Last week headlines informed us about China selling significant share of their American bonds. You can understand that as another episode of financial war between them. I think it is just a piece of a puzzle which will have dramatic impact on global markets and eventually will affect FED’s decision on whether to raise interest rates.

Since financial crisis broke out in 2008 central banks all over the world increased supply of money. Oversupply of free capital should officially stimulate the economy. In practice it was all about artificial demand for government debt. Printing machines started in the US but were quickly followed by Bank of England, Bank of Japan, People’s Bank of China and recently – European Central Bank.

It took seven years to increase supply of currency from 6 to 14 trillion USD.

Some time ago one of our readers (nick: Hoplita10) asked for an article describing one matter: What should be one’s steps when the crisis will hit and the economy will nose dive?

First and foremost I would like to point out that there is no such thing as ‘doomsday’. Yes, there are days when headlines are full of words ‘black’, ‘tragic’, ‘massacre’ and those when stock exchange may lose double digits (Daw Jones lost 22% during Black Monday ’87 but situation stabilized quickly after), but the crux lies somewhere else.

The most important for us is to see the bigger picture and draw the right conclusions. One-day losses during the slump of 2007-2008 did not go over 10% and still after 18 months indexes around the globe lost from 50-80%. Rapid, one-day losses are easy to be stopped by temporarily suspending trades. On the other hand, once the fear is installed among investors – this is unstoppable.

It has been long since I was thinking whether to touch upon the North Africa migration to Europe. Subject in itself sparks a lot of emotions. On the one side we have a natural empathy towards people running from war and looking for peace. On the other side we have those who react angrily after seeing an attitude of newcomers.

Before we delve into this complex topic let us see where it all started.

"When 500 years ago economies of many countries started to integrate Euro-Asia became the centre of the world trade. Country from Eurasia which dominated - controlled 2 out of 3 the most technologically advanced and productive regions of the globe. Approximately 75% of global population can be found in Eurasia that covers 70% of the all energy resources and 65% of the global wealth. - Zbigniew Brzezinski


Single country just like a group of countries who control resources of Eurasia, controls the global economy. The alternative to control the continent is to rule oceans. This gives control over sea trade routes and the flow of strategic resources indirectly giving keys to Eurasia.


It is year 1900. The British Empire is at its peak. No other country can match the power of it. They controlled Eurasia with a vast number of naval bases spanning from North Atlantic to Mediterranean Sea, Persian Gulf, Indian Ocean and Hong Kong. Colonies and bases guaranteed the maritime empire to control the Eurasia.

The twentieth century this control has been taken over by America. Just like British, now Americans control Eurasia with number of military bases. Number of American military bases is greater than the rest of the world altogether! Regarding military the US dominate technologically (with only few exceptions) especially over countries they control.

I saw that you really liked first part of Mike's series. Here you can find second part. This one's focus in on "Seven Stages of Empire". By studying a history of money he highlights cyclical stages of state development. 

TL:DR version for those that are about to find time to watch the series in the future:
1. State start with relatively healthy money based on gold or silver.

2. State develops economically and socially. Great public works burden the budget.

3. State is growing and its political influence is rising. Increase in military spending.

4. Expansionary use of army. Military expenses drastic hike.

5. To finance war state is debasing its currency.

6. Loss of purchasing power is noticed by a society. Prices are rising and trust in currency is lost.

7. Massive transfer of wealth from currency to precious metals and other tangible goods. Currency collapses.

Again I want you to stay vigilant and think for yourself. Mike makes money out of selling gold and silver. Keep that in mind while watching.

Trader 21

Due to a lack of time (travels) I would like to recommend you Mike Maloney's film Mike lays down basics about currency and money and the difference between those two. You will find out how oversupply of currency lowers purchasing power of your savings. You will understand the reasons why every single currency with no backing in material good failed miserably. 

Please do not stop educating yourself after watching this video - Mike with his precious metal business is giving his subjective view but for someone starting his/her adventure with finance it is worth watching this film.

History teaches us that China never had imperialistic ambitions. Policy of strong fist against minorities never translated itself into expansionary mission of achieving hegemony status.

Last 40 years China was developing very fast. Two factors being responsible for that. Cheap labor force open for global transfers of technology and capital flowing mostly from the US.

Transformation form the third world country into second largest economy (behind the US) and first according to purchasing power. Still even with strong economy China was treated like ostracisied causing that needs to do a lot to be accepted by ‘elite group’ that plays first fiddle on the international stage.

China’s main goal is to internationalise yuan (CNY) and add it to the currency basket of the International Monetary Fund. To succeed China needed to update both of their currency and gold reserves. Last update in 2009 put Chinese reserves at 1054 tons.

Speculations about how much gold is held by the People’s Bank of China (PBC) seem to have no end.  The newest update was quite a shock. It was stated that reserves amount to 1658 t and not to 3500 t as it was commonly perceived. Allegedly reserves were growing only by 100 t per year during last six years. 

Publication was pushed by the IMF, but in my opinion the official numbers are understated by a huge margin. Recently in one of my interviews I highlighted that it is more than possible that number given by authorities will be smaller than the true reserves but even I was surprised with 1600 t levels.