Teach Your Children Mandarin

Series of 1917 $1 United States Note

Image via Wikipedia

It’s the beginning of the end for the U.S. dollar.

China made headlines last week, overtaking Japan as the second-largest economy in the world. However, Damien Hoffman, co-founder of Wallstcheatsheet.com, says it was other news out of China that may prove more vital for the dollar’s standing as the world’s reserve currency.

Not only is China diversifying away from U.S. Treasuries with euros and other currencies, they are buying more gold and opening their debt markets to international companies. Last week, McDonald’s became the first nonfinancial foreign company to launch a yuan-backed bond offering. The deal was relatively small, with the fast-food giant raising nearly $30 million to expand in China, but was symbolically huge.

“The number itself isn’t important,” Hoffman tells Aaron in this clip. “What’s important is that now those yuan-backed bonds will change the dynamic of capital that is available in the world and where these companies are going to go to get that capital.”

If this trend continues – which Hoffman believes is inevitable – demand for U.S. dollars will wane, resulting in an even weaker dollar.

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Compounding the problem is the seismic shift of industrial jobs to emerging markets in Latin America and Asia. Hoffman worries a disappearing middle class and a compromised currency “doesn’t bode well” for living standards in America. He warns that unless we fundamentally fix our economic imbalances it’ll be wise to teach our children Mandarin — one of the prime reasons famed investor Jimmy Rogers says he moved his family to Singapore more-than three years ago.

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