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9 Signs That China Is Making A Move Against The U.S. Dollar
While 20-year highs for the CNY may be enough for many to question the USD's ongoing reserve status, it is clear that there are many other plans afoot that undermine the dominance of the greenback.
Submitted by Michael Snyder of The Economic Collapse blog,
On the global financial stage, China is playing chess while the U.S. is playing checkers, and the Chinese are now accelerating their long-term plan to dethrone the U.S. dollar. You see, the truth is that China does not plan to allow the U.S. financial system to dominate the world indefinitely. Right now, China is the number one exporter on the globe and China will have the largest economy on the planet at some point in the coming years.
The Chinese would like to see global currency usage reflect this shift in global economic power. At the moment, most global trade is conducted in U.S. dollars and more than 60 percent of all global foreign exchange reserves are held in U.S. dollars. This gives the United States an enormous built-in advantage, but thanks to decades of incredibly bad decisions this advantage is starting to erode. And due to the recent political instability in Washington D.C., the Chinese sense vulnerability. China has begun to publicly mock the level of U.S. debt, Chinese officials have publicly threatened to stop buying any more U.S. debt, the Chinese have started to aggressively make currency swap agreements with other major global powers, and China has been accumulating unprecedented amounts of gold. All of these moves are setting up the moment in the future when China will completely pull the rug out from under the U.S. dollar.
Today, the U.S. financial system is the core of the global financial system. Because nearly everybody uses the U.S. dollar to buy oil and to trade with one another, this creates a tremendous demand for U.S. dollars around the planet. So other nations are generally very happy to take our dollars in exchange for oil, cheap plastic gadgets and other things that U.S. consumers "need".
Major exporting nations accumulate huge piles of our dollars, but instead of just letting all of that money sit there, they often invest large portions of their currency reserves into U.S. Treasury bonds which can easily be liquidated if needed.
So if the U.S. financial system is the core of the global financial system, then U.S. debt is "the core of the core" as some people put it. U.S. Treasury bonds fuel the print, borrow, spend cycle that the global economy depends upon.
That is why a U.S. debt default would be such a big deal. A default would cause interest rates to skyrocket and the entire global economic system to go haywire.
Unfortunately for us, the U.S. debt spiral cannot go on indefinitely. Our debt is growing far, far more rapidly than our GDP is, and therefore our debt is completely and totally unsustainable.
The Chinese understand what is going on, and when the dust settles they plan to be the last ones standing. In the aftermath of a U.S. collapse, China anticipates having the largest economy on the planet, more gold than anyone else, and a respected international currency that the rest of the globe will be able to use to conduct international trade.
And China is not just going to sit back and wait for all of this to happen. In fact, they are already doing lots of things to get the ball moving. The following are 9 signs that China is making a move against the U.S. dollar...
#1 Chinese credit rating agency Dagong has downgraded U.S. debt from A to A- and has indicated that further downgrades are possible.
#2 China has just entered into a very large currency swap agreement with the eurozone that is considered a huge step toward establishing the yuan as a major world currency. This agreement will result in a lot less U.S. dollars being used in trade between China and Europe...
The swap deal will allow more trade and investment between the regions to be conducted in euros and yuan, without having to convert into another currency such as the U.S. dollar first, said Kathleen Brooks, a research director at FOREX.com.
"It's a way of promoting European and Chinese trade, but not doing it with the U.S. dollar," said Brooks. "It's a bit like cutting out the middleman, all of a sudden there's potentially no U.S. dollar risk."
#3 Back in June, China signed a major currency swap agreement with the United Kingdom. This was another very important step toward internationalizing the yuan.
#4 China currently owns about 1.3 trillion dollars of U.S. debt, and this enormous exposure to U.S. debt is starting to become a major political issue within China.
#5 Mei Xinyu, Commerce Minister adviser to the Chinese government, warned this week that if the U.S. government ever does default that China may decide to completely stop buying U.S. Treasury bonds.
#6 According to Yahoo News, China has already been looking for ways to diversify away from the U.S. dollar...
There have been media reports this week that China's State Administration of Foreign Exchange, the body that handles the country's $3.66 trillion of foreign exchange reserve, is looking to diversify into real estate investments in Europe.
#7 Xinhua, the official news agency of China, called for a "de-Americanized world" this week, and also made the following statement about the political turmoil in Washington: "The cyclical stagnation in Washington for a viable bipartisan solution over a federal budget and an approval for raising debt ceiling has again left many nations' tremendous dollar assets in jeopardy and the international community highly agonized."
#8 Xinhua also said the following about the U.S. debt deal on Thursday: "[P]oliticians in Washington have done nothing substantial but postponing once again the final bankruptcy of global confidence in the U.S. financial system". The commentary in the government-run publication also declared that the debt deal "was no more than prolonging the fuse of the U.S. debt bomb one inch longer."
#9 China is the largest producer of gold in the world, and it has also been importing an absolutely massive amount of gold from other nations. But instead of slowing down, the Chinese appear to be accelerating their gold buying. In fact, money manager Stephen Leeb says that his sources are telling him that China plans to buy another 5,000 tons of gold. There are many that are convinced that China eventually plans to back the yuan with gold and try to make it the number one alternative to the U.S. dollar.
So exactly what would happen if the Chinese announced someday that they were going to back their currency with gold and would no longer be using the U.S. dollar in international trade?
It would change the face of the global economy almost overnight. In a previous article, I described some of the things that we could expect to see happen...
If China does decide to back the yuan with gold and no longer use the U.S. dollar in international trade, it will have devastating effects on the U.S. economy. Demand for the U.S. dollar and U.S. debt would drop like a rock, and prices on the things that we buy every day would soar. At that point you could forget about cheap gasoline or cheap Chinese imports. Our entire way of life depends on the U.S. dollar being the primary reserve currency of the world and being able to import things very inexpensively. If the rest of the world (led by China) starts to reject the U.S. dollar, it would result in a massive tsunami of currency coming back to our shores and a very painful adjustment in our standard of living. Today, most U.S. currency is actually used outside of the United States. If someday that changes and we are no longer able to export our inflation that is going to mean big trouble for us.
The fact that we get to print up giant mountains of money and virtually everyone around the world uses it has been a huge boon for the U.S. economy.
When that changes, the word "catastrophic" is not going to be nearly strong enough to describe what is going to happen.
According to a Rasmussen Reports survey that was released this week, only 13 percent of all Americans believe that the country is on the right track. But the truth is that these are the good times. The American people haven't seen anything yet.
Someday people will look back and desperately wish that they could go back to the "good old days" of 2012 and 2013. This is about as good as things are going to get, and it is only downhill from here.
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Interesting thoughts. The question is how long will the US be a desirable destination? If the capital controls being issued by JPM Chase are a prelude to a USD devaluation, how long before the US becomes undesirable? Massive inflation, civil unrest, martial law in cities, food shortages etc.
The USD breaking below 80 may be sending a signal of things to come. We'll see.
And this on ZH yesterday...
"China Fosun International, China's largest private-owned conglomerate which invests in commodities, properties and pharmaceuticals also known as "Shanghai's Hutchison Whampoa", announced in a statement filed just as quietly with the Hong Kong stock exchange, that it had purchased JPM's iconic former headquarters, the tower built by none other than David Rockefeller, at 1 Chase Manhattan Plaza for a measly $725 million."
I was talking with a guy the other day who had just returned from shanghai. he's ex military, his wife is thai, and he was preparing to go to thailand for a month. we were talking about chinese manufacturing prowess, and how inexpensive products could be made. he said "they've got 3 billion people over there" I said no it's more like 1.3 billion, assuming he was mistaken. he shakes his head, and says "no, those numbers aren't accurate" I said why would they underreport something like that, and why would the west go along with it? he said "they have their reasons" It got me to thinking. he definitely has better sources of info than I do, and I have to admit it's possible.
They are underreporting their population by 2 billion people...? I find that a little hard to believe.
OK, 1.8b
that guy is a well-informed vet,
so we must all believe him!
A vet would never exaggerate.
I lived in China for 6 years. It was often reported the population was between 1.3 and 1.6B. The margin of error was equal to entire US pop
So how much gold does China currently own and how much more does it require before it pegs its currency to that gold? That is the important question for us.
An unexpected side effect of QE to infinity.
Almost every time in history that the Chinese have made some social or political shift, they have ended up killing millions upon millions of their own people. Not that they seem to care. Perhaps we should hope the USD remains the reserve currency for their sake.
Given (per ZH) that 40 percent of their 18-29 year olds are prediabetic, and given that they're still aborting their baby girls despite the fact that their sons can't find wives, and given that they're aging like crazy in a toxic cess pool of pollution, who cares if they obtain some special extra economic power? They're still fucked.
Prediction: their rich will move here and to Australia and Europe, their society will collapse into bloody mayhem as it has so many times before, and millions will die horribly. I hope I'm wrong.
Have you ever heard of War? Australia, New Zealand, and Canada are so resource rich and so weak, they are easy and logical takeover targets ... and we are so stupid and weak kneed ... They are screwed
I have a hard time believing that any US administration would let China go on a rampage in the South Pacific, to say nothing of Canada FFS. The MIC alone wouldn't stand for being sidelined in that sort of scenerio.
No. China is still a long way from being able to project power to that extent. They could make Oz and NZ nervous, but I'm pretty sure Chinese agression there would slap the rest of the Anglosphere out of its stupor.
No, America will take Canada.
China doesn't have to go to war to take over Australia. They are taking us over with migration and investment. My daughters neighbourhood (in Sydney) is both majority Chinese owned (80+%) and majority Chinese resident (50+%). Most of the $10,000,000+ plus properties that are sold are now purchased by wealthy Chinese, both for capital gain and for a bolthole if SHTF in China.
They are buying farmland and mines, investing in the stockmarket and buying up office blocks.
As neighbours go they are generally nice people, but I am concerned that they will turn Australia into another Chinese majority country (like Singapore); wealthy yes but no soul.
What's to stop China from dropping the gold-backing after its currency becomes the world reserve? Neither the UN nor any nation should control a world reserve currency.
They don't. It has always been gold. The US tried to replace gold with a scam and threats. It worked for a little while. But only gold survives a crisis. No fiat can weather a storm. It can work great until the first problem shows up. So gold always wins in the end by default. Even Roosevelt wasn't stupid enough to completely leave the gold standard when he did some of the most idiotic things this country has ever seen during the Lesser Depression in the 30's.
Articles like this neglect the fact that long term prospects for China are not very encouraging. Their population growth quite soon will start to nosedive. The number of available workers will start to decline.
China's future is not so bright. http://globaleconomicanalysis.blogspot.com/2012/05/chinas-population-poi...
China this China that. How stupid can we be ? Why dont we just look into the mirror to see who is doing what to us.
Yeah Baby!!! http://shutupnsing.wordpress.com/2013/10/19/congratulations-you-now-owe-the-world-mostly-china-17-trillion/
Another 'american' article. Same as the day goes.
The chinese are desesperately trying to avoid falling permanently on the wrong side of 'americanism'.
The fact is it is an 'american' world and there is no alternative.
'Americans', the biggest destroyers humanity ever known, successfully managed to eradicate diversity.
'Americanism' or nothing.
Bad news actually for 'americans' as 'americans' built their system feeding off non 'american' things. They destroyed the King, they destroyed the Indians etc
For 'americans', what is left to destroy but 'americans'?
Indians are a scarcity these days.
What a hog washings. Funny as lot though. So many points I won't address them in one swoop.
Guy does not really envision the consequences of pouring down Chinese citizenism citizens onto the world. It is going to be rough days for the locals. Oppression Chinese citizenism style repeated all over the world.
Don't forget the freedom to carry out an ethnical laundering under the guise of humanitarian concern. That is Chinese citizenism.
It is much mattering to acknowledge that Chinese citizenism citizens are ready to deny very basic observations like human being ness.
Funny how for Chinese citizenism citizens is all a matter of love or hate. So funny when one takes time to examine what they claim to be and support.
Standing in awe of the hypocriticality of Chinese Citizenism citizen AnAnnoyingMoose.
Only 'americans' consume resources, only 'americans' do the bad things, only 'americans' farm the weak and extort the poor, only 'americans' blob-up.
Too much cheap progration. Make me laugh.
The crust of the truth, the nib of the very mattering thing, is that communaughty Chinese Citizenism is the plague that keeps on giving, spreading toxic waste in both the physical world and the mind to all over the world. Blobbing-up the insanitational means as a way of avoiding self-indictment of venal, filthy, unsustainable ways of roadside crapping, puppy-stewing, infant murdering Chinese Citizenism. Parangongs of all, best at it.
But hey, the lowlife hates to admit that his life is low. Get used to it.
One million burning Tibetan monks and nuns are the torches lighting the path of truth of Chinese Citizenism.
Made me laugh. But somehow, as Chinese citizenism citizens are excretionists, their logics make a sense in a twisted way.
Yep, in a way, the blame is on the environmentalists. Chinese citizenism citizens are like an incontinent, save for their deliberatcy. Not like they can't help themselves. Don't expect them to self control, they won't. And who is in charge of limiting them in terms of environment? Environmentalists.
Environmentalists happened to be too weak to limit Chinese citizenism citizens. So they are to blame.
This is the logics in Chinese citizenism, it is all the fault of the weak if the weak does not manage to limit the strong. Twisted, coiled smelly pile logics.
This is how Chinese citizenism citizens permanently come to blame the weak for their Chinese citizenism citizens' failures. Environmentalists lost their match against Chinese citizenism citizens therefore they are to be blamed.
Chinese citizenism citizens have to be protected from their own errings.
I don't always shit on the roadsides, but when I do, I make sure that I drop my plop on a rotting unwanted female fetus.
Stay Chinese Citizenismish my friends.
The grand robbery by the Chinese Citizenism Communautist Party continues. Dont miss the next episode, same Chinese citizenism time, same Chinese citizenism channel.
As the digested puppies run through our bowels and onto the roadside, so are the days of our Chinese Citizenism lives.
This is not about China. The entire world has turned her back on the USA and is moving on. The USA has become a heavy burden that the rest of the world no longer wishes to carry. This is not a problem that can be solved with air craft carriers or stealth bombers. It is not a problem that can be fixed with bales of US dollars. It is not a problem that can be solved by political rhetoric. No one believes you any more. Americans need to start producing things of value. Bullshit walks.
I agree! MFG for our available workforce in early 1960's was 47% is now appx 5.5% and that number cheats a little.
Mexico recently had GM, GE, Honeywell, Goodrich Cessna plus many others invest billions to build MFG facilities. They will hire and train an estimated 50,000 within the first two years. Quietly, they will admit that wages were not the primary consideration; it was the Agencies EPA, NLRB and many others that make manufacturing impossible. Plus the Legal profession working with the Agencies and Unions filling endless amounts of Class Action suites that amounted to trillions of dollars.
Thisis what our high school grads need.
Criticize the US Dollar all you want. Below is the mathematics behind the USD.
http://bullandbearmash.com/about/usd/
Back in the late 1970s/early 1980s, the USSR was held in the same context as China is today.
China is usually the last to be blunt as others. One cannot deny the probable outcome of the current American Government to bankrupt the treasury and get Emergency powers to the President! The move to Single Party Executive Government has been obvious from the beginning. If we look at other American Presidents with opposing majorities we see a completely different response activity. President Clinton one of our finest Presidents worked with a significantly strong opposition to the great benefit of the population, Reagan did exactly the same.
Now we have a Socialistic President who makes clear full power unabated is his fervent desire. Unfortunately, he has significantly inferior opponents and a far less well organized opposition Party. It does appear that borrowing $300 Billion in one day is a signal that the desire to meet a deadline of government collapse is imminent. China has reluctantly seen this as probable and is taking steps not to be as laden with worthless USA debt and has confided that reluctantly to the world. We had a warning a few months ago when Japan, who seems on-board with China, sold part of their Treasuries back to the Fed. A historic first.
China and others will watch as we go to Single Party rule under a form of Emergency probably after the end of year Holidays. Most of the largest holders of American wealth have already converted huge amounts of Dollar Currency. The Dollar has already been reduced in its purchasing power well hidden by the CPI methods employed. Food prices have increased by more than 100% since 2008. That's a reduction in purchasing power of an average of 20% per year of necessary to life items.
President Obama has formed Organization For Action (OFA) a private 501C(4), under the E-Mail of Obama.com that is being funded by donations world wide, reportedly Billions of dollars. That's a first for a sitting President. It has been estimated by some that over 20 million people have signed up. Mr Messina, Plouffe and Axelrod, solid professionals, were the initiators. This will be put to great use after a probable crash.
Most Large monied proponents of the President are able to go into Bermudan Re-insurance accounts with their overseas profits reducing their tax burdens safely to 5% as they need to bring monies in. They are allowed to hold the balances in alternative currencies. Older retirees should be very worried. President Obama in his speeches made it seem that he believed Social Security to be just another Government Entitlement rather than a Protected Trust.There was such no equivalencies made to Government pensions which he considered sacrosanct.
One last inevitable step: President Obama has removed 9 Generals in his tenure. In other countries that's called "Coup Protection". Combine that with unapologetic NSA intelligence on every citizen far better than Beria could have hoped for (General Alexander, creator of modern NSA just resigned). And finally the placement of national Health care under the single Extra-Constitutional Agency, IRS, is problematic and signals willingness for one branch control. Please revue sect.1663 IRS code.
since this article is about what could happen if and when, it would have been more interesting if the author had speculated on the US' s response to the chinese moves. Clearly they are not going to take it lying down.
No, we are going to take it from the rear, on our knees without any lube, I'm afraid. The problem is that the Chinese are only one of many that will line up to screw us from every direction. When you are the debtor, you are the serf and you're only able to react, not act or lead, because you have given up leadership and control for a fistful of dollars.
war
Follow the money, folks....that means investing in what the Chinese invest in and investing in China, but not American firms in China.
How about you look a chart of money supply and credit growth in China, and then come back here and explain how the fuck they back their currency with gold. No? I didn't think so.
13 Signs That Dollar Screwed by China, And 13% of all Americans believe that the country is on the right track
YUAN
- 13 October 2013, U.S. fiscal failure warrants a de-Americanized world
- China’s Dagong Cuts U.S. Credit Rating After Debt Limit Raised
- China and Taiwan to Form Equity Exchange as Relations Improve
- ECB and the People’s Bank of China establish a bilateral currency swap agreement
- Switzerland Will Join Race to Be Trading Hub for China’s Yuan
- China-Britain currency swap agreement to boost market confidence: City of London
- China Names Yuan Convertibility Plan as Goal This Year
- RBA to Invest Foreign Currency Reserves in China, Lowe Says
- China to widen yuan trading band soon: official
- HSBC wins China approval for direct yuan trading
- Thanks, World Reserve Currency, But No Thanks: Australia And China To Enable Direct Currency Convertibility
- China, Brazil sign trade, currency deal before BRICS summit
- U.A.E. Considering Currency Swap Accord With China
- China to Free Currency in 5 Years, Says Hong Kong Exchanges’ Li
- China, Singapore Double Currency Swap Agreement to $48 Billion
- BOE Plans to Sign Yuan Currency Swap Deal With China
- Yuan Sets Tone for Asia as Japan Dethroned by China: Currencies
FUTURES
- Dalian Iron Ore Futures Debut as China Seeks Pricing Power
- China Challenges CME to SGX With Iron-Ore Futures Contract
- China to Start Bond Futures Trading Next Week After 18-Year Halt
- China Opens Capital Markets as U.K. Taps Overseas Yuan Business
- China moves to deepen capital markets
TRADE
- New freight train link between China and Germany
- India and China: Building trade and trust
- Russia agrees $270 billion oil deal with China
- Australia approves China Molybdenum’s Northparkes deal
- Smithfield Embodies China’s Record Hunger for Farm Assets
- China’s CNPC Said in Talks to Buy Brazil’s Barra for $2 Billion
- Iceland Is First in Europe to Sign Free Trade Pact With China
- China Russia deal on oil, coal and natural gas
- China Passes U.S. to Become the World’s Biggest Trading Nation
- Canada opens a pipeline to China
LINKS: http://forum.prisonplanet.com/index.php?topic=251598.0
This seems like old news. China has been a net seller not buyers.Also the PBOC has publicly said many times that China only owns $800 bil in US Treas. In addition China already hedged there dollar holdings ten fold. Buying resource companies,food &agriculture,and making alliances with strategic resource countries.China has also made currency swaps with over 24 countries. They will soon announce they have 10,000 tones of Gold. Tired of hearing that it's years from now. It's upon us now.
Actually, China is playing go while the U.S. is playing tiddlywinks.