Just a couple of quick headlines. According to China Daily, a senior Chinese advisor and Peking University professor, who was formerly the Chief Economist at the World Bank, is urging China and the world to replace the dollar. He claims, as reported in China Daily, that the dollar is “the root cause of global financial and economic crises.” This follows calls from the official Chinese State News Agency to “de-Americanize the world” and to replace the dollar.
Too few in America understand the implications of this. We’ve posted about it before but American arrogance and normalcy bias have so far prevented us from grasping what this would mean. If the dollar were not the world’s primary reserve currency, the next crisis would be much, much more painful. With our substantial debt, a serious problem would put us in a very weak position. Turkey is facing such struggles today as is much of Latin America.
It is important to remember that former “Treasury Secretary Timothy Geithner spoke at Peking University in June 2009, he reassured the audience of students that China’s dollar investments were safe. They broke out laughing.“ [Taken from page 25 of my new book Game Plan.] The Chinese people instinctively understand what we can’t seem to grasp. Perhaps that explains why they have been so actively buying gold the past few years.
Moneynews
Monday, February 10, 2014 07:40 AM Bloomberg News
Gold consumption and production in China expanded to records as prices that slumped into a bear market spurred sales of jewelry and bars, underlining a shift in global demand from west to east. Bullion increased.
Usage surged 41 percent to 1,176.4 metric tons in 2013 from the year before, according to data from the China Gold Association. Output rose 6.2 percent to 428.16 tons, making China the largest producer for a seventh year, the Beijing-based association said in an emailed statement.
China probably overtook India as the largest user last year, according to the producer-funded World Gold Council, which highlighted the eastward shift in global demand as holdings in exchange-traded products contracted by a record.
No wonder the Chinese students were laughing. We are in for a rude awakening.