Saturday, April 7, 2018

U.S. may win the trade war but China will win the currency war

With the U.S. having so few exports and China relying heavily on trade to sustain their economy, President Trump's fight to lower the trade deficit will inevitably be successful to a certain degree.  However the consequences of this battle will ultimately lead to a much bigger crisis as China becomes forced to having to attack the dollar in retaliation since this is where America's true power lies.

Ever since the Petrodollar came into existence in the 1970's, America has used their reserve currency status to not only grow their economy through the ability to create infinite credit, but also to use the dollar as a weapon against any and all nations who might seek their own independence from U.S. hegemony.

That was until around 2013 when Russia and China began an alliance that put the world's top energy producer in partnership with the world's second largest economy and number one banking center.

And of course because of this, the U.S. has attempted to retaliate against both nations through a number of covert regime overthrows (Ukraine, Iran, Syria, North Korea), as well as imposing economic sanctions on them through their sycophants in Europe in the hopes of forcing these two superpowers back under Western control.  And isn't it ironic that President Trump began his trade war policy just days before China implemented its own attack on the Petrodollar through their Yuan-Denominated oil contract?

Ernst Wolff: I'm afraid the situation takes a serious turn. I am also afraid that we are at the beginning of dangerous development. It’s reported only about the US threats to impose tariffs and the Chinese reaction. But judging by the circumstances in which the situation unfolds, we will be put under a cold shower soon.  The Shanghai Stock Exchange has already started to trade oil futures in yuans. This has been a very important decision because the dollar has always been the worldwide currency for oil futures trading. This is a huge affront towards the petrodollar. 
Besides, there is another consequence. The start of trading these oil futures coincided with the beginning of phase two of tests for the Cross Border Interbanking Payment System (CIPS). This is a yuan payment system, which is adopted by eleven Chinese financial institutions and eight foreign establishments, including Deutsche Bank. This payment system was created as a rival to the Swift system, used worldwide by major banks for payment processing. China has twice financially challenged the petrodollar and the US dollar just over the past week. We have seen before, where it can lead.  What I mean is that [Libyan leader Muamar] Gaddafi did it, [Iraqi leader] Saddam Hussein did it, so did Iran, and we all know which consequences it all had. – Sputnik News
China can afford to lose a portion of their trade with the U.S. because like what Russia did following the sanctions imposed upon them, there are always new markets available to sell one's goods.  But sadly the U.S. cannot afford to lose its unilateral authority over the global reserve currency because if they find themselves no longer able to print money at will, everything within their financial system will come crashing down, and at a time when they have little domestic production to sustain an economy.


I suspect the real aim of the trade war (and rate increase) is to prick China's mega bubble. If Trump succeeded, currency war would not be a problem in the coming 5 to 10 years.

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