The coming weeks will reveal whether anything comes to a head in the US and North Korean standoff. As the Trump administration works with its regional “partners,” including China, to resolve the immediate conflict-prone situation, China will be closely monitoring the US economy for any signs of instability in the US Dollar.
The reason for this: China has a long-standing impression that the US manufactures foreign crises to fund its own economy (through encouraging dollars to go into US Treasuries). They are aware that America’s economy has sustained years of subdued growth; that America is now showing signs of debt fatigue. With yield on the long bond declining to as low as 2.9%, bank lending showing signs of stalling, and the Atlanta Fed’s revised expectations indicating sharp downward growth, China is aware that an impending US recession is on the horizon.
In short, China assumes that the US economy is in a desperate situation. And contrary to public opinion and a rising stock market, we just might be.
Will China see this potential weakness as an opportunity to advance an attack on the US Dollar? Will it support their reasons to escalate a financial war with Americans? We will find out in the coming months…possibly weeks.
Whatever the outcome may emerge from this standoff, China’s long-term goal is to ease away from US Dollar dependency in order to finally displace the dollar’s reserve status. China has been easing out slowly, but they are unquestionably poised to accelerate this process with much greater force. If China decides to revalue gold, all western capital markets in the advanced world will be on the receiving end of a financial “shock and awe.”
Should China decide to replace the US Dollar with a gold-backed currency system, the financial crisis of 2008 will be nothing compared to this impending fall-out. Its victims will include all the countries dependent on western capital markets. And countries that are not dependent on the US Dollar—countries like Iran and Russia—will emerge significantly stronger than their dollar-dependent neighbors.
This final scenario would mark the decisive win for China and its partners in the Shanghai Cooperation Organization: free trade among their domains of influence with America and its western allies as their “feedstock.” It will sound the death knell of America’s dominance over global commerce.
Although many of our fellow Americans may suffer the fallout in this dire scenario, you have every power within your means to protect your financial assets. Gold is the critical tool that will be used to trigger this event. Gold is also the only sound-money solution that will save you when the US Dollar collapses.
By Jeff Cavanna | GSI Exchange Media Correspondent