As a follow-up to two recent articles (here and here) on Turkey, Eurasia, and the coming crash of the US$, please consider the following.
As Russia’s Sergey Glazyev said, “As soon as we and China dump the dollar, it will be the end of the US’ military might…” Keep that in mind as you read the following.
China’s current credit crisis causes concern for the world’s economies, but not for China. China can amass all the debt it wants in order to finance its economic revolution and the New Silk Road. There is no limit because the money it is using is free money. This is why they support shadow banking, why they lend enormous amounts to institutions, corporations, entrepreneurs, and citizens; it’s not their money they are lending. They are using their manufacturing sector to pull as much cash as possible out of the west and using that to finance their future. Their own foreign debt is financed by Americans paying interest on obligations. Even their US holdings were financed with American money. Trillions of dollar-store knick-knacks can buy a lot of T-bills. Merry Christmas.
Once they have squeezed all the blood they can out of the dollar, they have no need for the US anymore. This is when they will start calling in their US debt, gradually at first, but accelerating until the dollar is out of breath and collapses, well short of the finish line. This will kill the US dollar, and remove its ‘reserve’ status.
America owes China about $1 trillion, give or take, and owes Japan about $1.1 trillion. Japan is very close to China, both physically and culturally (in many respects – much closer than it is to America in any case.) This will become important in the near-future.
Eric Clapton – Nobody Knows You (3:19)
“The United States allowed China to become one of its biggest bankers because the American people enjoy low consumer prices. Selling debt to China funds federal government programs that allow the U.S. economy to grow. It also keeps U.S. interest rates low. But China’s ownership of the U.S. debt is shifting the economic balance of power in its favor. …Owning U.S. Treasury notes helps China’s economy grow by keeping its currency weaker than the dollar. It keeps Chinese exports cheaper than U.S. products. …China would not call in its debt all at once. If it did so, the demand for the dollar would plummet like a rock.”
America, as it turns out, is at China’s mercy. China and Russia have become very close, best buds, if you will. The New Silk Road is a plan to bring the Chinese economy to Europe’s doorstep. Beijing and Moscow are connected by a rail line which passes through Kazakhstan. Russia now controls most of the energy going into Europe through pipelines that run (or are being built) through Turkey. Turkey has a virtual stranglehold on the EU because it will have all the pipelines supplying European energy running through its territory as well as having control of the Euphrates river which delivers water to the middle-east. Because of Russian military strength, Turkey listens to Russia. Saud will soon see (or already does) that it makes a lot more sense to sell their oil to China and Europe, and now that Russia can protect them in the middle-east, they have no need for America anymore, nor Israel, for that matter. The petro-dollar will die the same death, America will leave the middle-east once and for all, and Israel will stop settling Arab land, one way or another. They will never have felt so alone. ISIS will be eradicated in short order, to boot.
Once the dollar is crippled, the stock markets will obviously take a nose-dive, but here’s where the insidious part of the plan goes into action – all western investors will be wiped out in one fell swoop. Sure lots of slick investors have a bearish hedging strategy against a Chinese credit crunch, but just think about it. If you are bullish and bet long stocks or dollars or whatever, you will lose it all; but even if you are bearish, what will you be paid with, dollars? Sure you will win all your bets, but your dollar rewards will then be worthless, too… and I haven’t even mentioned derivatives.
There will be nowhere left to turn. Only stackers will be able to eat, and only those heavily invested in crypto-currencies will manage to keep up their standards of living… in another country, of course.
In this new reverse alchemy, defenestration would become a popular pastime and paper gold would turn into lead, one bullet at a time.
Europe will suffer greatly as their currencies collapse, and Saudi and Russian energy will be very expensive (Saud has to make up all that money they’ve lost trying to kill US shale,) but they could still pull through. They might even sell a lot of luxury cars to the new billionaires in the east. Canada could also survive, as it could simply trade one global hegemon for another and sell its resources to China, instead. A very weak dollar would be good for exports, after all.
America, on the other hand, would finally be punished for all its bull-y-ing as city after city would very swiftly be turned into so many Detroits.
America would be rid of its arrogant bull’, and bears would once again roam free, smirking.
If anything ever goes wrong with the Chinese economy, they always have the option of selling their American holdings (T-bills) despite the fact that this would weaken USD.
“Is North Korea The Excuse China Needs To Launch Monetary Armageddon?”
The BIS, since its reporting is lagged, can provide cover for secret Chinese plans to crush the USD.
“This collapse in foreign exposure to China is confirmed by Bank of International Settlements (“BIS”), although this data is only to q3 2016.”
This may be hiding the underlying move by the Yuan.
“The forced deleveraging of China’s WMP-driven excess was not helped overnight by disappointing trade data as both import and export growth slumped.”
“The question now is not if China’s economy will slow, but rather how fast,” Mr Frieda added.
If ever there was a good time to sell some US assets, now might be it.