Foreign central banks are continuing to rid themselves of US dollars. From November 2015 to November 2016, central banks have sold $405 billion US treasures, much of which back to the US government, which is a new record. Much of this treasury dumping was from Japan, which was its fourth month in a row of doing so. The biggest seller, unsurprisingly, was China. They dumped $66.4 billion of our treasuries in just one month, which was the biggest monthly sale in five years. China’s total US treasury holdings are now at their lowest levels in seven years.
None of this is good news for the Western world. As I discussed here, one of the possible collapse scenarios for the US (number 3a in that article) is that everyone starts dumping their US bonds, and billions of US dollars avalanche back into the US, crashing the value of the dollar and the purchasing power of all Americans.
We’re not exactly seeing an avalanche yet, but we’re clearly seeing a small river, and one that’s growing every month. A year ago, foreign governments owned $4.1 trillion in US bonds. Today they have $3.7 trillion. That’s not insignificant for a one-year change.
I glance at a few key economic numbers every morning, including the US dollar. The value of the dollar seems to be unaffected at the moment, but the value of gold has been rising sharply since the middle of December. On Dec 15th, 2016 it was $1130 per ounce; today it’s over $1200 per ounce. That makes me smile a little bit.
This could all be meaningless in the short to mid-term though. If a huge financial crisis hits the world, most people will idiotically flock to the dollar, since they think it’s a safe currency, when in fact it is not. This would be good for the dollar and bad for gold. In the long-term however, I don’t see mathematically how gold can’t explode in value. Exactly when, I have no idea, I just think it’s coming.