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How the Chinese Will Establish a New Financial World Order

Stock-Markets / Financial Markets 2015 Sep 19, 2015 - 05:59 PM GMT

By: DailyWealth

Stock-Markets

Porter Stansberry writes: For many years now, it has been clear that China would soon be pull­ing the strings in the U.S. financial system.
 
In July 2015, the American people owed the Chinese government nearly $1.25 trillion.
 
I know big numbers don't mean much to most people, but keep in mind... this tab is now hundreds of billions of dollars more than what the U.S. government collects in ALL income taxes (both cor­porate and individual) each year. It's basically a sum we can never, ever hope to repay – at least, not by normal means.
 

Of course, the Chinese aren't stupid. They realize we are both trapped.
 
We are stuck with an enormous debt we can never realistically repay... And the Chinese are trapped with an outstanding loan they can neither get rid of nor hope to collect. So the Chinese govern­ment is now taking a secret and somewhat radical approach.
 
China has recently put into place a covert plan to get back as much of its money as possible – by extracting colossal sums from both the United States government and ordinary citizens, like you and me.
 
The Chinese State Administration of Foreign Exchange (SAFE) is now engaged in a full-fledged currency war with the United States. The ultimate goals – as the Chinese have publicly stated – are to cre­ate a new dominant world currency, dislodge the U.S. dollar from its current reserve role, and recover as much of the $1.25 trillion the U.S. government has borrowed as possible.
 
Lucky for us, we know what's going to happen. And we even have a pretty good idea of how it will all unfold. How do we know so much? Well, this isn't the first time the U.S. has tried to stiff its foreign creditors.
 
Most Americans probably don't remember this, but our last big currency war took place in the 1960s. Back then, French President Charles de Gaulle denounced the U.S. government's policy of print­ing overvalued U.S. dollars to pay its trade deficits... which allowed U.S. companies to buy European assets with dollars that were artificially held up in value by a gold peg that was nothing more than an accounting fiction. So de Gaulle took action...
 
In 1965, he took $150 million of his country's dollar reserves and redeemed the paper currency for U.S. gold from Ft. Knox. De Gaulle even offered to send the French Navy to escort the gold back to France. Today, this gold is worth about $5 billion.
 
Keep in mind... this occurred during a time when foreign govern­ments could legally redeem their paper dollars for gold, but U.S. citizens could not.
 
And France was not the only nation to do this... Spain soon re­deemed $60 million of U.S. dollar reserves for gold, and many other nations followed suit. By March 1968, gold was flowing out of the United States at an alarming rate.
 
By 1950, U.S. depositories held more gold than had ever been assembled in one place in world history (roughly 702 million ounces). But to manipulate our currency, the U.S. government was willing to give away more than half of the country's gold.
 
It's estimated that between the 1950s and early 1970s, we essentially gave away about two-thirds of our nation's gold reserves... around 400 million ounces... all because the U.S. government was trying to defend the U.S. dollar at a fixed rate of $35 per ounce of gold.
 
In short, we gave away 400 million ounces of gold and got $14 billion in exchange. Today, that same gold would be worth $450 billion... a 3,100% difference.
 
Incredibly stupid, wouldn't you agree? This blunder cost the U.S. much of its gold hoard.
 
When the history books are finally written, this chapter will go down as one of our nation's most incompetent political blunders. Of course, as is typical with politicians, they managed to make a bad situation even worse...
 
The root cause of the weakness in the U.S. dollar was easy to understand. Americans were consuming far more than they were producing. You could see this by looking at our government's annual deficits, which were larger than ever and growing... thanks to the gigantic new welfare programs and the Vietnam "police ac­tion." You could also see this by looking at our trade deficit, which continued to get bigger and bigger, forecasting a dramatic drop (eventually) in the value of the U.S. dollar.
 
Of course, economic realities are never foremost on the minds of politicians – especially not Richard Nixon's. On August 15, 1971, he went on live television before the most popular show in Ameri­ca (Bonanza) and announced a new plan...
 
The U.S. gold window would close effective immediately – and no nation or individual anywhere in the world would be allowed to exchange U.S. dollars for gold. The president announced a 10% surtax on ALL imports!
 
Such tariffs never accomplish much in terms of actually altering the balance of trade, as our trading partners simply put matching charges on our exports. So what happens is just less trade overall, which slows the whole global economy, making the impact of inflation worse.
 
Of course, Nixon pitched these moves as patriotic, saying: "I am determined that the American dollar must never again be a hos­tage in the hands of international speculators."
 
The "sheeple" cheered, as they always do whenever something is done to "stop the speculators." But the joke was on them. Within two years, America was in its worst recession since WWII... with an oil crisis, skyrocketing unemployment, a 30% drop in the stock market, and soaring inflation. Instead of becoming richer, millions of Americans got a lot poorer, practically overnight.
 
And that brings us to today...
 
Roughly 40 years later, the United States is in the middle of anoth­er currency war. But this time, our main adversary is not Europe. It's China. And this time, the situation is far more serious. Our nation and our economy are already in an extremely fragile state. In the 1960s, the American economy was growing rapidly, with decades of expansion still to come. That's not the case today.
 
This new currency war with China will wreak absolute havoc on the lives of millions of ordinary Americans, much sooner than most people think. It's critical over the next few years for you to understand exactly what the Chinese are doing, why they are doing it, and the near-certain outcome.
 
Regards,
 
Porter Stansberry

Editor's note: Our colleague Matt Badiali just published a presentation explaining China's plan to increase its power and damage the U.S. If Matt's predictions are right, millions of Americans will be completely unprepared when China makes its announcements. Stock markets and currency markets could crash overnight.
 
To learn what this means for you... why he's certain this rumor is true... and how to prepare – and profit – from this situation, be sure to watch Matt's brand-new presentation. Learn more here.

http://www.dailywealth.com

The DailyWealth Investment Philosophy: In a nutshell, my investment philosophy is this: Buy things of extraordinary value at a time when nobody else wants them. Then sell when people are willing to pay any price. You see, at DailyWealth, we believe most investors take way too much risk. Our mission is to show you how to avoid risky investments, and how to avoid what the average investor is doing. I believe that you can make a lot of money – and do it safely – by simply doing the opposite of what is most popular.

Customer Service: 1-888-261-2693 – Copyright 2013 Stansberry & Associates Investment Research. All Rights Reserved. Protected by copyright laws of the United States and international treaties. This e-letter may only be used pursuant to the subscription agreement and any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), in whole or in part, is strictly prohibited without the express written permission of Stansberry & Associates Investment Research, LLC. 1217 Saint Paul Street, Baltimore MD 21202

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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