Currency war coming up
WHILE the chance of the eruption of a conventional war between US and North Korea plus China and Russia has been relatively low, the more subtle yet equally crucial currency war has been going on for quite some time as China, Russia and many more intended to liberalize themselves from the US dollar.
Many analysts including Pat Hemasuk have come to the same conclusion that what US President Donald Trump has done lately is a clear indication he actually he did not want war to really happen.
He said that’s clear when President Trump said South Korea should pay for hosting the American THAAD anti-missile system, in line with his general narrative that America’s allies are taking advantage of US protection.
President Trump wants South Korea to pay around $1 billion for the deployment of the Terminal High Altitude Area Defense (THAAD) battery, he told Reuters.
“So what President Trump has done from the beginning, threatening North Korea by ordering naval ships and submarine to the Korean peninsula is nothing but to sell THAAD to South Korea. President Trump has been doing a good job together with those in the “deep state” who have real power and control most of the arms business in US.”
This has stirred up protests in South Korea as hundreds of protesters in the town of Seongju clashed with police last week as trailers carrying components of the US advanced missile defense system rolled through en route to a nearby installation site.
South Korea seemed to have no choice but pay for THAAD as President Trump bluntly said he will either renegotiate or terminate what he called a “horrible” free trade deal with South Korea and said Seoul should pay for the US anti-missile system that he priced at $1 billion.
The deployment of THAAD has been both divisive domestically and strained Seoul’s relationship with Beijing, which regards THAAD’s powerful radar as a security and surveillance threat. South Korean firms operating in China have been hit by consumer boycotts over the issue. Both China and Russia are quite worried about such deployment.
So both have just made their moves on the economic front with Moscow and Beijing joining forces in order to bypass the US dollar in the global markets and shifting to gold system.
They knew all too well that tons of US dollars have been printed out into the market via the quantitative easing (QE) system without any gold backing as reserves. China, as a major creditor of US holding trillions of dollars in US government bonds, has been selling more of such bonds lately and using the dollars to buy assets and companies in the US instead of holding the greenback.
In order to bypass the dollar in the global monetary system and to phase-in a gold-backed standard of trade, the Russian central bank opened its first overseas office in Beijing on March 14, marking a step forward in forging a Beijing-Moscow alliance.
The new central bank office was opened at a time when Russia is preparing to issue its first federal loan bonds denominated in Chinese yuan, a move that was widely viewed as intended to eventually test the global reserve status of the US dollar.
Also Russia – the world’s fourth largest gold producer – is expected to become a major supplier of gold to China, the probability of a scenario hinted by many that Beijing is preparing to eventually unroll a gold-backed currency.
But to get out of the dollar is not that easy as Russia could be blocked from the SWIFT system which provides secure worldwide interbank financial telecommunication for financial transfers. Both Russia and China are working out an alternative system just in case they are blocked from SWIFT.
Earlier China had established the Asian Infrastructure Investment Bank (AIIB), a multilateral development bank that aims to support the building of infrastructure in the Asia-Pacific region, which has been seen by many as an alternative to the Asian Development Bank and World Bank, controlled by US and its allies.
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Top: Coins against a backdrop of fire. Photo: Zechariah Judy
By Kowit Sanandang
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