Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Stock Market Intermediate Trend Intact - 25th Jan 21
Precious Metals Could Decline Before their Next Attempt to Rally - 25th Jan 21
Great Ways of Choosing Good CMMS Software for a Business - 25th Jan 21
The Dark Forces behind American Insurrectionists - 25th Jan 21
Economic Stimulus Doesn’t Always Stimulate – Pushing On A String - 25th Jan 21
Can Karcher K7 Pressure Washer Clean a Weed Infested Driveway? Extreme Power Test - 25th Jan 21
Lockdown Sea Shanty Craze - "Drunken Sailor" on the Pirate Falls Crazy Boat Ride - 25th Jan 21
Intel Empire Fights Back with Rocket and Alder Lake! - 24th Jan 21
4 Reasons for Coronavirus 2021 Hope - 24th Jan 21
Apple M1 Chip Another Nail in Intel's Coffin - Top AI Tech Stocks 2021 - 24th Jan 21
Stock Market: Why You Should Prepare for a Jump in Volatility - 24th Jan 21
What’s next for Bitcoin Price – $56k or $16k? - 24th Jan 21
How Does Credit Repair Work? - 24th Jan 21
Silver Price 2021 Roadmap - 22nd Jan 21
Why Biden Wants to Win the Fight for $15 Federal Minimum Wage - 22nd Jan 21
Here’s Why Gold Recently Moved Up - 22nd Jan 21
US Dollar Decline creates New Sector Opportunities to Trade - 22nd Jan 21
Sandisk Extreme Micro SDXC Memory Card Read Write Speed Test Actual vs Sales Pitch - 22nd Jan 21
NHS Recommends Oximeter Oxygen Sensor Monitors for Everyone 10 Months Late! - 22nd Jan 21
DoorDash Has All the Makings of the “Next Amazon” - 22nd Jan 21
How to Survive a Silver-Gold Sucker Punch - 22nd Jan 21
2021: The Year of the Gripping Hand - 22nd Jan 21
Technology Minerals appoints ex-BP Petrochemicals CEO as Advisor - 22nd Jan 21
Gold Price Drops Amid Stimulus and Poor Data - 21st Jan 21
Protecting the Vulnerable 2021 - 21st Jan 21
How To Play The Next Stage Of The Marijuana Boom - 21st Jan 21
UK Schools Lockdown 2021 Covid Education Crisis - Home Learning Routine - 21st Jan 21
General Artificial Intelligence Was BORN in 2020! GPT-3, Deep Mind - 20th Jan 21
Bitcoin Price Crash: FCA Warning Was a Slap in the Face. But Not the Cause - 20th Jan 21
US Coronavirus Pandemic 2021 - We’re Going to Need More Than a Vaccine - 20th Jan 21
The Biggest Biotech Story Of 2021? - 20th Jan 21
Biden Bailout, Democrat Takeover to Drive Americans into Gold - 20th Jan 21
Pandemic 2020 Is Gone! Will 2021 Be Better for Gold? - 20th Jan 21
Trump and Coronavirus Pandemic Final US Catastrophe 2021 - 19th Jan 21
How To Find Market Momentum Trades for Explosive Gains - 19th Jan 21
Cryptos: 5 Simple Strategies to Catch the Next Opportunity - 19th Jan 21
Who Will NEXT Be Removed from the Internet? - 19th Jan 21
This Small Company Could Revolutionize The Trillion-Dollar Drug Sector - 19th Jan 21
Gold/SPX Ratio and the Gold Stock Case - 18th Jan 21
More Stock Market Speculative Signs, Energy Rebound, Commodities Breakout - 18th Jan 21
Higher Yields Hit Gold Price, But for How Long? - 18th Jan 21
Some Basic Facts About Forex Trading - 18th Jan 21
Custom Build PC 2021 - Ryzen 5950x, RTX 3080, 64gb DDR4 Specs - Scan Computers 3SX Order Day 11 - 17th Jan 21
UK Car MOT Covid-19 Lockdown Extension 2021 - 17th Jan 21
Why Nvidia Is My “Slam Dunk” Stock Investment for the Decade - 16th Jan 21
Three Financial Markets Price Drivers in a Globalized World - 16th Jan 21
Sheffield Turns Coronavirus Tide, Covid-19 Infections Half Rest of England, implies Fast Pandemic Recovery - 16th Jan 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

U.S. Isolated in Opposition to Chinese Bank

Politics / Global Financial System Mar 31, 2015 - 03:32 PM GMT

By: John_Browne

Politics

Over the past few decades while the economic power of the Chinese has grown exponentially, many observers have been surprised by the relative willingness of China to operate within the financial and economic framework established by the dominant Western order. But it should now be blatantly clear that Beijing prefers to act slowly, deliberately and quietly to advance its agenda. This is the case with the establishment of the Asian Infrastructure Investment Bank (AIIB), a Chinese-led lending institution which could emerge as an international rival to the World Bank and the International Monetary Fund. Such an institution could support Beijing's political interests by controlling the flow of infrastructure financing that is vital for developing economies. As we all know, money can often buy loyalty.


Currently the regional infrastructure lending in Asia is led by the Asian Development Bank (ADB), modeled after the U.S.-dominated World Bank. Founded in the 1960s and headquartered in the Philippines, the ADB is headed by a Japanese appointee who enjoys the support of a 25% U.S./Japanese block vote, dwarfing China's 6 percent. But according to 2013 figures from the World Bank, and excluding the European Union's GDP of $17.5 trillion, China's GDP, at $9.2 trillion, now is second only to that of the U.S. with $16.8 trillion. It should have been clear that China would not accept such relegation indefinitely.

In October of last year China and India led 19 other Asian and Middle Eastern nations in the formation of the AIIB, which was initially capitalized with more than $50 billion. The United States, angry at what it perceived as a clear threat to its domination, supported by European and Japanese interests, leaned heavily on its allies not to join. Notably absent from the AIIB launch celebrations were the important Asian nations of Australia, Japan and South Korea, all very close allies of the U.S. However, once China decided to yield veto power, some Western interests appear to have reconsidered their opposition.

The big blow came in mid-March when the United Kingdom (despite its 'special relationship' with the United States) decided to join. This in turn encouraged other powerful EU nations, including Germany, France and Italy, to jump in as well. On March 26th, even South Korea joined, bringing the total AIIB membership to 37 nations, including 9 non-regional countries. This clear move to support China's campaign for greater regional power left the United States notably isolated. In response to the decision from London to lend its support, a US government official told the Financial Times, "We are wary about a trend toward constant accommodation of China, which is not the best way to engage a rising power."

The strength of support for the AIIB could be another step towards the 'de-dollarization' that many expect to be the endgame of Chinese economic policy. The loss of the U.S. dollar's coveted position as the international reserve currency would be a direct threat to America's ability effectively to set world interest rates and to create seemingly limitless fiat dollars without the need to finance them in free markets. The AIIB represents one more indication that the 'old' order of dollar hegemony may be nearing an end to be replaced likely by a Chinese-led currency, perhaps even one linked to gold.

The ADB argues that there is an $8 trillion infrastructure gap in Asia and that investment there will yield true economic growth and wealth creation. However, the Japanese fear that China will try to tie and even annex Asian countries via a network of strategic pipelines, railways and roads. In all likelihood, China may use the newly established AIIB to do just that.

Under President Obama, America is appearing weak on many fronts, including defense and monetary affairs. Already a combination of Obama's apparently inept foreign policy has led Chancellor Merkel of Germany to take a different posture over the Ukraine, exposing a potentially damaging split in the vitally important and longstanding NATO alliance. By leaning on its allies publicly, but ultimately ineffectively, to resist China's AIIB overtures, Obama has exposed another level of increasing diplomatic and monetary weakness.

Clearly, the Obama Administration was angered by the UK's reversal. Patrick Ventrell, a spokesman for the National Security Council, told CNNMoney that the White House had "concerns" over whether the AIIB will meet "high standards, particularly related to governance, and environmental and social safeguards." He added, "This is the UK's sovereign decision. We hope and expect that the UK will use its voice to push for adoption of high standards."

In this column we have argued at length that China likely desires to replace the U.S. dollar with its own version of an international reserve currency. Doubtless, China wants to capture the massive financial and economic privileges and power that control of such a currency bestows on its host nation.

It appears that de-dollarization is progressing slowly but surely, with the formation of the AIIB being just a single but important and highly visible step in that process. If the U.S. dollar ultimately loses its reserve status, those holding dollars or assets denominated in dollars will feel the pain. Worse still, America will lose the almost total dominance over world monetary affairs she has enjoyed since Bretton Woods in 1944. As a result, the current era of extreme dollar confidence may in the future be considered a period of dangerous delusion and willful ignorance of world events.

Subscribe to Euro Pacific's Weekly Digest: Receive all commentaries by Peter Schiff, Michael Pento, and John Browne delivered to your inbox every Monday.

By John Browne
Euro Pacific Capital
http://www.europac.net/

More importantly make sure to protect your wealth and preserve your purchasing power before it's too late. Discover the best way to buy gold at www.goldyoucanfold.com , download my free research report on the powerful case for investing in foreign equities available at www.researchreportone.com , and subscribe to my free, on-line investment newsletter at http://www.europac.net/newsletter/newsletter.asp

John Browne is the Senior Market Strategist for Euro Pacific Capital, Inc.  Mr. Brown is a distinguished former member of Britain's Parliament who served on the Treasury Select Committee, as Chairman of the Conservative Small Business Committee, and as a close associate of then-Prime Minister Margaret Thatcher. Among his many notable assignments, John served as a principal advisor to Mrs. Thatcher's government on issues related to the Soviet Union, and was the first to convince Thatcher of the growing stature of then Agriculture Minister Mikhail Gorbachev. As a partial result of Brown's advocacy, Thatcher famously pronounced that Gorbachev was a man the West "could do business with."  A graduate of the Royal Military Academy Sandhurst, Britain's version of West Point and retired British army major, John served as a pilot, parachutist, and communications specialist in the elite Grenadiers of the Royal Guard.

John_Browne Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules