Over the last couple of years, we’ve been reporting on efforts to remove the US dollar from its throne as the world reserve currency. We’ve primarily seen moves toward de-dollarization from countries like China and Russia, and other nations within their orbits. It’s easy for Americans to dismiss efforts to undermine the dollar as desperate moves by their enemies that will never gain any kind of international traction. But now we’re beginning to hear the same de-dollarization rhetoric from American allies.
Earlier this week, German foreign minister Heiko Maas called for the creation of a new payments system independent of the United States.
The bulls are running down Wall Street, but are bears lurking just around the corner? The mainstream doesn’t think so, but Peter Schiff does.
The Dow Jones climbed nearly 400 points Thursday after the Chinese announced a willingness to resume trade talks with the United States. No agenda was set, but the mere prospect of progress injected a shot of optimism in the market. Walmart also helped drive the surge, rising 10% after it beat earnings expectations.
In his most recent podcast, Peter asked the obvious question: why did the slimmest hope that we could see some resolution in the trade war give the stock market such a big bounce? It’s not like the market tanked because of the trade spat. In fact, everybody expects America to win. It’s the Chinese market that has been killed because of the trade war. It didn’t rally at all based on the prospect of talks
Could China be secretly pumping up its gold reserves?
Officially, the People’s Bank of China hasn’t added any gold to its hoard since October 2016. But some analysts don’t think the Chinese have stopped accumulating gold. They think they’ve just gone silent.
Gold production in China fell nearly 8% year-on-year in the first half of 2018, according to data released by the China Gold Association.
China ranks as the world’s leading gold producer.
In last Friday’s podcast, Peter Schiff talked about the potential impact of the trade war, arguing it could prick the US bubble economy. As a follow-up, in his latest podcast, Peter talked more about why a trade war could be worse for the US economy than most pundits seem to think, and he dug down to the root cause of the trade deficit.
The bottom line is slapping tariffs on Chinese imports isn’t going to solve the problem.
There was a lot of trade war talk at the end of last week. In fact, on Friday, some pundits said the trade war officially began. Last Thursday, President Trump said the US may ultimately impose tariffs on more than a half-trillion dollars’ worth of Chinese goods, and a round of tariffs went into effect. The United States began collecting tariffs on $34 billion in Chinese goods. China implemented additional tariffs on some import products from the United States immediately after US tariffs took effect, according to Chinese state media.
The stock markets shrugged it off. Both the NASDAQ and Dow were up over 100 points. In his latest podcast, Peter Schiff said the markets seemed to be saying, “Who cares about a trade war? Bring it on!”
The SchiffGold Friday Gold Wrap podcast combines a succinct summary of the week’s precious metals news coupled with thoughtful analysis. You can subscribe to the podcast on iTunes.
The Russians are dumping US Treasuries and buying gold.
As we reported earlier this week, the three largest holders of US Treasuries are not in a buying mood. In fact, they’re selling. The Japanese disposed of $12.3 billion in US debt. Meanwhile, Chinese Treasury holdings fell by $5.8 billion. The Federal Reserve has shed about $70 billion in US bonds since launching its tightening program last fall. So far, individual and institutional investors have picked up the slack.
Lost in the latest data about Treasury holdings was the fact that Russia dumped nearly half of its US debt in April. But even as it divests itself from US bonds, Russia’s total reserves have grown as the country adds to its gold holdings.
What do you do if one of your biggest trading partners is embroiled in a trade war and the other faces economic sanctions?
That’s exactly what Kyrgyzstan’s central bank is doing.
The Japanese and Chinese aren’t buying US Treasuries. In fact, both countries reduced their holdings in April.
According to the US Treasury Department, the Japanese disposed of $12.3 billion in US debt. Meanwhile, Chinese Treasury holdings fell by $5.8 billion.
This could be a troubling development for the US government as it scrambles to fund its massive deficits and ever-growing debt.
