Gold-Backed Yuan Could Ultimately Replace USD as Reserve Currency (Video)
On Friday, International Monetary Fund Director Christine Lagarde basically green-lighted the proposal to add the Chinese yuan to the IMF’s Special Drawing Rights basket of currencies. Peter Schiff told RT’s Boom Bust that this is just another step in the direction of China surpassing the United States as an economic power. Ultimately, Peter believes China could back its yuan with the gold reserves it has been stealthily amassing and present its currency as a stabler alternative to the US dollar.
Peter went on to argue that the Federal Reserve will not hike the fed funds rate in December, pointing to the Paris attacks as a new excuse the Fed could somehow use to maintain an easy monetary policy. This would allow the Fed to draw attention away from the fact that American consumers aren’t spending like they used to as the US tumbles into a new recession this holiday season.
Highlights from the video:
“I don’t think it’s going to have an immediate impact, but I think it is a step in the direction in which China has been headed. And that is to make the yuan a reserve currency, and ultimately potentially to be a replacement for the US dollar, especially if they have the good sense to back up their currency with their enormous gold reserves, which I think China is deliberately underreporting. I think they are accumulating more and more gold quietly and maybe secretly, because I do think that ultimately that is their intention to have a gold backed yuan become the predominant currency in the world…
“I think everything is being clouded by the dollar bubble, dollar mania, and now the most recent events in Europe. The tragic shootings in France are causing more people to believe that there will be even more cheap money policies, more quantitative easing in Europe. We know that Japan has just slipped back into recession. Who didn’t see that coming? And so this has also got the dollar rallying once again and that’s seeking to depress other currencies, including gold. So in this environment, it’s really hard to see any currencies making some headway. But I do think when the dollar bubble bursts [and] the air starts to come out, this is going to be something that helps contribute to the appeal of the yuan as it ultimately rises significantly against the US dollar…
“We’ve seen these high probabilities for Fed rate hikes all year long. This is nothing new. Several months before the Fed is supposed to raise rates, everybody believes they’re about to do it. Then something generally happens between then and the time the Fed is supposed to pull the trigger, and then the Fed has an excuse why they don’t move. If you look at the economic data that has come out recently – again, it’s all been bad. Other than that better-than-expected jobs number that we got, all the rest of the economic data has pretty much been worse than expected. And how do we know what the revisions are going to be to that jobs report? These numbers are notoriously revised, so it may not be as good as was originally reported. We still are going to get the November jobs number that comes out in early December. That may be bad. There’s a lot of news that could come out. Of course, the jobs numbers are backward looking. A recession doesn’t start because of layoffs. Layoffs typically result from a recession. All of the other economic data points are flashing recession. So it doesn’t make any sense if the Fed is going to be looking in the rearview mirror to try to formulate monetary policy and ignoring everything they see in the windshield. I still think the Fed is more likely going to punt again, not raise interest rates. Maybe they’ll even blame it on the terrorist events happening in Europe. That may allow them to pretend that their decision has nothing to do with the US economy. And maybe people will buy it again. But with the dollar rallying, commodity prices falling, the Fed has another reason to say, ‘You know, inflation is still too low. We don’t have our inflation goal.’ So they can easily get away without raising rates in December…
“First of all, the producer prices that come out the other day were quite week, number one. But look at the retail sales. Look at Macy’s, look at Nordstrom’s, even Urban Outfitters now today. Walmart’s numbers have been weak. All the big retailers – The Gap – if consumers have money, why aren’t they shopping. If people are getting jobs, why don’t they have to spruce up their wardrobes to go along with their new jobs? The consumer is struggling. That’s obvious. He’s buried under a mountain of debt. The jobs that we are creating are low-paying, part time. About 45,000 of the jobs that have been created in October were temporary jobs. These were jobs for the holiday season and probably the retailers are hiring more people than they need, judging by the sales numbers… These are all service sector jobs. We lost manufacturing, we lost mining, we lost transportation, we lost forestry. We lost the higher paying jobs. And what do we get? More waiters, more bartenders, more part-time jobs. You cannot build an economy on these low paying, service sector, part-time jobs. And that’s what all the other economic data is telling us…“
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