The G20 summit may mark the beginning of the end for the US dollar as the international reserve currency. World leaders meeting in London have a lot to thank China for. The International Monetary Fund says a cash injection of about 2 per cent of global gross domestic product is required to get the world economy back on track. Of the major economies, only the US and China are coming forward with a rescue plan of the required amount.
In fact, the mighty US stimulus may actually be much smaller than the US$787 billion headline figure. According to economist Joseph Stiglitz, a fiscal expansion at the federal level will be stymied by a fiscal contraction at a state level - greatly reducing the effective size of President Barack Obama's plan.
But, for China, more spending by the US would be a mixed blessing. A faster recovery in the US would mean a quicker recovery in demand for China's exports. But, the more bank notes the US prints, the more the value of China's US-dollar denominated reserves will fall.
As the issuer of the international reserve currency, the US has a unique advantage in the world financial system. If the US economy has problems, it can print money to spend its way out of the difficulty. Part of the cost of that spending will be borne by creditor countries, as the expansion of the money supply results in a decline in the value of their US-dollar holdings.
Beyond the resolution of the immediate crisis, this problem points to the second great task facing the G20 leaders - the reform of the world financial system.
Key to this process is reform of the IMF. It is clear that the fund's resources are woefully inadequate to deal with anything but the smallest of local problems. Increased resources for a reformed IMF is high on the agenda for the G20. But a consensus on what form that reform should take could be hard to reach.