It’s no secret that Russia and China want the Dollar replaced as the “World’s Currency” in the worst way possible, and really, who could blame them? US stewardship of its currency since moving off the Gold Standard has been nothing short of an abomination and complete breach of fiduciary responsibility.
Why Do China & Russia Want to Change the World Currency?
Both Russia and China have bigger fish to fry and both countries are their own worst enemies. In an effort to “buy into” the US economy, China has been buying massive amounts of US debt for many years. Unfortunately for China, as quickly as they have been buying up the debt, the US has been printing more fiat currency at an even faster rate. It’s like trying to dig a hole in quicksand and the result is the same, as fast as you can throw it out, it gets replaced. Over the years, China has been buying more and more of that hole, wherever it is. Meanwhile, Russia’s biggest blockade to replacement is just as self-inflicted, albeit an internal affliction. Vladimir Putin’s atrocities and strong arm tactics in every matter have endeared him to no one; not the Ukraine, not Europe, and not even China. But the Ukraine/Crimea Crisis might finally have proven, even to him, that European harmony is essential to an opportunity for financial improvement among the great majority of Russian citizens. And without lifting Russia up from its current position of 30 out of 36 on the OECD Better Life Index, its economy has no hope of being considered as a replacement option or even part of an “approved” basket of comingled financial elements.
Russian presidential elections are scheduled for March of 2018, but discussions have occurred that could move it up. New leadership focused on better living conditions and a healthy economy could put Russia on a much faster track to achieving their replacement goals. Likewise, China having seen the error of their ways has embarked upon a gold buying crusade. While worldwide reserves of gold have been shed over the past three years, China has been officially and unofficially adding to their reserves, especially most recently during November, December and January, which saw some of the lowest gold prices in six years.
Back at Home
Meanwhile, back home in the US, we’re dealing with the reality of negative interest rates, a slowing world economy, and oil prices that can’t seem to find a bottom. As a matter of fact, you have to go back seventy years to find anything close to the current gold:oil ratio. An ounce of gold will typically buy 10 to 25 barrels of oil, but as I’m writing this article, an ounce of gold will purchase 37½ barrels of oil. The slowdown of world economies, particularly China, is likely to weaken demand for US exports and further tighten already strained market conditions.
What’s the Solution?
Gold’s history of long term appreciation is certainly going to provide plenty of demand as this global crisis continues to fester, but its greatest benefit will most probably be found in its ability to maintain or even appreciate in value while most other popular investment products falter or simply fail completely.
Although the information in this commentary has been obtained from sources believed to be reliable, American Bullion does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice. American Bullion will not be liable for any errors or omissions in this information nor for the availability of this information. All content provided on this blog is for informational purposes only and should not be used to make buy or sell decisions for any type of precious metals.