China Pulling The Strings

September 10, 2014

China announced swap agreements with Argentina over this past week-end, they also said their mutual trade would be settled in Renminbi/yuan.  If you recall, Argentina just recently defaulted on debt.   A New York judge then ruled against Argentina's plan to hopefully restructure.  This looks to me like China has ruled against the New York judge!

China has also in recent months been globetrotting while putting in place "swaps" and lines of credit with many potential trading partners.  Unlike the U.S., they have not ignored African nations either.  They have also set up "yuan trading" hubs in some very "Western" nations including Britain, Germany and France.  Very methodically, China has put in place trade and finance systems which have no need for dollars and/or clearing functions performed by the U.S.

I mentioned Argentina because they are the latest deal struck by China and you'll notice that dollars "were" the alternative currency in Argentina ...until now.  This brings us to Russia.  We have for the last 6 months been putting more and more pressure on them in my opinion with the hopes of starting a war.  A war would surely "distract" attention from our current economic failings and in my opinion it is viewed as "necessary" by our rulers.

I also wanted to mention Argentina not because they had previously been under the U.S. dollar umbrella but because China has come to the rescue so to speak.  In the case of Russia, even assuming the Western sanctions do work and they do not throw the "natural gas card" at Europe, do you really believe China will let Russia fold?  Not that I believe Mr. Putin could be pressured in any way to say "aw shucks, you win" but do you really believe China would ever let it happen?

The hope is that Russia's energy sector gets squeezed.  The new "lower prices" for oil, coupled with Russian energy firms not being able to borrow for more than 30 days is the plan to get Mr. Putin to say "uncle" and admit that Russia needs the Western funding system.  This is not the case in the real world today, this is not the late 1980's where the very same scheme actually broke the Soviet Union.

Think about what has happened in just the last six months?  The BRICS have formed their own "IMF" or World Bank if you will in competition.  China has done deal after deal with anyone and everyone, East or West, NATO or non NATO, with whomever wants to do business with them.  Do you really believe China will not supply Russia's funding needs?  However much they are?  Do you really believe Mr. Putin does not know or is not fully aware of this?  From a financial or economic standpoint there is no way Western sanctions can make Russia do anything Russia doesn't want to do ...China will see to this.

Why do you think China has made all of these trade deals?  Why have they set up yuan trading hubs all over the world?  Why do you think they have imported at least 5,000 metric tons of gold over the last 3 years on top of what they already had?  Why have they done deals for raw materials in long term contracts which are payable with dollars?  "Because"!  Because China knows the U.S. is financially broke and they are preparing for a world which has moved away from using dollars.  They know gold and silver are real money which is why they have furiously imported so much.  They have done these many raw materials deals payable in dollars because this is an easy way to "spend" their dollar hoard...and they have lots and lots of them to spend.

Is it a perfect plan?  No it's not, nothing is perfect.  Once the dollar collapses I would expect to hear screaming and yelling from countries like Australia who have contracts to supply raw materials to China in return for U.S. dollars.  In my opinion, China will probably renegotiate many of the contracts but keep in mind, they will have the "bargaining power" at the table.  China only will have to say "we did these deals in good faith, now you want to change them?".  If China wants the raw goods, they will have to negotiate but you can bet the terms will be to their liking as all they have to say is "no deal" and walk away only to do a deal with someone else ...more desperate.  Do you see what I am getting at here?  China is pulling the strings, they are choreographing the wane in power of the US.  No, had we not done the stupid things we have over the last 20-30 years, China would not be able to do this ...but we did and they are. 

I want you to understand the what, how and why China is doing and has done what they have because they will soon be "making the rules" when it comes to business and finance.  I also think they will very soon be "making price" in the gold and silver markets.  They have a cash market about to go live to perform this function.  China is merely preparing for a world which is no longer dominated by the U.S..  We have abused our privilege as the issuer of the reserve currency.  We have lied, cheated and stolen our way out of the good graces of the rest of the world. 

Many have heard the theory of the "new world order", I believe there is a plan for this.  I also believe there is more than one plan for this, China's and the East's being the other one.  In my opinion there are only two real possibilities, first, China's plan working where the U.S. is isolated and no longer able to make the rules and pull all of the strings.  The other alternative is the horror of a global war where unfortunately man now has the ability to destroy the planet.  The West has a most archaic view of the new world order, one in which the US remains dominant, everyone uses dollars and smiles while being abused.   The most likely outcome is not an all or none thing, I believe we will see some of both, China's strength growing while U.S. dominance wanes and unfortunately some sort of war.

Like it or not, the U.S. has put itself in a position of growing isolation.  Everything we do is one sided.  Our financial and economic reports are blatantly bogus and foreigners know this.  We even allowed U.S. banks and financial institutions to omit or falsify financial reports after 2008 in the interests "of national security".  Think about this, you are an investor thinking about investing in a bank or a broker (in a moment of delusion) and you decide to read their financial reports.  Only thing is, they are not correct.  The reality is the bank is insolvent and broke but they don't have to tell anybody because of an Executive order (I think it was Bush who signed this). 

Here is my point, the Chinese know, the rest of the world knows, our allies (Germany in particular) know, we are broke, we lie, cheat and steal.  If this can be done in private, good.  If not, "oh well, who's going to call us on it?".  Well, what is happening in my opinion is the world, led by China are preparing to "call us on it" with China pulling the strings.  We will wake up to an entirely different world one day where the table is no longer slanted in our favor...I see a future where the "slant" to the table will be in a direction not favorable to the U.S..  This will surely be more than a wake-up call to the unsuspecting! 


Courtesy of

Bill Holter writes and is partnered with Jim Sinclair at the newly formed Holter/Sinclair collaboration. Prior, he wrote for Miles Franklin from 2012-15. Bill worked as a retail stockbroker for 23 years, including 12 as a branch manager at A.G. Edwards. He left Wall Street in late 2006 to avoid potential liabilities related to management of paper assets. In retirement he and his family moved to Costa Rica where he lived until 2011 when he moved back to the United States. Bill was a well-known contributor to the Gold Anti-Trust Action Committee (GATA) commentaries from 2007-present.

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