“You may return and tell Sun Quan to wash his neck: the executioner is coming.”
― Luo Guanzhong, Three Kingdoms
Written by Bryan Lutz, Editor at Dollarcollapse.com:
The amount of dollars traded by China is at inflection point.
But is it relevant enough to make a difference?
The Visual Capitalist’s latest chart provides some clarity. It compares trade in currency for the United State’s biggest global competitor, China.
In 2010, 83% of China’s trade was done in USD.
Now, it’s down to 42.8%.
The bigger difference is this:
China’s now trading internationally at 52.9% of their own currency, the Renminbi. Compared to 0.3% in 2010, that’s huge difference.
But not if you zoom out.
Zooming out you see that the Chinese Renminbi is only accounting for 7% of global trade.
The decline of USD in foreign exchange reserves has been relatively slow over the past twenty years.
Most of the world still trusts the dollar as a stable medium of exchange, but for how long?
The real threat is this:
Every currency is backed by trust.
They must trust the currency will hold its value, which is now becoming questionable for the USD.
For every USD printed, an equal amount of debt must be created.
And then, the US Treasury must find buyers for that debt.
So where does the real anxiety lay?
In the rising cost of sovereign debt, and the marketability of the bonds required to pay that debt.
For example, China has been the United State’s biggest buyer of debt. But now they’re moving from US Treasury Bonds into gold.
Business Insider writes:
China ramps up de-dollarization efforts by dumping a record amount of US bonds
“China unloaded a record volume of US bonds in the first quarter, escalating the country’s pivot from dollar-denominated assets.
According to US Treasury data cited by Bloomberg, Beijing sold $53.3 billion worth of US Treasury and agency bonds from its stockpile.
That’s above already eye-catching volumes China was offloading last year. Altogether, one estimate has calculated that the country has sold $300 billion of US Treasurys between 2021 and mid-2023. China’s selling grew to the point that markets worried about higher yields…
To diversify from the dollar, Beijing is also diving harder into purchasing gold.”
And that means, US Bonds are becoming less marketable. At least, to the United State’s Eastern competitors.
So, it looks like global trade in USDs isn’t going away anytime soon. Maybe, slowly but not instantly.
Unless, of course…
Trust is quickly lost because of insurmountable debt burdens.