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TheStreet Open House

Renminbi Relentlessly Replacing Dollar as Reserve Currency

The collapse in value of our paper currencies is accomplished through our morally/intellectually bankrupt central banks flooding the world with this (unbacked) paper. In other words, the entire global economy is already drowning in an ocean of these paper currencies. It is thus little surprise that these same central banks are now swapping their own paper for gold at the fastest rate on record.

It is in this context that we see a shift taking place where the U.S. dollar as reserve currency is being steadily replaced by the renminbi.

Some numbers are in order. A recent article in China Daily noted that for much of Asia the renminbi is already the reserve currency:

A "renminbi bloc" has been formed in East Asia, as nations in the region abandon the U.S. dollar and peg their currency to the Chinese yuan...

And now seven out of 10 economies in the region -- including South Korea, Indonesia, Malaysia, Singapore and Thailand - track the renminbi more closely than they do the U.S. dollar...

According to the latest report by the Society for Worldwide Interbank Financial Telecommunication, or SWIFT, renminbi-denominated trade accounted for 10 percent of China's total foreign trade in July. The figure was zero just two years ago.

From July 1 to Aug. 31, global payments in the renminbi rose 15.6%, according to Swift as payment in other currencies fell 0.9% on the average... emphasis mine

We see three obvious points:

  • The move from the dollar to the renminbi is now occurring rapidly.
  • Demand for the U.S. dollar is falling as a direct result of this shift.
  • Even Chinese media are attempting to cover up the collapse of the dollar.

Notice how the article talks about the demand for "other" (Western) currencies falling by "0.9% on average." This is laughable. It's not British pounds that are being dumped in favor of renminbi. It's not euros that are being dumped. It's dollars.

However, to hide the size of the collapse in demand for the dollar we see the propaganda machine "average out" the number with other currencies.

Referring again to the inevitable laws of supply and demand: As demand for the renminbi rises purely as a vehicle for international trade, then its value (relative to other currencies) must also rise as a result of this upward shift in demand.

Equally inevitable, as dollar holders abandon the dollar for the renminbi, an even greater global glut of dollars is created and the dollar must fall in value (relative to other currencies).

With this economic trend now carved in stone, Americans can rely upon the Federal Reserve -- the statutory "guardian" of the U.S. dollar -- to shrewdly limit the global supply of dollars in order to delay the complete/final collapse of the dollar as long as possible. Right?

Wrong. As sophisticated readers already know, the Federal Reserve recently announced a gratuitous, "open-ended", additional money-printing program of approximately $500 billion/year. This massive infusion of yet more dollars into the global economy is all dedicated to buying the worst financial feces from the balance sheets of the Wall Street crime syndicate.

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