You have probably heard a lot in the financial news about America’s reserve currency status being threatened by China and the BRICS countries. Before I go any further, let’s just be clear that Your Survival Guy is not defending what has been done to the American dollar over the last century or so. You know I have complained often and loudly about the post-gold dollar and the Fed’s abuse of it.
But just because the dollar has been abused doesn’t mean China is ready to take up the mantle of reserve currency status. The primary reason for this is China’s own unreliability. For example, a recent article in The Wall Street Journal by Rebecca Feng and Jason Douglas highlighted how the Chinese make economic data disappear when it starts to look less than favorable to the regime’s narrative of relentless progress. Feng and Douglas note that hundreds of data series that had been regularly published have been disappeared into an information Gulag.
When the facts got uncomfortable for the Chinese Communist Party, China’s National Bureau of Statistics simply ceased publishing data on things like unemployment and land sales. These data points could give economists a much better read on the health of China’s economy. Without them, it becomes difficult to judge the strength or weakness of the economy backing up the yuan, China’s currency.
Feng and Douglas go on to remind readers of the long history of China’s massaged economic numbers, which the country’s former premier Li Keqiang called “man-made.” In other words, fake.
Can a country that hides its economic data lead the world with a reliable reserve currency? It’s difficult to imagine finance ministers and treasurers filling their reserves with yuan when they can’t be sure they’re getting accurate GDP numbers from China.
Action Line: The dollar has been abused, there’s no denying that. But when it comes to currencies, it’s still the best house in a bad neighborhood. When you want to talk about your portfolio and the dollar, email me at ejsmith@yoursurvivalguy.com. And, click here to subscribe to my free monthly Survive & Thrive letter.
