And so it begins. That’s what I was thinking when I saw the headline on the Drudge Report yesterday. Truthfully, the phase out of the American dollar by our “enemies”, China and Russia, is not so shocking…..for those who are informed. I was more baffled by the actions of the market, which were up more than 100 points.
When I saw the headline, I thought…..“Here comes the REAL meltdown”. I was constantly checking my Bloomberg app waiting to see a multi-hundred point plunge by the DOW that never came.
Let’s remember: Matt Drudge uses eye-catching headlines even though they don’t REALLY portray the whole truth. Don’t get me wrong, I think he is an influential conservative who does good. He’s just running a business. I can’t blame the guy.
“CHINA, RUSSIA QUIT DOLLAR” read the headline, which would lead me to believe that they are dropping the currency all together. Meaning, China will sell our bonds and all transactions between the three countries (among the largest economies in the world) will not use the American dollar. This would surely lead to a meltdown. Of course, that is not what the story read once clicked on.
It was a BILATERAL agreement (just between them) between China and Russia to use their OWN currencies when trading with each other. These two countries trade about $40 billion worth, per year. Therefore, we are talking small numbers in the real of the global economy. That maybe one reason the markets didn’t react much.
Do I think that the markets should have plunged? Yeah I do, it’s a BIG DEAL when world leaders take a stand against America.
Maybe the market movers are more distracted with Black Friday (the biggest retail day of the year).
Maybe the move is already priced into the market (don’t think so).
Maybe, the phase out of the dollar is not truly apparent yet to the world (denial).
I am not saying that the markets won’t eventually react (Monday?) but what we are witnessing is the incremental phase out of the great American dollar.
By the way, I don’t think it was a coincidence that this happened the day before Thanksgiving. It was more of a political statement than an economic statement.