By Louis Navellier, Editor, Blue Chip Growth | Oct 14, 2015, 11:00 am EDT
You may have seen the screaming headlines: “New World Dollar Coming October 20?” “Dollar to be Replaced with New World Reserve Currency.” “WARNING: China’s New World Bank Threatens U.S. Dollar.”
As we draw closer to October 20 (the alleged day of reckoning for the U.S. dollar), I’ve been getting a ton of questions about what is going to happen to the greenback.
If you haven’t heard the chatter, let me get you up to speed.
Rumor has it that on October 20, 2015, the International Monetary Fund (IMF) will grant the Chinese yuan reserve currency status. That means that the yuan would get added to an elite basket of currencies that make up the fund’s lending reserves.
This, some argue, would be devastating to the dollar.
In my opinion, these fears are unfounded. The fact is that foreign capital continues to pour into the United States, and the relative strength of the U.S. economy makes it a safe haven for foreign investors.
In fact, the U.S. dollar is so strong against many of the world’s currencies (the Euro, Japanese Yen and the Chinese Yuan), that the IMF is all but begging the Fed to not raise interest rates.
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I must also mention what has happened to the Chinese Yuan in recent weeks. If you remember back to August, China’s government sent shockwaves throughout the world’s financial markets after devaluing the yuan not once, but three times. By doing this, China essentially told the IMF that it doesn’t want to be included as one of the world’s reserve currencies.
In addition, the Chinese government still needs to clear a number of regulatory hurdles before the yuan can be considered by the IMF. And, even if it is made a reserve currency, I just don’t see this hurting the dollar nearly as much as some are saying.
Let me tell you what’s going to happen on October 20.
By then, we’ll be in the thick of third-quarter earnings season. What will dominate the news won’t be announcements of some “new world order,” but probably much of the same news. We’ll have companies announce great quarterly results, and others miss the mark. Other companies will launch new stock buyback programs, announce mergers and acquisitions, and the like.
They say that nothing is certain but death and taxes, but I’d like to add another item to the list. Another certainty is that many media outlets profit from fear.
In this case, they’re trying to get more clicks. The more these talking heads scare you, the more you’re going to read their articles.
So, I’d file all of this talk about October 20 in the “junk” folder.