Precious Metals Market Analysis, By Michael Pennington (Copyright 2010 Pennco Coins)
I hate to focus such a large amount of attention in the newsletter to China. But, we have to realize how important China is to the dollar. They are upset at the U.S. for spending so much money and increasing its debt beyond its means. As a result, they will increase their rate of diversifying out of the dollar and add to their gold reserves. They know the dollar will collapse soon, and so they are pushing for a new world currency to replace the dollar thereby exchanging worthless dollars for a new currency backed by SDR’s and administered by the IMF.
Last week China announced a huge step in that direction. It was an announcement that was overlooked by many in the financial media. However, it is my opinion that this is the first move by China to get their currency, the yuan, positioned to replace the dollar as the world currency if a new one world currency is not implemented. Most experts thought China would buy the IMF bonds using their dollars. Instead at the last moment they paid with yaun and the IMF surprisingly accepted. This will spread the yaun throughout the world where the IMF intends to spend the money. The IMF will use yuan to buy assets from other financial institutions or for issuing loans, hence spreading the Chinese currency more widely.
Chinese official Ziang Zhang said: “This would signify that the renminbi, to a certain degree, would replace the dollar as a global reserve currency. It would be an important impetus for renminbi internationalisation and it would have a negative influence on international demand for the dollar,” Zhang said that could help to spread the use of yuan abroad, a move that Beijing has been quietly promoting. China signed a currency swap deal with Argentina in March and has agreed to lend yuan to the central banks of South Korea, Malaysia, Indonesia and Belarus in the event of emergencies.
If the IMF lends yuan to developing countries, they might choose to hold them as reserves or exchange it for dollars, Zhang said. “It will help to internationalize the yuan, because it will be a reserve currency for other emerging markets,” Zhang said. He concluded, “There’s still a long way for the SDR to become a global reserve currency.”
Let’s be smart. If you haven’t already, you need to diversify out of U.S. dollars and into Gold or Silver. If you’re still not sure, ask yourself the following key questions:
1. Is it prudent to keep your wealth denominated in a declining currency?
2. Will the Chinese lead a global exodus out of the dollar in 2009-10?
3. Could the new IMF “Special Drawing Rights” replace US dollars globally?
4. Are you ready for side effects: higher interest rates and cost of living?
What’s really at risk now is the dollar’s role as a reserve currency. The international exodus of the dollar has begun! The simplest solution to protecting your time, labor and nest egg is by converting a portion of your wealth from unstable dollars into gold, the most stable currency on earth.
Penncocoins - Precious Metals Market Analysis 