US frozen 300 billion dollars Russia reserve in the name of sanction over Ukraine war, the country desperately wants China to attack Taiwan in other to steal Chinese dollar reserve worth 3.3trillion dollars in the name of sanction.

US has been provoking China into conflict for a long time using Taiwan as a bait.

There have been calls in China that their government should withdraw their foreign reserve in dollars.

China has built a foreign exchange-earning economy and accumulated US$3.3 trillion in reserves over the past few decades, but such policies are outdated and need to be adjusted.

After the Russian-Ukrainian conflict, the United States has frozen US$300 billion in Russian banks. The incident shows that it is completely possible for the US to seize China’s overseas assets, particularly forex reserves, if it deems it necessary.

US inflation and foreign debt accumulation will lead to dollar depreciation. China should buy less US Treasury bonds, buy more commodities and strategic materials, and shift away from exports to domestic consumption. It also should try to fulfill the Sino-US trade agreement as much as possible. It should spend its forex reserves. All these will help promote renminbi internationalization and improve the security of China’s overseas assets. (Translator’s summary)


Today, I want to talk about the reform of the international monetary system, the security of China’s foreign exchange reserves, and the renminbi internationalization.

After the collapse of the Bretton Woods system (a monetary management system based on a link between gold and the United States dollar in 1944 to 1971), the exchange rate of gold was replaced by the US dollar. The status of the US dollar was not weakened but strengthened.
Those who study international finance were confused by such a trend.

When the dollar was backed by gold, people did not have confidence in it. How come everyone trusts the dollar when it is not backed by gold?

The only reason is that people’s confidence in the dollar has not been shaken by the collapse of the Bretton Woods system.

The international monetary system, which is now called the dollar standard, has a fundamental internal contradiction. The word contradiction is neutral without any derogatory meaning.


The US has to maintain a current account deficit in order to provide the world with dollar supply. In fact, it is providing the world with a reserve currency.


After decoupling from gold, the US dollar is purely a legal tender, which has no intrinsic value. Its value is based on American credit. What is credit? It refers to a condition that the purchasing powers of money and debt remain roughly the same. A hundred-dollar debt should not be devalued to ten dollars because of currency depreciation.

With the growth of world trade, the international demand for the reserve currency, mainly the US dollar, is also increasing.

The greater the US trade deficit, the greater the chance that the dollar will eventually depreciate. The possibility that the US will fail to comply with its credit is also growing. This issue is essentially a dilemma.

The US had a net foreign debt of US$15 trillion at the end of 2021 while the US’ foreign debt-to-GDP ratio kept surging. The dollar can still remain stable due to many reasons.

Many countries in the world, especially China, have a strong demand for the US dollar as a reserve currency. They accumulate their foreign reserves by purchasing the US treasury bonds, which represent a large portion of the US foreign debt.


Among these countries, Japan, China, Luxembourg, the United Kingdom and Ireland have purchased US$3.6 trillion of US treasuries.

If the rest of the world divests or stops buying US treasuries, the dollar will depreciate. At the same time, the inflation caused by the US’ extremely expansive monetary policy will further weaken the dollar’s status.

For quite a long time, foreign investors have been worried by the rising net foreign debt-to-GDP ratio, national debt-to-GDP ratio of the United States, as well as the extremely loose monetary policy implemented by the US over the past ten years. All these may worsen the US’ balance of payments situation while inflation will fuel the dollar depreciation.


Russian-Ukrainian conflict

Now a new problem has emerged. After the Russian-Ukrainian conflict, the US has frozen US$300 billion in Russian banks. Such a move against a nuclear power, which was out of people’s imagination in the past, seriously damaged the credit of the US.


The status of the US dollar as an international reserve currency has been further impacted by other geopolitical factors. These are the current challenges faced by the international monetary system.

China has long accumulated US$3.3 trillion in reserves through dual surpluses, namely the current and capital account surpluses. I have a few comments on this phenomenon:

First, by any measure, China’s reserves meet the forex adequacy ratio requirement.

Secondly, China’s forex reserves have an extremely low yield and focus too heavily on overseas assets. As we have a surplus in the capital account, we borrow money and remit it to the US. Therefore, a considerable part of China’s forex reserves is borrowed, but not earned from the trade surplus.

The financing cost of such a part of forex reserves is very high. Although China has US$2 trillion of overseas net assets, its investment return has always remained negative for more than ten years, or almost 20 years.

This situation is in sharp contrast with the US. The US has a net debt of US$10 trillion but receives an annual investment income of hundreds of billions of dollars. The investment income of the US in 2021 amounted to US$200 billion. This is my second point.

The third point is that the geopolitical conflict between China and the US poses a serious threat to the security of China’s overseas assets, especially its forex reserves. In fact, I have been worried about this issue for some time. The US’s freezing of Russia’s forex reserves shows that it is completely possible for the US to seize China’s overseas assets, particularly forex reserves, if it deems it necessary.

In fact, an article published by the Financial Times in December 2013 raised this issue. If the US has a conflict between China, it can seize China’s overseas assets. The US will suffer losses, but China’s losses will definitely be bigger. It will cause a serious blow to the global economy.

Biodun556:
US frozen 300 billion dollars Russia reserve in the name of sanction over Ukraine war, the country desperately want China to attack Taiwan in other to steal Chinese dollar reserve worth 3.3trillion dollars.

US has been provoking China into conflict for a long time using Taiwan as a bait.

There have calls in China that their government should withdraw their foreign reserve in dollar

exactly.

USA is in recession now so they are seriously looking for who to steal from through proxy wars.

Nancy2020:
exactly.

USA is in recession now so they are seriously looking for who to steal from through proxy wars.

Many buyers are now opting for cheap Russian oil paying in Ruble, this is terribly affecting the value of dollar

Any leader with brain should by now, know that best way to keep your country safe is keep your money and golds in your country.

That's why I think China isn't going to take over Taiwan despite the provocation. At least not anytime soon.

.

Lol. Analysis of international politics is now a full time job for some people. See them gather up there

Nancy2020:
exactly.

USA is in recession now so they are seriously looking for who to steal from through proxy wars.

Well, I would advise you to STFU and watch things as they unfold.Americans don't think from the direction you think.They are way more smarter than you could ever imagine.Before jumping into a war or triggering a proxy,the US already have list of things they want to achieve which you and I will not know.That was how many people said the US will lose its status as top1 economy and military power during the Iraq war and what happened? They are still riding.

VictorUSA1:
Well, I would advise you to STFU and watch things as they unfold.Americans don't think from the direction you think.They are way more smarter than you could ever imagine.Before jumping into a war or triggering a proxy,the US already have list of things they want to achieve which you and I will not know.That was how many people said the US will lose its status as top1 economy and military power during the Iraq war and what happened? They are still riding.

US is losing her number 1 spot in economy and military... You can disagree

Biodun556:


US is losing her number 1 spot in economy and military... You can disagree

You will keep saying this till eternity.

Biodun556:


US is losing her number 1 spot in economy and military... You can disagree

you guys have been saying it for years now ,in d next 100years enemy of USA will still be chattin the same shit but no one would ever come close