On SD Metals & Markets, Steve St Angelo discusses how China is killing the US dollar, and with it, the demand for US Treasuries. The Dow is 6,000 points off the 2016 lows, and now inflation is rearing it’s ugly head. With all the uncertainties gripping the US economy, one event will quickly turn into crazy moves in gold and silver prices…
The Chinese do not plan to live in a world dominated by the U.S. dollar for much longer. Chinese leaders have been calling for the U.S. dollar to be replaced as the primary global reserve currency for a long time, but up until now they have never been very specific about what they would put in place of it.
Many have assumed that the Chinese simply wanted some new international currency to be created. But what if that is not what the Chinese had in mind?
What if they have always wanted their own currency to become the single most dominant currency on the entire planet?
What you are about to see is rather startling, but it shouldn’t be a surprise.
When it comes to economics and finance, the Chinese have always been playing chess while the western world has been playing checkers.
Sadly, checkmate is now on the horizon.
When I arrived to Bangkok the other day, coming down the motorway from the airport I saw a huge billboard—and it floored me.
The billboard was from the Bank of China. It said: “RMB: New Choice; The World Currency”
China is literally advertising its currency overseas, and it’s making sure that everyone landing at one of the world’s busiest airports sees it. They know that the future belongs to them and they’re flaunting it.
In this MUST WATCH Bloomberg interview, Peter Schiff warns that China is poised to follow in the footsteps of the Swiss National Bank, and ditch the dollar peg- resulting in the Yuan soaring and a collapse of the dollar.
Schiff warns the fallout will be a 10 on the economic Richter scale, and will occur prior to the end of 2015, when the Fed announces QE4- “which will be bigger than QE1, 2, & 3 COMBINED”
Schiff’s full MUST WATCH interview is below:
The Chinese central bank, People’s Bank of China, has issued a press release announcing the authorization of direct trading between the renminbi and the euro on the inter-bank foreign exchange market.
This is HUGE.
The existing dollar-centric system is not in the favor of most of the new powers of the world…and they are rapidly moving to reduce their dependence on the dollar.
If $12+ trillion is no longer needed as reserves for international settlement – where does that money go? Well, a relatively small reduction in dollar trade replaced by Yuan, Ruble, Real, etc. (say 5%-10% over 2014) would free up $600 B to $1.2 T to move where dollars are still readily accepted…the US of A. Typically, these dollars would be levered up (say conservatively 5x’s)…and voila, $3 trillion to $6 trillion of purchasing power is introduced to America in 2014. Things like stocks, bonds, and Real Estate would be very positively pushed higher and higher (rents, insurance, etc. would also be unwelcomingly pushed higher as wages remain flat due to structural unemployment issues.
But let’s say in 2015 the pace of BRICS non-dollar trade continues expanding and international settlement in non-dollars grows by 10% to 20%…and 10% to 20% of dollars are no longer needed as reserves to buy oil, wheat, finance trade, etc. This is about $1.2 trillion to $2.4 trillion formerly held reserves cleared to go looking for their home…the US. $1.2 trillion to $2.4 trillion levered again very conservatively @ 5x’s is $6 trillion to $12 trillion in “hot” money looking for assets. With just a fraction of all the inflation the US exported over the ’71-present period coming home…this creates what amounts to a hyperinflationary-monetary dollar overdose in America.
Once these things start, they create a momentum of their own and eventually a likely counter by the administration to freeze out these dollars and the likely panic this ensues both domestically and internationally.
The Russian and Chinese central banks have agreed on a draft currency swap agreement, which will allow them to increase trade in domestic currencies and cut the dependence on the US dollar in bilateral payments.
“The draft document between the Central Bank of Russia and the People’s Bank of China on national currency swaps has been agreed by the parties,” and is at the stage of formal approval procedures, ITAR-TASS quotes the Russian regulator’s office on Thursday.
Currently, over 75 percent of payments in Russia-China trade settlements are made in US dollars.
For four decades, the dollar’s standing as the world’s most important currency—which has under-girded much of America’s post-World War II primacy in international affairs—has rested largely on the greenback’s dominant role in international energy markets.
Washington’s ability to leverage the security concerns of Saudi Arabia and other Persian Gulf Arab states to influence their decision-making on how their oil exports are priced and their petrodollar surpluses recycled has been central to consolidating and maintaining the dollar’s unique role in international energy markets.
China’s rise, as a global economic power and as Persian Gulf energy producers’ most important incremental market, poses the biggest challenge yet to the indefinite prolongation of dollar dominance, as the era of the petro-yuan begins.
In many ways the petroyuan got its start in Iran; for several years now, China has paid for some of its oil imports from the Islamic Republic with renminbi.
The emergence of the “petroyuan” alongside the petrodollar will almost certainly accelerate the ongoing erosion of America’s wider hegemony.
The birth of the Eurasian Trade Zone is nigh.
The Gold Standard will return, not in bank transfer platforms or currency trading platforms, but in peer-to-peer transactions made in settlement. The world demands a new payment system, an alternative to the deeply flawed USD-centric current system. Even effective viable barter systems are to emerge. It is coming. It will shake the world.
On the global financial stage, China is playing chess while the U.S. is playing checkers, and the Chinese are now accelerating their long-term plan to dethrone the U.S. dollar. You see, the truth is that China does not plan to allow the U.S. financial system to dominate the world indefinitely. Right now, China is the number one exporter on the globe and China will have the largest economy on the planet at some point in the coming years. The Chinese would like to see global currency usage reflect this shift in global economic power. At the moment, most global trade is conducted in U.S. dollars and more than 60 percent of all global foreign exchange reserves are held in U.S. dollars. This gives the United States an enormous built-in advantage, but thanks to decades of incredibly bad decisions this advantage is starting to erode. And due to the recent political instability in Washington D.C., the Chinese sense vulnerability. China has begun to publicly mock the level of U.S. debt, Chinese officials have publicly threatened to stop buying any more U.S. debt, the Chinese have started to aggressively make currency swap agreements with other major global powers, and China has been accumulating unprecedented amounts of gold.
All of these moves are setting up the moment in the future when China will completely pull the rug out from under the U.S. dollar.
What in the world is China up to? Why are the Chinese hoarding so much gold? Does China plan to back the yuan with gold and turn it into a global reserve currency? Could it be possible that China actually intends for the yuan to eventually replace the U.S. dollar as the primary reserve currency of the planet? Most people in the western world assume that China just wants a “seat at the table” and is content to let the United States run the show. But that isn’t the case at all. The truth is that China doesn’t just want to compete with the United States. Rather, China actually plans to replace the United States as the dominant economic power on the planet. In fact, China already accounts for more global trade than the United States does. So what would happen one day if China announced that it was backing the yuan with gold and that it would no longer be using the U.S. dollar in international trade? It would cause a financial shift so cataclysmic that it is hard to even imagine.
It won’t happen next week or next month, but eventually we could see China back the yuan with gold.
When that happens, it is going to be a complete and utter financial disaster for the United States.