The US dollar vs the Chinese Yuan
I listened to this audio segment and thought some very good points were raised.
The Chinese have been going about global diplomacy very differently than the US. Does this mean that they will overtake the dollar this year? Most likely not but there is a clear divide around the world forming and the US is only making the situation worse.
Mostly agree. I don’t think Chinese Yuan overtakes US $ as THE world reserve currency. It is against the culture to spend more than they produce, which is required by a world reserve currency status. What China want is to restore its status as the dominant power in the East Asia. If you take a look at the history, China dominated that region for most of the last 18 out of the 20 centuries and handed over to the West after 1900. The idea from Confucius theory is a Grand Unified nation. So Chinese map most include areas enclosed by natural barriers. The purpose is to avoid constant infighting.
The purpose of the new currency blocks is two fold. First it allows China continue to trade in case US dollar collapse. The second is to prevent US from sabotage China. Contrary to most people’s belief, US is not a peace lover. It actually actively damages other countries financially and militarily to keep them weak. Eventually I see US dollar greatly weakened and Yuan, Yen, euro and Ruble run parallel with US dollar. China will also keep US treasury for a long time to assure mutual destruction.
As for FED printing dollar to keep US military strong, I has my reservation since this will result in great dilution of people’s purchasing power to make US more like Germany in WWII. All hyper inflation is resulted from printing money, 100%.
I think the long term goal of China is the manufacture center of the world.
What? You gotta be kidding. Is that the plan now that they already make pretty much everything or have plans to buy the rest in cash?
I don’t think so but it looks like it. Since the leaders in Chinese top circle are mostly engineers so it is their game. They do buy a lot from rest of the world but corruption is preventing them from doing more.
An extension of manufacture center idea is to bid large engineering projects around the world. I know there are over 100 high speed train negotiations and several canals to go. At least China has to be friendly to the rest of the world for a long period of time in order to successfully bid the projects. Who knows what will happen.
Interesting Lawrence.
As Kyle Bass rightly noted, for a country to have its currency get the status or world reserve currency, the country must have a deep (sovereign) bond market AND rule of law.
So far, it therefore seems difficult China can achieve this – granted, things evolve overtime but I think the mindset associated with rule of law might be the most serious impediment.
Diversifying away from the USD for China also achieves this though: diversification – hence RISK diversification.
Best to all, and GL investing.
LPG
I think this is one part. It is very difficult for China to evolve to the state of the west, both people and politicians don’t believe it is realistic for China. The other part is that financial industry has to be dominating as part of economy if China becomes the world reserve currency. I cannot imaging merchants become the only game in town since their status has been under prostitution for the last 20 centuries. People don’t trust merchants and believe they are cheaters. It has improved a lot but Chinese don’t view merchants same way as the West.
China will not have an edge anymore with cheap labor, manufacturer’s are building plants using extremely sophisticated technology that doesn’t require our species, this revolution in artificial intelligence is part of the problem we are seeing with the imbalances in the world economy and it is a lot more complete then people realize.
The populace has embraced these changes by thinking that the new machines are not as smart as we are, and that it will free us up from the mundane part of life while giving us more time and a better standard of living. Man is the first species on this planet that will have engineered his own demise.
Now they are replacing family doctors with nurses that use computers to diagnose patients medical problems. Even the educated and highly skilled won’t be able to keep up.
Contrary to people’s suborn belief that China is low tech and only relies on cheap labor, China is doing a lot West can not do. There are many examples, the high speed train and Tibet high way and rail way are the top examples. China was trying to award the projects to the Japan and the West in the 90s and they concluded that it is not humanly doable after the survey. China also has the fastest computer in the world. I think all of these is based on the growing strength of engineering education where they turn out 5 million graduates each year. Have you heard that there are several restaurants in China using robots as waiters? I believe the danger for China is political not technical for any future growth.
Lawrence, if I walk around my house most of what I see that had been made in the US has been replaced by Chinese manufacturer’s a long time ago so I don’t think that China is low tech, if they were to build a modern economy today using cheap labor they wouldn’t have a market. Cheap labor is no longer a building block for anyones modern economy.
Maybe here is your answer:
http://www.shiftfrequency.com/dmitry-kalinichenko-grandmaster-putins-trap/
Never seen this one before GabrielB
that certainly would explain the relative strength of gold compared to oil.
Solution for US. Revalue gold 10 times its current price to say 12,000.00 /oz.
That gives them 10 times the duration to resolve the matter. Simultaneously keep value of dollar pegged to all other currencies.
Gabriel,
THAN ARTICLE my friend pretty much sums it up…..get your gold AND silver,,,,and hang on for DEAR LIFE!
The preoccupation of one panelist with the U.S. military supporting the dollar is humorous.
Read history and one will see that the military feeds off the economy and does not suppot it. An extract from the fall of the USSR:
“By the early 1980s, the Soviet armed forces had more troops, tanks, artillery guns and nuclear weapons than any other nation on earth. The Soviet Union fell in 1991, not because of military defeat but because of economic and political factors.”
If y’all think the USD , Is going to continue to be the worlds reserve currency, you truly are delusional.
Nuff said
Most likely the world reserve currency is a basket of currencies plus gold in the future. In the worst case, there might not be a reserve currencies, Only currency swaps instead.
It’s all about the SDRs
Special Drawing Rights
And THE USD is pretty much , toast.
I give the USD maybe two weeks to top.
It’s actually a good thing.
Means the bottom on gold! !
I don’t give it even that long. The Euro already hit bottom.
I need a lesson here in investing please…
If a company is worth 1 million dollars and insiders own say 50% of the company and they never sell any shares….can the share price go below 500k?
HOW ABOUT RUBLE VS DOLLAR???
http://itar-tass.com/en/economy/770161
I came across a Frank Holmes article today highlighting gold’s status as the #2nd best performing currency globally YTD, after the USD.
As I noted a few times on this website, people here talk about gold not doing much etc… but let’s keep in mind that this is in USD terms. In CAD, EUR, JPY or GBP, it’s been a different (and better) story.
As a reminder, and within quoting him exactly, Avi Gilburt has discussed a few weeks ago of a scenario where he envisages gold prices moving up alongside a strengthening USD… something about which, IMHO, he has not been asked to elaborate a bit more – but that is potentially an extremely valuable perspective.
GL investing/trading to all.
LPG