, or any other large holder of us currency loses faith and begins selling, or even begins buying less, then your dollar will lose value. that means that too many dollars will be on the market and the dollar will begin to inflate, meaning your dollar will be worth less.

Gotta go, here is an article on the dollar and trade that might give another picture about what i am talking about, here.

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