Millions of investors are hunkered down over fears that the U.S. dollar will lose 30% to 50% of its value in the upcoming months, as a result of the Chinese yuan becoming a "reserve currency."
There's no reason to join them in the proverbial bunker.
In fact, quite the opposite is true – and that's why I want you to go on the offensive.
Starting with these three choices.
What It Means to Be a Global Reserve Currency
If there's one thing I've learned over the years, it's that financial predictions are a lot like belly-buttons… in that everybody has one. Most are highly provocative simply because that's how the pundits and tipsters grab your attention.
Very few actually come to fruition, which is why it's almost always more profitable to take the other side of the equation.
Case in point, take the Chinese yuan, or "renminbi" as it's also known, which means "people's money."
There's been no end of hype about how that nation's money would crater the U.S. dollar when it became a "reserve currency." And it's reached a crescendo over the past few months.
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Admittedly, the arguments sound plausible. No doubt, that's why they're so scary.
The stream of thought usually goes something like this… global trade has shifted, China's economy dominates world markets, they'll start a currency war as a means of ensuring that China stays on top… all of which culminates with some variation of the U.S. dollar will crash by 30% to 50% when everybody starts selling it.
When you dig deeper, though, the story just doesn't hold up. Frankly, neither do most of the "experts" I might add, but that's a story for another time – very few of them understand how global financial markets actually work.
Let's start with what it means to be a "reserve currency."
Technically speaking, a reserve currency is a currency held in huge quantities by central banks and governments as part of their foreign exchange reserves. Usually that's because the nation holding it does so much trade that they need it to pay liabilities or manage ongoing trade relationships.
The press would have you think that the U.S. dollar is the world's reserve currency. In fact, reserve currencies come and go over time.
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