Jamie Carrasco: The Petrodollar is Now Under Attack
Jamie discusses how the Chinese yuan gold backed system was initially conceived back in the year 2000. However, China did not hold that much gold. That has changed considerably, as they have been acquiring more and converting it into metric bars. They can now use these bars pay for energy with gold. These contracts are denominated in yuan and are directly convertible to gold.
By using gold for energy, China is essentially saying that they will no longer pay in U.S. Dollars. This will lower the demand for ten-year treasuries as China will no longer need them. Many countries are likely to shift away from US Petrodollar system as a result. Chile, for example, produces 30% of the world’s copper and they are likely to start accepting gold instead.
The dollar has appreciated considerably relative to gold over the past twenty plus years, and now gold needs to appreciate much more to function as money again. If ten percent of trades occur in gold, there will be supply problems in the west. They plan to use this as a mechanism to drain the west of their remaining reserves.
The impetus for major oil producers to stop using the dollar will be greed as the U.S. is no longer the biggest buyer of oil. Asia is going to be the region with the most global growth for the conceivable future. China is rebuilding the historic silk road.
Canada is in a tough situation as our large industries can’t move to Asia. They can’t easily ship oil to Asia and are stuck with the United States. Canadians need to learn how to position themselves.
Talking Points From This Week’s Episode
• The hegemony of world finance is moving from the US to Asia.
• Recent trade disagreements may be a cover for the real changes that are coming.
• Global growth has and will continue to center on Asia.
• Canada appears to be in a poor position, and their dollar will likely suffer.
Jamie Carrasco is portfolio manager at Canaccord Genuity Inc. in Toronto. From 2014-2018 he worked as Director of Wealth Management and Associate Portfolio Manager for ScotiaMcLeod. Before this, he worked for Macquarie Group, CIBC Wood Gundy, BMO Nesbitt Burns, Gordon Capital and Merrill Lynch.
As a leading edge Canadian investment professional with 25 years of experience providing wealth management and investment counsel to affluent families, businesses and institutions both in Canada and Latin America, Jaime has garnered a reputation for questioning and challenging the status quo and exploring the most innovative investment strategies.
Jaime, whose mother tongue is Spanish, also speaks Italian and French and completed a BA in political science and economics at the University of Toronto in 1988. While a student, he worked for CS Yacht, a company that built luxury sailboats, thus spending his summers as a skipper for members of the Canadian establishment. Jaime credits this experience, and having survived sailing through Hurricane Bob in 1991, for learning lessons that have become a metaphor for his financial investment strategies;
“Like one’s financial wealth, sailing is not about controlling the wind, but rather about adjusting the sails.”