I think in the modern world economy, where gold backed currencies are a thing of the past, people need to understand that you should only trust your paper currency as much as you can trust your economy and government .. ie it's still a case of perception. Which in itself can be very dangerous.
Would I trust the currency of a country that relies on massive gold reserves to support it's economy .. NO! I'd buy gold too!
We all know business strength is the key to an economy and that relies on modernization and competition. The US is still king here and the US government knows this, it's printing money to lower the US$ to make the US more competitive and to pay off it's debt. But at any time they can raise rates and very quickly the US$ would be king again .. with gold the loser.
In the not too distant future the US economy may not be the power house it is now and perceptions will change.
As with the Yuan, the Chinese government better keep a close eye on inflation. The world economy doesn't need them to hit a brick wall!
1st world nations rely on 3rd world nations and world trade to keep inflation down .. but can these 3rd world nations handle rapidly growing economies? and who do they rely on to keep costs down?
The Chinese government's attitude of waiting till after 2004 to adjust the Yaun scares me .. they may need to act sooner, I think.
