Written by Chris Marcus for the Miles Franklin blog
There was an interesting report in the Wall Street Journal last week indicating that China may be in the process of taking its effort to de-couple from the U.S. debt markets to the next level.
In the past year the Chinese government has taken a series of actions towards moving away from U.S. financial infrastructure, and now they may be soliciting other nations to join their effort.
For its part, China is looking to line up other countries, especially in Europe and Asia, against the U.S., Chinese officials say. Their companies could benefit from China’s plans to allow foreign companies better access to its markets. The State Council, China’s cabinet, said late Wednesday it had decided to lower tariffs on imported washing machines, cosmetics and other consumer goods, starting July 1.
One can only wonder what the thinking in Washington really is at this point.
That the United States has adopted an aggressive foreign policy towards China hardly comes as a surprise given past history. Yet what’s different this time is that the policy is being directed against a nation that has the economic ability to respond. Which is exactly what China has done to this point.
As always, it’s only responsible to mention that this is a report based on sources, and not official verifiable government policy. Although if accurate as depicted, it demonstrates just how willing China is to defend itself against the U.S..
Earlier this year in a direct attack on the Petrodollar system the Chinese launched their own PetroYuan contract. Which according to this report has been rapidly growing in its use and adoption. Additionally, there is now news that the Chinese may even be considering their own Yuan-denominated precious metals contract. Which really is yet another stunning development.
There’s plenty of commentary on the Miles Franklin blog about how the precious metals prices have been manipulated lower with the sale of unbacked paper contracts. With a general belief in the community that at some point the demand for actual physical will overwhelm the amount of metal available and squeeze the market higher. And if the yuan precious metals contract experiences similar success and adoption to that of the PetroYuan contract, it would be truly fascinating to see what happens to the COMEX system after a few months of that.
The combination of a potential coalition against the U.S., the PetroYuan, and the possibility of a Yuan-denominated precious metals contract are an alarming series of developments for the dollar. Sometimes it’s hard to imagine that the events that are taking place on a regular basis are actually happening, especially without the markets pricing in the developments. Yet the signs are there, and likely to only to continue to increase until the markets are eventually repriced.
Which also means that the case for an incredibly bright future for both gold and silver is still intact, with perhaps the time to get in at anywhere near current levels quickly running out.
–Chris Marcus
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