By Sean Kelly
De-dollarization, the Cyber-Yuan, and Gold!
Although we consider it among the world’s most important financial megatrends, we have not written much lately about de-dollarization, the decaying role of the dollar as the standard of global trade and commerce. But it is only because the constituent elements driving de-dollarization – spending, debt, and money printing – are each growing like out-of-control science lab experiments, that it has taken much of our space to keep our friends and clients up to date on each.
They have eclipsed almost everything else.
De-dollarization is the world’s judgment of things to come from all this US spending, debt, and inflation of the money supply. Unlike gold or even an honest gold-backed currency (there are none today), paper money is a confidence game. As confidence wanes, few central banks are willing to hold their reserves in dollars.
The funny thing is they do not mind fleecing their own people with their own made-up money.
But because they know how the game works, they want to make sure they are not fleeced by us.
So, the world’s central banks are holding fewer and fewer dollars.
Think of it like a game of Old Maid. None of the central banks want to hold dollars that are losing value. They want to pass the Old Maid to someone else:
China still has a trillion US dollars, but that is down substantially in the last few years.
Since all that dollar wealth is held in the form of US debt instruments like Treasury bonds, they cannot sell them all at once. At the first sign of China dumping its holdings, the value of those bonds would tank. And they would get stuck holding the Old Maid.
So, China must manage its de-dollarization very carefully. It has moved massively into gold, and not simply in fortifying its gold reserves. China is also the world’s largest gold producer.
In addition to unwinding its dollar holdings a little at a time, it has now created a cyber yuan, a Chinese government-sponsored digital currency, not linked to the global dollar reserve system or the global trade settlement system, SWIFT (Society for Worldwide Interbank Financial Telecommunication), that is under the de facto control of the US government.
Isn’t it ironic that China does not want its financial activities controlled by a US-dominated monetary system, yet it insists on controlling its peoples’ financial activities with a highly authoritarian monetary system?
China’s digital currency is perfectly suited to an authoritarian economy. It is under the control of the central bank, so Big Brother Beijing will be able to track everything anyone does. It represents a huge leap forward in China’s “social credit system,” the government’s surveillance blacklists the enables it to punish the unapproved behavior of individuals. Criticize the government and lose your right to travel on trains or planes. Read unapproved news sources and lose your access to credit.
The new Chinese cyber yuan will allow instant and irresistible centralized imposition of financial conditions.
If the State wants people to save less and spend more, it can give the currency an expiration date. Taxes can be implemented unilaterally and imposed overnight. Compliance no longer must be won over with appeals to “fairness” or the “greater good.”
No wonder the Federal Reserve has teams working furiously on the same thing. No wonder there is a move to eliminate cash – and along with it financial privacy.
The move away from the dollar by central banks will gradually remove supports that have enabled US deficit spending and buoyed the purchasing power of the dollar higher than US debt and money-printing justify.
It will mean a less valuable dollar.
Those central banks are just trying to pass along the Old Maid.
To paraphrase an old poker expression, if you look around and don’t see who the made-up, funny-money central bankers’ victim is, it is you.
Learn why gold and silver are central to protecting your family, your wealth, and your retirement from the money manipulators. Let us provide you with a free one-on-one consultation.
Don’t get stuck with the Old Maid!