Russia and China Strengthen Their Alliance, Weakening the US Dollar in the Process - Nathan McDonald (13/10/2017)

From the archives of sprott money news

October 13, 2017

Month after month, year after year, the mighty King Dollar is slowly being weakened, its monopolistic grip as the fiat reserve currency of the world steadily lessening. To many, this reality passes them by, as they are blissfully ignorant to the facts, living their lives without knowing the true ramifications that this will have on their lives.


People have simply taken for granted the reality that they live in and the power that comes along with having the unique status of "reserve currency of the world". This has granted the United States the ability to expand its empire and military might, despite the fact that it is utterly bankrupt, with its debt levels just recently exceeding the stunning $20 trillion mark. This is a debt that will never be repaid.


Yet, it has not just been the United States that has benefited. Their closest allies have also experienced a trickling down effect and benefited from the close relationships they have formed with their ally and chief trading partner.


Indeed, it has been a good ride, but like all rides, eventually they must come to an end. This is exactly where we stand now. The ride is slowing down and not because the passengers want to get off, but because those waiting in line are demanding their turn.


China and Russia have been increasingly growing closer and closer as the years go on. They have been forced into this uncanny partnership due to the numerous economic sanctions placed on Russia and the ratcheting rhetoric used against China.


This partnership is not one that should be overlooked, as these two economic powers possess a stunning amount of not just military force, but also natural resources - the latter of which they continue to gobble up from lesser nations at a feverish pace.


Two resources that both countries desire, seemingly above all else, are oil and gold.


Russia, luckily, has a massive reserve of oil under the ground, being the world's largest producer of oil in the world , and China needs it to keep its economic engine running. Both have large reserves of gold both in the ground and in stockpile.


Therefore, it comes as no surprise to anyone following this story to see that both countries are once again moving even closer together, supplanting the need to settle in USD, and establishing the first ever Yuan to Ruble payment system .


This has to have the United States government and the elites who control the fiat based system worried. The need to have US dollars, also known as the "Petro Dollar", is what drives their might and power.


They cannot have countries simply abandoning this system haphazardly and setting up their own payment methods, and this is exactly what has led to so many countries in the middle east being ransacked for even thinking about doing so.


Unfortunately for the West, Russia and China are no pushovers, and other than jawboning and rhetoric, we expect little to nothing to occur.


They know this, and they know that the West is ultimately powerless to stop them, as they forge their alliance and plan for the eventual day when it is "their turn" to hop on board the ride and instill their own reserve currency, one that many speculate will be tied to a basket of hard assets, including gold and oil.


This is just one more chapter in the ever unfolding currency wars and the gradual decline of the US Dollar, as the reserve currency of the world. This book is far from finished, but one thing is certain, it's sure to be a page turner.

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About the Author

Nathan McDonald is a libertarian, entrepreneur and precious metals enthusiast. He has always taken a keen interest in free markets and economics since an early age, which naturally led him to become a true believer in precious metals and all that they stand for.

Nathan served eight years in the Royal Canadian Navy as an electronics technician, seeing the true state of the world, before starting his first successful business. He has since gone on to create a number of businesses, all of which are still in operation and growing.

In addition to this, Nathan runs a network of successful precious metals blogs, and a growing newsletter that has attracted readers from all around the world. He is a regular and highlighted writer for the highly respected Sprott Money Blog, which covers world events, geopolitics and of course precious metals.

*The author is not affiliated with, endorsed or sponsored by Sprott Money Ltd. The views and opinions expressed in this material are those of the author or guest speaker, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.


Michael Molyneaux
October 13, 2017 at 3:41 PM
Good article but it's old news. We've been reading about this for a few years already. Can someone tell us exactly when the eclipse of the Petrodollar will occur and why at that specific future date.
October 13, 2017 at 5:18 PM
the bible speaks about the kings of the east and russia,china and japan comprise the main players
James Colyn
October 13, 2017 at 11:35 PM
Great post, and hardly "old" news. In fact, as McDonald stated, most people remain totally clueless about these recent developments and about where this will lead. Which is unfortunate (to put it mildly), because it will lead to the collapse of many economies, the decimation of the middle class, and untold hardship for many across the world. This is an ongoing process, and any updates are appreciated.
Vangel Vesovski
October 14, 2017 at 7:59 AM
I believe that one of the elements that has kept the USD from falling sharply has been the myth of energy independence. The massive amount of liquidity created by the Fed has permitted a group of managers in the oil patch to build a system that transfers wealth from investors and lenders to themselves and the Wall Street banks that have backed their companies. They have borrowed at what is essentially zero interest and have used the proceeds to increase the output of shale oil and gas. The entire game has been one of getting paid to destroy capital by producing hydrocarbons at a cost that is greater than the market price. This fact has been hidden by an ability to assume ultimate recovery rates that are much higher than what the production data is showing and by the ability to pretend that shale formations are homogeneous. Both are perfectly in compliance with SEC rules that were designed to let struggling shale companies avoid rules that would prevent them from reporting unproven reserves as reserves. The shale sector could not make a profit when oil was over $90 and gas was at $10. Ironically, the shale miracle myth drove prices lower and lower until the underlying truth has been exposed to those who cared to listen to what the conference calls were showing. It was easy to ignore a CEO talking about funding gaps when oil was $90 a barrel and production was growing. It isn't when the company has never generated positive free cash flows and is looking at producing in non-core areas of marginal formations at today's prices. Once the shale miracle is exposed as a fraud, one of the big pillars supporting the USD will be taken away. What I don't understand is why Sprott has not done more to expose this story.
Andrew Davis
October 22, 2017 at 1:26 AM
Why is the American dollar powerful?