Chinese Yuan Aims to Knock Out the American Dollar
The almighty American Dollar’s current reign as the “World Champion” reserve currency may be coming to a end. The aim is for the chinese yuan to knock out the American Dollar, and has made aggressive moves in precious metals to achieve their goals. With the creation of its Asian Infrastructure Investment Bank (AIIB), they will challenge the U.S. dominance of the world’s financial system.
China, the only serious contender, has been working hard behind the scenes and is determined to make their yuan a reserve currency and transform itself into a financial “super heavy weight”. In a widely-quoted speech, China’s Central Bank Governor Zhou Xiaochuan had argued a global system so reliant on a single currency — the US dollar — was inherently prone to shocks. Zhou had said China wanted to look towards creating a “super-sovereign” currency to replace the dollar’s hegemony. Our current status as the world’s reserve currency is the only thing keeping our dollar upright despite our lackluster economy, incredible government debt and the trillions spent on the Quantitative Easing program.
China recently cleared a massive hurdle in its fight to become a reserve when the International Monetary Fund’s (IMF) Executive Board included China's yuan, or renminbi as it's also known, in an exclusive group of currencies that make up the basket of the IMF's Special Drawing Rights (SDR). The addition will take effect Oct. 1, 2016, with the yuan having a 10.92 per cent weighing in the basket, the IMF said. Currently, the value of an SDR is based on a basket of four currencies: the Euro, Japanese Yen, Pound Sterling and the U.S. dollar. After the renminbi’s inclusion in the SDR, weighings will be 41.73 per cent for the dollar, 30.93 per cent for the euro, 8.33 per cent for the yen and 8.09 per cent for the British pound. The weighing will affect the interest countries pay when they borrow from the IMF. China’s Central Bank chief Zhou showed Chona’s intention when he said in a recent statement, “We can start now to gradually broaden the use of the SDR, including using it as a reporting currency in parallel with the USD (American Dollar) and exploring issuance of SDR-denominated assets”. Our own government has put us up against the ropes. The American economy is overspent, bloodied and choking in debt. Three rounds of quantitative easing have flooded the money supply with cash, devaluing the paper dollar, creating a huge asset bubble in stocks and putting us on the path to hyperinflation.
It’s only a matter of time until China, the world’s largest economy, is declared the winner and the yuan takes the world’s reserve currency title. Like an aging prize fighter, we are now facing what Britain’s currency endured after World War II when the Pound Sterling lost its reserve status to our dollar - the resulting double-digit drop in the value of the pound, a massive blow in living standards in the UK and the end of a global empire. However, we don’t have to throw in the towel or just sit ringside and watch while the knock out punches are delivered. Put your guard up by calling an International Precious Metals account executive today. Our professional metals experts can help you build a portfolio to withstand a barrage of economic and geopolitical threats. Join our thousands of successful clients who are aware of the profound implications of China’s rise are buying gold, silver and the precious metals to protect the wealth and purchasing power of their savings when our currency collapses to the mat.
About the Author
