Skip to content

Saudi Arabia Considers Selling Oil In Yuan

[Image © The Daily Telegraph]

So What? I hear you yawn… Actually, this is potentially a BIG story.

For decades, the US Dollar has been considered to be the World’s Reserve Currency. That is, the value of the US Dollar has been unquestionably trusted and therefore, it has been the currency that a vast proportion of world trade is conducted in. Oil, coal, gold, silver and other metals, cotton, coffee, wheat and hundreds of others commodities, are all traded in US Dollars.

The size and scope of the US economy has leant weight to this trust. After all, the US economy has been the largest and most developed economy in the world, by a long margin, for a long time.

But all is not well in the US economy. The US Treasury has had a policy of quantitative easing, or printing money as you and I know it, since November 2008. Since 2014, the Federal Reserve has “expanded its balance sheet” from around $US4 trillion to almost $US9 trillion, essentially by buying long term Treasury Bonds. In this process, the Fed simply creates the money it uses to buy debt from the Treasury.

And that is the very definition of inflation. In economics jargon, inflation isn’t prices going up. Inflation is the expansion of the money supply, not backed by an equal increase in production. Prices go up as a result of inflation of the money supply. And inflation is a sure sign that everyone is losing faith in the value of your currency.

READ THE FULL ARTICLE

Published: 16 March 2022

From the Daily Telegraph NZ

Share This

Leave a Reply

Your email address will not be published.