One for you, gg. In my inbox yesterday, the usual 'get what you pay for' discourse. Lots of graphs, lots of "I told you so's"
But an interesting posit, as follows
"At the end of last year total central bank foreign currency reserves amounted to nearly $13 trillion.
Approximately 60% of which is in U.S dollars and 20% is in euros, the majority of which is invested in U.S and European government securities.
If you were responsible for the foreign exchange reserves of a central bank and given what has just happened to Russia, would you not be thinking about your exposure to U.S dollars, or euros?
If you were in Japan, South Korea, Australia, the U.K, France, Canada, or any other member of the western alliance, you wouldn’t be.
What, however, if you were in China, or even Saudi Arabia?
Surely you would think twice about where you invested? ....
In 2010 Russia had $176 billion invested in U.S Treasury securities and today it is $4.5 billion....
What about China?
The latest data shows that China has a bit over $1 trillion invested in U.S securities.
Remember China has total foreign exchange reserves of $3.22 trillion, which is the largest in the world.
What about Saudi Arabia?
Saudi has $119 billion in U.S Treasuries.
Pause for a moment, before you dismiss what I am about to say.
Remember that on 23 February 2022, the day before the invasion of Ukraine, no one thought that America and its European allies would sanction the Russian central bank.
The world has changed.
America has weaponized the dollar and Biden may not put NATO boots on the ground in Ukraine but he will use every tool at his disposal in the war between democracy and autocracy.
If you were sitting in Beijing with responsibility for a $1 trillion investment in U.S government debt would you be confident and comfortable?
Would you look to increase or decrease your exposure?
You know the answer.
And, an even better question is what do they invest in?
There is only one true global store of value that has stood the test of ancient and modern history…5,000 years of turbulence, revolution, hyperinflation, world wars and changing currency regimes.
And it’s not bitcoin or any of the other 12,000, and counting, cryptocurrencies.
My bet is that some of America’s autocratic creditors will head for the exit in the years ahead.
Between you and me, it will not be years.
Yes, and they will follow Putin’s lead and sell U.S Treasury securities and buy gold. .... "
Jonathan Pain.