Another Salvo from China in the Currency War

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Posted by Cynic | Posted in Banking, Money, States | Posted on 22-11-2013

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China is backing off it’s USD feast saying that it has had quite enough for now.

http://www.bloomberg.com/news/2013-11-20/pboc-says-no-longer-in-china-s-favor-to-boost-record-reserves.html

China, not China“It’s no longer in China’s favor to accumulate foreign-exchange reserves,” Yi Gang, a deputy governor at the central bank, said in a speech organized by China Economists 50 Forum at Tsinghua University yesterday.

With China buying less American debt, the “good times” for the US are coming to an end. This decreased demand for the USD will cascade down into the ranks of the poor and middle classes and wreak havoc as all financial crises do.

As the dollar loses value, prices will begin to rise. Keep in mind that real inflation is much higher than government reports due to how they manipulate the inflation calculation methodology. Here are a couple charts from Shadow Stats that illustrate the disparity:

The question now is how much value will the USD lose now that its single largest buyer is no longer going to be buying?

We are looking at the start of the end for the USD. It’s been losing purchasing power for a century now with less than 4% of the value it had 100 years ago. Inflation numbers have been hidden from most people through manipulated methods, and now are poised for a massive acceleration as the USD is on the verge of dropping into free-fall.

In a recent Keiser Report, Max Keiser warned that we’re on the edge of seeing a 30-year bond bubble pop. With US bonds being one of the largest out there, and demand for them drying up as China backs off and the Fed hints at tapering their Quantitative Easing money printers, it looks like the needle is getting closer.

I’m very curious as to how the US dollar collapse will play out. If it’s anything like the Asian currency crisis in 1997/1998, we’ll see this disease spread the same way. The Canadian CAD, the United Kingdom GBP, the Swiss CHF, the Japanese JPY, the Australian AUD, and the European EUR will all suffer as each of those countries has been printing money similarly to how the American have.

With Canada linked at the hip through it being the US’s largest trading partner, I expect to see the devastation hit Canada first. This might not play out like that though as Canada’s banks are rumoured to be relatively stable. Perhaps the toxic debt may cascade elsewhere first. But that won’t stop the massive hit Canada will take in terms of trade when the US can no longer afford to purchase goods from Canada.

This is going to hurt. A lot of people are going to pay dearly for supporting their criminal governments and their insane spending sprees.

With any luck, we’ll see a return for the value of gold and silver, and perhaps even bitcoins. That $10,000/ozt gold and $100,000/BTC may be closer than anyone realises.