Joe Biden’s “Summer of Recovery” may have started off with a bang as China announces that it will allow their currency, the Yuan, to float freely from the U.S. dollar. For many years, China’s policy has been to artificially restrain the Yuan, keeping it well below the U.S. dollar, typically at a rate of more than 6 Yuan to $1. The strategy being to keep Chinese exports cheap on the world market. But this action has led to domestic problems, inflation and an over-heated real estate market being the chief concerns.

Globally, stock markets responded well to the decision. Some mid-day levels had the Dow Jones Index over 130 points. Even gold bullion rose to a new record height. Many analysts see the floating of the Yuan as a positive sign that other nations will now have a chance at increasing their export sales. The Obama Administration has been leaning on China to float the Yuan for over a year.

But the move may be a signal before the start of the G20 Summit this weekend in Toronto that China is jumping ship from the game of currency-chicken. Since the start of the financial crisis, affected nations have been busy spending, adding to budget deficits and shoveling raw currency into their economies. The U.S. Federal Reserve has pumped trillions of dollars since the crisis began. The European Union has done likewise through its European Central Bank, the ECB. In recent months, concerns over debts for nations like Greece and Spain has led to even more money being needed to buy their bonds and keep them afloat.

All of this has led to a race to the bottom to see who can print more money than the others. With China pulling out of this game, the once strong U.S. dollar may now join other currencies as they lose value. The dollar had been holding it’s own since the crisis began since many others were in worse shape than America is. But all of that may now change. The number to really watch is the price of oil, which also increased today.

The other factor to watch is the bond market. U.S. Treasuries dipped today due to the news from China as concerns that a stronger Yuan may lead to less purchasing of debt by China. Already since early this year, China has been scaling back bond buys, and has even reduced it’s overall exposure to U.S. bonds. Promises from China to help Europe with bond purchases may also be impacted by the Yuan decision. The end result could set the stage for furthering calls to replace the U.S. dollar as the world’s reserve currency. Also today, it was learned that Germany and France have entered into discussions of a possible two-tier Euro, with one to be used by nations with serious debt problems and a separate currency for the stronger countries. As the Yuan gains value over other currencies, we may see a whole new financial crisis emerging.