Thread by @MichaelMburu_

CHINA has a brilliant strategy to defeat the dollar. What is it & why?

THREAD
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It's easy to forget that despite the US Dollar & The Pound hegemony that has cemented the west as the financial powerhouse, it's China that invented PAPER MONEY.

In the 7th century 1200 years ago when Marco Polo walked into the courts Kublai Khan the grandson of Genghis Khan he found what was to be the first fiduciary currency using paper money based on government reputation and threats.

First forward to 800 years,,,, what happened?

In short a feudal political society driven by trade as opposed to war created a political system that disliked territorial expansion.

First forward to 2019 under the PRC feudalism ended & in 30 years China has grown to become,

- The 2nd World Power
- The Largest Exporter

Still despite being the world's largest exporter, the Yuan doesn't command international clout.

The dollar is the benchmark currency.

- 2/3rds of all central bank reserves are in dollars.
- 40% of all debt globally is in dollars.

Why is China finding it hard to sell the Yuan?

To find out why we need to know what makes the dollar a reference currency, it's OIL.

By the US coercing Saudi Arabia to use the $ in the largest global commodity product, Nixon cheekishly positioned the $ as the global trade benchmark currency.

That ensured the dollar was in huge demand that it has basically allowed the US government to print money without inflicting inflation on their economy.

But now China wants to flip this established order. 😆

China has officially surpassed the US as the largest oil importer.

This is where the pieces start falling into place.

Oil is the largest globally traded commodity product. By coercing Saudi Arabia to use the $, the US taught China a good lesson.

Behold the PETROYUAN.

China is now forcing all countries it buys oil from to use the Yuan.

Russia, Angola and now Xi Jin Ping's recent visit to Venezuela has now brought three countries under the new PETROYUAN.

But still they & most of the economies don't want to commit to the Yuan. Why?

DEVALUATION.

For China to maintain it's large exports they need to be cheap.

Hence the constant devaluation being done on the Yuan by the Chinese government.

As a work around to this China has committed to these countries to back their Yuan's with Gold.

This is working to convince them and convince others as it allows countries to escape US sanctions.

SAUDI ARABIA needs to accept just a portion of Yuan and that's it!

Let's be honest we know how backing FIAT with gold ends.

Eventually the banks end up printing more money via loans than they can back & when clients come to collect the gold the whole pyramid scheme collapses.

But doing so means also China will eventually have to open up more so as to assure & guarantee investors security.

Why would I want to store oil futures in a Chinese bank that can delete my account with just a phone call from the PRC?

Will China accept this trade off?

THE END