China Looks Set To Introduce Gold-Backed New World Reserve Currency
The US dollar has been the world’s reserve currency for many decades now, but the trends seems to indicate that China is preparing to overtake the US in regards to being the “standard” currency. The world’s monetary system has not had any direct involvement with gold since 1971, when U.S. president Richard Nixon ended the conversion of the dollar into gold.
China seems to be preparing itself for a big involvement in gold, potentially backing their currency with gold. This simple graph below shows that world reserve currencies come and go, and they change on average every 95 years.
It is impossible to know exactly how much gold China has, as their central bank is more secretive in this regard compared to other countries. The last “official” announcement of their gold holdings was in 2009, and it was reported as 1,054 tons. Those figures would currently put China in the number 6 spot on the list of countries who hold the most gold. However, Matt Insley at Agora Financial put together an estimate based on import figures, mining production figures, as well as more stealthy forms such as black-market gold from Africa and the fact that China urges it’s citizens to own physical gold. The mining and import numbers alone would mean that China has at least 3927 tons, but with the other additions, it brings the number up to potentially 7000 tons!
Will the U.S. Dollar Lose its Reserve Status?
THIS is Why Gold Still Matters
By Geoffrey Pike
Monday, November 4th, 2013
The U.S. dollar has been considered the world’s reserve currency since the end of World War II.
This could be attributed to the economic and military strength of the United States and the relative stability of the dollar in comparison to other major currencies.
As usual, oil plays a major role in this issue.
Countries that export a lot of oil, particularly those in the Middle East, will usually sell their oil for U.S. dollars.
So if a group in Japan wants to buy oil from Saudi Arabia, it will convert Japanese yen into U.S. dollars to pay Saudi Arabia for the oil. The seller of the oil (more often than not, the government of Saudi Arabia) accepts U.S. dollars; they will then use these dollars to buy goods and services from the U.S., or they’ll convert dollars back their own currency.
Another option is to invest the dollars, particularly in U.S. Treasuries.
Having the dollar serve as the world’s reserve currency has been a major subsidy to both the U.S. government and to Americans. Foreign governments and central banks are more likely to buy U.S. government debt, which allows the U.S. government to spend more money and run up deficits with a lower interest rate. The two biggest foreign buyers of U.S. government debt come from the governments of Japan and China. More
So, while helping nations out who are in need, is it wise in our current financial debt crisis to be sending a billion to the Ukraine or a billion to Egypt or three billion to Israel? Just how can we cut benefits promised to our military and then say we can send billions to these nations? Oddly, most of them don’t even like America. I imagine a billion dollars could help our injured veterans out a great deal. It’s time for Americans to get off the government proverbial teat and start realizing we are digging our graves and our children’s graves by funding ridiculous programs, playing world cop, and allowing corporations special treatment while hammering small business into the ground.