Folks with assets leveraged with fixed long term debt could become much wealthier. This is the way that it has worked in the past. Folks with no assets or long term debt… well they just have to hope that their wages keep up with the inflation.
But I wonder if we could see a economic conditions where the effect of the increase in the money supply results in devaluation of our currency but no inflation in American assets or products, no increase in wages, high interest rates and inflation in products that we by from abroad… which is about everything. This could be a bitch.
This is not a yes/no question. Rather, what China is doing is introducing variety so as not to have all its eggs in one basket. So it will continue to hold dollars but also other currency like Euros. This makes sense as it would not want to depress the value of its holdings in dollars by dumping them too fast. But it also wants to diversify the risk by holding Euros and other currencies. My feeling is that over the years the percentage they hold in dollars will gradually diminish and in say 20~30 years it will be less than half of the total.