Biden Lets China Threaten The Greenback's Status As The World's Reserve Currency

President Joe Biden's deliberate attempts to insult Saudi Crown Prince Mohammed bin Salman and his refusal to unleash domestic oil manufacturing have led the dollar to clear the way for the ascent of the Chinese yuan. Not only is Saudi Arabia now considering adopting the Communist Party's currency for its oil trades, but France has already begun to do so.

In a blink-if-you-miss-it headline from Beijing, the Shanghai Petroleum and Natural Gas Exchange announced that for the first time ever, a Chinese oil company had completed a yuan-settled liquefied natural gas trade through the exchange. The trading partner in question was not an enemy of Washington but rather our oldest ally. However noble the American campaign to convince her allies to bypass Russian oil markets, it has pushed our European allies, France included, into reliance on Chinese oil.

The Shanghai Exchange revelation is just the tip of the iceberg. Across the planet, the CCP has eagerly filled the void left by Biden's mystifying foreign policy. Since its invasion of Ukraine, Russia has replaced its greenbacks and euros with yuan. This process of "dedollarization" explicitly aims to unseat the dollar as the reserve currency of Russia and, in the long run, that of the world.

The global dominance of the greenback has long been on the wane, falling from more than 70% of the world's foreign exchange reserves by the turn of the century to less than 60% in 2021. While the yuan only comprises 3%, Beijing has already begun to execute its plans to unseat the prominence of the dollar.

Biden lets China threaten the greenback's status as the world's reserve currency (msn.com)

Biden is proving to be maybe the worst geopolitical president I think I've ever seen. It looks like the petrodollar hangs in the balance.

 

The China Daily reported this week that a state oil company had conducted a natural gas transaction with French energy giant Total and that the deal had been settled in yuan. The deal, conducted on a Shanghai exchange, was the first of its kind and important enough for Chinese state media to tout its significance. This news is not typical fodder for a crypto newsletter that is, as regular readers know, about topics like Bitcoin and U.S. blockchain companies. But step back and you might see a connection.

In September, Foreign Policy published an article titled "China is quietly trying to dethrone the dollar" that explained how the country wants to establish regional corridors where global transactions are settled in a currency that is not the greenback. The goal here is not hard to understand. China views the U.S. as its main adversary and is looking to weaken the country however it can—including by diluting the dominance of the dollar, which gives the U.S. power over the world's banking systems and lets it borrow money at rock-bottom rates.

China is not alone in this. Iran, whose evil regime has made the country subject to harsh sanctions, has for years sought to establish payment networks outside of U.S. control. Meanwhile, Russia—which is becoming a vassal state of China under Vladimir Putin's disastrous leadership—is happy to embrace yuan-based payment arrangements, while also tolerating cyber criminals who rely on crypto to carry out ransomware and other hacking attacks.

All of this amounts to a type of economic warfare and, when it comes to crypto, there are two important developments to watch. The first is a recent decision by Beijing to back Hong Kong's push to become a global cryptocurrency hub by encouraging its state banks to do business with crypto companies in the territory. This is not a change of heart by China on the merits of crypto—recall it chased the crypto industry out of the country five years ago—but another effort to support transaction networks that don't rely on the dollar.

Gas, crypto, and China’s move to dethrone the dollar (msn.com)

 

Biden's inflation is a fact that weakens the dollar. Sanctions are a fact that push other countries to trade in a currency other than the dollar. Also, Biden being rigid on peace negotiations in Russia is a fact that keeps the war going, resulting in many countries around the world pointing the finger at the United States as war hawking in Ukraine. Also, Biden's track record of hamstringing domestic oil production is a fact that prevents us from exporting oil to countries that would buy that oil in US dollars rather than Chinese currency. And then there is Biden neglecting Saudi Arabia, a country we rely on to bolster the petrodollar, allowing the Saudis to cozy up to China.

Watching the news...Xi is constantly flying around the world to different countries trying to recruit other countries into China's economic circle of influence. Brazil, Saudi Arabia, Honduras, all flipped to China in the past couple of months. Biden has dementia, and so we have to hide him. Think Kirby vs. Mullen here except worse. And the stakes are not the best football team, but rather the premier economic power in the world.

None of this is fake news. You can try to defend the merits of Biden's policy actions, but the critique here being leveled at Biden's policy actions is grounded in the reality of things that are substantially real.