Earth shattering monetary stimulus from the Bank of Japan, a threat to the safety of European deposits (courtesy of the Cyprus bailout), weeks of fretting over U.S. spending cuts - 2013 has given financial market participants an awful lot to digest so far.

This probably explains why perhaps the most significant story of them all seems to have passed most people by - China, and the increasing role its currency is having in the world.

Few would dispute China's end goal of having its currency, the yuan, become a genuine world reserve currency. Who wouldn't want cheap access to world capital markets that reserve currency status brings? Not to mention cheaper transaction costs on international trade.

Indeed most spectators also understand China's political motives in achieving reserve currency status for the yuan (more voting rights at IMF, World Bank etc). However, what does seem to be lost on the financial world right now is how quickly they are getting there.

Before we assess the steps China is taking to achieve this end, let's get reacquainted with the world of foreign currency reserves.

(Read More: How the Yuan Could Take the Dollar's Crown)

According to IMF data there is currently approximately $11 trillion of foreign exchange reserves sitting in the coffers of the world's central banks. $6 trillion of this is referred to as "allocated reserves" where the currency composition is known. Most of the remaining $4-5 trillion "unallocated reserves" are owned by China who choose not to divulge the currency composition of their foreign loot.

We know roughly 62 percent of "allocated reserves" are held in U.S. dollars, 23 percent in euros, 4 percent in yen, 4 percent in sterling with the Swiss franc, the Aussie and Canadian dollars making up the tiny remaining balance.

(Read More: Watch This Currency If You Want to Trade China)

The most striking aspect of these allocations is how uncorrelated they are to one distribution of international trade and two to distribution of world gross domestic product (GDP).

Most recent International trade data show the largest volume of trade of goods are distributed as follows - European Union 12.3 percent, U.S. 11.3 percent, China 11.3 percent, Japan 5 percent, U.K. 3.3 percent and South Korea 3.3 percent

As regards with world GDP, the order of distribution is not un-similar - E.U. 23 percent, U.S. 21 percent, China 10 percent, Japan 8 percent and U.K. 3.3 percent.

(Read More: Not Our 'Currency War': New Zealand Finance Minister)

Those reserve allocations just don't seem right do they?

Of course this issue is far from new - long have central bankers, politicians and economists mooted a fairer and more representative reserve currency system, with SDR (the IMF's Special Drawing Rights) often mentioned.

Well now it seems China's time has come.

Growth in global foreign currency reserves has exploded - the $11 trillion in central bank coffers today is over three times what it was 10 years ago. The dawn of monetary debasement via the printing press has rocked confidence in all the major currencies. Even gold no longer cuts it. The world is crying out for a new store of value - and the Chinese know it.

The Chinese yuan is not freely traded on the open market and its capital markets are far from fully open - so how is the yuan getting into the hands of those desperate to diversify reserves into this currency which offers fundamentally better value?

The rally in the gold market over the last several years has been based on a misunderstanding of the global economy's problems and a misunderstanding of what quantitative easing is.

Investors are just starting to realize that their framework for analysis can't account for what's happening in the world right now. They are gradually learning that the economics they learned from textbooks needs updating. That's why they are starting to throw in the towel on gold and why I expect the price to fall further.

The macroeconomic case for buying gold can be summed up by recent comments by John Reade, partner and gold strategist at Paulson & Co, who said: "federal governments have been printing money at an unprecedented rate creating demand for gold as an alternative currency. It is this expectation of global paper currency debasement which makes gold an attractive long-term investment." (Financial Times, April 15 2013). This analysis is based on a misunderstanding of quantitative easing. Furthermore, it fails to take into account the unorthodox behavior of an economy facing a "balance sheet recession."

Having broken through the 100 mark, U.S. dollar/yen has just kept on going. The recent Group of Seven (G-7) meeting gave no reason to sell as the group accepted the idea that a weaker currency is inevitable collateral damage from the monetary policy.

Of course, given that Japan's monetary policy is no different from the U.S. or Britain's, how can any of them complain?

Furthermore, it looks like Prime Minister Shinzo Abe's policies are already starting to bear fruit. Money supply growth has picked up a bit, bank lending is increasing, some prices are rising, the stock market is soaring…You can't argue with success.

The question now is how high can U.S. dollar/yen go? Fundamental value for a currency is set by purchasing power parity (PPP). Purchasing power parity is a simple idea: two currencies are at parity when a basket of goods and services costs the same in both countries.

If a Big Mac costs $3 in the U.S. and 300 yen in Japan, then purchasing power parity is 100 yen to the dollar. (And by the way, people do study the price of Big Macs for just that purpose, because they're widely available and the same everywhere.)

It should come as no surprise that employees today are struggling to balance work and personal responsibilities.

Longer work hours and more erratic work schedules, the increasing prevalence of two-career families, the demands of constant accessibility and global collaboration, and leaner operations have all created a recipe for strains in this area.

Indeed, Hay Group's global employee opinion database, comprised of data from more than 5 million employees worldwide, indicates that more than half of employees express concerns about the adequacy of staffing levels and over 40 percent report that their organizations do not provide sufficient work-life balance support.

When will the U.S. Federal Reserve begin to move toward a gradually less accommodative credit stance? What instruments and techniques will it use to shrink its bloated balance sheet? Will that lead to widely circulated apocalyptic scenarios of crashing markets and financial institutions?

These are arguably among the most important questions investment strategists are wrestling with at the moment. I have discussed them in some of my previous posts, but here are a few updates to cover more recent developments.

The most useful thing to keep in mind with respect to the timing of the policy change is that the Fed is a short-term forecaster in the global economic universe. The fact that its forecasting track record is debatable is not helpful in trying to determine its policies' turning points. It is much more helpful to realize that – just as in the case of any other forecaster – the Fed's decisions are data driven.

Just when you thought showrooming was here to stay, the Senate throws brick-and-mortar retailers a lifeline.

For many physical retailers including Best Buy, a national Internet sales tax may signal the early arrival of Christmas. The potential collapse of the pricing advantage for online-only retailers may help brick-and-mortar models avoid a Circuit City fate. It is also good news for consumers, from a competitive stand point, and for states who will now collect much-needed incremental sales tax.

With yesterday's Senate vote of 69 to 27, passing the Internet sales tax, retailers are one step closer to a level pricing playing field. Now the bill moves on to the House of Representatives, where there will likely be more push back. Some view the bill as an incremental tax on the consumer, despite the fact that consumers are supposed to self-declare Internet purchases on their tax returns.

Japan's yen weakened to 100 per U.S. dollar Thursday for the first time in four years. This was a critical market level, both psychologically and technically, as investors watch to see if "Abenomics" – the policies unveiled by Prime Minister Abe last fall – can finally overcome years of deflation and lackluster growth.

Monetary policy is the cornerstone of Abenomics. Under Abe's reign, the Bank of Japan (BoJ) has taken on a new governor and two new governors, all with more dovish attitudes. Not surprisingly then, this new BoJ has ratcheted up its version of quantitative easing. Hoping to reach a 2% inflation target in two years' time, the BoJ plans to expand its monetary base to 270 trillion yen by the end of 2014. That means that each month, the BoJ is buying almost as many of its bonds (about $76 billion per month) as the Fed is buying with QE ($85 billion per month), but in Japan's case, the buying is occurring with a notably smaller economy (one might call it "more bang for your yen," or "more QE per capita").

The U.S. Federal Reserve and the European Central Bank (ECB) are faced with opposite policy problems that will exert a greater and greater influence over the forex market in the next several months.

I expect the different stances of these two central banks to push the euro/dollar out of its recent trading range on the downside.

First let's take the Fed. The big debate at the Fed's March meeting, according to the minutes released in mid-April, was whether to "taper off" quantitative easing (QE) or not. Then the statement from the April meeting shifted the debate to the left when it said "the committee [Federal Open Market Committee] is prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation…" The question became not whether to taper off or not, but whether to loosen further or to taper off.

But as usual the FOMC's statement also said that it would continue with QE "until the outlook for the labor market has improved substantially." That adds another question for the Fed: how do you define "substantial?" The April nonfarm payrolls data showed jobs have been rising an average of 200,000 jobs a month over the last seven months, versus only 130,000 a month as recently as last September. Does this qualify as "substantial"? Jeffrey Lacker certainly thinks it does.

Lacker, president of the Federal Reserve Bank of Richmond, Virginia, said about the figures, "I don't think there is any question...that we've seen substantial improvement in the labor market outlook over the last 6 months." Note the use of the phrase "substantial improvement." And just in case you missed the point, he added, "I think you ought to evaluate the likelihood of us reducing the pace of asset purchases accordingly."

As you read news headlines and listen to and watch media reports on the market, it's important to recognize that language may have different meanings depending on your perspective. Just last week the media reported that J.C. Penney stock "soared" 11 percent—on the surface that seems to be a positive enough development.

While "soaring" is certainly more positive than "plunging," soaring suggests good news at J.C. Penney and for most investors this is how they will take the headline. Those investors will not look below the surface for the complete story.

Discord and petty rivalries among the euro area political leaders have left the European Central Bank (ECB) as the only effective manager of the monetary union's ongoing economic crisis. The ECB's leadership is perhaps also the best hope of bridging the political, economic and psychological fault lines in a union where understanding and cooperation were supposed to be the hallmarks of a new, fraternal Europe.

Confusion and disarray that followed the onset of the euro area crisis in late 2009 showed that political leaders were totally unprepared to deal with systemic problems which, for years, were well known to all of them. Indeed, the disastrous state of Greek public finances and the crippling exposure of Spanish and Irish banks to the souring real estate booms were not sudden discoveries.

"They just let the thing go" is what the former ECB President Jean-Claude Trichet said about the euro area leaders' failure to deal with these problems in a timely and effective manner.

(Read More: Why Fed, ECB's 'Great Job' Is Not Enough)

It then fell to Trichet's ECB successor, Mario Draghi, to show leadership the heads of state and government were unable to exercise, partly because some of them apparently wanted very stringent lending conditions for countries which far exceeded the budget deficit limits (3 percent of gross domestic product), and who failed to properly supervise their banking sector.

And punish they did. Frightened by the prospect of an imploding monetary union, financial markets imposed default-like bond yields, and an enraged public threw out the sitting governments in Greece, Ireland, Portugal, Spain and Italy. But "throwing the rascals out," as the popular saying goes, was just the beginning. What followed these government changes were deep budget cuts, tax hikes and unemployment-boosting structural reforms to allegedly restore investor confidence the euro area leaders destroyed with their indifference to obvious signs of a brewing crisis.

Reassuring Investors

That is when the ECB's new President Draghi stepped in. He cut interest rates as soon as he took the helm of the bank in November 2011. More radical measures followed: it was only during his second monthly meeting of the bank's governing board that he announced unlimited funding of the euro area banks. And then he fired the big bazooka on July 26, 2012, when he issued his famous pledge to do "whatever it takes" to support the euro.