Putin has been publicly calling for the international community to rethink the dollar as the international reserve for more than a decade -- before the collapse of the housing market in 2008 triggered a global recession -- but Trump's belligerent foreign policy and restoration of trade tariffs with China, Canada and the EU has caused much of the world to join the conversation.
Kay Van Petersen -- global macro strategist at Saxo Capital Markets, based in Singapore -- told reporters:
The unintended consequence of the U.S. fighting across multiple fronts drills home the point that the world needs an alternative to the U.S. dollar for trade and transfers. If anything, the trade war will lead to a redoubling of efforts on the structural roll-out of the yuan to echo this internationalisation theme."
The use of the yuan outside mainland China soared for a period after the global financial crisis in 2008, but quickly declined until picking up again this year. But replacing the dollar with the yuan is clearly part of Beijing's long-term strategy, as the leadership pressures trading partners to accept the yuan as payment for Chinese exports.
In 2014, China linked the Hong Kong stock market with the Shanghai exchange, and in 2016, began allowing foreigners to invest in mainland Chinese capital markets. The Chinese authorities also launched yuan-denominated gold contracts on the Hong Kong and Dubai exchanges last year, as well as new "Petroyuan" oil-futures contracts on the Shanghai International Energy Exchange in March this year.
Many economists believe that it is inevitable that China, the world's largest oil importer, will unseat the U.S. as the world's financial superpower. In retaliation for the Trump administration's restoration of tariffs on Chinese imports, the country has slapped tariffs on $50 billion worth of U.S. goods.
Said Hayden Briscoe, head of Asia-Pacific fixed income at UBS Asset Management:
We now think these oil [-producing] countries, who are selling oil into these contracts and are getting paid in yuans, are starting to recycle their profits back into Chinese government bonds, and this is going to continue for decades."
Financiers are well aware of strategies to dethrone the U.S. dollar and the impact that will have on Wall Street. There is no shortage of economists and political scientists who believe that it was Muammar Gaddafi's proposal to create a gold-backed pan-African currency that led to the Obama administration's military intervention to topple the Libyan dictator's government. The decline of the dollar will likely take years to complete but it mirrors the decline of the U.S. as the world's lone superpower. As one economist told the RT network recently:
Eventually, the evolution of global finance will be very much related to the evolution of the global balance of power. This will not happen overnight. It will take time and many more crises and balance shifts. No one really knows what the new system will look like."
(Note: You can view every article as one long page if you sign up as an Advocate Member, or higher).
2
1
1
