In what is being dubbed as one of the ‘final steps toward a one world or global currency’ China’s renminbi will be initiated into the IMF’s basket of currencies, known as SDRs (Special Drawing Rights), on October 1st. Prior to renminbi-inclusion, the SDR consisted of the USD, yen, GBP and euro. The renminbi’s acceptance will have global ramifications from a trade and geopolitical standpoint as leading economies are linked and supported by one quasi-currency. This is very dangerous, and we’re going to explain why this week…
We find it more than coincidental this is happening at a time when investment into gold has surpassed all other demands, including jewellery, for the first time in history. As the U.S. Dollar takes a more shared role with respect to its status as the world reserve currency, the opportunity is rapidly approaching for countries such as China and Russia to no longer have to conform to an American policy world…
This transition will present numerous opportunities not just in precious metals, but in commodities as a whole. You need to understand just how much power China will now have on the global stage.
According to the IMF, “The SDR is an international reserve asset, created by the IMF in 1969 to supplement its member countries’ official reserves.” Its main assets at inception were gold and the USD…
U.S. needs China to Bolster SDR Global Currency
Many, including author and financial war game expert, Jim Rickards, are expecting the IMF to have the last clean balance sheet following the next global debt crisis. A forthcoming bailout of the United States, Japan and other heavily indebted sovereign nations via the issuance of SDRs by the IMF could be in the cards…
The IMF touted itself by stating,
“more recently, the 2009 SDR allocations totaling SDR 182.6 billion played a critical role in providing liquidity to the global economic system and supplementing member countries’ official reserves amid the global financial crisis.”
Remember, the Fed’s balance sheet has already been tapped and sits at $4.5 trillion. The Fed won’t be there to bail out big banks and the rest of America when the next crisis hits, unless it wants to turn U.S. dollars into confetti overnight.
Federal Reserve balance sheet sits stubbornly above $4 trillion
Until October 1st arrives, the value of the SDR is currently based on a basket of four major currencies (all heavily indebted nations): U.S. dollar, euro, Japanese yen and the pound sterling.
China to join SDR Global Currency
The Chinese renminbi will be the fifth currency added to the basket. However, it will instantly jump to the 3rd most important currency in the SDR basket. Nearly an 11% SDR total allocation will be given to the renminbi – ahead of the yen and GBP. This is huge for China’s global power standing. Currencies are selected “due to their importance in the world’s trading and financial systems,” according to the IMF…
And what happened last week reveals the speed at which the World Bank hopes to entrench the renminbi into the global currency bloc…
On August 12th, the World Bank announced it would issue $2.8 billion worth of SDR bonds in China this month. “The bonds will be denominated in SDRs and payable in Chinese renminbi (RMB),” according to the World Bank. In conjunction with this, China Development Bank will also issue between $300 million to $800 million of SDR notes.
Key fact: SDR bonds issued by the World Bank are different than SDR units or currency issued by the IMF. The Epoch Times recently explained the key differences in regard to the coming SDR bond issuance in China:
“In fact, they are a derivative of it. When the World Bank unit called International Bank for Reconstruction and Development (IBRD) issues the bonds, it receives payment in yuan from the Chinese market or at first from the issue’s underwriter, the Industrial and Commercial Bank of China.”
What does it cost a central bank to buy SDRs? Not much… just the cost of printing domestic currency. SDRs represent a promise to be repaid or exchanged by currencies held within the SDR bloc. This is why membership is key to global influence.
SDRs, via the IMF, are effectively another means to create, distribute and spend currency that previously did not exist. The rise of Special Drawing Rights has been designed to spread risk across major countries and currencies of the world. The West, now heavily indebted, is ready for China to shoulder some of that risk in exchange for giving the Asian nation tremendous global influence.
China’s Global Clout Rising with SDR Currency Allocation
China has long criticized U.S. dollar hegemony and argued for a seat at the international monetary table for years. The current governor of the PBOC, Zhou Xiaochuan, wrote in 2009 that, “Special consideration should be given to giving the SDR a greater role. The SDR has the features and potential to act as a super-sovereign reserve currency.”
The architects of the SDR currency may have something much more ‘global’ in mind…
Valentin Schmid of Epoch Times, wrote that:
“Now that the first issuance is well underway, it is easy to lever up the balance sheets of international development organizations and keep issuing-or printing-SDR obligations even in the trillions until even private market actors support and accept them. Once the SDR is widely accepted as payment, the IMF could just redeem all outstanding local currencies for SDR and the world would not only have a new reserve currency, but just one global currency.”
James Rickards told Epoch Times in early 2016 that:
“What you are going to see is world money. You are going to see the IMF print Special Drawing Rights (SDR). It’s a geeky name but it’s a kind of world money printed by the IMF. They’ll flood the world with trillions of SDRs.”
With the first $2.8 billion SDR bond set to be issued in China this month, the communist nation must be satisfied with how things are unfolding. Entering the elite currency bloc in 2016, amidst such global turmoil, is as clear a sign as any that global elites are preparing to dilute their reliance on the U.S. dollar.
Including Renminbi in Global Currency SDR | A Risky Move for America
Bringing China into the mix is a double-edged sword for Western leadership. China has shown interest for many years to be part of ‘the club’ in respect to gaining access and influence within the IMF and World Bank… In 2016, after decades of envious growth, its economy, population and GDP clearly justify inclusion. It is the world’s second largest economy after all. However, China may be realizing the SDR package looked better than the contents inside…
Every nation involved is drowning in debt with little to show but anemic growth and declining populations. The West has become as dependent on China as she is them. This may explain China’s emboldened stance across the world in regions as diverse as Africa, the South China Sea and even Syria. China knows it is now irreplaceable to the global economy and monetary system… this is why it is taking bold and uncharacteristic military stances of late.
* Click here to read our report on China’s power grab in Africa and the impacts on junior miners.
China Sends More Troops to Back Assad
We’ve discussed the shadow wars being fought within Syria under the guise of targeting ISIS for years now. In a January 2016 report titled Using Oil as a Weapon, we outlined Saudi Arabia’s motives to crush the price of oil. In short, everyone is in Syria for their own reasons, the least of which has anything to do with the humanitarian crisis.
China pushing further into the fray in support of Russia could not only heat up the shadow war in the Middle East, but decide the victor. The communist nation is reportedly sending thousands of more troops to Syria to aid and better train Assad’s troops. The intent is to take their involvement in Syria from discreet to direct – showing support for its allies Iran, Syria and Russia while quelling Islamic extremism. Zero Hedge broke the story in an article titled China Sides With Russia In Syrian War, Will Provide “Aid And Military Training” To Assad.
As the renminbi increases in global trade, so will China’s military presence around the world
The Director of the Office for International Military Cooperation of China’s Central Military Commission, Guan Youfei, visited Damascus last week for talks with Syrian Defense Minister Fahad Jassim al-Freij.
A Chinese news agency paraphrased Guan as saying:
“China and Syria’s militaries have a traditionally friendly relationship, and China’s military is willing to keep strengthening exchanges and cooperation with Syria’s military.”
This is a radical departure from China’s past, almost isolationist, foreign policy towards regions outside its sphere of economic and military influence. So, why is China really in Syria?
To support Russia and minimize American influence. The stakes? The European energy market.
In late-2015, Professor Mitchell Orenstein of the Davis Center for Russian and Eurasian Studies at Harvard University, wrote,
“Most of the foreign belligerents in the war in Syria are gas-exporting countries with interests in one of the two competing pipeline projects that seek to cross Syrian territory to deliver either Qatari or Iranian gas to Europe.”
The war in Syria expanded to Iran-based air strikes this past week as Russia “…struck Islamic State targets in Syria’s Deir al-Zor province, destroying two command posts and killing more than 150 militants,” according to Reuters.
Russia blatantly rejected U.S. suggestions its co-operation with Tehran might violate a U.N. resolution. These were the first airstrikes carried out by Russia from Iran.
In a continued trend of blatant disrespect, Major-General Igor Konashenkov commented, “It’s not our practice to give advice to the leadership of the U.S. State Department.”
In other words, shut up and sit down, America.
The route of the pipeline being stealthy fought over is mapped below:
Why is this a must win for Iran and Russia?
Both Iran and Russia have been reeling under low oil prices, and they are desperate to control exports for European energy markets. To lose that marketplace would be the end of both countries’ geopolitical ambitions.
Professor Mitchell Orenstein went on to explain,
“…in 2009, Qatar proposed to build a pipeline to send its gas northwest via Saudi Arabia, Jordan, and Syria to Turkey… However, Syrian President Bashar al-Assad refused to sign the plan; Russia, which did not want to see its position in European gas markets undermined, put him under intense pressure not to…”
The crux of the matter is that Russia’s Gazprom sells nearly 80% of its gas to Europe. Below is an excerpt from Middle East Eye, which highlights the Kremlin’s moves back in 2010:
“Russia put its weight behind “an alternative Iran-Iraq-Syria pipeline that would pump Iranian gas from the same field out via Syrian ports such as Latakia and under the Mediterranean.” The project would allow Moscow “to control gas imports to Europe from Iran, the Caspian Sea region, and Central Asia.”
The West is being forced to let China into their club in a bid to justify the creation of a one world currency; but in doing so, China is exacting its own trump card in geopolitical regions that will benefit itself and its friends. A stronger China is a stronger Russia. United, the two rising powers create a weaker United States and have the potential to sway European powers such as Germany to their side, as well as the energy market.
A Quantum Leap for China
What went off with little fanfare in the West is being hailed in the East as perhaps the greatest scientific invention in 50 years. China just launched a first of its kind, supposed unhackable satellite into space potentially capable of quantum communications this past week. And there are rumours that Russia helped provide IP for the project in exchange for joint usage.
“Researchers around the world have successfully sent quantum messages by land. But a true satellite-based network would make it possible to send quickly encrypted messages in an instant around the world and open the door to other possible uses of the technology.”
China has publicly stated they intend to use this for defence purposes, namely in the fight against an Islamist insurgence.
“The newly-launched satellite marks a transition in China’s role – from a follower in classic information technology development to one of the leaders guiding future achievements,” Pan Jianwei, the project’s chief scientist stated.
This satellite could be a game-changer for space militarization and secure communication. And the US is unsure what to make of it all… ten years ago a military move like this would have never happened without America’s blessing. Now, being accepted in the SDR and as a global economic power, China makes its own geopolitical decisions without even consulting the White House.
Don’t think China’s enemies in the South-China sea conflict, who are largely American allies, are not watching in dismay as Russia and now China step into the Middle East with an air of confidence not seen in at least 30 years. The rise to prominence, both militarily and economically, of China is here to stay. And the larger the renminbi weighting in the SDR, the more permanent its power will be.
The U.S. dollar and U.S. hegemony are not what they used to be…
As the renminbi continues to grow in universal appeal and integration via SDRs and SDR bonds, expect China to become more emboldened in the global arena. One look at Chinese investment in Africa will tell you how serious they are…
A final, perfect example of China’s rising global clout can be seen in a $2.65 billion deal, inked in June, for the Tenke mine in the southeastern part of the Democratic Republic of the Congo (DRC) – arguably the most corrupt nation on earth.
The deal makes China the world leader in electric battery technology due to its control of over 62% of the global cobalt market, according to the Financial Times. China receives somewhere between 93% and 99% of its cobalt from the DRC… it had to secure this mine – and it did.
Can you imagine the U.S. not beating China to this mine 10 or 20 years ago?
It has become painfully obvious that the U.S. needs China to make the SDR a viable currency bloc. It knows that when the next crisis hits, and it will, China has to be involved in the bailout for the world to not completely give up on the U.S. dollar.
With its stature rising, Russia will use China to do its bidding; and the West will have to comply more than not if it wants to lean on China’s economic growth to accomplish its goal of a ‘one world currency’.
All the best with your investments,
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