Thursday, October 06, 2016

A 4-Front Assault On The Dollar?!
"The response to U.S. efforts to cheapen the dollar in 2010–2011 was not long in coming. It came from four directions — the IMF, Russia, China and Saudi Arabia. Enter the new world money: the SDR. Less than a year after Obama’s declaration of a new currency war, the IMF released a paper that is a blueprint for implementation of a new global reserve currency called the special drawing right (SDR), or world money. On Dec. 1, 2015, the IMF announced that the Chinese yuan would be included in the basket of currencies used to determine the value of one SDR. With China onboard, the SDR is poised to become the de facto global reserve currency. China’s and Russia’s immediate response to the coming dollar collapse and rise of the SDR is to buy gold .. Saudi Arabia’s response has been more subtle but may be more dramatic in the end. Relations between Saudi Arabia and the U.S. have deteriorated sharply over the course of the Obama administration. The primary cause was the Iran-U.S. nuclear negotiations and what amounts to the U.S. recognizing Iran as the leading regional power .. The Saudis have threatened to dump their U.S. Treasury securities in response to the release of the secret report, but so far that threat has not materialized .. Neither the U.S. nor Saudi Arabia has much leverage over the other, in contrast to 1975, when each side held powerful trump cards .. Saudi Arabia could easily price oil in yuan and then swap the yuan for Swiss francs or SDRs and use the proceeds to add to its reserves or buy gold. Saudi Arabia could also price oil in SDRs or gold and hold those assets or swap them for other hard currencies to diversify away from dollars .. All of these trends — IMF support for SDRs, Russian and Chinese support for gold and Saudi Arabia’s search for a new benchmark for oil — came to a head last month in Hangzhou, China, at the G-20 Leaders’ Summit, almost seven years to the day after the Pittsburgh G-20 Summit that spawned the new currency war. China’s President Xi is the president of the G-20 for 2016 and has made strides on the world stage as an equal partner with the U.S. in the management of the international monetary system. Now, just four weeks following the G-20 Summit, the yuan has officially joined the SDR .. Gold, yuan and SDRs all have one thing in common — they are alternatives to the dollar. As momentum toward these alternatives grows, the role of dollars as a reserve currency could diminish quite quickly — like sterling’s role between 1914–1944. The result for dollar holders will be exactly the same as the result for sterling holders: inflation and lost wealth."
- Jim Rickards*
LINK HERE to the essay

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