Sunday, December 17, 2017

Yuan denominated oil contract finally hitting home as Trump administration preparing for economic war to save the Petrodollar

Now that Washington's gambit to try to start a war in North Korea has failed, it appears that the Trump Administration is finally recognizing that economic threats from Beijing to the long-standing Petrodollar system are now very real.  And this is in large part due to China's moving forward with a Yuan denominated oil contract that may or may not also be tied to gold sometime in the future.

Control over how oil is priced is the primary mechanism that has allowed the U.S. to print the world's sole reserve currency.  And with China set to go online with their alternatively denominated oil contract between now and early January, President Trump is preparing to accuse the Far East economy of 'economic aggression' despite the fact that Washington has used this tool, as well as many other resources, to try to dissuade any and all governments from ditching the dollar.

Just a few short days after Chinese regulators gave the greenlight to petro-yuan futures trading, signaling an escalation in the war against dollar hegemony, President Trump is reportedly set to accuse China of "economic aggression" in efforts to "undermine international order" during his national security strategy speech on Monday. 
The last week has more intriguing than usual in the world of Sino-US relations - not only did China push ahead with its plans for a yuan/gold-backed oil futures contract, directly threatening the great military-servicing global petrodollar recycling scheme; but Washington appeared to do an about-face in its rhetoric towards North Korea, as Secretary of State Tillerson indicated that the US would be willing to hold talks with North Korea without any preconditions. 
Both actions could be seen as tilting towards China (obviously with the oil trading and more what China had hoped for on North Korea), appear to have prompted Trump to go on the offensive, as The FT reports, Donald Trump will accuse China of engaging in “economic aggression” when he unveils his national security strategy on Monday, in a strong sign that he has become frustrated at his inability to use his bond with China’s President Xi Jinping to convince Beijing to address his trade concerns. 
Several people familiar with the national security strategy - a formal document produced by every US president since Ronald Reagan - said Mr Trump would propose a much tougher stance on China than previous administrations. 
“The national security strategy is likely to define China as a competitor in every realm. Not just a competitor but a threat, and therefore, in the view of many in this administration, an adversary,” said one person. 
“This is not something that they just cooked up. Mar-a-Lago interrupted the campaign rhetoric, and Xi Jinping took a little gamble and came here and embraced Trump. Trump said ‘fine, do something on North Korea and on trade’, but that didn’t work out so well.” – Zerohedge
The biggest irony of course in all of this is that the U.S. has been the one to destroy the reserve currency by both removing it from a gold standard, and then printing it to infinity which has allowed for inflation to be exported to nations forced to use the dollar.  And now that China, Russia, the BRICS, and even countries in the Middle East are ready for an alternative to dollar hegemony, Trump is left with few options but to throw a tantrum against Beijing for a problem the U.S. created themselves.

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