Jim Rickards Recently:
“They are stuck with their dollars. They fear, rightly, that the US will inflate its way out of its $19 trillion mountain of debt. China’s solution is to buy gold. If dollar inflation emerges, China’s Treasury holdings will devalue, but the dollar price of its gold will soar. A large gold reserve is a prudent diversification. Russia’s motives are geopolitical. Gold is the model 21st century weapon for financial wars.The US controls dollar payments systems and, with help from European allies, can eject adversaries from the international payments system called Swift. Gold is immune to such assaults. Physical gold in your custody cannot be hacked, erased, or frozen. Moving gold is a simple way for Russia to settle accounts without US interference.”
In previous posts and an interview or two, we have been trying to make it painfully obvious to readers that the Petrodollar is dying. And that with its death, the Golden Yuan will rise. Now, that does not necessarily imply that China will back its currency explicitly with Gold. But it does not have to. Implicit backing and the ability to actually do deals with physical Gold are just as good and even better if you are a trade partner who is unsure of the Yuan's USD peg status. Why the focus on China though?
That is because it is China that needs to both buy stuff and dedollarize. We have been seeing this for the last 5 years in their dealings with Argentia ( Soy beans), Trinidad (Oil), African nations, and now the Saudis and Russians.
This is it again in summary from an April Post on the Golden Yuan
The Past : Gold > USD > PetroDollar
- Create Gold Demand: 1944 we steer world towards gold for good reason (we have it, and Germany's lack of Gold was the cause for WW2)
- Inflate Debt: 1971 we have to monetize debt to pay for wars in vietnam and korea > go off gold standard
- Create USD Demand: 1974 cut Arab deal USD for Oil > we sell them military arms, they buy UST
The Future: PetroDollar > Gold / PetroYuan
- Arabs have their own strong army, US not buying as much oil, China wants more Oil
- China wants to replace USD as world reserve, Arabs want to sell more oil (without shale competition)
- Arabs cut deal to sell oil to china in Yuan. Arabs will buy gold with Yuan
- Arab world increasing trust in China, Russia a product of implicit backing of currencies with Gold
- Arab world increasing mistrust of US intentions- ambivalent to US policies
Here is a nice piece that not only echoes our observations but opines what lengths the US will go to keep its currency dominance. - Soren K.
What the Federal Reserve Doesn't Want You to Know
Written by Shaun Bradley for Antimedia
The United States’ ability to maintain its influence over the rest of the world has been slowly diminishing. Since the petrodollar was established in 1971, U.S. currency has monopolized international trade through oil deals with the Organization of the Petroleum Exporting Countries (OPEC) and continuous military interventions. There is, however, growing opposition to the American standard, and it gained more support recently when several Gulf states suddenly blockaded Qatar, which they accused of funding terrorism.
Despite the mainstream narrative, there are several other reasons why Qatar is in the crosshairs. Over the past two years, it conducted over $86 billion worth of transactions in Chinese yuan and has signed other agreements with China that encourage further economic cooperation. Qatar also shares the world’s largest natural gas field with Iran, giving the two countries significant regional influence to expand their own trade deals.
Meanwhile, uncontrollable debt and political divisions in the United States are clear signs of vulnerability. The Chinese and Russians proactively set up alternative financial systems for countries looking to distance themselves from the Federal Reserve. After the IMF accepted the yuan into its basket of reserve currencies in October of last year, investors and economists finally started to pay attention. The economic power held by the Federal Reserve has been key in financing the American empire, but geopolitical changes are happening fast. The United States’ reputation has been tarnished by decades of undeclared wars, mass surveillance, and catastrophic foreign policy.
One of America’s best remaining assets is its military strength, but it’s useless without a strong economy to fund it. Rival coalitions like the BRICS nations aren’t challenging the established order head on and are instead opting to undermine its financial support. Qatar is just the latest country to take steps to bypass the U.S. dollar. Russia made headlines in 2016 when they started accepting payments in yuan and took over as China’s largest oil partner, stealing a huge market share from Saudi Arabia in the process. Iran also dropped the dollar earlier this year in response to President Trump’s travel ban. As the tide continues to turn against the petrodollar, eventually even our allies will start to question what best serves their own interests.
Many E.U. member states are clashing with the unelected leadership in Brussels over immigration, terrorism, and austerity measures. If no solutions are found and things deteriorate, other countries could potentially follow the U.K.’s lead and vote to leave, as well. It is starting to become obvious that countries in Eastern Europe will look to the East to get the resources their economies need.
[EDIT: Take a look at this screenshot from a Grant Williams Presentation and connect the dots]
China, Russia, and India are all ahead of the curve and started stockpiling gold years ago. They recognize that hard assets will be the measure of true wealth in the near future — not fiat money. The historic hyperinflation that has occurred in these countries solidified the importance of precious metals in their monetary systems. Unfortunately, most Americans are ignorant of the past and will likely embrace more government bailouts and money printing when faced with the next recession. Even Fed officials have admitted that more quantitative easing is likely the only path going forward.
Several renowned investors have warned about this ongoing shift of economic power from West to East, but bureaucrats and central bankers refuse to admit how serious things could get. The impact on the average person could be devastating if they are not properly educated and prepared for the fallout.
Economist and author James Rickards summarized why China and Russia are so interested in acquiring precious metals:
“They are stuck with their dollars. They fear, rightly, that the US will inflate its way out of its $19 trillion mountain of debt. China’s solution is to buy gold. If dollar inflation emerges, China’s Treasury holdings will devalue, but the dollar price of its gold will soar. A large gold reserve is a prudent diversification. Russia’s motives are geopolitical. Gold is the model 21st century weapon for financial wars.The US controls dollar payments systems and, with help from European allies, can eject adversaries from the international payments system called Swift. Gold is immune to such assaults. Physical gold in your custody cannot be hacked, erased, or frozen. Moving gold is a simple way for Russia to settle accounts without US interference.”
Mainstream pundits will continue to distract the public with the same optimistic talking points, but taking advantage of this calm before the storm is important. As this transition takes place, central bankers will sacrifice anything and everything to keep their Ponzi scheme going. Only individuals can take the initiative to protect themselves and be able to help others who won’t be as lucky. Those who embrace sound money and cryptocurrencies will thrive in this new competitive global economy, but if America fails to adapt, the same fiat system that gave it power will drag it into poverty.
Read more by Soren K.Group
