Bitcoin & Geopolitics - Week 13

The United States is starting to panic that the rest of the world is moving away from the dollar. The proxy war in Ukraine and tensions with China are turning into a global slingshot against the greenback.

Petroyuan

The first major warning shot came from Riyadh late last year. The Chinese president went to the Saudi capital for a Summit with the 21 countries of the Arab League.

Xi Jinping invited OPEC to stop selling its oil exclusively in dollars, but also in yuan. The request was accepted. The Saudi energy minister announced in the wake of the Davos Summit that his country would now accept the yuan and the euro.

Even Kenya has just announced that it has obtained permission to buy Saudi and Emirati oil in its own currency. Other countries have to make such an announcement soon.

Sergei Lavrov is no stranger to this currency revolt. The Russian foreign minister said on July 24, 2022 in Cairo before the Arab League:

“More and more countries are considering settling their trade in currencies other than the dollar. […] Trade between Russia and the countries of the Arab League has increased considerably, reaching more than 20 billion dollars. Maybe next time we’ll count in another currency, not dollars.”

Sergei Lavrov said in essence exactly the same thing to the 55 states of the African Union four days later. These statements seem to have been well received, as the heads of state of 40 African countries came to Moscow last week.

More crucially, Xi Jinping was also on hand to lend his support to Vladimir. The Russian president returned the favor by saying he was “in favor of exchanges paid in yuan between Russia, Asian, African and Latin American countries.”

The czar added to this on Sunday, March 26:

They [the United States] are sawing off the branch they are sitting on – I repeat – by limiting the use of the dollar on the basis of momentary and political considerations. They harm themselves, and we might even add that they shoot themselves in the foot.

We would like to use the dollar, but they won’t let us. How can we make payments? In a currency acceptable to our partners. The yuan is one such currency, especially since it is used by the International Monetary Fund.

Do you know that Middle Eastern countries have announced that they want to sell their oil in yuan? We will gradually extend this practice and expand the use of trusted currencies.”

In January, China’s central bank reduced its holdings of U.S. debt for the sixth consecutive month. China now holds only $859 billion. The lowest since May 2010.

China remains the second-largest holder of Treasuries after Japan ($1.104 trillion). But probably not for long. Bloomberg also reports that central banks are liquidating their holdings of Treasuries at the fastest pace in nine years.

The big sell-off is clearly seen in the IMF figures. Foreign exchange reserves in dollars have been declining steadily since the war in Ukraine began. They have fallen from $7,092 billion to $6,441 billion at the end of the third quarter of 2022. That is a 10% decline.

So much so that Americans are really starting to worry. The tension is palpable on CNN.

“An unprecedented situation”

If the US dollar's global supremacy erodes, America will face a reckoning like none before.

A surprising segment on CNN.

🔊

pic.twitter.com/1r8msosckh

— Wall Street Silver (@WallStreetSilv) March 27, 2023

Hyperinflation on Fox News

The tone is even more alarmist on Fox News where they predict a huge inflation if the emerging economies stop using the dollar:

The Shift from the U.S. Dollar 👀🤯

On Fox News 🇺🇲 pic.twitter.com/ANky3xoXTW

— Bitcoin News ⚡ (@BitcoinNewsCom) March 27, 2023

That is the best way to put it. The end of the “exorbitant privilege” will force the United States to reduce its chronic trade deficit or risk a collapse in the dollar exchange rate. The decline in imports will translate into inflation and a drastic decline in the standard of living of Americans.

Regarding the CBDC, yes, this dystopian currency certainly has the hidden agenda of rationing the population in order to keep inflation under control.

Let’s end with Xi Jinping’s last words to Vladimir Putin: “The change that is coming has not happened for over 100 years and we are the drivers of that change”.

The big question now is what currency will the Chinese and Americans end up trading in? The United States will never accept the yuan. A new reserve currency will have to emerge. Gold? No, Bitcoin.