China’s new aspirations have the power to radically change not only the relationship between the U.S. and China, but also between America and rest of the world.
The fact that the dollar is the nominal world reserve currency today is really quite a pretty advantage for the U.S.
On a recent trip to South Africa they didn’t talk about how many rand an ounce of gold was selling for, they were talking dollars; same for oil. And it goes beyond pricing. If we need more oil and we don’t have currency to spare, that’s okay. We just print our own money, use it to buy the oil, and the Saudis take it because the dollar’s the reserve currency.
But on the day that the dollar becomes a less useful reserve currency, we have a problem.
For example, we could approach the Saudis and say, “we need a tanker full of oil,” and they could say, “Well, okay, you can pay us in Chinese yuan.” But we don’t have any Chinese yuan, so they say, “then we don’t have any oil for you.”
That’s not a problem that the U.S. has dealt with in modern history.
It is, however, a problem other countries deal with now. When Mexico needs to import natural gas and the seller says, “that’ll be so many dollars,” if Mexico says, “Oh, we’re all out of foreign exchange,” they can’t import the gas. It’s that simple, they can’t print U.S. dollars so they’re out of luck.
So anyhow, having your currency be the world’s reserve currency is an enviable position. That’s especially so, when it comes to raw materials like energy, minerals, food, and paying for whatever you import.
The Chinese likely think we have abused the position. Like I said, think like China. We’ve abused the position of our strong dollar to dominate the world, to dominate world trade, to dominate world politics. They’d like to see the U.S. come down off the hill, and the same thing with the Europeans. But they’re cautious and patience.
China’s Slow Play
So if you’re China right now, you’re trying to break the stranglehold the dollar has over your economy, but you’re sanguine enough to understand that at this point you’re not going to knock the U.S. completely off its pedestal.
And remember, the Chinese don’t want to be No. 1 now, because if you’re No. 1, what’s everybody else in the world trying to do? They’re trying to knock you off. They’re trying to knock you down.
So if you’re China, why do you want to put yourself in that position? No, if you’re China you simply want to compete. Although it sounds strange for a Communist country, domination can wait.
In the short-term then, what I would see happening after 2015 is China using their Treasury holdings (and their gold hoard) as leverage to turn the SDR basket more favorable to China’s economic interest. Maybe China gets a seat at the table and the yuan is added to the SDR basket? Maybe there’s a component of gold in the basket? Either outcome benefits China’s position.
On top of that we could see China try to convert its U.S. Treasury holdings into more of the freshly-balanced SDRs.
Indeed, the Chinese would be stupid not to understand that every year of inflation reduces the overall purchasing power of the $1.2 trillion they hold in U.S. Bonds.
Yeah, it’s a great big monetary shell game. We have these SDRs, and China walks to the table and says, “Okay, we have these American Treasuries, so we’re going to post our Treasuries against the IMF, and we will take an equivalent SDR in return.”
And getting back to what I said earlier, it’s very likely that the SDRs are going to have a gold-backed component; whereas right now U.S. Treasury bonds have zero gold-backed component.
And if I’m China, some gold is better than no gold. I’d rather have 100 percent gold-backed currency, but if I can’t get currency backed at 100 percent I’ll take 50 percent, I’ll take 20 percent. I’ll take whatever’s better than zero, which is where China’s current holdings of U.S. Treasuries stand. This is a dynamic situation, but that’s what I think is going on. And that’s what I think we can look forward to over the next two years – a sea-change in the global monetary system.
So that’s my big, huge, arm-waving macroeconomic argument for why the next couple of years are going to be very, very good for gold investors and why 2015 is going be spectacularly good for gold investors.
Up until now there has been a slow, more or less steady rise in the price of gold – you know, $1,000, $1,200, $1,500 — and the next couple of years could bring prices of $2,000, $2,500, $3,000 an ounce.
But by 2015 when the SDR revision kicks in and everybody realizes what’s going on, I think we could see gold rally substantially from its current price to north of $2,500. On the high end we could see an order of magnitude change in the price of gold from $2,500 to say $25,000 an ounce!
Right now only few sort of far-out thinkers are talking about this. Hopefully you’re one of them.
Original article posted on Daily Resource Hunter
Byron King is the editor of Outstanding Investments, Byron King's Military-Tech Alert, and Real Wealth Trader. He is a Harvard-trained geologist who has traveled to every U.S. state and territory and six of the seven continents. He has conducted site visits to mineral deposits in 26 countries and deep-water oil fields in five oceans. This provides him with a unique perspective on the myriad of investment opportunities in energy and mineral exploration. He has been interviewed by dozens of major print and broadcast media outlets including The Financial Times, The Guardian, The Washington Post, MSN Money, MarketWatch, Fox Business News, and PBS Newshour.
Sounds right to me. I would have liked to see more about China’s diversification efforts in other fields too.
By now most people know how to make a debt clock.
Simple, it ticks similarly to a household clock. It comes
with a constant speed, a cycle of determined units in
dollar per day. Timelessly, showing dollar time which
has no affiliation to Greenwich association.
No standardisation, though online, it may manually reset
its constant speed – accerelate or decerelate.
Is the clock built to deceive or for alien’s time concept?
ummm, I wonder what that $25,000 will buy at that point… Even though I am one of this so called tiny gold bugs.
Pingback: plantacja lawendy()
Pingback: jazda konna()
Pingback: texas car title and payday loans()
Pingback: kfz versicherungsvergleich()
Pingback: work from home()
Pingback: boost nutritional drink()
Pingback: how to win the lottery guaranteed additional info()
Pingback: stromanbieter vergleich()
Pingback: european roulette free()
Pingback: joan rivers cirugia()
Pingback: Merle Dixon()
Pingback: slot machine bar()
Pingback: epromos logoed apparel()
Pingback: plastic surgery disasters()
Pingback: selena gomez gif()
Pingback: giochi slot machine gratis e senza scaricare()
Pingback: selma blair hot()
Pingback: new launch()
Pingback: weight loss()
Pingback: how do you get rid of warts()
Pingback: warts removal()
Pingback: fat loss factor scam()
Pingback: one direction()
Pingback: drunk driving attorney Miami()
Pingback: surgery abroad philippines()
Pingback: casino bonus senza deposito()
Pingback: how to open a business()
Pingback: raspberry ketones()
Pingback: umek at tomorrowland()
Pingback: playa del carmen weather()
Pingback: best app builder()
Pingback: budowa remont domu()
Pingback: How To Conceive A Girl()
Pingback: points on driving record()
Pingback: selena gomez boob job()
Pingback: paintless dent repair()
Pingback: pret immobilier()
Pingback: Joshua A. Jacobi()
Pingback: blake lively cosmetic surgery()
Pingback: binary option brokers()
Pingback: casino ohne einzahlung()
Pingback: ĀTRIE KREDĪTI()
Pingback: mamoplastia fotos()
Pingback: send flowers minsk()
Pingback: slot machine gratis()
Pingback: visit this blog()
Pingback: how to eliminate bed bugs()
Pingback: Due dilligence()
Pingback: Website plans pricing()
The clock is ticking down to April 15th. TaxBot founder, Sandy Botkin, outlines the five big tax changes for 2015 you need know before you file...
Look, we're not contrarian just for the sake of being contrarian. Only idiots are. And yes, the market will eventually drop. But the charts will tell us when it's time to sell. And right now, they're screaming "BUY". There's simply no other way to put it.
The trouble with money printing, explains David Stockman, is that it's responsible for Tesla. Armed with earnings figures, he shreds the company’s visage to pieces...
This year, we expect China to reveal just how much gold it owns. Today, our friend, Frank Holmes, gives his insight on how China could buy even more gold in the near future. And we’ve got every reason to believe it could upset the gold markets any day now, with great results for gold investors…
Where can you reasonably expect to make 50% in the next six months… and in the oil-patch, no less? The best way to play this short-term opportunity is with a handful of well-positioned refiners. Jody Chudley tells all...
Oil isn't magically jumping to $100 anytime soon. As I said, it could fluctuate around $50 for the foreseeable future. That's great news for businesses using a lot of fuel. Operating costs are way down, which means higher profits. And higher stock prices.