Nov. 30th 2015 - IMF to Consider Chinese Yuan as Standard Reserve Currency...and what that might mean for US

I believe that financial experts are starting to believe that China has become, “Too Big to Fail” and that one solution would be to add the Chinese Yuan to the IMF reserve currency status in an effort to bolster China’s slumping economy.

While the USA has been the driver of demand of Chinese made goods, many believe that China itself could be a consumer of it’s own goods if their own economy could be properly energized.

The point is that without the U.S., China has little demand for commodities including middle-eastern oil, the secondary benefactor of the U.S. Petro Dollar.

The promise to the IMF and world banks would be that by making the Chinese Yuan an IMF Standard Reserve Currency, that a relatively new, thriving, middle class could be cultivated in China thereby increasing their own domestic demand and could set the world economies right…this of course would be at the expense of the U.S. economy and U.S. dollar. The missing factor however is that the U.S. economy has been artificially heated up through the use of issued credit through home and auto financing and credit card debt. The Chinese citizens are mostly credit averse and not conspicuous consumers as we Americans are so the effect of swapping out American demand for Chinese demand will fail unless credit is issued to Chinese consumers and utilized by them. 

Plenty of news outlets report this possibility. It might be American arrogance that would cause some people to think that the U.S. dollar will always be the most reliable trading currency especially for middle eastern oil. This American hubris regarding our standing in world politics has been a mistake in the eyes of the world and this move to accept the Yuan should be considered to be an expression of a loss of confidence in U.S. currency, the economy and our future future demand for world products. 

Toppling the King of the Hill 

There is no love lost for America which many around the world see as a bully imposing it’s will against the world and many countries would invite a fresh world order that excludes the U.S. and it's dollar. We are after all describing multi-national banks that view profit as the highest and best goal for consideration of a change to the SRC.

The clock is ticking against China and the world which depends on their demand for energy, commodities and their contributing low cost production. Adding China to the IMF SDR2 could potentially flood the Chinese market with new investment dollars giving them the needed investment interest to prop up their economy and put their middle class to work. Adding the Yuan to the IMF SDR would be very detrimental to the USA which has already been reduced in status by current and former international policies.

I believe that adding of the Yuan to the IMF SDR or creating an SDR2 would have major negative impacts on the US dollar and would further reduce and potentially eliminate our standing as a major world leader and threaten the already weakened and credit burdened US economy. 

With an additional would reserve currency, demand for the U.S. dollar could find itself in competition with the Yuan for the purchase of middle-eastern crude oil. The "dump" of U.S. dollar would have major implications to the U.S. economy, including investments, bonds, and stocks. Without continued foreign cash flow through the purchase of U.S. bonds, a serious exodus from the U.S. dollar could collapse our debt heavy U.S. economy. I believe the Chinese and Russians know this fact and it is evidenced by their recently and still yet to be completely disclosed, scale of their hoarding of physical gold.  

A new reserve currency would most certainly affect the price of oil and have far reaching implications especially to us here in the ND Bakken shale oil play. 

Recently, I have been advising clients and friends to adopt a plan to cut costs, reduce inventory and save cash as a survival strategy to weather this nearly 62% downturn (from the high in 2008) in US crude oil prices that is currently impacting north west North Dakota. 

Please read further....

IMF Move to Give Yuan Reserve Status Likely to Boost China Assets
https://www.wsj.com/articles/imf-move-to-give-yuan-reserve-status-likely-to-boost-china-assets-1447608676

IMF currency basket review of Chinese yuan set for November 30, 2015
https://www.reuters.com/article/2015/11/04/imf-china-yuan-idUSL3N12Z3DH20151104#VyU1AMjlwKFldsGO.97

China inclusion in IMF currency basket not just symbolic
https://www.ft.com/cms/s/0/02bd4fe4-8cf2-11e5-8be4-3506bf20cc2b.html#axzz3sI1GZDso

Bloomberg - IMF Said to Give China Strong Signs of Reserve-Currency Nod
https://www.bloomberg.com/news/articles/2015-10-23/imf-said-to-give-china-strong-signs-of-reserve-currency-blessing

What Will It Mean If the Yuan Gets Reserve-Currency Status?
https://www.bloomberg.com/news/articles/2015-10-24/what-will-it-mean-for-the-yuan-to-get-imf-reserve-currency-nod-

U.S. Takes Step Toward Support for China's Reserve-Currency Bid
https://www.bloomberg.com/news/articles/2015-09-25/u-s-takes-step-toward-support-for-china-s-reserve-currency-bid

Yuan Set to Join IMF Basket in Step Toward Currency Big Leagues
https://www.bloomberg.com/news/articles/2015-11-13/imf-staff-recommend-yuan-be-included-in-reserve-currency-basket