Dr. Susmit Kumar, Ph.D.

[In both my books - “Casino Capitalism” (2012) and “The Modernization of Islam and the Creation of a Multipolar World Order” (2008) - I predicted, based on extensive analysis of global economic data, sudden collapse of the US economy, similar to the Soviet Union collapse in 1991. It is worth noting that even CIA had not predicted the 1991 collapse of Soviet Union.]

China has multi-prong strategy to make its yuan as the global currency (leading global reserve currency), replacing the US dollar. Please read my article - China Does Not Care For US Credit Rating Agencies – about some of these strategies.

The US is a bankrupt country surviving simply by printing its currency that happens to be the global currency (read my article The US Dollar – A Ponzi Scheme), to pay for its twin deficits – budget and trade deficits. It is up to China to decide when it would pull the carpet underneath the US dollar, causing the entire US economy to collapse (read my article: Chinese yuan replacing US dollar as global currency: A not so distant prospect).

In an op-ed article, published in the New York Times, William Grieder, a bestselling author, wrote (“America's Truth Deficit,” New York Times, July 18, 2005):

 

“For years, elite opinion dismissed the buildup of foreign indebtedness as a trivial issue. Now that it is too large to deny, they concede the trend is "unsustainable." That's an economist's euphemism which means: things cannot go on like this, not without ugly consequences for American living standards. But why alarm the public?”

According to Lou Crandall, chief economist at Wrightson ICAP, which analyzes Treasury financing trends (“U.S. Debt Expected To Soar This Year,” Lori Montgomery, Washington Post, January 3, 2009): 

 

“While the current market for [US] Treasuries is booming, it’s unclear whether demand for debt can be sustained. There’s a time bomb somewhere, but we don’t know exactly where on the calendar it’s planted.”

In the last ten years China has replaced the US as the world’s chosen trading partner. For an example, China has become the number one trading partner of the entire Africa continent and most major countries. It is using its currency yuan, instead of the US dollar, as the mode of transaction with its trading partners. In 2009, only 1% of Chinese trade was in yuan whereas in 2014, 19% of Chinese trade was in yuan. As per HSBC CEO, more than 50% of Chinese trade would be in yuan by 2020. (“Half of China's total trade to be settled in yuan by 2020 - HSBC CEO,” Michelle Chen and Eric Meijer, Reuters, March 26, 2015). Right now, you can use dollar in Uganda (just for an example sake) and they will not accept Chinese Yuan. But once China starts to use its Yuan in trade with the entire Africa, you may not be able to use US dollar at all. In the next few years, yuan is going to replace the US dollar as the mode of transaction in global trade.

China is planning to bring back gold standards for international payment after several decades. Being the world’s largest importer of yellow metal, China is now preparing to launch an oil futures contract denominated in yuan and redeemable in gold. While the yuan is not yet a global trade settlement currency, China will make the plan possible by backing the yuan with gold for settling crude oil imports. China is also the largest importer of crude oil. So far, globally, the dollar has been a major currency to pay for importing crude oil. China’s plan to import oil with yuan backed by gold would be a game changer as gold would become the de-facto payment standard despite the fact that all contracts might not finally be converted in gold. The oil contract, to be traded on the Shanghai International Energy Exchange, will be China’s first futures contract that is open to international firms for trading. There is no official word on when the contract will be launched but testing has been underway since July 2017 (China to bring back gold in international settlement with new oil futures, Rajesh Bhayani, Business Standard, September 26, 2017). China tried to convince Saudi Arabia for yuan-based oil settlement, but did not get positive response. China has yuan oil settlement agreement with Russia (since 2015), Iran (since 2012) and Venezuela (since 2017).

As per Carl Weinberg, chief economist and managing director at High Frequency Economics, Beijing stands to become the most dominant global player in oil demand since China usurped the U.S. as the ‘biggest oil importer on the planet’ as much as one or two years from now, Chinese demand will dwarf U.S. demand [It is worth noting that the population of China is nearly four and a half times that of the US]. He said, ‘China will ‘compel’ Saudi Arabia to trade oil in yuan and, when this happens, the rest of the oil market will follow suit and abandon the U.S. dollar as the worlds reserve currency.’ Since a 1974 agreement between U.S. President Richard Nixon and Saudi King Faisal, Saudi Arabia has accepted payments for nearly all of its oil exports in dollars. However, as China imports more and more oil from countries across the world, the idea of having to purchase that same oil in dollars has become increasingly irritable to Beijing. In recent years, China has sought to ratchet up the pressure on Saudi Arabia over the form of currency in which their oil trade is conducted, with Riyadh now enjoying less and less oil purchases from Bejing (Dollar value drop? China will ‘compel’ Saudi Arabia to trade oil in yuan, Sam Meredith, USA Today/CNBC, October 11, 2017). Weinberg received a doctorate in economics from the University of Pennsylvania where he worked on project under Nobel laureate Lawrence Klein (Weinberg A New Style Monetry Authority, Kathleen Hays, Investor's Daily, August 9, 1989). Once the crude oil is traded/priced in yuan, it would be just a matter of time that all other commodities, like copper, aluminum, wheat, and rice, would be traded in yuan, resulting in yuan to become the leading global reserve currency, in place of US dollar.

The US-based economists are agents of the American economic colonialism. They will never teach you or show you the path to get out of US dollar “maya” (“US dollar illusion”, i.e. US dollar Ponzi scheme) because if they would, their career in US is finished. They will only teach you how you can work hard, competing with other exporting countries, to get a piece of the US consumer market. China recognized the US dollar maya and hence since the very beginning, they started to accumulate dollars, by having trade surplus year after year, to create a war chest of $4 trillion FOREX. China is now in a position to replace the US dollar maya with its own yuan maya, i.e. to make yuan a Ponzi scheme. If India wants to become a superpower, it first needs trade surplus for at least a decade or more to accumulate couple of trillions of dollars in FOREX so that it can make its currency rupee a global currency which the US would never like to see because it would downgrade its own currency dollar. The US-based economists would never bring you to a position which could lead to forcing the Saudi Arabia to price crude oil in rupee rather than the US dollar, similar to what China has been doing with Saudi Arabia. The US-based economists would never teach India something which would negatively affect the US dollar and US economy because these economists are in India for just 3 or 5 years tenure and thereafter, they go back to the US and hence their ultimate allegiance is to the US and not to India. These economists are the Bhisma Pitamah of Mahabharat. Bhisma Pitamah was a very honest person, but had allegiance to the throne of Hastinapura. Hence in the Mahabharat war, he fought on behalf of Kauravas, who were ruling Hastinapura, against the righteous Pandavas despite knowing that the Kauravas were evil and doing injustice to Pandavas.