Yuan

[[wysiwyg_imageupload:1350:]]By Julian Phillips on Wed, 19 Jan 2011
The reality of China and the U.S.

Last week we published an article on the advent of the Yuan as a global reserve currency. We believe this event is the most significant event to appear on the global monetary scene. It overshadows the Eurozone debt problems because it will change the monetary world significantly. We don’t believe for one second that the euro will collapse. The euro will receive considerable investment from China overtime at a time when it is needed most. China realizes that as an alternative to the U.S. dollar, the euro is needed in the global monetary system. By investing in the world’s two most powerful trading blocs, China is gaining a foothold that may well swing the [financial] balance of power towards itself, in time. Neither of these two blocs will be able to do without China’s investments shortly. Such dependence protects China as much as it weakens the Eurozone and the U.S.

[[wysiwyg_imageupload:1300:]]By Gold Forecaster

While China is taking a greater portion of our financial attention on a daily basis, it seems to us that the sheer size of China and its continued growth has not been factored into the world economic perspective, even now.   One of the consequences of profit driven capitalism in the past was the relocation of manufacturing from high-cost, developed countries to the lower cost country of China.   U.S. corporations that did that, have enjoyed better-than-ever profits, but in the process have educated new, Chinese, lower-priced competition that will overwhelm us all in the future.   The enrichment of China and its arrival on the world scene will surpass the U.S.  as the largest world economy by 2020 at the latest [we would not be surprised if this happened even before 2015].  This will trigger a financial tsunami that will change they way we think and invest. 

[[wysiwyg_imageupload:1058:]]By Gary Dorsch

In 2009, China spent $89-billion for imports of crude oil, $50-billion on iron ore, and $30-billion on copper. However, even before the final tally for 2010’s import bill is calculated, Beijing understands that the era of cheap commodities is over, and that if continues to target economic growth of 9% or more, it’ll have to pay a heavy price. Beijing has been backed into a corner, by the US Treasury, and its powerful allies at Japan’s ministry of finance, and must soon decide how to navigate its economy in the year ahead. The threat of hyper-inflation looms on the horizon.