Russia Benefits From Exposure To Euro and Gold in US Dollar Exodus

Officially, Russia has $361 billion in foreign currency reserves, third only to Japan and China. Russia’s reserves have benefited from added exposure to the euro and gold. Japan and China, as you know, own an awful lot of greenbacks ($1.2 trillion for China and $900 billion for Japan.)

Diversification of currency reserves is no easy thing. But trading U.S. dollars for ownership of resource assets (anywhere you can find them) is quite clearly part of Russian and Chinese national policy. And it some ways, it means that the end of the dollar standard really started in 2003, when commodities and resource shares began outperforming everything else.

The main point is, if you’re looking for an official frantic rush out of the dollar and into another paper currency, you’re looking for the wrong thing. The exodus out of the dollar began nearly four years ago, by foreign investors who saw that it was better to own real tangible assets than the unbacked liability of a bankrupt government.

And another note on cash flow from Jonathan Barrett in today’s Australian, who warns on the hype in uranium stocks. “As it is only the large Australian miners that are generating cash-flow from their uranium operations, buying small uranium stocks is basically a speculative action based on the beliefs that the miners will uncover, mine, and turn a profit from their intended operations,” writes Barrett.

Yup. But there is a lot of speculation about the future today, from uranium to China. Round and round the money goes. Where the bubble pops…nobody knows.

Dan Denning
Markets and Money

Dan Denning

Dan Denning examines the geopolitical and economic events that can affect your investments domestically. He raises the questions you need to answer, in order to survive financially in these turbulent times.

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