Re: The Fed\'s Secret Weapon
I'm not sure about the T-Bills. I have read that foriegn banks hold vast vaults of $100 bills. Sometimes, this is to back up a local currency.
I don't think that the new dollar would be as worthless as the old. You have to bear in mind that oil would still be traded for in dollars. New or not, The US would still guarantee the security of the largest oil producing country (Saudi Arabia). Also, much of Saudi Arabia's reserves are held in US banks. I'm sure that their dollar holdings would be converted quite readily.
As for China...Recently the Chinese have made threats to undermine the value of the dollar by flooding the market with their $1 Trillion of reserves. If the currency was reissued, this would destroy their ability to destabilize our currency. That wouldn't be a bad thing, in this scenario. A remonitization of the value of foriegn reserves would severly limit one country's ability to affect the value of the new currency.
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