Dear member,


The creation of the AIIB, China's new Asian Infrastructure Investment Bank, and its rapid endorsement globally, will go down in the history books as the catalyst behind the US dollar losing its status as the global reserve currency.

The formation of the AIIB threatens US dollar hegemony

With the formation of the AIIB, we are witnessing a once in a lifetime shift of power, and it will impact your investment strategy for decades to come.


The formation of the AIIB is the most significant move yet to hasten the rise of the yuan, while at the same time diminishing the centrality of the US dollar.


Ten, or even as little as five years ago, a move like this from China would be unimaginable without full US dollar integration and support. Different story in 2015. Competitors, enemies and even allies of the United States are going against America in favour of China's brainchild, which is the AIIB...

What global bank, or entity, could cause nations such as Iran and Israel, sworn enemies, to rush in and become founding members of the same institution?


The AIIB...


Not only did China accept Iran and Israel both as founding members, but a swath of Western nations, and long-time US allies, as well.


In respect to Iran's founding membership bid being accepted, Beijing emphasized that the decision was made by existing AIIB members, including China, Britain, France, India and Italy.


This is a monumental example of financial and economic influence determining geopolitical results.


So, what would entice nations such as Britain and India - long-standing allies of the US - to give Iran carte blanche?


The desire to appease and strengthen ties with China.


China's growing global influence in recent years has been shocking, and there is no sign of it slowing down. With the adoption of the yuan in global trade appearing to be the communist nation's number one priority, many Western nations have been welcoming it with open arms. Bypassing the USD to trade in the Chinese yuan serves Western nations well, particularly during a period when the greenback has risen 10% or more in the last year against many currencies.


Furthermore, the economic clout of China will continue to strengthen in the West so long as European and the US economies remain tepid. Western politicians will turn a blind eye, and in many cases leave their principles at the door, in a bid to boost growth and ensure their own survival.

Only a rising power such as China could rally the support of 35 founding countries from such opposite sides of the geopolitical table; countries such as the U.K., Israel and Australia... while long-time allies of the US, these nations are fearful they will be left behind if not strongly aligned with China.


This potential changing of the guard has grown to such a threat that former Treasury Secretary Larry Summers wrote, in respect to the formation of the AIIB, that:

Make no mistake: While still early in the game, the rise of the AIIB is symbolic to the quickening transformational shift in power, both economically and politically, from West to East.


Documented with the global endorsements of the AIIB, China is winning the confidence game as nations lean towards its growth and boldly prepare for a less influential US dollar. Furthermore, with the global adoption of the AIIB, countries resisting endorsing it could compromise their trade growth, and self-inflict economic isolation...

David Barnabe, a Finance Department spokesman in Ottawa, said in an email statement that, "Canada is currently looking at the initiative."

China closed the window for founding members on March 31st, with Canada not yet a member.


The US is by far Canada's largest trading partner; and while Canada has taken significant steps toward strengthening its relationship with China (in November of 2014, Stephen Harper signed a reciprocal currency deal with China in a bid to boost exports), joining the AIIB seems too great of a geopolitical risk at this point. The US government has made it clear to its allies that they are not supportive of the AIIB.

Canada finds itself in a loyalty predicament in respect to the AIIB, not unlike many Western nations

In a late-January, Weekly Volume titled Nerve-Racking Event for The Fed, we highlighted the slew of countries rushing to sign currency swap deals with China. The majority of these countries, such as Switzerland and Russia, have smoothly transitioned into the AIIB. Their confidence in the yuan and Beijing began rising many years ago. Below is a short excerpt from that Weekly Volume.

Unsurprisingly, Russia, Malaysia and New Zealand are all founding members of AIIB.


An article in The Georgia Straight, authored by Ng Weng Hoong on April 8th, 2015, titled New Canadian RMB financial hub cuts out U.S. dollar, explains Canada's steps to bypass the US dollar in future transactions with China.


The bilateral trade agreements and currency swap deal in Beijing last November set the stage for Canadian Finance Minister Joe Oliver, at a ceremony in Toronto on March 23, to announce "Canada as the Americas' first hub to clear trades in goods and services using the Chinese yuan, or renminbi (RMB), without having to first convert to U.S. dollars."

Below is an excerpt from Hoong's article in The Georgia Straight:

So, while Canada may not be participating in the AIIB just yet, its economic relationship with China is arguably stronger than ever. And we speculate the Canadian government will join the AIIB, it is simply a matter of when.

As predicted, Japan and the US, two countries which dominate the world's current development banks, did not apply for AIIB membership.

Not surprisingly, Japan and the US, nations which control two of the three most traded currencies globally, have publicised their concerns with the AIIB

Likely to undermine China's efforts with the AIIB, Japan's Chief Cabinet Secretary, Yoshihide Suga, asked the question:

US Treasury Secretary Jacob J. Lew attempted to cast a cloud of doubt over the AIIB as well when he stated:

Rumours were swirling this week, however, that Japan may be forced to join the AIIB given that virtually all of the Asia Pacific already has... this would leave the US without much support left from its allies.


Staunch US allies such as Saudi Arabia and Great Britain have ignored the United States' concerns about becoming founding members of China's new bank. This is a clear sign of divergence... and although the majority of Western central banks are still following the Fed down the longest and most dangerous debt monetization road in history, there is a limit to their loyalty, as we are finding out.


How much longer will Western nations follow the US down the path of debt monetization if the world's largest economy falls back into a serious recession and is unable to pay its bills?


The AIIB is a precursor to economic powers eventually choosing the yuan over the dollar as the source of stability in global finance; and ultimately the global reserve currency of choice.

While the $50-billion AIIB is reportedly being established to meet infrastructure needs in the developing world, its real purpose will be to lend to nations it (China and the bank's key players) sees fit. These countries with infrastructure needs, who can also provide China with necessary pipeline access and natural resources, will then be indebted, both literally and figuratively, to the communist nation. Suffice to say, China is moving itself into the position as the world's banker, just as the US has been for nearly a century. (Confessions of an Economic Hit Man

Kenneth Rogoff, a former chief economist for the International Monetary Fund, professor of economics and public policy at Harvard University, recently penned an article titled Will China's infrastructure bank work? Below is a short excerpt:

The US has enjoyed, and abused, the privileges of controlling an unchallenged world reserve currency since Bretton Woods in 1944. However, the days of exporting its debt and inflation to countries around the world, which have pegged their currencies to the dollar, may be numbered. The days of other countries blindly following the Fed down the QE and ZIRP (zero interest rate policy) primrose path is coming to an end as the new normal in an ever increasing China-centric global financial system begins to take shape.


All the best with your investments,