May 6, 2013 Posted By Jonathan Stacke In Featured, General, News, Uncategorized Tagged Bitcoin, China, US, USD Comments 15
http://www.thegenesisblock.com/bitcoin-the-newest-tool-in-chinas-currency-war-chest/
Throughout history wars have been fought for a number of reasons, not the least of which is economic gain. The traditional means to that end has been physical combat, but were now in a new era an era where wars are increasingly fought with technical and financial means. The US has already fallen victim to widespread cyber attacks originating in China and is suspected of conductingits own technological attacks on others.
The recent economic crisis showed the world how susceptible even powerful nations are to financial tumult. Displacing the USD as the global reserve currency would put China closer to their explicitly stated aspirations without ever having to engage the worlds strongest military.
At the end of last week China Central Television, a state-run broadcaster, aired a documentary offering an overview of bitcoin and its potential benefits. Given the tight controls the Chinese government has over mainland media, this was not just tacit approval from the worlds second largest and centrally-run economy. It was a continuation of an ongoing series of rhetoric and actions to undermine the US Dollar, as well as destabilize the beneficiary of global reserve currency status: the United States.
[h=2]China Wants to Remove the US Dollars Reserve Currency Status[/h]
(courtesy of wikipedia)
Since the end of World War II, the US Dollar has enjoyed the benefits of being the worlds reserve currency. The dollar has remained strong as a result of being the denominating currency of roughly 60% of global bank and sovereign foreign currency reserves, as well as the de facto medium of exchange for major commodity transactions. The reserve currencys issuing nation receives a number of unique benefits, not the least of which is the ability to borrow money at significantly lower rates, as has been heavily taken advantage of by the US.
China has been outspoken for years about their desire to find a replacement for the USD as the worlds reserve currency, citing the dollars susceptibility to volatility and inflation. That concern is not new to the global stage and was famously addressed in 1971 when US Secretary of the US Treasury John Connally told a group of European finance ministers that the dollar was our currency, and your problem.
Since the global financial crisis began China has been on an unabated campaign to displace the dollars coveted position bitcoin provides a potentially game-changing tool in that arsenal. Below is a brief timeline of the escalating currency war China has openly waged:
- March 2009 China central bank governor zhou xiaochuan appeals to the g20 to create a new currency standard to replace the dollar as global reserve. Keep in mind that bitcoin was in its infancy when this recommendation was made this appeal likely would have referred to a basket of many currencies or notes issued by the International Monetary Fund.
- September 2012 China announces it will begin selling oil in currencies other than the dollar. Since the 1970s, global oil sales have been conducted in dollars as a result of longstanding diplomatic agreements the US made with major oil producing nations.
- September 2012 A member of chinas commerce ministry publicly recommends using their position as Tokyos largest foreign creditor to launch a bond attack on Japan.
The comments were made amid escalating territorial disputes and suggested China impose sanctions on Japan in the most effective manner by selling large quantities of Japanese bonds to drive up the neighboring countrys borrowing costs.
Worth noting: China is also the US top foreign creditor, holding more than 7% of outstanding US debt. - March 2013 Chinese central bank Deputy Governor Yi Gang declares china is fully prepared for a currency war, specifically noting China will take into full account the quantitative easing policies implemented by central banks of foreign countries.
- March / April 2013 China bypasses the USD as an intermediary of exchange by opening direct swap lines with australia and brazil to build trade with the two nations without requiring a facilitating swap to USD.
If China successfully aids the proliferation of bitcoin, the implications on the global currency system could be monumental. Rather than having to use USD as an intermediary currency or establish swap lines to support international trade, a world conducting trade with bitcoin would mean the USD currently used for this purpose would be leaked as additional supply in the Forex markets, driving down the value of USD and driving up borrowing rates for the US. This change, on a large scale, would drastically accelerate the effects of the inflationary policies already taken up by the Federal Reserve. A significant inflationary trend in USD could potentially create a devastating cycle as global banks looking to preserve their wealth seek alternative reserve currencies, even further reducing the dollars value.
The effect in China and on the bitcoin market is already being realized. Bitcoin wallet software has been downloaded nearly 40,000 times since the program aired three days ago thats almost 7 times the number downloaded in the US over the same period and 13 times the rate of downloads in China leading up to the report.
If this trend continues, we may have just witnessed the single most significant event in bitcoin history since the currencys inception.
Guys, I recently did some back of the envelope calculation to get an idea of the worth of Bitcoin, and it startled me the figures I saw on my calculator.
Bitcoin is a global currency. Every currency in the world is competing to buy this currency. To simplify my calculation, I considered just the dollar vs Bitcoin. Turns out the just the Bank reserves and time deposits stand at about $10.4 trillion. Whereas there are around 11 million BTCs.
If 0.1% of cash and bank deposit go towards buying Bitcoin just from the US, Bitcoin would stand at $945.... Mind it, this is NOT M2 or even M3. This means I am not counting people using money in their savings account, CDs, Stocks and bonds to buy bitcoin.
Now add Europe, Japan, the whole EMEA region, the far-east.. People say Bitcoin is in a bubble and when you ask them if they even know how to purchase bitcoin, they are dumbfounded. I first posted a thread here on this site right after buying bitcoin for $4... Guys.. bitcoin is in its initial stages. Open an account at https://www.fybsg.com/ or Mtgox or any other exchange, wire them the money and buy and hold this currency. Buy it on behalf of others. Sell this currency in Pakistan as a business..
All the best!
