paulcraigroberts.org / Paul Craig Roberts / October 16, 2017
Readers at home and around the world want to know what to make of the announcement that China henceforth will conduct oil purchases and sales in gold-backed Chinese currency.
Is this an attack by Russia and China on the US dollar? Will the dollar weaken and collapse from being discarded as the currency in which oil is transacted? These and other questions are on readers’ minds.
Below is my opinion:
The US dollar’s value depends on whether central banks, corporations, and individuals are content to hold their assets or wealth in dollars. If they are, it does not matter what currency is used to transact oil. If they are not, it does not matter if all oil is transacted in dollars. Why?
Because if they don’t want to hold dollars, they will dump the dollars as soon as the transaction is completed and move into other currencies or gold. What China is doing is creating a currency that might be a more attractive currency to hold.
It is possible that the gold-backed Chinese currency is a move against US power, but I see it differently. I see it as a protection against US power. China and Russia are disassociating from the dollar system, because Washington, in its abuse of the world currency role, uses the dollar payments mechanism to impose sanctions on other countries and to threaten them with exclusion from the payments clearing system.