The Conrad Group

American politics accelerate the decline of the dollar and the rise of the Chinese yuan

It is often said that reality can trump a good fiction novel anytime. In the case of the United States Congress, we have the basis for a fiction novel that the average reader could never have imagined to be true. In the past 10 years, we have amassed trillions of dollars in debt from two unfunded wars, an unfunded prescription drug plan, unfunded tax cuts as well as the capital required to stave off a depression as the result of the global financial crisis. The world now watches in disbelief as selfish children deny the facts surrounding their current situation.

We are the tools of our own demise, given that a downgrade in our credit rating is now a certainty (two rating agencies have already down-graded our debt), and this will, of course, precipitate a rapid depreciation of the U.S. dollar. So where is the upside? Well, if you are holding RMB, you are holding the next reserve currency, which will most assuredly be backed by a basket of precious metals. How long will it take for the inevitable to occur? It took less than 10 years for the British pound to be replaced by the U.S. dollar and that was during the industrial age. At this rate, five years or less would be a plausible bet. To read more about William’s take on the debt crisis in Washington, please click here.

 

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