Cryptocurrencies

China-Russia financial alliance against the dollar plays Bitcoin’s game (BTC) – Cryptocurrencies

The Financial Times – which is not exactly what you might call a crypto-anarchist newspaper – echoes the geopolitical pages of Thecointribune. In an article titled “Russia, China Ditch Dollar for Financial Alliance,” the FT provides fresh figures on the extent of de-dollarization between the two countries.


No dollar between friends

The British newspaper reports that the dollar’s share in bilateral trade between Russia and China has fallen below 50% during the first quarter of 2020. Figures available on the website of the Russian central bank.

The dollar’s share rose to 46% while that of the euro climbed to 30%. Knowing that the share of the greenback was still 90% just 5 years ago… Exchanges in rubles as well as yuan counted for 24% commercial transactions between the two nations. A new record.

A financial alliance is being born alongside their commercial and military alliances. Vladimir Putin announced last year his intention to help China develop a ballistic missile detection system. The Russian President has promised a radical increase in Chinese defense capabilities by specifying that only the United States and Russia had such an arsenal.

On the trade front, Russia is constructing a 1.42m diameter pipeline (Power of Siberia) to deliver annually 61 billion cubic meters of gas in the Middle Kingdom. Let us not forget either that the new Silk Roads will pass through Moscow and a host of infrastructure projects are springing up all over Asia.

Now, the Sino-Russian alliance is also extending through the dedollarisation their trade.

gas pipeline russia china
Power of Siberia

G7

Russia cut ties following the coup d’etat in ukraine which resulted in the capture of Crimea (housing the naval base of Sebastopol in the Black Sea). Slamming the door of G8 in the process, Vladimir Putin swiveled towards Xi Jinping and, facing western economic sanctions, swore to remove the dollar from international trade …

An increasingly urgent need since the United States quickly threatened Russia with a financial embargo. Indeed, any transaction involving the dollar must go through a American clearinghouse, which means that the US government can prohibit any transaction.

Message received 5 out of 5 so that the Sino-Russian tango has since set up its own international payment infrastructures. A question of economic survival for China, whose hegemonic ambitions have been hampered by the trade war with the Trump administration. A vital precaution when we see that Uncle Sam did not hesitate to disconnect Iran from the omnipotent SWIFT network.

As a reminder, SWIFT is a financial architecture infiltrating almost all international transactions of more than 24,000 banks. To be deprived of it is to see your economy collapse (hyperinflation) because it cannot pay for its imports and be paid for its exports.

Foreign exchange reserves

The dollar is still a little over 60% of global foreign exchange reserves. The explanation being that the largest oil-producing countries sell it in dollars (an M16 on the temple …). We were still at 70% in the not-so-distant past, which suggests that Putin’s efforts are starting to pay off …

Russia got rid of 101 billion dollars at the start of last year, most of its reserves in dollars then. A hole filled by the euro, the yuan and the gold… The renminbi thus represents 15% Russia’s foreign exchange reserves compared to 5% previously. Russia holds ¼ of world foreign exchange reserves in yuan and its sovereign wealth fund can now invest in Chinese debt.

Pub

Cryptoassets are highly volatile unregulated investment products. No EU investor protection. Your capital is at risk.

And if further proof of the friendship between Beijing and Moscow was needed, the two central banks concluded a ” swap “(Exchange) of currency worth 150 billion yuan ($ 25 billion) for 3 years. The two countries were therefore able to obtain their neighbor’s currency without having to buy it on the foreign exchange market (forex). This is the demonstration of a strong alliance because the Fed only grants swaps to the European Central Bank, the Swiss National Bank, the Bank of England and the Bank of Japan. His close allies.

Memento mori

It would not be reasonable to believe that the dollar could remain the main international reserve currency ad vitam aeternam. The patience of nations has limits, especially since Washington uses dollar extraterritoriality against its own allies (BNP / IRAN…). Declaring embargoes here and there to destabilize regimes will end up completely eroding the supremacy of the American monkey currency.

History of international reserve currencies

The extraterritoriality of American law is a low intensity war. A war by law theorized by the US military and deployed as an alternative mode to military action (Lawfare). And since this is a incessant war, a winner will eventually emerge. It is not said that American society will be able to afford the luxury of their hegemony for a long time to come …

The empire is plugging the breaches through which Chinese tentacles spread along the new silk roads. Whether at Kashmir, on the strait of malacca (Malaysia), of Ormuz (Iran) or in China Sea, the United States is trying to counter the Chinese advance. So many gesticulations of one broken empireu, who will soon have to wean himself from his addiction to oil … Yes, the peak of US shale oil should occur here Four years according to the International Energy Agency. How long will the United States be able to maintain the illusion without oil …

The falling dollar

After 9 years strength, the dollar is again on the downward slope. With interest rates close to zero, a budget deficit freewheeling and a economic scuttling in the face of media hysteria surrounding the Covid, the dollar is at its lowest for two years. This trend could continue if Trump is re-elected and continues to close his trade deficit with China.

Even banks like Goldman Sachs indulge in saying that it was only a matter of time before the dollar weakened after rising 30% in the last 12 years. Quite simply, the dollar is the most overvalued currency in the world based on the real exchange rate. According to the Bank for International Settlements, the dollar is around 16% overvalued against the euro.

Dollar Index (strength of the dollar against major currencies)

As you can see from the previous chart (Dollar Index), bullish or bearish cycles are long and persistent. So maybe we are at the start of a cycle of decline of the dollar that will last several years. This can be considered as long as the Fed maintains a very accommodating monetary policy. It is difficult to see how the US Central Bank could raise its key rate with such a monumental government debt … #QE_Infinity. Bodes well for BTC / USD.

Exit the dollar, long live the Bitcoin

It is a bit of a rush to think that Bitcoin will soon replace the dollar on the global monetary board. Let us know how to keep it. No need for bombastic statements about the cause of cryptocurrency.

But all the same … All the countries that collect gold and try to create their ” CBDC “(Central Bank Digital Currency) should take a closer look at digital gold, BTC … It is a currency stateless that no one in particular can control. A neutral currency whose transactions are impossible to stop. No embargo with Bitcoin …

Her liquidity is much higher than that of gold whose physical form makes it necessary to adopt the imperfect Gold Standard. Everyone will remember the year 1971, when Nixon abolished the convertibility of the dollar into gold without anyone being able to oppose it …

Bitcoin does not have this problem. There is no need to create a gold-backed fiat currency for practical reasons. Blockchain transactions can be done in an instant, almost for free… The Exchange Bitfinex has for example carried out a transaction of $ 1.1 billion in BTC for only $ 0.68. Try to do this in the fractional reserve banking system, this gas factory where the money we think we have in our accounts is actually counterfeit money, An illusion…

Pub

Cryptoassets are highly volatile unregulated investment products. No EU investor protection. Your capital is at risk.

Never forget that paper money (1.4 trillion in the euro area) represents only 10% of the entire M3 money supply (13 885 billion). 8% worldwide. Conversely, there is no such thing as fake Bitcoin. There will never be a bank run against Bitcoin …

Related Articles

Back to top button