Masters Series: What to Expect From This Upcoming Once-in-a-Lifetime Financial Event
Editor's note: There's a massive shift coming to the world's monetary system.
Today's Masters Series essay originally appeared in our free DailyWealth e-letter on May 12. In it, Steve Sjuggerud shares the details... including which currency he expects to gain reserve currency status in the coming months. This will personally affect you and your wealth. Read on to learn more...
What to Expect From This Upcoming Once-in-a-Lifetime Financial Event
By Steve Sjuggerud, editor, True Wealth
As I told you yesterday, a new currency will likely get "reserve currency" status next October... joining the four other world reserve currencies.
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 as the top reserve currency. Like I said, next October's change is a significant event.
So how do we know this event will likely take place next October? Because that's when the International Monetary Fund (IMF) will implement changes to 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 fall. And the results of that meeting will be put into the market next October.
We haven't seen a major change to the reserve currency system in more than 33 years. But next 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. In March, U.S. Treasury Secretary Jack Lew visited China, and then said China was "not 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, which 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 to, 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: Steve believes the story in China is a matter of "when," not "if." And the renminbi's addition to the list of reserve currencies will be one of the most important stories of our investing lifetimes.
This megatrend could trigger one of the biggest transfers of wealth we've ever seen. And it will stretch far beyond China, personally affecting every single American. Click here for the details.