06/03/11 My job takes me all over the world.
So far this year, I’ve traveled on your behalf to visit Singapore, Cambodia, Thailand, Vietnam and Brazil. And we’re not even at the halfway point yet!
These trips make up the backbone of my research into the best investments the world has to offer. I pound the sidewalk. Talk to locals. Meet with experts on the ground. And do my best to get “under the hood” of the places I visit.
I always have one question in mind when I travel: What makes this place tick? Sometimes the answer is the polar opposite of the Wall Street consensus. Then I know there’s a real opportunity to profit.
But not all my research is carried out on the ground. I also find myself staying up late at night reading research reports with boring titles, such as the latest one from the World Bank – a 174-pager called “Multipolarity: The New Economic Order.”
Now, I’ll be the first to admit: It doesn’t exactly scream excitement.
And truth be told, I’d much rather have my boots on the ground somewhere exotic than be wading through chapters with names like “Macroeconomic policy disparities, selected actual and potential growth poles among advanced and emerging economies.”
But sometimes these kinds of reports contain invaluable nuggets about the big-picture outlook for the global economy. And the recent World Bank report doesn’t disappoint.
You see, according to the report, by 2025 the dollar’s reign as the world’s reserve currency will be well and truly over.
Or as the economists at the World Bank put it (emphasis added):
The international monetary system is likely to cease being dominated by a single currency. Emerging-market countries [...] will become key players in financial markets. In short, a new world order with a more diffuse distribution of economic power is emerging.
If you have been following International Living Investor for some time, the idea that the dollar’s days as the world’s reserve currency are numbered won’t come as a surprise.
But the World Bank report sheds new light on the issue. In 2025 – just 14 years from now – the World Bank says the world economy will be run according to a “multi-currency” understanding, one in which the dollar is joined by the euro and Chinese yuan (also known as the renminbi).
It’s no wonder the dollar hit a three-year low versus a basket of other major currencies recently. The smart money sees the writing on the wall for the buck: It’s now a matter of “when” not “if” it will be knocked off its reserve currency perch.
On Wednesday, I recommended you add shares of the Wisdom Tree Emerging Currency Fund (NYSE:CEW) to your global portfolio.
This easy-to-buy ETF gives you exposure to a basket of emerging market currencies, including the Mexican peso, Brazilian real, Chilean peso, South African rand, Polish zloty, Israeli shekel, Turkish lira, Chinese yuan, South Korean won, Taiwanese dollar, and Indian rupee.
If you make one currency diversification play this year, make it CEW.
But if you’re looking for a more targeted play on the new currency world order coming down the pike, consider the Wisdom Tree Dreyfus Chinese Yuan Fund (NYSE:CYB).
This seeks to achieve total returns reflective of both money market rates in China available to foreign investors and changes in value of the yuan relative to the dollar.
As the Chinese currency takes a more central role in global trade, CYB will climb…and provide a great hedge against a weakening dollar.
The new world order is coming. You can either prepare for it now. Or you can watch the value of your dollar-based savings erode over time.
The choice is yours.
Good luck and good investing.
Chris Hunter
for The Daily Reckoning
Chris Hunter
In addition to his hectic travel schedule and editorial duties over at International Living, Chris also contributes to the Bonner & Partners Family Office project, a research service created by Bill Bonner to help readers build and preserve “multi-generational wealth.”
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No individual who doesn’t have money to lose should be investing in any kind of currency fund. The same people who have the money to do that can be playing million dollar a hand baccarat instead.
Since when is the world bank a group of experts? They’re hacks. Now the dollar may very well be knocked off its perch, but China seems to look more and more like Japan circa 1987. And its demographics are horrifying. Yes, the Mexican Peso is the currency of the future, just like in the 60′s, 70′s, 80′s, 90, etc. It’s just that the future never gets here.
In 2025 the Euro won’t exist. Neither will the EU as it stands now. The latest report from the World Bank was probably drafted 12 months ago and has taken this long to be reviewed. ignore this report its out by a country mile. faster responses re necessary in our downward spiralling world…
Even though none of the experts give this currency the exposure or publicity like they give the China Yuan or Euro or Mexican Peso….it will be the currency to reckon with in the future. It’s the India Rupee – Indians have the largest domestic consumption among all developing economies. When visited 2 distant places last week San Francisco downtown & Dubai , In both places saw many Indians in all shops—-that speaks
“The new world order is coming.”
and how. if the dollar loses reserve status u.s. consumer demand will collapse, the world-wide economy that exports to that market will seize up, and everyone everywhere will go into protectionist mode trying to maintain their share of the export market. yep, by that time the mighty mexican peso could just possibly be able to support remaining trade world-wide. there’s your new world order.
When the dollar, which is a fiat currency, collapses no one is going to accept fiat anything.
Why would you accept the yuan, the euro, the swiss frank or whatever fiat currency is around after seeing what happened to the dollar?
“Back to the future”, the next money will be gold and silver.
Eliminate the Fed. Bring the guns, boats and military men back home. Default as gracefully as possible. Leave all “Free Trade Pacts” Open the gold/silver window. Eliminate legal tender laws. Allow competing currencies. Get government out of the market and out of our lives. End the corporate/government marriage.
Be a heck of a ride,,, yes?
I would comment to all the flaws in this single variable theory, but all the other commnets seem to sum up the other counter varaibles well enough.
“The way to crush the bourgeoisie is to grind them between the millstones of taxation and inflation.”
Vladimir Lenin
“By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens.”
—John Maynard Keynes, Economic Consequences of Peace
“Bernanke Is Santa Claus And We’re All Celebrating Denial”
Billionaire Julian Robertson
http://www.businessinsider.com/julian-robertson-dollar-debt-china-australia-2011-3
It has been said that democracy is the worst form of government except all the others that have been tried.
Sir Winston Churchill
“Capitalism without bankruptcy is like Christianity without hell.”
Frank Borman – retired NASA astronaut and engineer
George W. Bush saying of the 2008 bank bailouts, “I’ve abandoned free-market principles to save the free-market system.”
CYB is not very good at doing what it is designed to do. It has not actually returned any money when the Yuan has appreciated. Wisdom Tree tries to track the Yuan by buying futures, but those futures usually already represent anticipated moves in the currency. I’ve owned this for a couple of years, and while the Yuan has appreciated vs. the dollar, CYB has not. The only one making money on this is Wisdom Tree. Such is the case with most commodity based ETF’s that purchase futures to gain exposure to the commodity. It just doesn’t work.
And the rat race continues.
“And the rat race continues.”
stop running. the bible says that with food and clothing we shall be content. consider it.
CYB is a derivative that does not track the value of the Yuan relative to the dollar. Because it is based on currency futures, it only goes up or down if the *expected* rate of change differs from the actual rate of change. Put CYB and the Yuan (in dollars) on the same graph and you’ll see what I mean.
Thank you JR Wirth, Mark and David X for your substantive comments.
Invest in guns, ammo, and can openers.
“stop running. the bible says that with food and clothing we shall be content. consider it.” When did this site become a bible class. There are other places for believers of a puppet master in the sky. Or as Hawkins says its a fairy tale.
OMG @ CT. gman’s comment has nothing to do with bible thumping, ‘puppet master in the sky’ as you put it, or as Hawkins says ‘a fairy tale’. Rather it’s a comment on what are the basic needs that must be met first and foremost. Food and shelter. But I regress on the OMG at the beginning of this comment. Don’t want to make any inferences to your puppet master in the sky in your fairy tale.
Hi,
Actually, I found a interesting website that talks about currency. In the NEW WORLD ORDER people will not use money anymore but instead rely on a system of resources governed by general availability.
Cool Site.