US destroys her hegemony
The Shanghai Cooperation Organisation gathering in Tianjin hosting 23 world leaders and more at the military parade in Beijing shows that the world is ignoring autarkic America.
ALASDAIR MACLEOD
Ever since the US decided that China was a threat to its role as the world’s policeman and financier, it has been on the back foot.
Provocation failed in its objective every time, as the Chinese leadership always took the long view and failed to react.
It had analysed US tactics of dollar debt pump-and-dump, concluding rightly or wrongly that it could be extended to China.
Sensibly, China refused to borrow dollars, accumulating them instead, implying it could be China doing the pump-and-dump by selling US treasuries and driving up bond yields.
Then there is the history of US attempts at regime change, usually successful.
The crude overthrow of leaders by covert CIA actions was not possible in China’s case.
Instead, China was cast out as a pariah state because of its maltreatment of Uigurs.
The attempts to curtail Chinese technology by casting back door spying aspersions followed, along with the detention of Meng Wanzhou, Huawei’s CFO in Canada on US instructions.
The list of provocations which failed in their intent is extensive.
Every time, China’s view of American interference was why interrupt an enemy when it defeats its own objectives by making all the mistakes?
Of course, US anti-Chinese propaganda has been imprinted on western minds, which are pigheadedly unaware of China’s role in assembling a global trade force wholly independent from the US and its dollar.
Mainstream media reporting of the major gathering in Tianjin is dismissive, which is an egregious error.
Emerging nations, mostly sick of the Americans and Europeans and less fearful of the consequences are flocking to join the joint Chinese and Russian sphere of influence.
The combination of the Shanghai Cooperation Organisation, which is predominantly Asian mainland, and BRICS which is the rest of the world is growing rapidly.
President Trump’s MAGA autarkicism and tariff policies have triggered a flood of nations looking to join what is rapidly becoming the most powerful economic force on earth.
Trump’s abusive threat against India for processing Russian oil backfired badly.
In the past India would have rushed to mollify the US.
Instead, it is said that when Trump tried to climb down, Modi refused to take his ‘phone calls and travelled to Tianjin where he has been seen in close conversation with Putin and Xi despite the territorial dispute with China, and China’s supply of weapons to Pakistan.
At the centre of it all is these three nations, members of both SCO and BRICS.
India, China, and Russia combined represents 3 billion souls or 37% of the world’s population.
That they will work closely together was one of the messages from Tianjin.
It will surprise readers to learn that Wednesday’s military parade in Beijing was also attended by some key western allies.
These included Kim Min-seok, South Korea’s prime minister, Prabowo Subianto, Indonesian president, Shebaz Sharif, Pakistan’s prime minister, Robert Fico, Slovak prime minister, Daniel Andrews former premier of Victoria Australia, John Key, New Zealand former prime minister, and Helen Clark also a former New Zealand prime minister.
Trading without the dollar
The primary objective of the SCO and BRICS is for member nations to do away with the dollar in trade finance, commodity pricing, and capital investment.
It is likely that the SCO’s proposed development bank will have a central role in replacing national debts denominated in dollars with Chinese yuan, allowing them to escape dollar hegemony.
It will supplement the BRICS development bank in Shanghai.
National members of the SCO and BRICS amount to over 70% of the world’s population.
As these plans mature, the dollar’s reserve status will be replaced by the yuan, leading to a winding down of foreign dollar balances, currently estimated by the US Treasury to total about $40 trillion, about one-third more than the US’s entire GDP.
This estimate doesn’t include offshore dollar balances estimated some time ago by the Bank for International Settlements to be close to a further $90 trillion principally facilitating foreign exchange transactions between other currencies and to a lesser extent the eurodollar market.
The negative implications for the dollar will not be lost on China’s leadership.
It is a process which will be sped up by BRICS members and potential members replacing their dollar obligations with yuan.
They also see the dollar heading towards a crisis on US economic policy alone.
The irony is that the US pump-and-dump operation used against other nations is now playing out against America itself, with treasury yields rising and inevitably leading to a financial and credit crisis, with or without a push from China.
For a long time, China has taken the view that the entire fiat currency system has a limited life: use it while you can but protect yourself against its ultimate failure.
We know that China and its citizens have used a significant portion of their post-Mao wealth to accumulate gold bullion following legislation introduced specifically towards that end in 1983.
In the 42 years since, unwanted bullion in the west has migrated into China and almost none has been allowed out.
China understands the difference between fiat credit and monetary gold, and that currencies are merely a promise of final settlement which no issuer today is prepared to honour.
She knows that in a post-dollar world that promise must return, and China can provide that assurance by backing the yuan with some guarantee of convertibility.
To this end, the Shanghai Gold Exchange has said it will open vaults in Hong Kong and Saudi Arabia, presumably to be followed by others, which will accept gold exchangeable for yuan.
A post-fiat world is emerging.
It will be central to trade and finance for a generally underdeveloped world, rapidly embracing communications and Chinese commercial technology which is now superior to anything in America and in her spheres of influence.
Conclusion
It appears that the SCO and BRICS are on the verge of a further leap forward, facilitated by the continuing failures of US containment strategies and the unintended consequences of President Trump’s MAGA policies and tariff disruptions.
The following has emerged:
· The establishment of an SCO bank alongside the BRICS bank in Shanghai will assist members to replace capital commitments in dollars with yuan.
· We know that other nations are looking to join BRICS, and the SCO itself will expand as associates and dialog partners move towards full status.
The surprise is that while Australia and New Zealand are not officially interested, they have sent unofficial representatives to the Beijing military parade.
Fico from Slovakia alerts us that some of the East Europeans are potentially interested.
· Plans to ensure that gold is central to the entire SCO/BRICS payments system as and when it will be necessary are materialising before our eyes.
· The dollar faces an unwinding of its central position to the world economy which is likely to be more rapid that generally expected.
None of this is reflected in foreign exchange markets yet.
But as the US debt trap is sprung, it will be an additional factor accelerating the fiat dollar’s demise.
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