Last week, in the dusty recesses of the US Treasury website (what do you mean, you don't check it regularly?), a new document appeared.
On first reading, the contents don't appear to be very interesting but closer reading reveals a startling act of financial aggression by Russia against the US. Of course, the Russians tend to get the blame for most things these days. Assassinations, computer hacking, interfering in elections...the media is keen to scapegoat Russia whenever possible. There is one story you won't read about and it's more important than the others however.
There is a document that shows the foreign holdings of US government debt ('US Treasuries'), month by month, country by country. There is a delay in collecting all the information so the most recent month shown is April.
Over the course of April 2018, Russia dumped HALF of all its US Treasuries into the market - $47.4 billion dollars worth to be exact. This was the reason for the blow out in the US government borrowing costs over April by the way. It was the sheer amount of US debt ditched by Russia that left a significant dent and pushed the US ten-year bond yield over 3%, something not seen for over 4 years. Whilst Russia ditched their dollars, they were busy buying something else however. It is something they've been loading up on for a long, long time. I'll give you a clue: It's shiny, heavy and it can't be defaulted on most importantly.
The gold holdings of the Russian government are now more than 1.5 times the value of their US Treasury holdings.
How things change - in late 2009 Russia's US treasury holdings were more than five times the value of their gold holdings. So what do the Russians know that we don't?
Russia is preparing for a change in the monetary system. They wish to move away from the dollar, and the immense power America wields with it. They encourage the use of local currencies between nations, rather than one global reserve currency. They are expecting a multi-polar world, rather than the unipolar system that we've gown so used to. The media may not have reported this story much, but that might be for fear that by doing so, they would exacerbate the problem. Stock markets and housing markets continue to trade as close to historic highs. The rules surrounding lending in the US are being relaxed and the memories of 2008 are fading into the past. I believe they will return to haunt us however.
The real problem will arise when Russia's partner, China, decides to unload its immense US treasury position. They are at the top of the table and hold over 1 trillion dollars of it.
That will make the news, I'm certain of it. It would be worth positioning yourself before this happens. Because it will happen.
James Sanders, London
James Sanders is a London based trader and investor. He founded the UK’s largest independent derivatives broker in 2001 and left the City in 2009.