It’s not just oil-for-yuan or oil-for-gold. Here’s two more nails the Chinese just hammered into the U.S. Dollar Coffin…
Two pieces of news have recently surfaced that while on the surface signal a bunch of legalese and market mumbo-jumbo, they are two more clear examples of what is looking more and more like the U.S. dollar’s “death by a thousand cuts”.
First, one of China’s Credit Rating Agencies, Dagong Global Credit Rating Co, which would be akin to Standard and Poor’s in the U.S., has cut the United State’s sovereign rattings from A- to BBB+
Here’s more from Reuters:
China’s Dagong Global Credit Rating Co, one of the country’s most prominent ratings firms, on Tuesday cut the local and foreign currency sovereign ratings of the United States, citing an increasing reliance on debt in the world’s largest economy.
Dagong said in a statement that it cut the sovereign ratings to BBB+ from A- and also placed them on a negative outlook.
The growing reliance on the debt-driven mode of economic development will continue to erode the solvency of the U.S. federal government, the Beijing-based ratings agency said.
Of course, we have been talking about the unsustainability of this debt-based paradigm ad nauseum, but what we are seeing now are the incremental steps towards the unsustainable paradigm being laid bare for all to see.
A change from A- to BBB+ isn’t huge, earth shattering on it’s own, but it is another straw on the camel’s back.
But that’s not the only nail that was hammered yesterday.
President Xi Jinping himself is now forced to make a move one way or another in the global chess match as President Trump called him up, personally, to not just talk about North Korea but to voice his “disappointment” with China’s trade deficit.
Here’s more on that from Zero Hedge:
While President Trump “expressed hope” that the resumed inter-Korean dialogue may prompt a change in North Korea’s destructive behavior, perhaps more notable was the fact that President Trump used the call “express disappointment that the United States’ trade deficit with China has continued to grow” and made clear that “the situation is not sustainable.”
Indeed – China’s Trade Surplus with the US grew notably in Trump’s first year…
On the surface, President Trump is pounding his chest and expressing disgust, but under the surface, China holds the upper hand.
China does not owe the United States trillions of dollars, nor is it China that counts on the U.S. for all sorts of finished goods that ordinary citizens use on a daily basis.
It’s the other way around. The U.S. owes China money, and there will come a point, where China will just write-off the loss and move-on.
That point will be reached when the U.S. pushes China too far, or, from a stacker perspective, when the West is no longer willing to supply China with bargain basement pricing of actual, physical gold & silver.
While we don’t know when that day may come, we do know it is fast approaching.
Between IMF SDR basket inclusion to ECB and Germans holding Yuan foreign currency reserves, to the Shanghai Gold Exchange to the imminent launch of the petro-yuan and the development of international payments competitor to the Western SWIFT system, here’s just two more reason’s China has to ditch the dollar sooner than later.
– Half Dollar