Musburger1
2,500+ Posts
This is one of the most interesting articles I've seen on ZeroHedge recently submitted by a group called Gavekal Research.
http://www.zerohedge.com/news/2017-...lash-empires-russias-role-global-game-changer
It's quite a lengthy article that would take about 20 minutes to read, but short of reading a book, it goes into detail about possible scenarios. I'll give a brief summary.
1. The main hegemonic competition will be between the US and China. The US dominates the sea and thus has the ability to control trade routes. The US also has great leverage over the global system primarily through the US dollar being the reserve currency and the petro dollar arrangement, particularly with Saudi Arabia.
2. China is putting together a high speed land-based trade route that would connect China with not only Russia, but also the with the middle East and Europe.
3. China is implementing a gold exchange in Renmenbi that offers countries to bypass the dollar.
5. Saudi Arabia. As China becomes the largest customer of the Saudis, the Saudis will want to have reserves in gold rather than in dollar denominated assets, especially if the dollar falls in value.
6. Russia. As the US uses Russia as its political whipping boy, Russia will continue accelerating the relationship with China to implement both the land-based trade route and construct an alternative monetary system to the dollar system currently in place.
http://www.zerohedge.com/news/2017-...lash-empires-russias-role-global-game-changer
It's quite a lengthy article that would take about 20 minutes to read, but short of reading a book, it goes into detail about possible scenarios. I'll give a brief summary.
1. The main hegemonic competition will be between the US and China. The US dominates the sea and thus has the ability to control trade routes. The US also has great leverage over the global system primarily through the US dollar being the reserve currency and the petro dollar arrangement, particularly with Saudi Arabia.
2. China is putting together a high speed land-based trade route that would connect China with not only Russia, but also the with the middle East and Europe.
3. China is implementing a gold exchange in Renmenbi that offers countries to bypass the dollar.
The rise of the renminbi
Which brings us to a key change in our global monetary system that has received scant attention, namely, the recent announcement by the Hong Kong exchange that investors will soon be able to buy and settle gold contracts in renminbi (see release). This initiative has the potential to be a game-changer for the architecture of our global monetary system.
Imagine being Russia, Iran, Qatar, Venezuela, Sudan, Uzbekistan or any other country liable to fall foul of US foreign policy, and thus susceptible to having Washington use the dollar as a “soft weapon” (see BNP, Big Brother And The US Dollar). Then China comes along and says: “Rather than trading in dollars, which leaves us both exposed to US sanctions, and US banks’ willingness to fund our trade, let’s deal in renminbi. I can guarantee that ICBC will never pull the rug from under your feet”.
If you are Russia, or Qatar (which have already signed renminbi deals for oil and natural gas), this may be an interesting proposition. However, the question will quickly arise: “What will I do with my renminbi? Sure, I can buy goods in China, but I only need so much cheap clothing, tennis shoes, and plastic junk. What do I do with what is left over?”. And the answer to that question is that the US dollar remains the world’s reserve currency since the US offers the deepest and most liquid asset markets. From real estate (as shown by the Russia-Trump investigation), to equities, to bonds, there is no shortage of US assets that Americans will sell foreigners so that foreigners can park their hard earned dollars back into the US.
This brings us back to China and the main constraint to the renminbi’s rise as a reserve currency. Simply put, foreign investors do not trust the Chinese government enough to park their excess reserves in Chinese assets. This lack of trust was crystallized by the decision in the summer of 2015 to “shut down” the equity markets for a while and stop trading in any stock that looked like it was heading south. That decision confirmed foreign investors’ apprehension about China and in their eyes set back renminbi internationalization by several years, if not decades.
Until now, that is. For by creating a gold contract settled in renminbi, Russia may now sell oil to China for renminbi (already signed), then take whatever excess currency it earns to buy gold in Hong Kong. As a result, Russia does not have to buy Chinese assets or switch the proceeds into dollars (and so potentially fall under the thumb of the US Treasury). This new arrangement is good news for Russia, good news for China, good news for gold and horrible news for Saudi Arabia as it leaves the Middle-Eastern kingdom in between a rock and a hard place.
4. By the US pressuring Europe with sanctions intended to hurt Russia, Germany is contemplating sliding out of the Western sphere into the Chinese/Russian sphere. If the dollar weakens, the economic future of Germany looks more promising moving toward the East.Which brings us to a key change in our global monetary system that has received scant attention, namely, the recent announcement by the Hong Kong exchange that investors will soon be able to buy and settle gold contracts in renminbi (see release). This initiative has the potential to be a game-changer for the architecture of our global monetary system.
Imagine being Russia, Iran, Qatar, Venezuela, Sudan, Uzbekistan or any other country liable to fall foul of US foreign policy, and thus susceptible to having Washington use the dollar as a “soft weapon” (see BNP, Big Brother And The US Dollar). Then China comes along and says: “Rather than trading in dollars, which leaves us both exposed to US sanctions, and US banks’ willingness to fund our trade, let’s deal in renminbi. I can guarantee that ICBC will never pull the rug from under your feet”.
If you are Russia, or Qatar (which have already signed renminbi deals for oil and natural gas), this may be an interesting proposition. However, the question will quickly arise: “What will I do with my renminbi? Sure, I can buy goods in China, but I only need so much cheap clothing, tennis shoes, and plastic junk. What do I do with what is left over?”. And the answer to that question is that the US dollar remains the world’s reserve currency since the US offers the deepest and most liquid asset markets. From real estate (as shown by the Russia-Trump investigation), to equities, to bonds, there is no shortage of US assets that Americans will sell foreigners so that foreigners can park their hard earned dollars back into the US.
This brings us back to China and the main constraint to the renminbi’s rise as a reserve currency. Simply put, foreign investors do not trust the Chinese government enough to park their excess reserves in Chinese assets. This lack of trust was crystallized by the decision in the summer of 2015 to “shut down” the equity markets for a while and stop trading in any stock that looked like it was heading south. That decision confirmed foreign investors’ apprehension about China and in their eyes set back renminbi internationalization by several years, if not decades.
Until now, that is. For by creating a gold contract settled in renminbi, Russia may now sell oil to China for renminbi (already signed), then take whatever excess currency it earns to buy gold in Hong Kong. As a result, Russia does not have to buy Chinese assets or switch the proceeds into dollars (and so potentially fall under the thumb of the US Treasury). This new arrangement is good news for Russia, good news for China, good news for gold and horrible news for Saudi Arabia as it leaves the Middle-Eastern kingdom in between a rock and a hard place.
5. Saudi Arabia. As China becomes the largest customer of the Saudis, the Saudis will want to have reserves in gold rather than in dollar denominated assets, especially if the dollar falls in value.
6. Russia. As the US uses Russia as its political whipping boy, Russia will continue accelerating the relationship with China to implement both the land-based trade route and construct an alternative monetary system to the dollar system currently in place.
