In April 2024, the Asian currency war is about to start, and the United States wants to kick China out of SWIFT while harvesting Asian countries?
With the arrival of U.S. official Antony Blinken in Shanghai, the news that the U.S. wants to eat in a bowl and watch the pot intensify. This is an implicit rule of the international community, not at the table, but on the menu. Even with the yen and the won in hand, the United States is not satisfied.
So what does the United States really want to do? What does it mean if China is kicked out of the dollar?
Asian Currency Defense
Asian currency wars have become the hottest term during this period, so why is this happening? The main reason is that there are problems in the US economy and the riotous operation of the United States. The problem of inflation in the United States has always existed, and it is even getting worse.
In particular, the increasingly loose monetary policy during the epidemic has made the situation worse for the United States. By the time the Fed realized the magnitude of the problem, inflation was already out of control. The reason why the economic problems of the United States are now prominent is that the root cause is the continuous suppression of the Federal Reserve.
It has given a temporary relief to the inflation problem by raising interest rates no more than a dozen times. However, after all, the bank interest rate hike cannot solve the problem at the root, and the more it is suppressed, the rebound will only get bigger and bigger. As a result, the United States has fallen into the current situation, and even has a posture of breaking the jar and breaking it.
Originally, the Fed wanted to cut interest rates sharply because it was suffering from the foreign debt it was carrying. But for some reason, it dispelled that idea. As a result, the US dollar has risen, leading to an imminent currency war in Asia, and even keeping some countries busy.
In particular, countries such as Japan, South Korea, and India have recorded record lows in their currencies. Seeing that the strengthening of the dollar has a serious impact on their own economies, Japan and South Korea hurriedly shouted for control. And Indonesia is even more directly out of the field, and the layout is carried out by himself. It is enough to see the impact of the dollar on a number of countries.
Among them, Japan was the most severely harvested by the dollar, although it was the closest dog to the United States. But when something goes wrong, it's the first person to get a knife. Japan is not so much an ally of the United States as it is its grain reserves. According to the news on the foreign exchange market in Tokyo on April 25, the yen reached the 155.75:1 mark against the dollar.
This has already broken through the expectations of professionals for Japan's plunge. In fact, everyone guessed that the yen would fall, but they did not expect it to fall so horribly. After all, Japan is too dependent on the U.S. economy and the dollar system, and it will always be hit the hardest.
In just four days, the Japanese government had to come forward and even go to the United States with South Korea to ask for help. And South Korea is also a difficult brother to Japan, and the yen has fallen numbly, and the won is also on par with it. Even the exchange rate of the South Korean won against the US dollar has surpassed the economic crisis of 08.
The turmoil caused by the strengthening of the dollar is beyond anyone's imagination, and it once again shows the world the power of the hegemony of the dollar. Many people don't understand how the hegemony of the dollar was established, and how did the United States maintain its hegemony in this situation of multinational domination?
The main reason why the United States was able to establish such hegemony and even use the dollar as its own weapon is that it was early enough. When all countries are in a state of chaos, the United States can stand alone and even start a war for money. Relying on war and geographical advantages, it gradually grew.
At a time when all countries need to recuperate from war, the United States seized the opportunity. After World War II, it successfully established the Bretton Woods monetary system with the US dollar at its core. To tie the dollar to gold is to equate the dollar to gold.
In this way, the U.S. dollar became a storage currency and became the dominant currency in international trade. The hegemony of the dollar is established in such a situation, and it is too late for other countries to overthrow it. The United States has even used the dollar as a weapon, and it has become more than just a currency, but has been given a special meaning.
But is the hegemony of the dollar necessarily indestructible?
The dollar collapsed
Obviously, not every country is willing to submit to the United States and become the same commodity as Japan and South Korea. So the de-dollarization campaign has not stopped, but the attempt to completely eliminate the dollar will not succeed overnight.
However, these countries have also leveraged the dollar, and the dollar has also crashed. In 1960, there was a large-scale sell-off of the dollar to grab gold, which directly led to a crisis in the credibility of the dollar. In the following decade or so, there were three more large-scale sell-offs in the US dollar.
If the dollar had been pegged to gold alone, perhaps the system built by the dollar would have collapsed long ago. However, the US dollar cannot help but have a relationship with gold, and it is also linked to strategic oil resources. Although these times led to problems in the Bretton Woods system, it was still impossible to overthrow the hegemony of the dollar.
This is why the United States has been muddying the waters in the Middle East, even provoking a fight at any cost. Only in this way can it maximize its benefits and become the final winner. Although the United States has stalled on the road of demons, the position of the dollar is still difficult to shake, until one of its decisions has caused many countries to start de-dollarization.
This is a few years ago, when the United States wanted to concoct a war between Russia and Ukraine. It has always seen Russia as an adversary. Now, relying on a small fulcrum in Ukraine, Russia can be leveraged, and the United States is naturally happy. But it didn't expect it to cause a lot of problems for itself.
In order to comprehensively suppress Russia, the United States directly froze Russia's overseas dollar savings and even kicked some Russian financial institutions out of the SWIFT system. The SWIFT system is a global trade settlement system, and its introduction would mean cutting off Russia's overseas trade.
However, Russia has been prepared for a long time, and this move by the United States has not had too serious a serious impact on it. The U.S. uses the U.S. dollar as a weapon sanction, which has made many countries see its hidden dangers. As a result, they began to carry out de-dollarization moves, which led to the hegemony of the dollar began to be suppressed.
However, the family foundation gathered over the years is not easy to shake. Although de-dollarization is proceeding in an orderly manner, it is not a big problem for the United States. At this stage, the US dollar continues to strengthen, leading to turmoil in Asian currencies.
As a result, many countries that rely on the dollar system, such as Japan and South Korea, have seen their exchange rates plummet, and they cannot control it at all. The most intuitive feeling is that the price of gold is rising, and so is the price of oil. Because both are deeply tied to the dollar, they are the two most important pillars of the Bretton Woods system.
In a situation where Asian countries are complaining about hardship, China's stability is quite prominent. Just because China has been hit by the dollar can be said to be relatively small, after all, China has not stopped dollarization in the past. After Russia was sanctioned by the United States, the yuan became its only option and the best option.
This gives China the confidence and capital to embrace the boom, and many of the transactions are settled directly in renminbi rather than in dollars. For example, more than 90% of trade with Russia is settled in national currency.
Even if the US dollar continues to strengthen, it will not have much impact on the yuan. Although it can stand alone, China is also in the game, so it still does not choose to let it go. The strength of the dollar is a brutal harvest for Asian currencies, but the United States is not having a good time at home.
So I saw the news of US Secretary of State Antony Blinken's visit to China on April 24, and there was even news that the United States wanted to cooperate with China. In fact, this is not the first time that the United States has approached China for cooperation, as early as the end of 2023, high-level American officials came to China.
But this time, the United States has some bad intentions.
Exceptional status
According to April 25, 2024 local time in the United States, U.S. Treasury Secretary Janet Yellen said in an interview that there will be no sanctions on Bank of China. Previously, there was news that the United States wants to kick China out of SWIFT settlement and restrict China's economic development.
As mentioned above, SWIFT is very important in global trade, and the reason why the United States can secretly control it is only because it relies on the US dollar for settlement. In this way, no matter how you go around, you can't get around the threshold of the dollar. From these few events alone, it is enough to see that the hegemony of the dollar has been established and cannot even be shaken.
But for big countries like China and Russia, the progress of their de-dollarization has continued. Therefore, even if the United States wants to use the dollar as a weapon to suppress China, it will not have much impact. And when the United States moves out of the hegemony of the dollar, it also has to think about whether it will lead to negative effects on itself.
After all, the United States has used the dollar as a weapon one after another, which is bound to make some countries fearful, and the process of de-dollarization will be accelerated again. Therefore, the United States does not dare to implement it lightly, but they have never given up using the dollar as their own weapon.
In Russia, they used it once, and they wanted to do it again in China. However, there are many problems in the US economy now, and inflation has even crushed it to death, so it must seek external dredging. China, as the second largest economy in fact, is naturally the best choice for them.
So in this interview, Yellen never responded positively to whether to impose sanctions on the Bank of China. She even said that this would be something that the United States would be ready to use if necessary. It shows that the United States has never given up suppressing China's economy, and even if it is already mired in the quagmire, it wants to pull the other side into the water.
Even the United States wants to sanction Chinese banks, and even wants to kick China out of SWIFT settlements like Russia. But it is almost impossible to achieve it, and China's industry and manufacturing industry are developing quite well, and it has ties with many countries.
Suppose the United States really kicks China out of the SWIFT system and imposes a full range of sanctions. Then it will definitely not be able to find a second country to take China's place, and who should fill such a huge market gap. Although this is a big cake, it is also a piece of existence that is enough to support the dead.
Moreover, the United States is not sure whether it will once again spur the wave of de-dollarization in various countries after it has done so. If such a situation really arises, it will be shooting yourself in the foot. I didn't get any benefits, and I made myself a commotion.
So most of the time, U.S. officials just shout slogans, and they don't dare to do it, at least for now. And the United States is still in a contest with Russia, and now it is going to have friction with China, unless it is completely insane.
The fact that the United States kicked China out of the dollar settlement system is almost an impossible assumption at this stage. China's kicking out of the dollar settlement system does not mean anything, after all, there are many transactions in which China does not use the dollar. In response to the concerns of US officials, Chinese Foreign Ministry spokesman Wang Wenbin also responded.
He pointed out that the United States is extremely hypocritical, smearing the normal trade between China and Russia, and on the other hand, providing large-scale assistance to Ukraine to make the battlefield a miasma. In fact, this is not the first time that U.S. official Yellen has played a trick, and earlier she publicly accused China of "overcapacity".
In fact, everyone understands that she is worried that China's foreign trade status will further expand, resulting in no room for American companies to survive. Over the years, the United States has done its best to protect local companies. The slogan of supporting free trade is spoken, but various protective policies are secretly introduced.
The double standard of the United States is nothing new, after all, its hypocrisy is obvious to all. In the imminent Asian currency war, it is almost impossible for the dollar to harvest China, and if it wants to kick China out, it must weigh whether the consequences can be bearable.
Primary sources
This article was originally published in Sina Finance's report on April 25, 2024 on "The Dollar Crashes, the World Has Been Bitter for a Long Time!".
The original article was published on Xinhuanet's February 28, 2022 report on "How powerful is the US and EU kicking out some Russian banks out of SWIFT's 'financial nuclear bomb'".
This article was originally published in the Luzhong Morning Post on April 24, 2024 on the article "The United States is considering imposing sanctions on Chinese financial institutions?
This article was originally published on the Observer.com's April 26, 2024 report on "Sanctions against Bank of China?" Yellen's latest statement
The original article was published on the Observer Network on April 25, 2024 on ""Blame the Federal Reserve", many Asian countries start a currency defense war".