If one has been paying attention to the unfolding emerging market crisis then you already know we have some serious problems going on in the underbelly of the global economy. The size of the emerging markets GDP becomes less important when they begin having problems in bunches. If you have a single nation get themselves into monetary trouble it’s not a big deal. However, when you have Brazil, Argentina, Venezuela, Turkey, India, South Africa and China all struggling to one degree or another this has the potential to create a firestorm of economic problems. This is to say nothing of the potential impact the coming sanctions against Iran and Russia will have on the global economy.
We have documented, over the past several years, how China is on again – off again acquiring American debt, e.g. treasuries. It is also well known that China has built a parallel financial system to the current global financial system. Banks, electronic settlements, global trade mechanisms, gold settlement markets and all the other necessary support to step away from the current system entirely. Russia has, to a lesser degree, done the exact same thing. Russia’s financial infrastructure is not as robust as China’s but she has worked diligently to protect herself from a weaponized monetary system created by the Federal Reserve and western banking systems. The current system is coming to an end, we believe, within the next decade and now we find that Jim Rogers is saying the same thing
“In the next few years the American dollar is going to lose its position as the world’s reserve currency and the world’s medium of exchange,” Rogers said, adding that the world has always moved away from dominant currencies in the past as situations changed.He said that the British pound once used to be the dominant currency in the world, and before that there were other dominant currencies like the Spanish peseta, the French franc, and the Dutch guilder.“They all had that position at one time or another but then went to excess and are not that sound anymore, they lost their position… People don’t like Washington’s power, so they are moving away and finding ways to get away from the dollar. It has happened throughout history, it happened to the pound sterling, you know the rest of that story,” Rogers said, adding there’s no need to worry because “it’s not a disaster.” Source
Now we learn that Russia and China are taking another step away from the Federal Reserve Note, US dollar debt based system, and will begin using more yuan and ruble to settle trade between themselves. Some of you are thinking “who cares“, it’s China and Russia. Well, you should care, as these are the number 2 and number 12 economies in the world and Russia is one of the worlds largest suppliers of oil. Some would argue Russia has the largest oil reserves in the world – not fracked oil, but actual oil that’s easily obtained and high quality.
This is on top of all the other statements, agreements and monetary infrastructure that have been instituted to displace the Federal Reserve Note, US dollar as world reserve currency. I’m not sure how much more is left for these two countries to build-out and change before they are 100% out of using the world reserve currency. Yes, I understand China still has more than $1 trillion Federal Reserve Notes on her balance sheet; however, if they are just sitting there the US Treasury has to pay the interest due each month, while this $1 trillion is completely dormant. China uses the interest payments to build out another nuclear power plant, water system, solar farm or any other of a thousand ways to strengthen her economy while the dormant Federal Reserve Notes are doing nothing for U.S. economy. The real question is what will happen when China begins sending these dormant funds back to their owner?
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