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China Knocking on the Door of Global Reserve-Currency; World Teeters on Collapse

Friday, August 7, 2015 18:00

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In the first video below, it begins with clips of Obama going on and on not about equal opportunity, but about equal results, and how it’s his job as President to make sure he aids in facilitating that as much as possible. Honestly, I’m not sure which offends me more, 1) The fact that Americans know so little about their own government and Constitution, that they have NO CLUE how patently false Obama’s comments are; or 2) The fact the President of the United States is preying on people’s stupidity as a political tool.

At about the 4:00 minute mark, fireworks begin to go off at the round table, and the host needs to rein everyone back in. Just before the 7:00 minute mark, Peter Schiff drops the bomb that a collapse of epic proportions is absolutely coming for the United States… We are DOOMED! If you read my post the other day titled, Secret Societies Have Arranged For Trillions to be Spent On Underground Bunkers For Them, Not You, I bring up the FACT that the current financial derivatives bubble we are presently reading in is actually 20% larger than the one in 2008, so the whole world is in for a rude awakening very soon.

In the second video below, you’ll see Peter Schiff’s comments from about 6 months ago when Peter described the long term effects the actions of the Swiss and the Chinese at the time were ultimately going to have on the Dollar. To describe the financial event that ultimately will bring the United States to its knees, Peter calls the event a 10.0 on the financial Richter scale. He describes it as something that can be referred to as nothing less than “spectacular,” and he does NOT mean in a good way.

Here we are six months later, and as the global financial house of toothpicks gets closer and closer to finally blowing over, I want you to remember the words Peter chose in this video. I have been saying a global collapse of biblical proportions is coming, and just like in 2008, it will be the U.S. that blows it all wide open, and we’ll bring the rest of the world down with us. The difference this time, is the world, and more specifically countries like China, are positioned to deliver the knockout punch to the U.S. sending us almost over night back to the stone age.

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As I wrote in, Deathblow to the Dollar – Even Our “Allies” Abandoning U.S., and probably 50 other posts:

This generation of Americans has no concept of what losing that status will mean to our way of life. That’s because they’ve never known life here in the U.S. as anything other than the Reserve Currency. Being the Reserve Currency has been an ongoing scam on the rest of the world, and the rest of the world has finally caught on. Other countries pay their workers crap wages to make OUR products, and then LEND us the money to buy the products THEY produce. It was only a matter of time before all these other countries figured out they didn’t need to keep funding OUR extravagance at THEIR expense.

OBAMA SPITTING IN THE FACES OF OUR ALLIES HAS NOT HELPED AMERICA!

Being the world Reserve Currency has given America special privileges and ENORMOUS power. Our status has allowed us to borrow money at rates a fraction of our “ALLIES.” With everything being denominated in U.S. Dollars, it gave the United States control in everyone else’s financial affairs. It appears everyone else got tired of it. Furthermore, whenever trouble has struck, America has just started up the printing press. Since taking office, Obama has printed approximately $85 BILLION PER MONTH OUT OF THIN AIR. By joining China’s new bank discussed below, our “ALLIES,” and the rest of the world, have sent a CLEAR message to America:

YOU ARE BROKE, AND YOU ARE OBSOLETE!

As the author below states, “The blows to America’s economic might are descending rapidly and forcibly. Brace yourself: A new economic age is about to begin.” The infrastructure is being built for a world without the United States. China’s new long-awaited international payment system could go live as early as September or October. The new payment system will allow nations and companies to conduct transactions outside America’s control. Furthermore, America’s financial house will be in such disarray, some have said within one year of the economic collapse as many as 9 out of 10 Americans will be DEAD!

The Economist Reports:

RARELY in their 46-year history have Special Drawing Rights commanded quite so many headlines. SDRs play a mostly arcane role in the global financial system. Technically they constitute an international reserve asset that helps maintain balance between countries with big external liabilities and those flush with cash. In practice, they are more marginal, as countries largely rely on capital markets and hard currencies to cover their obligations.

Now China, eager to make the yuan go global, has placed SDRs in the spotlight. The International Monetary Fund, which manages the SDRs, is conducting a five-yearly review of the basket of currencies that form its value. China wants it to bring the yuan into the basket.

That would be a big decision, meaning that the IMF has in effect recognised the yuan as a reserve currency, despite China’s extensive capital controls. It would not suddenly turn the yuan into a rival to the dollar (as we lay out in this week’s issue, that is still a long time off). But it would be a symbolic boost to its international standing, giving countries more confidence to add the yuan to their currency reserves. In a newly published staff paper, the IMF shows that the yuan is close to making the cut but may need a little goodwill from the directors deciding on it. The paper, which was discussed at an IMF board meeting last week, lays out the parameters for the formal SDR review that will take place later this year.

Two criteria determine whether a currency can be part of the SDR. Its issuing country must be a major exporter, and the currency must be freely usable. No one disputes that China meets the first criterion. Over the past five years, its exports averaged 11% of the global total. That places it behind the European Union and America but well ahead of Japan and Britain (the euro, dollar, yen and pound are the four currencies that currently make up the SDR).

The second criterion is the tricky one. If freely usable is understood as fully convertible, the yuan would not make the grade. China places caps on how much cash its residents can take out of the country; forces international companies to do extensive paperwork before bringing large sums in; and limits foreigners to strict quotas for investing in its capital markets.

But, as the IMF explains in its paper, freely usable means something else. It refers to whether a currency is widely used in international transactions and whether it is widely traded in global markets. Full convertibility would help a currency meet these standards but is not a prerequisite. In theory judging this ought to be clear-cut. Across a range of indicators considered by the IMF, the yuan seems to sit just outside the SDR club. In 2014 it ranked 7th among currencies in countries’ official reserve assets. It was the 8th-most used for both international debt securities and cross-border payments. As for trading, it ranked 11th in global currency spot markets.

However, if the yuan is judged based on its trajectory, rather than a snapshot of its current standing, the case for its inclusion in the SDR is much stronger. Its international use has grown rapidly in recent years, albeit from a low base. Consider the indicators outlined above. In 2014 it accounted for 1.1% of countries’ official reserve assets, up from 0.7% in 2013. Some 0.6% of international debt securities are now denominated in yuan, up from just 0.1% in 2010. For cross-border payments, 1% are conducted in yuan, up from 0.2% in 2012. International trading of the yuan has had a similar, if slightly slower, ascent: 0.8% of currency transactions in the global spot market involved yuan in 2013, up from 0.3% in 2010. Moreover, while capital controls make it difficult for ordinary foreign firms to invest in Chinese markets, the government has started to open its door more widely to other countries’ central banks.

Given uncertainties over interpretation of these indicators, and the flux in China’s own rules, the IMF staff paper does not make a definitive recommendation. “The ultimate assessment by the Board will involve a significant element of judgment”, it concludes. One major but unstated factor in this judgment is what impact admission to the SDR would have on China’s reform process. Growing international use of the yuan stems in large part from the Chinese central bank’s efforts to loosen, gradually but steadily, restrictions on cross-border capital flows and to free up the country’s financial system.

The central bank is widely, and rightly, seen as the most eager among China’s official institutions in pushing for economic reforms. Bringing the yuan into the SDR would give the bank a victory and strengthen its position in domestic debates, by showing that opening up the economy brings rewards. At a time when there are doubts about China’s commitment to reform, following its heavy-handed stock market intervention, that would be all the more valuable. With the yuan close to reserve-currency status on its own merits, the political argument may just be the clincher.

DON’’T FORGET ALL THE GOLD CHINA IS HOARDING…

Mining.com Reports:

China’s recent stock market gyrations have some analysts now calling China the biggest bubble in history. But those who write off China because of market volatility are missing a more important long-term trend of Chinese geopolitical and monetary ascendancy. That trend shows no signs of abating.

China’s leaders have a clever strategy, and Western financial powers may someday wake up in shock when they realize what has occurred.

It’s true that the Chinese government has helped fuel artificial demand for property and equities. China skeptics who argue that these artificially inflated markets will crash to much lower levels could well prove to be correct. Some China doubters also argue that a downturn in China’s economy will put downward pressure on commodity prices.

Commodities – from crude oil to copper to gold and silver – have already suffered a severe cyclical downturn. Commodity markets tend to be leading indicators, moving in advance of whatever economic story of the day the financial media are telling.

But single-day draw downs of more than 8% in the Chinese stock market this summer certainly caused some forced liquidations of precious metals positions.

The very fact that booms and busts in China’s markets and economy can now exert heavy influence in globally traded markets such as commodities proves the point that China’s influence isn’t on the wane. Not by a long shot. Even if China’s double-digit rates of growth in the early 2000s prove fleeting and never return, China’s economy still remains on track to eclipse the U.S. economy in the years ahead as the world’s largest.

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