Sorry I missed this post - was not avoiding it because it strongly argues against all of my "black cloud is approaching" Dollar, US & EU POV. (I will try to read and comment only your second link later.)
It is a long article and I only skimmed it. My overview is that it is mainly a strawman attack on the soundness of the Euro as an alternative to the dollar - and in this I tend to agree for the reasons he mentions but more importantly for one he does not. - Namely Russia has Europe by the "energy balls." Russian gas will go to Japan and China in the not too distant future. - About 1000 miles of the pipeline is already in the ground. Only the route of the eastern end is still in doubt - The shorter, more economical termination is still in Russia; but this is not including the cost of a liquification plant (which Japan will probably finance) to make LNG for tankers going to both Japan and China. Japan is lobbing hard for this choice. The alternative is a pipeline into China - China likes that choice.
The real, long-term, alternative for currency for world trade is the yuan. He only briefly mentions China after his long attack on his strawman in ONE, next to last, paragraph! In their entireity the last two paragraphs are:
"Which brings me to China, a country that is growing old before it ever becomes rich. The working-age population peaks in 2015 - just eight years time. China then dives into the steepest demographic decline ever known by any nation in peace-time. As for China's current boom, you need only know three things so see where this is going: credit is being channelled for political purposes through Communist state banks that are not subject to market discipline; almost half of GDP is going on investment, leading to a glut of factories; return on that investment, measured by the incremental capital output ratio, is 4.4. Much of it is being wasted. Compare that to Japan (3.2), South Korea (3.2), and Taiwan (2.7) during their growth spurts. China is not going to take over the world economy, now or ever. The window will close shut before they get there.
No, the 21st Century will be the American century, just like the 20th Century. Americans may have to tighten their belts a bit after all the sins of Alan Greenspan and the Clinton-Bush debt generation. But the dollar will still be the world's reserve currency long after the euro has disappeared and the yen has been forgotten... Now, the Indian Rupee? Hhm. Another day."
In an era of high automation and expensive energy, a static population or even a declining one is an ASSET, not a liability as he thinks. The simple fact is that the current US standard of living is not possible for China (or India) if their populations exceed 1 billion because the resources to support this do not exist on Earth. As I have been posting for more than a year, the day will come when it is to China's economic advantage to destroy the dollar, even though that will cause some loss in the purchasing power of their remaining dollar reserves and some* of their externally owned assets (in "sovern funds" accounts). (Lower prices for oil etc. with US and EU in deep depression will compensate for these losses in the long run.)
There will not be a "glut of factories" - he is idiotically assuming that if the US and EU do not buy the Chinese factory production that it will be impossible to sell it! The domestic population is basically debt free and just now learning what credit cards are. Western banks have been buying parts of the Chinese banking system, which
WAS as he described an inefficient way to prop up the inefficient State owned enterprises. This inefficiency was almost needed back Mau's era to keep the workers employed. Now, however, China's problem is to find enough qualified workers - salary are rising rapidly and inflation also - China has raised the interest rates and/or bank reserve requirements at least 4 times (I think 5) in 2007 alone to fight the demand-driven internal growth inflation. (Price of pork has doubled in a year as more can now afford to eat it and production is down due to a spreading disease problem.) China will need even more factories to supply this growing domestic demand. In a decade, if they use credit cards, stop saving about 25% of their salaries, etc - a demand greater than the US's total purchasing power! (When the continuing and rapid drop in purchasing power of the dollar is considered. I.e. China can surpass the US by US dropping into deep depression as well as by four times the US's growth rate, which alone would take several decades.) The Chinese will be very hard pressed to both meet the domestic demand and honor the many long term promisses they have made to their future "economic colonies."
Long Summary: He mainly attacks his strawman, is ignorant of the well underway transformation of the Chinese banking system and ignorant of the fact that State owned business are now be closed (instead of "proped up") to free up workers and use them more productively, and his ROI data is wrong. Both because it is hard to measure and because there is practically nothing one can invest in for higher ROI than mines, railroads and ports in Africa and South America!
For two examples, China has a 30 year contract with the world's number one supplier of iron ore - Vale do Rio Dolce - here in Brazil that requires China to not only pay world price but also to expand mines, build railroads and ports to handle the ever increasing shipments - by 18% last year. Some Chinese factories will be sending port cranes, locomotives and hopper cars to Brazil. China and Brazil's Embraear (World's #3 maker of airplanes) jointly build them in China now and will be expanding the factory - huge and growing need for these "short haul" - 100 = or - 30 seater jets to tie Chineses cities together. Parts of these planes are still built in Brazil and shipped to China - Chinese factory goods will be increasingly coming to Brazil to pay for these wings and motors etc., etc.
Short Summary: He is not only badly ignorant about the real alternative to dollar developing but making false assumptions and fully distracted by a strawman of his creation.
PS, not ony is there little realism in this link, but there is some political distortion in his "the Clinton-Bush debt generation." Clinton ran net surplusses as he did not start any wars or give taxes back to the rich, setup expensive programs to transfer wealth from Joe American to the already rich, such as the Alcohol from corn nonsense etc. In contrast to GWB who will incease the debt by more than all prior presidents combined! GWB is why it is now too late IMHO, to avoid US falling into deep depression. If Clinton's policies were still in effect, US would still be the world's leader, the dollar sound and the US economy still increasingly prosperious. America's voters will pay dearly for their stupidity or perhaps more accurately for the Supreme Court awarding the election to the one who got the least votes..
---------------
*Not those they are developing in Africa and South America - I.e. the ports, railroads, mines, financial institutions, schools, clinics, etc. that China is building outside of US and EU to faciliate their "economic colonies" being more efficient suppliers of the energy and and raw materials, which their still booming factories will require. It is just like the British building railroads in India nearly 100 years ago for the same reason.
