It’s Official But Don’t Assume It’s Benign

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Chinese Yuan Enters Reserve Currency Status with the IMF

If World War 3 is cyber-economic (and it is), the yesterday we just saw one of our most important weapons given away. Yesterday was a huge day for China. Christine Largade, managing Director of the International Monetary Fund announced that the Yuan has just taken its place alongside the dollar, Euro, British pound, and Japanese yen as an official reserve currency. The move has been expected for a while but was delayed in August.

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The Chinese ARE Dumping our Treasury Bonds

We warned about this in our Pentagon research back in late 2008 and early 2009 but there were plenty of skeptics. We emphasized the risk in the 2012 NY Times bestseller, Secret Weapon. In Chapter 9, we made a strong case that China could dump their Treasury bond holdings and work fervently to establish the Yuan as a reserve currency alternative to the American dollar. We pointed out how multiple Chinese sources were planning for this and labeled it “financial warfare.” We made it clear that this would prove deflationary for China but said “If China can tolerate such deflation and if it can transition effectively, it will be sitting in the shade.”

While we knew then that the time had not yet arrived for China to make her move, we also knew it was just a matter of time. Starting in 2011, we began to address the risk of financial warfare in this Blog. Just look back at this February 2011 post where we argued that China had a long-term view and a five-year plan:

The Chinese Take a Long Term View; Evaluating Their 5YP Continue reading

Putin is acting on his threats

For the past five years, we have warned that Vladimir Putin intended to remove the dollar as the world’s reserve currency. He understands what the Chinese have shared (from a February 2011 article in Quishi, the official Journal of the Central Committee of the Chinese Communist Party):

The fact that the U.S. dollar is the world’s reserve currency makes the U.S. a financial superpower . . .Therefore, for China to challenge the position of the U.S. dollar, it needs to take a path of internationalization and directly confront the U.S. dollar.

Putin has been scheming to get China and others to join him in unseating the dollar, thus ending perhaps America’s greatest strategic advantage as a superpower. Everything else is somewhat of a subterfuge. This is the real focus. The amazing thing is how little attention has been given to this truly systemic threat. Take a look at this Blog post as a reminder:

Putin’s Direct Threat: We Are Ready to Crash the Dollar (from Voice of Russia) Continue reading