There has been much speculation over the past couple of weeks that the most recent G8 Summit in Italy would bring talk of creating a one-world currency or reserve currency.  There have also been reports that Russia’s Medvedev openly suggested using gold to create a new reserve currency.  The gold coins, which would be minted in several countries, would hold an intrinsic value.  Something that the US currency has not had for decades.  Moving back to a global gold standard would have its pros and cons, but one thing is sure, if the global reserve currency changes from the US Dollar to anything else, the US is in for a real roller coaster of an economic shakeup, even more so than it is currently experiencing.

Talk of a global gold currency has many people suspicious that the Russia leader’s suggestion will pit Russian and China against other western powers in a global economic battle for resources and wealth.  The US still holds the world’s largest gold reserve by a long shot, but recently China has announced that it has quietly and consistently been buying up gold over the past five years.  This behavior is understandable, but nonetheless questionable when you think about the possibility of a China-Russia economic alliance.

When it comes down to it, China and Russia are a match made in heaven, theoretically of course.   China is the world’s leading industrial producer while Russia has much of the world’s raw materials and resources available for the taking, and at cheap prices.  If China were to make a large-scale economic move, trying to secure enough resources to continue to ultimately generate more wealth inside their own borders, they would need to find a suitor with a huge amount of raw goods.  This give and take could eventually even lead to war, something many economists and politicians see as unavoidable in the next half-century.

Russia has been suffering economically for decades and is now facing the possibility of having to liquidate much of its valuable resources in order to come up with the cash necessary to keep its government and country on its feet.  There is little doubt that if or when the price is right, Russia will not hesitate in the least to sell their share of the world’s raw materials.  Most of the world’s timber and mining resources lie within its borders.  China’s labor resource market, coupled with Russia’s raw goods resource market, has the potential to lead to an explosive partnership no matter which way you view it.

Without the US Dollar to back the world’s debts, Americans would be negatively affected in almost every way.  Keeping the US Dollar as the reserve currency is key to the US’s survival in the global economy.  But don’t be surprised if China and Russia make a move to seal some sort of economic deal in the near future.  It only makes sense.  Both countries have what the other needs.  The coming decades will likely give rise to new partnerships around the world, as the vacuum created by the bursting of the economic bubble in the US will yield some less than optimal results for everyone.