New accounts let anyone bet against the dollar
A shopper pays cash for sales merchandise December 26, 2000 at the Lakeline Mall in Austin, Texas. Stores were hoping that after Christmas shopping could salvage what seems to be a disappointing holiday season.
HOST: Oil is back up around $105 a barrell in overseas trading today. I say dollars because that's the currency that's used to buy and sell oil around the world. But the dollar's spot as the dominant global currency is being challenged.
We continue our Economy 4.0 series on the new global economy now with this report from Special correspondent David Brancaccio.
David Brancaccio: The dollar at Numero Uno for the last 70 years or so brings special benefits our way. Foreigners like to save in dollars, demand that keeps our interest rates down. Converting currency is expensive and American companies have the advantage of not switching if an international deal is done in dollars. But that's changing.
Barry Eichengreen: At the end of last year, there were 70,000 Chinese companies that were doing their cross-border trade using China's own currency, which meant that the foreign company on the other side of the deal was accepting Chinese currency in payment.
Barry Eichengreen, an economist at UC Berkeley, has a new book about the dollar called "Exorbitant Privilege." That's the phrase coined years ago by a French official annoyed by the dollar advantage. But the current rise in deals done in Chinese renminbi is just one sign its star is rising quickly.
Eichengreen: So you may have heard that the Bank of China started offering Chinese currency deposits to Americans.
Brancaccio on New York City street: Well, there it is, on Madison Avenue, the Bank of China, USA. All I need is a couple of forms of ID, a social security card and at least $500, and I can become an international currency speculator.
Eichengreen: If you want to take a bet that the Chinese currency is going to rise relative to the dollar over time, you can do that now.
And deposits in the Bank of China-New York account are FDIC-insured. U.S.-based Everbank also has a renminbi account, but with a minimum deposit of $10,000. Everbank's Chuck Butler:
Chuck Butler: The Chinese said, OK, we're going to start allowing the currency to appreciate again and it's moved, since last June, about 4 percent higher.
The accounts don't pay interest so they only make money if the renminbi is ascendant. But Eichengreen does not believe the dollar is washed up. History shows the world can live with several of these coveted "reserve" currencies. His prediction: By 2020, the Euro, the renminbi, and the dollar could all share the top spot.
In New York, I'm David Brancaccio for Marketplace.
Jeremy Hobson: More info on Chinese currency accounts for Americans at the Economy 4.0 blog.