Posted on 10/25/2017 9:06:24 AM PDT by b4its2late
China, the world’s biggest oil importer, is set this year to implement its plan to end the global dominance of the U.S. dollar by launching a gold-backed futures contract denominated in yuan. Experts say that Beijing’s plan to start a gold-backed crude oil futures contract based on the yuan represents an important step in the country’s push to end the dollar’s global dominance. The adoption of the new crude oil benchmark by major players in global oil markets would sound the death knell of the currently dominant dollar-denominated oil futures, according to experts.
Adam Levinson, head of Graticule Asset Management Asia, told Bloomberg that China’s latest move is part of a long-term plan for the yuan to topple the dollar as the currency used to price oil in global markets. Chinese planners correctly believe that setting up the yuan to compete with the dollar in global markets is essential to achieving the status of an economic superpower.
Besides its state-owned oil companies, China hopes that countries, such as Russia, Iran, and Venezuela, targeted by the U.S. with economic sanctions would be the first to adopt the new yuan-based benchmark as part of their strategy to reduce their vulnerability to U.S. foreign policy, which seeks to use economic sanctions to punish countries that refuse to toe the line.
The new benchmark will allow countries, such as Russia, Iran, and Venezuela, whose economies are under the pressure of U.S. economic sanctions, to avoid the penalties of the imposed sanctions by trading crude oil in yuan instead of the dollar. It will allow them to make payments with gold and to convert yuan to gold without having to hold Chinese assets or convert to the U.S. dollar.
Chinese economic planners hope that Chinese state-owned oil companies and the first set of countries that adopt the new yuan-based benchmark will be able to generate the liquidity needed for the takeoff of the new oil pricing benchmark. This will encourage other nations exposed to U.S. currency risk to adopt the alternative oil pricing benchmark which, in the long run, could challenge established benchmarks, such as the dollar-denominated West Texas Intermediate (WTI) and Brent.
The Chinese authorities first announced the plan to start a crude oil futures contract priced in yuan and convertible into gold earlier this year.
Backing by gold sounds good. But if the Chinese are holding the gold reserves, you still have to trust the Chicoms. I dunno if the world is going to do that. What do you guys think?
What do I think?
Well, they asked for it. That’s what I think.
Time to cut them off from their biggest market and set sanctions on any American company doing business in China. If nothing else it is time to start treating them like the adversary that they are and install tariffs on their imports.
They are now implementing their master plan to devastate the US.
It sounds hyperbolic, but this is tantamount to an act of war.
The real fact is, does anyone want to trust the Chicoms with their money?
They are not exactly a law based country. They don’t exactly allow for conversion of the Yuan at market rates and they have a nasty habit of killing their political adversaries.
Do you honestly think that the other major powers or any country, would store their reserve gold for exchange with China?
Sounds like an Armenian name.
The Chinese have a proverb: "We can always fool the foreigner." Anyone who does business with the Chinese is a fool, because they are just going to rip you off.
We did "business" with the Chinese to the tune of them now holding several trillion of our dollars and most of what was once our industrial/manufacturing base.
So what does that make us?
The best that could be said of such schemes is that they could permit China and the US to monetize their large stockpiles and ongoing production of gold. The drawback is that such innovations would tend to devalue the ordinary, non gold-backed versions of the yuan and dollar. The result would be pressure on the corresponding national economies and a diminished value and credit-worthiness for debt instruments denominated in the non gold-backed currency. For China especially, this would likely make it harder to access international debt markets except in the gold version of the yuan.
Moreover, China's gold yuan will have limited appeal because China cannot duplicate the dollar's place within a set of benign and reliable rules and economic, political, and military alliances that the US created after WWII. Using the dollar and becoming part of the international dollar system more less guarantees that the US has your back and can be counted on in times of trouble.
When a friendly nation that uses the dollar as its primary trade and reserve currency gets in trouble, it can usually rely on the United States for help -- and not just dollar loans, but up to and including having American armored brigades and aircraft carriers come to the rescue. Thus the oil rich and dollar reliant Kuwaitis were pulled out of the clutches of Saddam Hussein in the first Gulf War. Absent a similar capability and willingness by China, it is hard to imagine Kuwait or any other vulnerable nation embracing the yuan even if it is backed by gold.
In concept, China could try to construct a position for itself in a rival international system that parallels that enjoyed by the US. In practice though, China bullies its neighbors and is uninterested in coming to anyone's aid. China aims to be a world hegemon, with other countries treated as vassals or enemies. Few countries will want to sign on to relying on to the gold yuan and advance such ambitions.
Zimbabwe dollars have found a home.
I am curious, what will the globalists think? Can’t rule the world without controlling the financial aspects. Will CFR be against losing their control?
Agreed.
I wouldn’t trust them as far as I could throw Hillary.
The greater risk to globalists is the wave of Trump style populism that is now sweeping through Europe. In addition, blockchain technology could be used to disintermediate banks from their privileged, rent-generating perch in the economy. With blockchain technology, a monetary unit (a bitcoin or a dollar or another currency) can be transferred from buyer to seller without having to go through a bank or other financial intermediary. The accounting function that they perform is carried out and embedded within the blockchain code and associated software for each monetary unit.
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