For the last two months tariffs have been at the top of the financial news. While most of the attention has been on China and the U.S., Russia has also been in the sights and tweets of President Trump. The President wants to lower the trade deficit that widened over 12% last year to $566 Billion. This is the largest gap since 2008. China is not only the biggest country we trade with, but with whom we have the largest trade deficit with, hitting a record high of $375 Billion in February.
Tariffs and the Trade Deficit
Economists said the growing trade deficit stemmed largely from the strength of the United States economy, which helped American consumers afford more imported electronics, clothes and appliances. The value of the dollar declined almost 11% last year. This made American products cheaper to buy overseas, which helped to lift exports, but not enough to prevent the gap from widening. The Trump administration has long promised to eliminate the trade gap, citing it as evidence of the decline of American manufacturing and a troubling reliance on foreign goods.
As the rhetoric about tariffs continues publicly between the U.S. and China, could there be a more significant reason for all this talk behind the scenes? Something that has, in essence, been under a U.S. media blackout, having only been reported on once within the U.S. news media. What am I referring to? Something I have been following in foreign news that has gained momentum. Something I wrote a newsletter on last October and even created a section for in our new white paper called “Time Is Up…”.
China Unleashes the Petroyuan
On March 26th this year the Petroyuan was launched. For those that are not aware of this term, the Petroyuan is China letting countries and individuals use the Chinese currency instead of using the U.S. Dollar to purchase or trade Oil. China has been setting this up for years. Many countries besides China want to buy or sell Oil without using U.S. Dollars. I wrote last October that at first, the trades would be rather insignificant. That over time as these trades gains momentum, it will not only compete with the U.S Dollar, but could dethrone the Dollar as the world’s reserve currency. This system that has been set up by China is no longer relying on the U.S. Dollar, rather an alternative way of buying Oil outside of the dollar. I was far off of the trade volume being rather insignificant. The first trading day the Petroyaun was launched, the volume was off the charts, with well over $10 Billion traded in the first hour. Additionally, well over 23,000 contracts also were traded in just the first hour. That first day, the Yuan traded 4 times the volume of Brent Crude Oil Futures. Reuters reveled that Chinese regulators have already asked financial institutions to prepare for pricing crude imports in the Yuan rather than the Dollar. Beijing has started with purchases from Russia and Angola, two nations which, like China, are keen to break the Dollars global dominance. Russia and China, and a host of other countries, are sick of being told they must use Dollars for trade. When these countries buy Oil in a Dollar denominated contract, it helps fund the U.S. financial system. These countries have been at a crossroad for some time now. Their belief is that they should not be forced to only purchase Oil in a Dollar contract. There should be an alternative currency to buy and sell Oil. Especially since certain countries see the U.S. is outright hostile to those nations and seeks their support by forcing them to buy Oil only in Dollars.
President Nixon took the Dollar off a Gold standard on August 15th, 1971. In 1974 the Petrodollar was established to further establish the Dollar as the world’s reserve currency forcing the world to buy Oil in only U.S. Dollars.
The New Kid on the Block
Now there is a new kid on the block who seems to be moving rapidly into its own adulthood. At the end of April, the first 30-day trading contracts will come due, while at the same time, payment of Oil bought from China will be fully paid for in their currency, the Yuan. China has gone back to the future. These contracts with individuals and countries that own them, can convert the Yuan fully into gold. This is done through the system that China has set up through the Shanghai Gold Exchange. China will be the only country of the world that you can convert their currency into gold. It is also the only major currency you can trade Oil in outside of the Dollar trade. These contracts will come due at the end of the month and we could see a greater demand than normal for Gold in late April or early May.
This comes at a time when President Trump is taking steps to make America great again, but at the cost of breaking economic agreements, and stepping on other countries toes. This path that President Trump is taking to achieve greatness, is leading America to be somewhat isolated and changes the way America is being recognized around the globe.
One would think this is big news and a threat to the U.S. Either this is not a big deal at all, or the U.S. news media doesn’t think Americans need to be informed about it. Maybe neither, just maybe it is big news, but news that would cause us to pause and think a moment about our financial future, and the debt of our country, and who is going to hold the Dollar to support our debt. Maybe that is why there is a U.S. media blackout.
What You Can Do to Protect Your Financial Future
I must say once again, this conversion from the Yuan into Gold might be rather slow and insignificant at the moment, but over time this should gain momentum and compete, unfortunately with the U.S. Dollar. This would cause lower Dollar values, higher interest rates, and higher prices in Gold. Time will tell if I am too slow in my assumptions. Frankly I would rather be two years too early than two days too late in my assumptions and my personal ownership of Gold. Shouldn’t you? If you sense something is coming that will bring uncertainty, then now is the time to act. Call a Landmark Capital representative and learn some fact and also get our new white paper title “Time Is Up! Which Bubble Will Burst First to Cause the Great Deflate”?