If you
leave your sliding glass door open, you might let in a stray cat, raccoon, or
bugs without knowing it.
Some
intruders are worse than others. All can be annoying. But let in a thief, who
robs your home... and it only takes that one time to change your life
forever.
The U.S.
has essentially left their “sliding glass door” open, and on March 26 China is set to become
the intruder that may very well deal a death blow to the dollar.
China
Prepares Death Blow to the Dollar
On
March 26 China will finally launch a yuan-dominated oil futures contract. Over the
last decade there have been a number of “false-starts,” but this time the contract has
gotten approval from China’s State Council.
With that
approval, the “petroyuan” will become real and China will set out to challenge the “petrodollar” for
dominance. Adam Levinson, managing partner and chief investment
officer at hedge fund manager Graticule Asset Management Asia (GAMA),
already warned last year that
China launching a yuan-denominated oil futures contract will shock those
investors who have not been paying attention.
This
could be a death blow for an already weakening U.S. dollar, and
the rise of the yuan as
the dominant world currency.
But
this isn’t just some slow, news day “fad” that will fizzle in a few days.
A Warning
for Investors Since 2015
Back
in 2015, the first of a number of strikes against the petrodollar was dealt by
China. Gazprom Neft, the third-largest oil producer in Russia, decided
to move away from the dollar and
towards the yuan and other Asian currencies.
Iran
followed suit the same year, using the yuan with a
host of other foreign currencies in trade, including Iranian oil.
During
the same year China also developed its Silk Road, while the
yuan was beginning to establish more dominance in the European markets.
But
the U.S. petrodollar still had a fighting chance in 2015 because China’s oil
imports were all over the place. Back then, Nick Cunningham of OilPrice.com wrote…
Despite
accounting for much of the world’s growth in demand in the 21st Century,
China’s oil imports have been all over the map in recent months. In April,
China imported 7.4 million barrels per day, a record high and enough to make it
the world’s largest oil importer. But a month later, imports plummeted to just
5.5 million barrels per day.
That
problem has since gone away, signaling China’s rise to oil dominance…
The
Slippery Slope to the Petroyuan Begins Here
The
petrodollar is backed by Treasuries, so it can help fuel U.S. deficit spending.
Take that away, and the U.S. is in trouble.
It
looks like that time has come…
A death
blow that began in 2015 hit again in 2017 when China became the world’s largest consumer of imported crude…
Now that
China is the world’s leading consumer of oil, Beijing can
exert some real leverage over Saudi Arabia to pay for crude in yuan. It’s
suspected that this is what’s motivating Chinese officials to make a
full-fledged effort to renegotiate their trade deal.
So
fast-forward to now, and the final blow to the petrodollar could happen
starting on March 26. We hinted at this possibility back in September 2017…
With
major oil exporters finally having a viable way to circumvent the petrodollar
system, the U.S. economy could soon encounter severely troubled waters.
First of
all, the dollar’s value depends massively on its use as an oil trade vehicle.
When that goes away, we will likely see a strong and steady decline in the
dollar’s value.
Once
the oil markets are upended, the yuan
has an opportunity to
become the dominant world currency overall. This will further weaken the
dollar.
The
Petrodollar’s Downfall Could be a Lift for Gold
Amongst
all the trouble ahead for the dollar, there are some good news too. The U.S.
might have ditched the gold standard in the 1970’s, but with gold making a
return to world headlines… we could see a resurgence.
For the
first time since our nation abandoned the gold standard decades ago, physical
gold is being reintroduced to the global monetary system in a major way. That
alone is incredibly good news for gold owners.
A
reintroduction of gold to the global economy could result in a notable rise in
gold prices. It’s safe to assume exporters are more likely to choose a gold-backed financial
instrument over one created out of thin air any day of the
week.
Soon
after, we could see more and more nations jump on the bandwagon, resulting in a
substantial rise in gold prices.
https://www.zerohedge.com/news/2018-03-22/china-one-signature-away-dealing-dollar-death-blow