Wednesday, May 17, 2017

Alasdair Macleod - Chinas Plan to Subvert the Global Dollar Standard

ZeroHedge runs this article by Alasdair Macleod which appears originally here at I am featuring this article not because I know whether or not China has a plan to overthrow the US dollar by using its gold reserves. I don't and Chinese officials never talk about such a plan in public. However, this is one of the most prevalent speculations you see if you spend any time at all researching the topics covered here on this blog. 

An article like this by necessity has to include a fair amount of speculation by the author since we can safely assume that Chinese officials are going to keep any plans they may have along these lines close to the vest. This article is one of the better ones I have read in terms of laying out a plausible theory as to why China might want to move away from the US dollar or even use their gold reserves if they had to do that some day. It is worth your time to read regardless and allows you to at least get an overview of this view regarding China and its desire to move the world away from the US dollar over time. Below are a couple of excerpts from the article.


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"Already, China dominates world trade. Her own economy is already significantly larger than that of the US on the purchasing power parity (PPP) estimates. While being the largest consumer of raw materials, China also exports more finished goods by value than any other country. As the Asian powerhouse, she has lifted the economies of all the countries on the western side of the Pacific Ocean, which including her own between them have a GDP of $50 trillion. Her exports into Asia now exceed her exports to the US. Yet despite this dominance, most of China’s trade is conducted in US dollars, something China is bound to change, if she is to contain external economic risk and replace America as the dominant global empire. Both objectives can only be achieved by China replacing the dollar as a medium of exchange."

Why Gold Is Central to China’s Future Trade-Settlement Policy

"China’s challenge is the yuan as a purely fiat currency will take decades to replace the dollar, possibly never. And that assumes that China follows more stable monetary policies than the US. This has not been the case since the Lehman crisis, with China’s M2 broad money quantity expanding rapidly, accounting for much of the world’s monetary growth in recent years. The rate of monetary expansion is criticized as a dangerous credit bubble by western analysts, who are quick to condone monetary expansion in their own developed nations, but turn into hard-core monetarist critics over China. No, China will never replace the dollar with her own currency without a golden guarantee.

Therefore, China needs to deploy gold to displace the dollar. This might be done in one of two ways, one encouraging markets to evolve away from dollars toward gold, or alternatively by the state forcing the pace."
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Added note: Below is a reader comment that contains links that are not live links. I have added them below to make them clickable links for readers who may want to look at them:


  1. Larry, are you familiar with Luke Gromen's work?

    What we should be looking out for and the western media does not report this is the Shanghai Crude Futures denominated in RMB.


  2. Thanks for your comments and links. I will post them above so that they are live links.