by tonytran2015 (Melbourne, Australia).
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#trade war, #dollar, #treasury note, #bond, #US, #China,
Trade War has begun and the combatants are trying to outsmart their respective opponents [1,2].
1. China is no more the largest holder of US treasury notes.
Japan is. [3,4,5]
2. China and Russia had quietly (using straw men) sold off most of their US treasury notes.
Now they can thrash the US economy with no harm to themselves.
3. The Shanghai Security partners now form a gold-plus-oil based trading block.
They have a robust trading system based on REAL money which are gold and oil.
4. China has found other markets for their (low grade) consumable products.
China’s other markets are The Shanghai Security block (Russia, China, former Soviet Republics, Pakistan), Asian, African countries, EU, their raw material suppliers (Australia, Brazil, Pacific Island Nations).
China does not need to keep its currency low relative to US dollars to preserve its outlet in the US, especially after most of US manufacturing industries have moved to China.
5. Soon there will be an about face on China/US exchange rate.
China will force US dollars down after US had LOST all manufacturing CAPABILITIES and NEED to buy Chinese products (This strategy had been previously applied many times in Chinese-Vietnamese trade). That is why tariff and import/export control are ALWAYS NEEDED.
Forcing US dollars down also increase the perceived Chinese national wealth and let China buy more foods and more raw materials.
6. The dollars will lose their massive international reserve-currency holdings.
After they lose their privileged position they will be more volatile relative to US annual budget deficits. There will be more countries dumping US dollars as reserve-currency holdings. The cycle will feed on itself until the dollars reach their real commodity based value which is suspected to be much less than the present value.
… U.S. dollars were convertible to gold. In France, it was called “America’s exorbitant privilege” as it resulted in an “asymmetric financial system” where foreigners “see themselves supporting American living standards and subsidizing American multinationals”. As American economist Barry Eichengreen summarized: “It costs only a few cents for the Bureau of Engraving and Printing to produce a $100 bill, but other countries had to pony up $100 of actual goods in order to obtain one.” In February 1965 President Charles de Gaulle announced his intention to exchange its U.S. dollar reserves for gold at the official exchange rate. He sent the French Navy across the Atlantic to pick up the French reserve of gold and was followed by several countries. (https://en.wikipedia.org/wiki/Exorbitant_privilege)
7. US banning of processing of transactions involving US sanction’s targets quickens de-internationalization of US dollars.
US fiat dollars also suffer from US banning of processing of transactions involving US’ targets.
The Belgium-based SWIFT financial messaging service said on Monday it is suspending some unspecified Iranian banks’ access to its messaging system in the interest of the stability and integrity of the global financial system. (https://www.reuters.com/article/us-usa-iran-sanctions-swift/swift-says-suspending-some-iranian-banks-access-to-messaging-system-idUSKCN1NA1PN)
8. Less people will be willing to buy US treasury notes.
US interest rate will shoot up like those in third world countries after every undisciplined budgetary plan promoted by American (In Name Only?) lefties.
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