Masters Series: What to Expect From This Upcoming Once-in-a-Generation Financial Event
Editor's note: In October, the International Monetary Fund will make an announcement that could change the lives of every U.S. citizen.
Today's weekend Masters Series essay originally appeared in the May issue of True Wealth. In it, Steve Sjuggerud reveals the details... and explains why this move could be setting investors up for big gains going forward...
What to Expect From This Upcoming Once-in-a-Generation Financial Event
By Steve Sjuggerud, editor, True Wealth
In a decade or two, this newly added currency will likely challenge the euro for the No. 2 position among reserve currencies. And in the long run, it could potentially take over the U.S. dollar's role. Like I said, this October's announcement is a significant event.
So how do we know this event will likely take place in October? Because that's when the IMF will announce the results of its meeting about the world's reserve currency system...
Twice a decade, the IMF executive board meets to reassess the makeup of its basket of reserve currencies. The next five-year meeting is this June. And the results of that meeting will be announced in October.
We haven't seen a major change to the reserve currency system in more than 33 years. But this October, the world will likely learn about a NEW reserve currency.
You may have guessed that I'm talking about China's currency, the renminbi.
China is the world's second-largest economy. It could be the world's largest economy within 15 years. The country certainly deserves a seat at the "grown-ups" table.
China has asked to be included as part of the IMF's "Special Drawing Rights" (SDR) reserve currency basket. In my opinion, this June, the IMF should grant China's currency entry as part of the SDR.
The entire world gets it... Germany and the U.K., for example, have been downright enthusiastic about China joining the IMF's SDR currency basket. However, the U.S. is being embarrassingly ornery about this situation.
The U.S. has cited a number of technical reasons why the renminbi shouldn't become part of the SDR. Just two weeks ago, U.S. Treasury Secretary Jack Lew visited China, and then said China "wasn't ready" for reserve currency status.
The U.S. can seriously stand in China's way... It has the majority of the IMF's votes. So it's possible that the U.S. could block China's request to have its currency included as part of the IMF's SDR.
But looking at the longer term... It'll be hard for the U.S. to hold off China. It should become the world's largest economy soon. (I'm not being unpatriotic, I'm just stating a fact.)
And China's currency is already unofficially a reserve currency in many places... At least 40 government central banks have invested in the renminbi, and more are planning on doing so, according to British bank Standard Chartered. More than 10,000 financial institutions already do business in the renminbi.
In short, it's happening, whether the U.S. government wants it to or not.
So some sort of deal will likely be worked out between China and the U.S. to give China the currency status it wants. I expect that's the news we'll hear this October (despite what the U.S. is saying today).
Surprisingly, most investors haven't bought the renminbi yet... And that means we can act now to set ourselves up to profit...
Good investing,
Steve
Editor's note: In the May issue of True Wealth, Steve recommended his top way to profit from this upcoming shift. While the rest of the world earns next to nothing on its cash, you can set yourself up for steady, safe 6.5% returns. Plus, Steve notes, you can "own what will likely be the world's second-most important currency – before basically anyone else owns it."
Steve also put together a video presentation detailing the IMF's October announcement. Whether you actively invest in the market or simply own any assets (i.e. real estate, housing, etc.), you will be personally affected by the IMF's announcement. Watch Steve's presentation by clicking here.