116- The “New” Silk Road

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Map is old silk road.
Map is old silk road.

China and Russia are going to increase trade in Asia and between Asia and Europe and other areas close to Asia by “renewing” the Silk Road.  Not just one road but several ways to try and make Asia smaller.  If that is possible.  Railroads, highways, ocean lanes are being put together to make transportation and a better economic system for these nations that are aligning themselves together.

China will also be doing this as a stimulus to try and bring their economy out of the recession it has gotten itself into as a result of a runaway stock market that has come back down.  Think shovel ready jobs on a scale much bigger than anything we have tried.  and, it will truly be an infrastructure program.  Not a way to shove money to your “favored” businesses like Obama did with the U.S. stimulus.

So as farmers and ranchers where should this concern us.  How about the words, Asian Investment Bank headquartered in Shanghai China?? And European investors are putting money into these corridors.  A maritime silk road that will have Chinese ocean fleets sailing them.

China -Pakistan -corridor that goes on into Iran with not only a road but a natural gas pipeline right into China.  China/Myanmar/Bangladesh/India corridor that will bring the 2 most populous countries in the world closer together.

High speed rail on the Trans-Siberian Railway.  This would link Lisbon, Portugal all the way to Vladivostok, Russia.  Atlantic to the Pacific across Asia.

 

Shanghai Cooperation Organization,will cut out America and the World Bank.  Not to mention the IMF, International Monetary Fund.  Move the center of finance from New York to Shanghai.  It took World War 1 to move it from London to New York.  Hong Kong is also in the loop of this.  Singapore would also benefit.  4000 years ago China was the center of the universe for a long time, this would move the center back.  This is huge.

In 1995 it only took the soybean production for 2 Illinois counties to provide the soybean exports to China.  In 2015 it will take the production from 133 soybean producing counties to provide for the exports to China.  What if we lose this?

Couple possible bumps in the road for China, their debt has quadrupled since 2007.  Their housing prices went down about 6% last year.  China is having some “too much” debt problem, but so is everybody else.  Lots of countries in the west are much worse off.  Speaking of bailouts, rumor has it Russia with Putin in charge is giving Greece a $5 billion dollar “bridge loan”.  So as northern Europe tries to force solutions on Greece, they get money from Russia.  Speaking of Greece, Germany at some point in time is going to have to deal with this.  In my opinion either pay them off to go away, or pay them off to stay in the Euro zone.

So how does this all affect me, you ask?  I think the ultimate end game is to dethrone the dollar.  Most all trade today is done in US dollars, which means a country has to pay banks in New York to switch their money into dollars, do the deal then switch the dollars into the other country’s currency.  Russia and China want to settle trade in their own currency.  I cannot blame them for that, but if the dollar is no longer the currency international trade is done in then US farmers will no longer be indirectly affected by the value of the dollar, but directly affected.  You could be in the impossible position of buying inputs in a foreign currency and selling commodities for dollars.  Inflation and higher interest rates will happen also.

 

As for the Silk Road, this could be big if Africa ever gets its economic act together.  Africa could feed Asia.  I believe this may not happen for awhile.  Africa has to become more stable and respect private property rights which would increase food production there tremendously.  Don’t count on that happening soon.  They would think they were embracing laws made by the former colonial powers and would leave their tribal rule of whoever has the bigger guns legal system behind.

The new Silk Road does have great consequences for most of the rest of the economy of the world.  Keep you eyes on this.  Putin wants to re renew the Russian empire.  China has always believed they are the true center of the world and we have lots of people in these United States that actually think we are the biggest problem in the world.

China has had some major Chinese Stock Market troubles, but it is the second biggest market in the world behind the United States.

So Russia becomes relevant again.  Russia will be in line to sell the Chinese lots of commodities.  Maybe that is why Russia is trying to take back Ukraine.  Silk road will maybe run through it?  China gets access to cheap, plentiful, and not able to be cut off commodities.

They both will trade in a currency that they own and control.  They will not be at the mercy of having to use some other currency (U.S. dollar) that they do not control.

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