/news/ - Sanctions Madness Imperils The Dollar, Driving Other Countries To Set Up Their Own Exchanges Outside The Dollar

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Sanctions Madness Imperils The Dollar, Driving Other Countries To Set Up Their Own Exchanges Outside The Dollar Reader 09/21/2017 (Thu) 12:47:42 Id: f173f2 [Preview] No. 1799
Last week US Treasury Secretary Steve Mnuchin warned the US will impose new sanctions on China if it doesn't conform to UN sanctions on North Korea:
"If China doesn’t follow these sanctions, we will put additional sanctions on them and prevent them from accessing the U.S. and international dollar system, and that’s quite meaningful."
In other words, the administration wants to sanction one of the US's biggest trading partners, and the world's second-largest economy.
China is the world's third-largest recipient of Americans exports, behind only Canada and Mexico. China is the world's largest source of imports for Americans, slightly ahead of both Mexico and Canada.
In 2016, Americans exported $169 billion in goods and services to China while importing $478 billion of goods and services. Every year, both consumers and producers benefit from the importation of Chinese electronics, machinery, food, footwear, and more.
Ratcheting up economic warfare with China could serve to cut off these avenues of trade and thus will only cost consumers and small business owners who currently benefit from lower-cost machinery, clothing, and more.
For the mercantilists in the Trump administration, of course, American consumers import "too much" from China anyway, and Americans ought to be prohibited by the US government from purchasing what they want.
As Mnuchin notes, the strategy here is to "prevent [the Chinese] from accessing the U.S. and international dollar system." In practice, this would likely mean restricting access to the so-called SWIFT system which facilitates international transactions in dollars.
This idea is highly problematic in its own way. Were the Chinese to be cut off from the dollar, this would only create an enormous incentive for the Chinese to move away from the dollar into other currencies — including its own. China's largest trading partners would likely follow China in this exodus. Moreover, China and Russia have already foreseen the possibility of SWIFT being "weaponized."
Reader 09/21/2017 (Thu) 12:48:24 Id: f173f2 [Preview] No. 1800 del
>>1799
As Jeff Thomas notes:
China, Russia and others have seen this day coming and have created their own SWIFT system, world cable network and world banking system. All that’s needed to kick it all into gear is a major international need to bypass SWIFT. The US government has just provided that need with this threat. There would certainly be teething pains in getting the new system running on a massive scale, but the sudden worldwide need would drive the implementation.
Moreover, China is a key trading partner for Germany, Russia, Australia, Japan. Brazil, and South Korea. Will these countries simply write off China as a trading partner because thy can't settle accounts in dollars? It's unlikely.
While this would not necessarily destroy the dollar, a movement away from the US dollar would greatly diminish the dollar's standing as the world's reserve currency. It would diminish the dollar's role as the go-to currency, and this would, in turn, drive up borrowing costs — i.e. interest rates — for the US government. This would make our debt problem even more unsustainable and insolvent in return.
The fact is, as Foreign Policy noted last year, China is becoming "too big to sanction." Todd Williamson writes on how the IMF has now added China’s currency, the renminbi (RMB), to its basket of four reserve currencies known as Special Drawing Rights. In doing so, Williamson notes, the IMF "may have delivered a severe blow to the strength of a key tool in the West’s geopolitical arsenal: financial sanctions."
Reader 09/21/2017 (Thu) 12:48:47 Id: f173f2 [Preview] No. 1801 del
>>1800
He continues:
The RMB is currently the fourth-most traded currency on the global market (behind the dollar, euro, and pound). It now holds the third highest percentage in the basket, at just under 11 percent, placing it ahead of the pound’s 8 percent (though far below the dollar, which holds more than 40 percent). The IMF’s decision to include the RMB is more than a symbolic sign of the currency’s liberalization: It’s also a big step toward the RMB’s regular usage outside of China. The SDR determines the mix of currencies in which the IMF lends out — a total of $112 billion in 2015 — and the RMB’s inclusion in this distribution mechanism will likely drive up the currency’s demand. The comfort level of the RMB’s usage in global transactions among central banks, sovereign wealth funds, and other massive financial institutions will rise with the currency’s greater accessibility.
In other words, slapping financial sanctions on the Chinese is nothing at all like doing the same to the Iranians or the Venezuelans. The Chinese economy and the Chinese currency are already huge global players which huge trading partners.
One has to wonder if the United States government is being coaxed by China with all the North Korea threats, as a strawman to pull the rug from under the US dollar. We all know China has deep connections with North Korea, what better way to come up with some hyperbole 'external threat' that would lead the US into a reactionary frenzy to "piss off China", then giving China THE PERFECT EXCUSE TO REJECT THE DOLLAR, as they are all ready to set-up their own exchange?
Kinda makes one think if this hasn't been in the plans for a long, long time.
https://archive.fo/PKXCe
http://www.zerohedge.com/news/2017-09-20/trumps-china-sanctions-madness-imperils-dollar

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