It seems appropriate here to reflect on the significance in the increase of trade in the Chinese currency, the Renminbi (or Yuan).
Like all nations at this moment in time, the Chinese currency is a "fiat" currency. So in today's context, there is nothing unusual about it. Why then is this headline significant?
As you may well know, dear reader, a fiat currency is a promise currency. It's value is derived by the perceived ability of the nation to pay its debts relative to other nation's fiat currency.
As we see shift globally, from the US dollar - the reserve fiat currency - to other currencies, we need to ask why move?
Yes, the US is a highly indebted nation.
But European sovereign debts are also high.
So where do nations and large investors put their funds?
As China continues to grow its economy, its influence also increases. Exporting nation that it is, it is in China's best interests to bring its currency as a global alternative to the overprinted US dollar and European Union's Euro. With the rate China is producing goods for sale elsewhere, a currency that is perceived to be valuable, and particularly has a sound foundation compared to the Euro or US dollar, it is certain to bring them a higher global profile.
This spells trouble for American and European banks in the long term.
As the reader may know, banks make credit available to borrowers who in turn invest in productive activities. What may not be well known, is the dependency governments have on banks, in a fractional reserve fiat currency system to keep the debt bubble expanding. If banks were to slow their purchase of US debts (treasuries), bond yields would rise, causing a domino effect with higher borrowing costs and slowing or negative economic growth. This could be a major factor in tipping the balance of financial power globally away from the Anglo-American banks and also diminish American government influence.
The key way to continue this trend is for the Chinese central bank to behave in a way that boosts global confidence in their currency.
The primary ways to complete this process to to keep interest rates at attractive levels and purchase huge amounts of gold to back up the "promise" part of the fiat currency.
Given the trouble the Germans are having with the US Federal Reserve in getting their gold back in a timely manner, the US, with their giant budget deficits and massive bond sales, is rapidly eroding what confidence remains in the dollar by behaving in a way that indicates they just might not have the gold they say they have or even deliver on their bond payment promises.
In the end, perhaps the tipping point will be reached, not because of Chinese success, but by continued European and American debt excess.