If your country is ranked in the top 20 of 190 nations in economic strength are you an
“emerging market” or have your “emerged”? Personally, I wouldn’t call a top
20 nation emerging, they have arrived. India 6th, Brazil 8th, Russia
12th and Turkey 17th are all in the headlines as struggling with monetary
issues for one reason or another and constantly referenced as an “emerging
market”. Why?
It could be argued that China, the second largest economy in the world, is
struggling with monetary issues as well. This could have profound effects on
the global economy, manufacturing and other areas that connect the global
markets.
If one has been paying attention to the unfolding emerging market crisis
then you already know we have some serious problems going on in the
underbelly of the global economy. The size of the emerging markets GDP
becomes less important when they begin having problems in bunches. If you
have a single nation get themselves into monetary trouble it’s not a big
deal. However, when you have Brazil, Argentina, Venezuela,
Turkey, India, South Africa and China all struggling to one degree or
another this has the potential to create a firestorm of economic problems.
This is to say nothing of the potential impact the coming sanctions against
Iran and Russia will have on the global economy.
We have documented, over the past several years, how China is on again –
off again acquiring American debt, e.g. treasuries. It is also well known
that China has built a parallel financial system to the current global
financial system. Banks, electronic settlements, global trade mechanisms,
gold settlement markets and all the other necessary support to step away from
the current system entirely. Russia, has, to a lesser degree, done the exact
same thing. Russia’s financial infrastructure is not as robust as China’s but
she has worked diligently to protect herself from a weaponized monetary
system created by the Federal Reserve and western banking systems. The
current system is coming to an end and, as we have said, within the next
decade and now we find that Jim Rogers is saying the same thing.
“In the next few years the American dollar is going to lose its
position as the world’s reserve currency and the world’s medium of exchange,” Rogers
said, adding that the world has always moved away from dominant currencies in
the past as situations changed.
He said that the British pound once used to be the dominant currency in
the world, and before that there were other dominant currencies like the
Spanish peseta, the French franc, and the Dutch guilder.
“They all had that position at one time or another but then went to excess
and are not that sound anymore, they lost their position… People don’t like
Washington’s power, so they are moving away and finding ways to get away from
the dollar. It has happened throughout history, it happened to the pound
sterling, you know the rest of that story,” Rogers said, adding there’s
no need to worry because “it’s not a disaster.” Source
Now we learn that Russia and China are taking another step away from the
Federal Reserve Note, US dollar debt based system, and will begin using more
yuan and ruble to settle trade between themselves. Some of you are thinking “who
cares“, it’s China and Russia. Well, you should care, as these are the number 2 and number 12 economies in the world and Russia
is one of the worlds largest suppliers of oil. Some would argue Russia has
the largest oil reserves in the world – not fracked oil, but actual oil that
easily obtained.
VLADIVOSTOK, Russia: Russian President Vladimir Putin on Tuesday (Sep 11)
said that Moscow and Beijing plan to use their own national currencies more
often in trade deals as Russia’s relations with the West deteriorate.
“The Russian and Chinese sides confirmed their interest in using national
currencies more actively in reciprocal payments,” Putin told journalists
during a press briefing with Chinese leader Xi Jinping after talks at an
economic forum in the far eastern Russian city of Vladivostok.
Putin said this would “increase the stability of banks’ servicing of
export and import operations while there are ongoing risks on global
markets”. Source
This is on top of all the other statements, agreements and monetary
infrastructure that has been put into place. I’m not sure how much more is
left for these two countries to build-out and change before they are 100% out
of using the “world reserve currency”. Yes, I understand China still has more
than $1 trillion Federal Reserve Notes on her balance sheet; however, if they
are just sitting there the US Treasury has to pay the interest due each
month, while this $1 trillion is completely dormant. China uses the interest
payments to build out another nuclear power plant, water system, solar farm or
any other of a thousand ways to strengthen her economy while the dormant
Federal Reserve Notes doing are nothing for U.S. economy. The real
question is what will happen when China begins sending these dormant funds
back to their owner?
