Recently, however, there has been some movement from the Chinese on the subject of currency pegs. Specifically, the People’s Bank of China has agreed to allow the yuan to rise or fall up to 1% from a mid-point each day. That doubles the size of the movements that can occur in the currency, which is currently allowed to move no more than 0.5%. Analysts claim that the move is coming from China now because the country’s leaders believe the yuan has reached a point of equilibrium and that its strong economy can withstand more movement in the currency.
Worth noting, however, is that this move is quite likely part of a larger Chinese plan to make the country a global banking center by the year 2020. Part of that process would undoubtedly result in the yuan becoming an international reserve currency or co-reserve-currency, a distinction currently held only by the U.S. dollar. For those wondering what the loss of reserve currency status would do to the U.S., the issue is simple. Without reserve currency status, the U.S. would be forced to buy oil and other goods, services and commodities in local currencies or a reserve currency other than the U.S. dollar. The result would be that dollar devaluation by the Federal Reserve would result in massive cost spikes for such goods and services.
To this point, the world has played along with this rigged game, but with China eyeing banking supremacy and many countries beginning to do business for oil and other commodities in local currencies instead of the dollar, it appears the time is quickly approaching that Americans better get used to some truly high prices for things like electronics, clothing and, yes, gasoline (if you thought $ 4/gallon was high, well…you’ve seen nothing yet).