Zero Hedge: In the wake of the Fed’s promise of 23 March to print money without limit in order to rescue the covid-stricken US economy, China changed its policy of importing industrial materials to a more aggressive stance. In examining the rationale behind this move, this article concludes that while there are sound geopolitical reasons behind it the monetary effect will be to drive down the dollar’s purchasing power, and that this is already happening.
More recently, a veiled threat has emerged that China could dump all her US Treasury and agency bonds if the relationship with America deteriorates further.
This appears to be a cover for China to reduce her dollar exposure more aggressively. The consequences are a primal threat to the Fed’s policy of escalating monetary policy while maintaining the dollar’s status in the foreign exchanges. Read More …
Opinion: China trots out this threat periodically, indicating that Donald Trump’s trade war is working. Here’s why:
- For Beijing, selling US Treasuries isn’t the hard part. The hard part is what the PBoC does with the proceeds. If they buy other USD assets, then nothing has changed.
- If they buy euro, yen, sterling, etc., they will unleash anger from these countries who will suffer disinflationary pressures as their currencies rise against the dollar, and who will have to absorb the consequent reduction in the US current account deficit.
- If they buy the currencies of developing countries, they take highly pro-cyclical credit risks that they have been actively trying to reduce.
- If they stockpile commodities, given how important Chinese growth is for commodity prices, they lock in a huge amount of volatility and more unwanted pro-cyclicality into their balance sheets.
- If they remain in RMB, of course, their currency will rise in value and their trade surpluses will disappear.
- Over the short term Beijing is probably better off by reducing the threat of Washington’s cutting it off from the USD system source
That China has been working to end the US Dollar’s global dominance and replace it with yuan (renminbi) has been the subject of dozens of our posts.
March 28. 2018
China’s ‘PetroYuan’ Futures Launch Threatens US Dollar
China’s yuan-denominated crude oil futures launched overnight in Shanghai with 62,500 contracts traded in aggregate, meaning over 62 million barrels of oil changed hands for a notional volume around 27 billion yuan (over $4 billion).
This could be a death blow for an already weakening U.S. dollar, and the rise of the yuan as the dominant world currency. more …
October 12, 2017
China will ‘compel’ Saudis to trade oil in yuan — and that affects the US dollar
Carl Weinberg, chief economist and managing director at High Frequency Economics, said Beijing stands to become the most dominant global player in oil demand since China usurped the U.S. as the “biggest oil importer on the planet.”
Saudi Arabia has “to pay attention to this because even as much as one or two years from now, Chinese demand will dwarf U.S. demand,” Weinberg said. more …
The US has been world reserve currency since 1944. Any nation wishing to buy commodities must use the dollar as currency. The only sure way to understand how the world’s currencies will one day crash is to work backwards from what we know.
In Revelation 6:5-6 a global monetary catastrophe will overtake the world. It will happen suddenly and only the 1% will be spared for a short time.
See our paper: “The 1% and Revelation: Do Not Harm the Oil and Wine” here