China Is Becoming the World’s Richest Nation

DRIGGS, IDAHO – I read that China has defeated COVID-19… and life has returned to normal there. Children go to school. Office workers go to their offices. People don’t even have to wear masks in public…

(This is not state propaganda. The reports I’ve seen about this come from Americans living in China. They’ve been posting messages on social media platforms.)

Meanwhile, Europe and America seem to be heading back into lockdown…

More below…

Teton Mountain Hideout

Greetings from our hideout in the Teton mountains…

My family and I are rootless nomads… We got rid of all our things nearly three years ago, and now we drift around the world, homeschooling our kids, and having adventures…

We’re currently in Driggs, Idaho. We’ve rented an Airbnb and we’re going to spend the winter getting dumped on with snow and learning how to ski.

(The ski hill we live on – Grand Targhee – gets 500 inches of snow a year. It’s barely Halloween and we’ve already had freezing temperatures and six inches of snow.)

Becoming the World’s Richest Nation

Back to China…

China is fast becoming the world’s richest nation…

Kate, the kids, and I spent two months in China last year.

We made a 10,000-mile loop around the country using the new high-speed rail network, visiting as many cities and tourist attractions as we could.

We saw the Great Wall, the Terracotta Army, the Panda sanctuary, the Tiger Leaping Gorge, and more.

We were amazed at how advanced China was… The cities seemed so futuristic, so clean, and so modern.

We used subway systems to get around. Every city had one. Many of them were new.

We ambled around the public spaces and carefully manicured parks, admiring the art displays and sculptures.

People wore western-style fashions and brand names and carried Starbucks drinks in one hand and iPhones in the other, just as you’d see in New York or London…

Watching the West Implode

Today, I see reports that China’s ports are congested with ships bringing oil, gas, and iron ore… while container ships leave loaded with manufactured goods destined for America.

(Side note: Container ship rates are at nine-year highs and the container ship business is at maximum capacity.)

This chart shows Chinese exports to America are breaking all-time records…

The Chinese must be watching the West implode, thinking, “We thought it would take decades to overtake them, and maybe a war, too. But it’s happening almost overnight…”

Next, I imagine the Chinese will want to turn their currency – the yuan – into the world’s super currency. They’re taking slow and deliberate steps to do this…

First, they’re exploiting the global dollar-centric system where the U.S. runs gargantuan deficits and shovels dollars to China. China uses these dollars to a) buy up hard assets all over the world like ports, mines, farmland, etc… and b) modernize its infrastructure.

In other words, they’re getting rich while the U.S. goes broke making them rich. But the politicians won’t do anything to stop it. If they escalate the trade war, the stock market will crash, and the U.S. economy will shrink even more.

Next, China is striking deals with its major trading partners – like Russia and Saudi Arabia – outside the dollar.

It has the power and influence to do this because it’s the world’s largest importer of commodities, including oil. According to Bloomberg, China now uses euros in over 50% of its purchases from Russia.

We’ve seen China launch a yuan-denominated oil contract (in March 2018). And there’s been rumors that Saudi Arabia has started selling oil to China for yuan, which can then be traded for manufactured goods or used to pay Chinese contractors in Saudi Arabia.

Finally, China has quietly become the world’s largest producer of gold.

According to this chart, China now has 22,000 tonnes of gold. If true, that means China has nearly triple the official gold reserves of the United States.

They’ve also launched a gold exchange called the Shanghai Gold Exchange. I imagine China intends at some point to back the yuan with gold and make it fully convertible with other currencies.

As the U.S. government falls deeper into bankruptcy and prints trillions and trillions of new dollars, a gold-backed yuan could be quite attractive to international capital…

– Tom Dyson

P.S. Here we are at one of the major train stations in Beijing…

Like what you’re reading? Send your thoughts to [email protected].

A snow shoveling warning… a movie suggestion… and memories of Yellowstone National Park…

Reader comment: I’ll repeat my warning to you about shoveling snow – it is very stressful to the body (are you in shape?). Buy a snow-blower! When I worked in the ER, one snowstorm resulted in a host of myocardial infarcts, plus the usual broken bones. That day in the U, I filled the two ICUs in our hospital with MIs just from snow shoveling! Watch out!!!

Tom’s response: Isn’t this why people have kids?

Reader comment: Hello Tom, I have enjoyed your family’s travels and your insights on money and investing. I noticed how much you enjoyed the story of Monte Walsh; it is a wonderful story. Now that you and the family are going to settle down for the winter, you guys might enjoy the movie.

Tom Selleck starred in it with Isabella Rossellini and Keith Carradine, one of my favorite western movies. Tom Selleck also starred in another similar movie called Crossfire Trail; you and your family may enjoy them on a cold movie night.

Reader comment: Yellowstone is an amazing place. Be sure to visit the Big Falls and Grand Canyon. There are many other waterfalls in the park, but they are quite remote. If you’re lucky, you’ll catch sight of wolves.

Reader comment: I enjoy your posts every day. Every day. I was born 84 years ago in Washington. My uncle took me as a kid to Yellowstone National Park and Lake Pend Oreille for fishing.

And the bitcoin debate continues…

Reader comment: You’re a 20th-century thinker living well with family in the 21st century. Keep your gold in the ground – where it belongs – while pondering the fact that all assets in the 21st century are made up of digital ones and zeroes, those which the rest of us are using to purchase goods and services (via blockchain apps, central bank digital currencies, bitcoin, etc.).

As the U.S. dollar continues to be debased, bitcoin – not gold – is being discussed as the world’s next reserve currency. And the list goes on, as decentralized blockchain applications – including digital currencies – continue to be built on a global basis, primarily because the centralized means of controlling people (government, financial entities, big business) has failed (you were part of this game, so you know well this point is true).

A better definition of money (rather than your primitive, goofy metaphor) is that it’s durable, divisible, consistent, convenient, and intrinsically – yep, those ones and zeroes – valuable.

Both gold and bitcoin meet these criteria, though gold should remain in the ground, while bitcoin continues its rise in our global, digital, 21st-century environment. (Simple bet: From beginning to end of calendar year 2021, which asset will have a greater percentage increase in value, gold or bitcoin?)

Looking forward to reading about you “Sunshine Staters” embarking upon your adventures within “Snow Country”…

Tom’s response: I’m old school, I admit it.

Reader comment: I cannot understand the fascination with cyber currency. Block chain may be a big advancement in security but that does not translate into that someone’s bit on his computer is of value to me – or to anyone, for that matter. I’m reading that there are over 6,000 cyber currencies, of which a large percentage have already gone bankrupt.

What wallet am I going to look in of the millions of wallets in the clouds? Maybe I should become a miner. An old cliché that I’ve found to be a truism, “You can’t get something for nothing.”

Tom’s note: As always, thank you for your kind messages. Please keep writing us at [email protected]. We read every note you send us.