Last week, leading into the weekend, the International Monetary Fund’s (IMF) Director Christine Lagarde pretty much gave the green light to add the Chinese renminbi (RMB) / yuan to the IMF’s Special Drawing Rights basket of currencies following an IMF Executive Board review.
Following this news, Peter Schiff, the CEO and Chief Global Strategist of Euro Pacific Capital told RT’s Boom Bust that he sees this as just another step in the direction of China surpassing the U.S. as an economic power.
“I don’t think it’s going to have an immediate impact, but I think it is a step in the direction in which China has been headed. And that is to make the yuan a reserve currency, and ultimately potentially to be a replacement for the US dollar, especially if they have the good sense to back up their currency with their enormous gold reserves, which I think China is deliberately underreporting. I think they are accumulating more and more gold quietly and maybe secretly, because I do think that ultimately that is their intention to have a gold backed yuan become the predominant currency in the world…”
Furthermore, Schiff argues that the U.S. Federal Reserve won’t hike the rate in December, pointing to the recent terrorist attacks in Paris as a new excuse that the Fed could somehow use to maintain an easy monetary policy.
“I think everything is being clouded by the dollar bubble, dollar mania, and now the most recent events in Europe. The tragic shootings in France are causing more people to believe that there will be even more cheap money policies, more quantitative easing in Europe…
But I do think when the dollar bubble bursts [and] the air starts to come out, this is going to be something that helps contribute to the appeal of the yuan as it ultimately rises significantly against the US dollar…”
That said, Schiff argues, this would allow the U.S. Fed to draw attention away from the fact that American consumers aren’t spending cash like they used to spend as the U.S. tumbles into a new recession this holiday season.