Buy Gold: The days of the United States are numbered

Gold Investment - 24 October 2011

A U.S currency bill that aims to impose higher tariffs on Chinese products has passed the U.S. Senate, and if not blocked by the U.S. House of Representatives, it could lead to a full-blown trade war between the U.S. and China. Tensions between the two countries are also intensifying due to more possible U.S. arms sales to Taiwan, the disputed island located near the southeastern coast of mainland China. All of this doesn’t bode well for the Federal Reserve Note (more commonly referred to as “the Dollar”) nor the U.S. economy.

Invest in precious metals today! Contact us for details.

Invest in precious metals today! Contact us for details.

China dislikes, or pretends to dislike, the idea that the U.S. intents to enact a law that will in essence force China to allow the Chinese Yuan to increase in value against the U.S. Dollar. It is after all no secret that more than one U.S. Senator feel that China should not be allowed to manipulate their currency at a cost to the United States. Lindsey Graham , U.S. Senator of South Carolina, has for example made it clear that "…Chinese manipulation of the yuan has cost this country at least 2 million jobs - 41,000 in South Carolina - and it is an unfair trade practice in another name" (Boehner: New Tariffs Could Start China Trade War, CBN News, 13 October 2011). On the other hand, Cui Tiankai, China’s Vice Foreign Minister, has made it clear for one that if “…the proposed legislation become law, the only result would be a trade war between China and the US and that would be a lose-lose situation for both sides” (China: Approval of currency bill would start trade war, hurt US jobs, Global Times, 10 October 2011).

Invest in precious metals today! Contact us for details.

Invest in precious metals today! Contact us for details.

Now given the above, bill or no bill, it would actually be beneficial for the Chinese to allow its currency to rise in value against the U.S. Dollar. We are of the opinion that although this might cause pain to Chinese exporters over the short-term, it will be much better for China over the medium to long term. Yes, the United States presents a substantial market for Chinese products, but we feel that domestic demand in China, if allowed, should be able to off-set any drop in Chinese exports as a result of a stronger Chinese currency.

<< Previous    [1]  2  3  4  5  ...6    Next >>