My translation into English of a press conference given by the top China monetary policy expert Chen Yulu appeared in December of 2014 at American Daily Herald. Mr. Chen showed that the internationalization of the RMB had nearly doubled YOY in 2013 and reported that RMB clearing centers were opening up in major European capitals and in Asian countries allied with the US. Based on such data, he predicted meteoric growth of the RMB, namely, in 3-5 years, the Chinese yuan (RMB) could be the third most widely used currency in world trade, even though at the time it was ranked only ninth. Though Mr. Chen emphasized that China did not intend to replace the dollar in world trade, it would be hard to conclude otherwise from the facts and figures he presented.
Yesterday, a report came in regarding the Asian Infrastructure Investment Bank (AIIB), a venture launched by Beijing. Germany, France and Italy had followed Britain’s lead in joining this bank. More ominously for the petrodollar, Saudi Arabia was already a founding member. The U.S. warned other countries to “think twice” about joining. We shall examine why.
Earlier that day, we learned that Australia had also joined this Chinese banking venture.
The U.S. has at least two reasons to fear that the Third World will prefer the new bank over the World Bank:
- The World Bank is increasingly enforcing “Western values” which boil down to social Marxism, plus climate change ideology. Thus its policies encroach on Third World national sovereignties.
- The World Bank is funded essentially by Keynesian debt-based economies, notably the US, whose currency is propped up by a flimsy agreement with the Saudis enjoining the latter to sell their oil only in US dollars, which are rapidly losing intrinsic value, regardless of their apparent value compared to other currencies with debt-based “value.”
I had shown here how Keynesianism and social Marxism are the result of the same sort of mind set and carry the seeds of their own failure within them.
Financial experts have warned us that a debt based economy has an expiration date. Many people ignored the warning, putting all their faith in the petrodollar agreement, which is threatened by China. Recall the Nixon was eager for free trade with China and for the petrodollar agreement with the Saudis. How ironic – and fitting, and predictable in retrospect – that both countries have now embraced each other to the detriment of the country that lent them their strength.
I had pointed out here that the petrodollar agreement with the Saudis is a veritable pact with the devil and the ulterior motive for the shedding of US and foreign blood in proxy religious wars that invariably redound to the deaths of Christians and other minorities in Muslim countries.
Some more-moderate Republicans and orthodox investors keep insisting that the dollar continues to rise and the stock market is going up and up, so not to worry.
All very true, so far. But you can’t measure the strength of a debt-based currency against that of another debt-based currency. You need to gage it against a currency backed by a real, productive economy, like China’s, the economic giant with the largest precious metal and foreign cash reserves in the world.
Lately, the RMB has been tracking the dollar in almost a flat line, showing great stability so far. And the RMB is not backed by an agreement with the Saudis to protect them from enemies real and imagined in exchange for artificially propping up the currency. But that could change.
A scan of the above referenced Reuters article on the gaggle of European countries joining the AIIB revealed the source of U.S. concerns:
Quote: Washington has questioned whether the AIIB will have high standards of governance and environmental and social safeguards. [my emphasis]
Can you guess what “social safeguards” might include?
The U.S. dominates the World Bank, and here is a glimpse of what these “social safeguards” entail:
“JIM KIM, the president of the World Bank, wants it to promote gay rights. He has declared the “fight to eliminate all institutionalized discrimination” to be an “urgent task”. He recently put on hold a $90 m loan to Uganda’s health sector after its government introduced one of Africa’s most draconian anti-gay laws. He has ordered an overhaul of the bank’s lending policies to make sure that no loan assists discrimination. At this week’s Spring Meetings in Washington, D.C., he is convening discussions with gay activists on how best to do so.”
It seems the U.S. has transformed the World Bank into a social change agent and intends to enforce its ideas of gay marriage and the like, and that is no doubt why it is not in a hurry to join the AIIB.
The World Bank partners with Millennium Challenge Corporation (MCC), which develops guidelines for social and environmental policies for the bank. In the introduction to its pamphlet “Guidelines for Environmental and Social Assessment,” MCC writes:
“Unlike biology, gender is mutable, and women’s and men’s roles, behaviors, and responsibilities change over time and are different in different societies.”
The concept that “gender is mutable” is not further explained but it encapsulates the LGBT ideology of “queer theory,” which holds that the male-female distinction is not preset by biology but rather by individual choice. This contradicts not only common sense but the teachings of every world religion. And since no justification for this is provided in the literature targeting the lendee, it constitutes a quasi-religious decree reflecting what could be called “queer theology.” In fact, in enforcing this ideology, the World Bank is encroaching on the moral teachings, including religious teachings, prevailing in the countries to which it lends.
The environmental restrictions for lending by the World Bank prohibit lending for projects that provide the kind of amenities existing throughout the First World. It will not lend for projects involving oil refineries and most smelting processes, for nuclear power facilities or for
“Construction of motorways, express roads and lines for long-distance railway traffic and of airports with a basic runway length of 2,100 meters or more; construction of a new road of four or more lanes, or realignment and/or widening of an existing road so as to provide four or more lanes, where such new road, or realigned and/or widened section of road would be 10 kilometers or more in a continuous length.”
Thus it in effect supports a worldwide caste system where only the rich countries that can afford their own financing may enjoy modern highways and modern international airports.
Assuming the AIIB’s lending rates are reasonable, then as long as the Chinese bank imposes none of the above-outlined ideologically based restrictions on its lendees, it will easily compete with our sclerotic and moribund U.S. hegemony.
After all, in business, the formula for success is filling the voids left by competitors’ offerings of goods and services.
The lack of respect for clients’ sovereignty in making free-market choices is a hidden reason for a decline in the prestige of the World Bank, and since the trend in BRICS countries like China is to trade in non-dollar currencies, this dedollarization policy can only lead to a decline in the dollar in the future.
U.S. enforced social and environmental Marxism is slowly turning financial clients away and the Chinese are providing a vital missing ingredient, namely, respect for thenational sovereignty of client countries.
The importance of sovereignty and the way it is abused by the U.S. is discussed here and here by yours truly at American Daily Herald and here and here by international law expert Bernard Chalumeau (in translation) at my own web site. Europe’s participation in the AIIB is a natural and predictable reaction to this lack of respect for it sovereignty.
So with all these strikes against the U.S.-backed World Bank and its absurd policies, and in view of the dedollarization policies of China and the BRICS, what kind of future can we reasonably expect for the dollar?
AMEinfo.com, a Middle East trade site, carries a little-noticed fact that could be a game changer:
“The Saudi minister supported China’s plan to establish the Asian bank for investment in infrastructure projects in which the kingdom agreed to become a member.“
Obviously, the Saudis are turning away from their one-time most favored trading partner and embracing the world’s largest economy, one that is perfectly capable of providing the same kind of military guarantees to the Saudis as the U.S. now provides.
Can we look forward to a “petroyuan” in the not-so-distant future?