-- Published: Tuesday, 26 August 2014 | Print | Disqus
By Bill Holter
Have you ever wondered what the world will look like when China decides to no longer use the dollar? I could have said "Russia and China" but Russia has already been forced away from the dollar in one of the worst policy moves ever enacted by the U.S.. Rather than "punishing" Russia by kicking them out of the SWIFT system, the U.S. would have been better served if they tried to lock them within it, so it goes.
I will get to my above question shortly but I think a quick look at exactly what China has been doing recently is in order. China you can be sure is at the foundation of the forming of the new BRICS bank. This will compete and I believe ultimately replace the West's SWIFT system. China has also gobbled up a minimum of 6,000 tons of gold over the last 4 years. This amount added to their already 1,054 tons brings them to 7,000 total. In my opinion, China has far in excess of 10,000 tons of gold as I believe the 1,054 number was grossly under reported and they also have "legacy" gold which is accounted for nowhere except within China. I remind you that the U.S. claims to have 8,133 tons of gold and the Chinese are very adept at mathematics. They know what the global production numbers have been which means they also know they have imported gold that had been held in reserves in the U.S.. If we can do this math on the back of a napkin then trust me, they know full well the gold reserves status around the world. By process of elimination they know exactly what our "hole card" is.
Recently, China has quietly shed their "passive" face. Their actions in the South China Sea and jousts with Japan over "ownership" of oil rich territory are quite telling. The Chinese are well known as a "gracious" people and culture "publicly". You may recall John Kerry's visit where he showed up 30 minutes late to a meeting, that "favor" has been returned several times. Mr. Kerry has even had his audience declined by his Chinese counterpart, does this tell you anything?
Last week, a Chinese fighter jet and U.S. spy plane were involved in a "Top Gun" style encounter http://freebeacon.com/national-security/chinese-jet-threatened-u-s-intelligence-aircraft/ , do you really believe the Chinese pilot would have done this without permission? Or how about a couple of weeks ago when the Russians probed our air space 16 times, would any of this have been done without a "plan"? Before finishing this part, remember that gold will be traded in Shanghai beginning in October ... and yes it will be real gold which is traded and settled. "Unlimited" futures contract for sale without the metal to settle will not be tolerated. This is just a little more than one month away!
So what will the world look like once China decides to no longer use dollars? First, I want to point out that China's trading partners will also be "drawn in" to no longer using dollars ...because they won't need them any longer. This will start a rush of dollars heading back to where they were first printed ...because they will still be "accepted" here. The effect of dollars crashing our shores will be what the government "calls" inflation. "CPI" will explode as "stuff" gets bought up by the over supply of dollars.
Conversely, since dollars will be "less accepted" globally, by necessity dollars will be used to purchase the foreign currencies of whomever we are trading with. This will tend to raise the value of the foreign currencies and depress the dollar even further. As dollars will be less sought after, any "trade" will require MORE dollars to settle. I also want to point out that the U.S. does not have much in the way of foreign reserves currently because in the past we "never needed them". This is because the dollar was the reserve currency which was accepted everywhere and could settle any trade. THIS will change.
The best question is "what will this mean to you personally?". If you are an American, your cost of living will explode higher as more dollars will be required for the same amount of previous goods. Another way to say this is "your standard of living will decline greatly". Also, I believe there will be shortages in any number of everyday goods. This is because we no longer make all or even many of the goods which we use in everyday life ...they were "outsourced" long ago and are produced overseas ...we now import them and pay with dollars. Do you see the problem if foreigners don't want to accept dollars anymore? Or if they do, they want more of them because each dollar is worth "less"?
This is what we are staring right in the face, right now. Undoubtedly the Chinese will move away from the dollar. Economically, financially, diplomatically and militarily they are mocking the U.S.. Do you really believe the Chinese would do anything at all like this if they did not already have a plan as in the "Art of War"? Do we have a plan for when the dollar is no longer accepted? Any plan? Do you?
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-- Published: Tuesday, 26 August 2014 | E-Mail | Print | Source: GoldSeek.com