According to a recent article from The Street.com, “The most important economic issue over the next decade will be the rising position of the Chinese currency, the renminbi, in the foreign exchange markets.”
While current global financial reserves are dominated by the dollar, euro, yen and British pound, there is a significant shift taking place right now. A shift that could dramatically change the global reserve market and the dollar’s status as the reserve currency of choice.
The central banks that issue these currencies have, however, been attempting to fight deflationary pressures. The U.S. Federal Reserve is likely to raise rates this year in an attempt to maintain its credibility, while the Japanese Government as well as the European Central Bank continue with stimulus measures in order to try to boost economic activity. Similarly, the Bank of England is holding interest rates at a record low of .5 percent while continuing its bond purchasing program. All of these policies greatly undermine the value of these currencies.
While many global central banks are engaged in quantitative easing aimed at devaluing their own paper, the Chinese currency has been gaining traction as a potential reserve currency.
The Chinese Government has taken the necessary steps to position the yuan as a global reserve currency, and it would seem that it is only a matter of time before the currency achieves such status.
In fact, China’s currency has been used more and more in various transactions as the superpower tries to position itself as a major force in global financial markets.
Chinese investors have been able to move money into world markets, and the country may even see some of its stocks listed in the MSCI emerging market stock index.
The tide is clearly shifting… Are you ready?
The Euro zone may try to move back towards a strong currency once it is certain that deflation is not taking hold. The U.S., Japan and UK, however, may look to keep their currencies weak as economic activity remains stagnant.
These currency wars would seem to play directly in the hands of the Chinese as they attempt to make their move with the Renminbi. The IMF has recently stated that it believes the Yuan is no longer undervalued. The currency has remained relatively stable against the dollar over the last few years. As the currency gains reserve status, its value will likely become even more stable.
Stability in the Chinese currency will attract more investment in it…
As the Yuan comes to prominence as a global reserve currency, it could also drive further diversification of global reserves, with other currencies also looking to gain such status.
All of this means less need for dollars…
As the need for dollars begins to decline, desire for U.S. debt will also likely decline.
As more and more dollars find their way back home, supply will go up while value will go down.
A weaker dollar will cause a number of significant issues…
Everyday goods and services will become more expensive.
Wages will have to rise in order to keep up with a decline in buying power.
Imports will become more expensive.
Many businesses will suffer.
Consumer spending will decline.
A weak, depreciating dollar can have serious consequences for your pocketbook…
The time to think about protection from such a dollar decline is now.
Fortunately, there are asset classes that may provide a hedge against falling currency values. Hard assets like gold, silver and other precious metals are recognized for their ability to preserve purchasing power and wealth.
These precious metals are known all over the world for their inherent value and reputation. Gold, for example, is being widely acquired by global central banks-and with good reason. These central banks see the coming shift in world currency markets, and are looking for ways to diversify and protect their holdings.
Don’t wait until it’s too late. Take steps now to protect the wealth you have worked so hard to build.
Consider an allocation in gold, silver and other precious metals…
The time to act is now. One of the simplest ways to gain exposure to these critical precious metals is through a precious metals IRA. Getting started with a gold IRA is easy. Our experienced executives are here to guide you, step by step, through the entire process. Call us today at 1-800-341-8584 FREE FREE FREE to get started.Tags: china, chinese currency, chinese gold, renminbi, Yuan