Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Silver Price Trend Forecast Summer 2020 - 3rd Jul 20
Silver Market Is at a Critical Juncture - 3rd Jul 20
Gold Stocks Breakout Not Confirmed Yet - 3rd Jul 20
Coronavirus Strikes Back. But Force Is Strong With Gold - 3rd Jul 20
Stock Market Russell 2000 Gaps Present Real Targets - 3rd Jul 20
Johnson & Johnson (JNJ) Big Pharma Stock for Machine Learning Life Extension Investing - 2nd Jul 20
All Eyes on Markets to Get a Refreshed Outlook - 2nd Jul 20
The Darkening Clouds on the Stock Market S&P 500 Horizon - 2nd Jul 20
US Fourth Turning Reaches Boiling Point as America Bends its Knee - 2nd Jul 20
After 2nd Quarter Economic Carnage, the Quest for Philippine Recovery - 2nd Jul 20
Gold Completes Another Washout Rotation – Here We Go - 2nd Jul 20
Roosevelt 2.0 and ‘here, hold my beer' - 2nd Jul 20
U.S. Dollar: When Almost Everyone Is Bearish... - 1st Jul 20
Politicians Prepare New Money Drops as US Dollar Weakens - 1st Jul 20
Gold Stocks Still Undervalued - 1st Jul 20
High Premiums in Physical Gold Market: Scam or Supply Crisis? - 1st Jul 20
US Stock Markets Enter Parabolic Price Move - 1st Jul 20
In The Year 2025 If Fiat Currency Can Survive - 30th Jun 20
Gold Likes the IMF Predicting a Deeper Recession - 30th Jun 20
Silver Is Still Cheap For Now - 30th Jun 20
More Stock Market Selling Ahead - 30th Jun 20
Trending Ecommerce Sites in 2020 - 30th Jun 20
Stock Market S&P 500 Approaching the Precipice - 29th Jun 20
APPLE Tech Stock for Investing to Profit from the Machine Learning Mega trend - 29th Jun 20
Student / Gamer Custom System Build June 2020 Proving Impossible - Overclockers UK - 29th Jun 20
US Dollar with Ney and Gann Angles - 29th Jun 20
Europe's Banking Sector: When (and Why) the Rout Really Began - 29th Jun 20
Will People Accept Rampant Inflation? Hell, No! - 29th Jun 20
Gold & Silver Begin The Move To New All-Time Highs - 29th Jun 20
US Stock Market Enters Parabolic Price Move – Be Prepared - 29th Jun 20
Meet BlackRock, the New Great Vampire Squid - 28th Jun 20
Stock Market S&P 500 Approaching a Defining Moment - 28th Jun 20
U.S. Long Bond: Let's Review the "Upward Point of Exhaustion" - 27th Jun 20
Gold, Copper and Silver are Must-own Metals - 27th Jun 20
Why People Have Always Held Gold - 27th Jun 20
Crude Oil Price Meets Key Resistance - 27th Jun 20
INTEL x86 Chip Giant Stock Targets Artificial Intelligence and Quantum Computing for 2020's Growth - 25th Jun 20
Gold’s Long-term Turning Point is Here - 25th Jun 20
Hainan’s ASEAN Future and Dark Clouds Over Hong Kong - 25th Jun 20
Silver Price Trend Analysis - 24th Jun 20
A Stealth Stocks Double Dip or Bear Market Has Started - 24th Jun 20
Trillion-dollar US infrastructure plan will draw in plenty of metal - 24th Jun 20
WARNING: The U.S. Banking System ISN’T as Strong as Advertised - 24th Jun 20
All That Glitters When the World Jitters is Probably Gold - 24th Jun 20
Making Sense of Crude Oil Price Narrow Trading Range - 23rd Jun 20
Elon Musk Mocks Nikola Motors as “Dumb.” Is He Right? - 23rd Jun 20
MICROSOFT Transforming from PC Software to Cloud Services AI, Deep Learning Giant - 23rd Jun 20
Stock Market Decline Resumes - 22nd Jun 20
Excellent Silver Seasonal Buying Opportunity Lies Directly Ahead - 22nd Jun 20
Where is the US Dollar trend headed ? - 22nd Jun 20
Most Shoppers have Stopped Following Supermarket Arrows, is Coughing the New Racism? - 22nd Jun 20

Market Oracle FREE Newsletter

AI Stocks 2020-2035 15 Year Trend Forecast

Abandoning the USS Dollar, As Gold Shines Again

Currencies / US Dollar Oct 13, 2009 - 02:40 PM GMT

By: Jennifer_Barry

Currencies

Best Financial Markets Analysis ArticleRobert Fisk's article in The Independent on October 6, “The Demise of the Dollar,” has created many shock waves in the currency markets. Fisk reported that major Arab nations are secretly planning to dump the current petrodollar scheme in favor of pricing oil in a basket of currencies. Included in this basket will be the yen, yuan, euro, a new, pan-Arab currency, and gold bullion. Co-conspirators include Saudi Arabia, Russia, Brazil, China, France, and the formerly compliant Japanese. This validated my July prediction that the Persian Gulf states will eventually accept yuan in exchange for oil.


It's no accident that three of the four BRIC nations are active participants in this plan. The leaders of these nations have moved beyond BRIC being a theoretical construct invented by Goldman Sachs in 2001. They have formed an actual alliance based on common goals, cooperating both politically and economically.

The BRIC governments also share a distrust of American motives. Asserting their growing independence, Brazil, Russia, India and China held their first formal conference this June in Yekaterinburg, and the United States was not permitted to attend as an observer. They understandably didn't want to share the details of their tactics to lessen their exposure to dollar depreciation. The leaders of the BRIC countries have already publicly discussed purchasing each other’s bonds and engaging in intra-group currency swaps. Two of the nations – Russia and China – are members of the Shanghai Cooperation Organization (SCO) who have agreed in principle to using regional currencies in trade.

Every member but Russia has committed to purchasing IMF bonds denominated in Special Drawing Rights, which includes such non-dollar currencies such as the yen, euro, and pound. The nations have a combined holding of $2.8 trillion in USD reserves, so any commitment to sell dollar instruments or even lessen the scale of purchases is a serious threat to the currency.

While many of the governments involved have denied oil plan, it fits in with the alternative currency initiatives already announced. In addition, the Gulf Cooperation Council's move toward monetary union is far from unique. Just two years ago, former Mexican President Vincente Fox mentioned on Larry King Live that he had discussed a single currency for the Americas with President Bush, but this was part of a “very long term” plan. In April 2008, the 10 ASEAN countries (Association of Southeast Asian Nations) met to discuss “monetary integration” and cooperation with regional non-members China, South Korea and Japan. Even the Bank for International Settlements called for eliminating national currencies and forming regional currency blocs “based on the dollar, euro and renminbi or yen” in 2006.   It makes sense that nations would collaborate to form currency life rafts to survive the eventual sinking of the U.S. dollar, now listing badly to starboard.

Gold Shines Again

Despite the fact that most Western financial advisors and economists perceive gold as an oddly fetishized commodity, the global majority understands this metal is the king of currencies. I view this inclusion of gold in a monetary basket as a transitional state to a gold backed currency.

After all, this possibility was broached a few months ago at the July G8 meeting. Gold coins imprinted with the slogan “Future World Currency” were presented to each of the world leaders. Originally designed to unite Europe with the United States, Russian President Medvedev expanded its scope and touted it as the new “supranational currency.” While China was not present at this meeting, its steady drumbeat of complaints about U.S. monetary policy suggests it was behind this initiative.

Nevertheless, I don’t believe either President Medvedev or President Hu of China actually wants to unite the globe under one monetary standard, even if it uses gold coins. Instead, they are clearly trying to move from the current dollar hegemony to a system of competing reserve currencies without crashing the global economy.

Each country has ambitions to supplant the U.S. dollar with its own money. Medvedev hasn't been shy about expressing his desire to convert the ruble into an international medium of exchange. China is now selling yuan-denominated bonds outside its borders as an intermediate step toward forming a globally traded currency.

Many nations from South Africa to Argentina have purchased bullion for their reserves, but China has the inside track when it comes to replacing the USD with an alternative hard currency. China has much larger forex reserves with which it can acquire assets, and it didn’t
suffer a depression at the turn of the century as Russia did.

As I explained in my July article, “Gold, the U.S. Dollar and the Chinese Yuan,” the Chinese have a long term goal to become the pre-eminent reserve currency. The government allowed the private ownership and sale of gold by their citizens in 2002 in order to re-monetize the metal, and now they are promoting silver purchases as well. The Chinese know they must step in to facilitate the move back to hard money.

Chinese officials are aware of the significance of the bailouts I discussed last fall in my essay, “US Dollar Doomed as Credit Crisis Turning into a Currency Crisis.” Despite rhetoric to the contrary, the situation has only worsened over the past year. The potential liabilities have increased to $23.7 trillion, according to the TARP's special inspector general, Neil Barofsky. The tremendous inflation of the money supply was billed as a necessary rescue of the global financial system, but in reality, the U.S. will effectively default on its obligations through hyperinflation.

In the meantime, China is scouring the world, securing gold and hard assets in exchange for its dollar promises. The Chinese will swap this paper for bullion as long as counterparties are willing to make the trade. Fortunately for them, Western central banks continue to unload gold both openly and surreptitiously in order to make their currencies look solid. Nonetheless, if these nations don’t curb their reckless spending, they will find their global influence draining away even faster than the metal China is actively acquiring.

by Jennifer Barry

Global Asset Strategist

http://www.globalassetstrategist.com

Copyright 2009 Jennifer Barry

Hello, I'm Jennifer Barry and I want to help you not only preserve your wealth, but add to your nest egg. How can I do this? I investigate the financial universe for undervalued assets you can invest in. Then I write about them in my monthly newsletter, Global Asset Strategist.

Disclaimer: Precious metals, commodity stocks, futures, and associated investments can be very volatile. Prices may rise and fall quickly and unpredictably. It may take months or years to see a significant profit. The owners and employees of Global Asset Strategist own some or all of the investments profiled in the newsletter, and will benefit from a price increase. We will disclose our ownership position when we recommend an asset and if we sell any investments previously recommended. We don't receive any compensation from companies for profiling any stock. Information published on this website and/or in the newsletter comes from sources thought to be reliable. This information may not be complete or correct. Global Asset Strategist does not employ licensed financial advisors, and does not give investment advice. Suggestions to buy or sell any asset listed are based on the opinions of Jennifer Barry only. Please conduct your own research before making any purchases, and don't spend more than you can afford. We recommend that you consult a trusted financial advisor who understands your individual situation before committing any capital.

Jennifer Barry Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules