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Challenging The US Dollar – Soon, China Will Buy Saudi’s Oil Only In Yuan



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Oct 12 2017
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United States can get most of what it wanted, including intimidating and bullying anyone in the world, partly because of its almighty U.S. dollar. It’s a known fact that the U.S. is broke. America is the world’s biggest debtor nation – owing more than US$20.37 trillion – and climbing. Whenever they run out of money, they would start the printing machines to print more.

 

It’s the demands for U.S. dollar that keeps the currency note valuable. But a combination of geopolitical pressures could spark the end of the U.S. dollar as the world’s reserve currency, according to the head of FX strategy at Saxo Bank. When the faith on the notes disappears, the powerful America could crumble. That day has actually already begun – quietly and slowly but surely.

 

John Hardy of Saxo Bank said – “The world is turning its back on the almighty dollar.” And thanks to President Donald Trump, the day when business depends lesser on the U.S. dollar than it is today has been leapfrogged. The U.S.-Europe transatlantic relationship is fast loosening its shine as the E.U. realizes it’s time they become more independent.

capitalism-and-globalism-burning-dollar-note-on-cigar

The E.U. doesn’t need the U.S. to survive. In fact, the European Union’s economy is bigger than the United States. For the second year in a row in 2016, China – not the U.S. – was actually the world’s biggest economy, generating US$21.3 trillion in economic output. That number is enough to wipe out today’s U.S. national debt, with some loose change.

 

And European Union – not the U.S. – was in second place behind China, churning US$19.2 trillion while third place America produced US$18.6 trillion. Together, China and the EU generated about 33.9% of planet Earth’s economic output of US$119.4 trillion. However, the U.S. could easily send the Middle Kingdom Chinese into financial chaos by wrecking its economy – with Section 301.

 

China knew it but has no choice but to play balls, for now. And the Chinese also knew the only way to fight back eventually is to rely lesser on the U.S. dollar, without which Washington would not be able to tell anyone in the world what to do and what not to do. Just like the EU, it doesn’t make sense for China to trade with other countries based on U.S. dollar.

US Dollars and China Yuan Renminbi - Currency Notes

As the world’s biggest economy, the Chinese has long realized how dumb it is to do business using the dollar, instead of their own currency – Yuan or Renminbi. The U.S.-North Korea conflict is a classic example how China can be arm-twisted to fix a problem started by the U.S. But soon, that could change and the U.S. domination may be a thing of the past.

 

Not only China is the world’s biggest economy today, they are also the world’s largest consumer of crude oil. As the Republicans and Democrats are doing a fabulous job destroying their own nation, China is working on a plan to “force” Saudi Arabia to trade oil in Yuan, instead of the traditional U.S. 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.” He said – “I believe that Yuan pricing of oil is coming and as soon as the Saudis move to accept it, then the rest of the oil market will move along with them.”

China Petro-Yuan

Is this a wishful thinking, considering 80% of world trades are being conducted using U.S. dollar? Not at all, if one can see how many enemies the U.S., and Donald Trump for that matter, has made over the decades. In April, China and Russia has started the ball-rolling in killing the U.S. dollar when both powerful nations agreed to trade oil in a non-dollar environment.

 

With trade volume of US$59.5 billion in 2016, China’s ICBC (Industrial and Commercial Bank of China) has opened a clearing bank in Russia for trade settlements on business involvement – including electricity, mining, chemical, oil and gas, telecommunication, retail, machinery and metallurgy sector in Russia.

 

With more countries, such as Iran and Venezuela, being added to the list of America’s foreign enemies, those nations who have been suffering at the hands of U.S. financial and trade sanctions will be happy participants in the Chinese scheme and could provide critical mass. Now, China is targeting Saudi Arabia, the leader of OPEC cartel.

China President Xi Jinping and Saudi Arabia King Salman

Since a 1974 agreement between U.S. President Richard Nixon and Saudi King Faisal, Saudi Arabia has accepted payments for nearly all of its oil exports in dollars. And King Salman uses this excuse in order not to offend the U.S. when trades with the Chinese. Beijing, however, isn’t impressed that they need to pay using their rival’s currency.

 

To pressure Saudi, China has been purchasing less and less oil from the Middle Eastern kingdom. It doesn’t help Saudi’s bargaining chips that crude oil prices remain stubbornly low. Mr. Weinberg said – “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.

 

America should be worried about China’s plan to crown their own currency – “de-dollarization” – because the demand for the U.S. dollar would be between US$600-US$800 billion less, when oil trade is moved out of dollars to Yuan. Not comfortable with the not-so-glorious Yuan / Renminbi currency? No problem, because the Chinese has another currency on the offering – “GOLD.”

China Yuan Punching Challenging US Dollar - Backed with Gold

It was a clever plan because not only China is openly challenging the U.S. imperialism, the latest move by the Chinese will allow oil exporting countries such as Iran and Russia to bypass U.S. sanctions by trading in Yuan instead of U.S. dollars. To make the Yuan denominated contracts more appealing, China is making the Yuan fully convertible to gold on the Shanghai and Hong Kong exchanges.

 

Yuan-backed oil and gold futures, when fully implemented, mean that users can be paid in physical glittering gold. Already, Russia’s biggest bank Sberbank has announced in July that its Swiss subsidiary had begun trading physical gold on the Shanghai Gold Exchange. While “petro-yuan” isn’t as attractive as “petro-dollar”, the “petro-yuan with gold” could definitely be a game changer.

 

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