almost 800 years ago Marco Polo visited Kublai Khan's court the first emperor of
the yuan Chinese dynasty and grandson of Genghis Khan himself
there he founds what was probably the first fiduciary currency of all time a
currency that was entirely based on the government's reputation and the threat
of a harsh and certain punishment for those who refuse to use it
I love China the biggest bank in the world is from China
what's going on with China is unbelievable the largest devaluation in
two decades you know where they're the United States headquarters is located in
this building in Trump Tower I love China
because even though in recent centuries the world of finance has been chiefly
dominated by the West the pound sterling in the United States dollar becoming
hegemonic for more than 200 years we're forgetting that it was the Chinese back
in the seventh century who developed one of the greatest financial innovations in
history paper money divya china wants to regain that leadership but of course in
order to do so they have to do one thing and that of course is defeat the US
dollar
China in the United States have an almost overwhelming rivalry the
difference between the two is huge and of course it favors the North American
power in practically every field including the very important financial
sphere
yes each ina is the second world power is the second largest economy and the
largest exporter in the world in spite of all of this however its own currency
the one doesn't really have much international clout and hold on a sec
because I can guess what you're probably thinking
yep the Chinese yuan has been used more in recent years due to the Chinese
economy's huge growth but let's not fool ourselves we aren't willing to convert
our savings into you are an in the same way that many people do with dollars and
certainly drug traffickers aren't willing to be paid in briefcases full of
Chinese currency in other words in practice the you'ens
importance at an international level remains pretty insignificant or at least
that was until now because folks in this video we're gonna talk to you about how
Xi Jinping's government wants to end the dollars dominance and make the yuan
reflect the economic weight of the Chinese giant and you know what this is
a lot to do with the fact that China has already surpassed the United States as
the world's biggest oil importer
and now you are wondering well yes I'm in but I mean what does the yuan what's
got to do with oil well we're gonna get to that soon but first we need to go
back in time about 45 years we have to go to the 1970s maybe you've heard about
the petro dollar the time has come for a new economic policy for the United
States the petro dollar the story of a pact since the Second World War and the
Bretton Woods agreements of 1944 the dollar has been the reference currency
the leading world currency if you are indeed the dollar is by far the most
commonly used in the international currency market indeed two-thirds of all
of the world's central bank's reserves are in dollars and almost 40% of all
debt issued globally is in US dollars in other words nowadays the dollar is like
the oxygen of the global economic system any country will have a very hard time
moving forward if they can't get some dollars however there was a period in
history where this ecosystem almost collapsed
this'll happens on August the 15th 1971 when Richard Nixon announced the ends of
the dollars convertibility I have directed the Secretary of the Treasury
to take the action necessary to defend the dollar against the speculation I
have directed secretary Connolly to suspend temporarily the convertibility
of the dollar into gold or other reserve assets except in amounts and conditions
determined to be in the interest of monetary stability and in the best
interest of the United States before then the dollar was a convertible
currency that is the different central banks could convert it into gold this
means you could tell the Federal Reserve Area dollars now give me the equivalent
value in gold the problem was that the Korean War the Vietnam War and numerous
public spending plans were adding up so the Federal Reserve issued many more
dollars than they had goals to back it up
but with Nixon's decision all of this ended and the dollar became a fully
fiduciary currency
well the thing is that this decision which was announced as a temporary
measure and then became permanent risked the people's faith in the dollar up
until then the dollar had been the benchmark currency but from then on why
would anyone accept some paper that the Federal Reserve could simply printer
will the French president himself General Charles de Gaulle had already
stated his concern in 1965 even before the dollars convertibility was abolished
check this out the fact that many countries accept as a principle dollars
as good as gold leads Americans to get into debt and to get into debt for free
at the expense of other countries because what the u.s. owes them it is
paid at least in part with dollars they are the only ones allowed to omit
Charles Dougal but folks faced with the risk that the global monetary system
could collapse if the dollar was the reference currency the United States
found a formula to save and consolidate the dollars hegemony of course during
about petrodollars
you see in 1974 the United States and Saudi Arabia they agreed that all oil
purchases would be done in US dollars and not only that the reserves of the
money generated would be channelled through the North American financial
system which of course is run with dollars and this this is how the petro
dollar was born a year later 1975 the other OPEC countries joined in and dear
viewer we're talking about the oil market it's the largest commodity market
in the world
in other words Saudi Arabia essentially came to the dollars rescue which of
course they didn't do for free Saudi Arabia's ruling family wanted nothing
less than absolute protection from the United States something like a
comprehensive insurance plan bit of a spoiler alert if they absolutely got
that you probably knew that the Saudi led operations are fully US backed
trying to bring stability to Yemen but the US has its own fight
as we told you here before a visual politic in exchange for receiving every
kind of protection from the North American military first Saudi Arabia and
then the other OPEC countries promised to flood the United States with money
and cheap oil
but I know I'm sure that at this point some of you might be wondering well what
good does this do for the United States well the dollar is in such huge demand
as the worldwide reference currency for trade savings and investments that it
has allowed the United States for example to print money to finance the
government's without generating inflation or affecting their economic
stability and not only that the dollars present
throughout the world has also favored the United States as they've been able
to create more developed financial markets they've been able to have more
buyers for their debt securities and they've been able to secure the current
importance of Wall Street but we talk extensively about all of that in another
video I'm going to link to that in the description below the point is that now
the Chinese the world's biggest oil importers want to flip around this
established order the petrol one
a visual politic we already talked to lots about the New Silk Road well we
could say that this is another of the great products which the Chinese
government is currently working on pretty intensively see in June of 2017
Beijing took the first step when it agreed with Russia that oil purchases
could be made in you want thus was born what is known as the petrol yuan this is
a form of sale that is now being used in many of the oil deals that China makes
with Russia Iran Angola and Venezuela
however the truth is that countries haven't been eager to accept this
currency why is this well that's because it's considered a liquid rather risky
highly volatile and not exactly a reliable currency well to overcome this
reluctance in March 2018 China announced a new twist oil futures contracts they
were launched on the Shanghai International Energy exchange under a
yuan denomination but first a quick note a futures contract is an agreement that
forces the contracting parties to buy or sell an assets in this case oil for a
fixed price that is agreed on today despite the fact that the delivery of
said asset of the oil in this case will be made in the future this is our
companies and governments can organize themselves and know how much oil they'll
be able to buy at a predetermined price
but that's not all to reassure sellers China announced that the yuan
denominated futures would be backed by gold in other words the country that
sells the oil will be able to exchange the yuan it receives for gold whenever
it wants to this this is a pretty attractive deal than you think
this is another detail the countries that charge in yuan can also escape the
US sanctions the pace of expansion has been explosive the shanghai contract has
become an unexpected thorn in the side of the main Western benchmarks Steven
Ennis head of asia-pacific trading at futures brokerage Oh Wanda in Singapore
obviously there's still a long way to go before it can catch up with Western
markets but so far reception seems to have been well rather good
so with this new framework in place do you know what China is doing exactly
it's pressuring their suppliers to accept charging for oil in yuan oh and
if you don't want to accept that you're on wells I'm worried about it I'm just
gonna buy less oil from you no problemo in fact this explains exactly why China
has prioritized countries such as Russia and Angola as its oil suppliers in
recent years
but that's not all China knows that Saudi Arabia could play a major role in
this entire process if this country even partially accepted the yuan the entire
global monetary order would totally change news stories like these that have
longer just about energy security but about financial and political strategies
check this out Saudi Aramco agrees to Chinese JV deal
for ten billion dollar refinery could he imagine if the Saudi oil that Aramco is
going to supply to this new refinery was paid in yuan this folks is the move with
which Beijing wants to end the dollars importance or at least weaken it
China is buy more and more oil each time than they're paying for a great part of
it in yuan and this has many many implications for example China's oil
suppliers will have more accounts and reserves in yuan with which they won't
only buy Chinese technology and products but the surplus will be heavily invested
in China itself and government debt in the real estate sector in stocks when
they are released etc etc in other words China wants to have all of the benefit
that the United States has enjoys in recent decades China wants the petrol
you want to contribute decisively to its national development strategy far beyond
the export sector all the while pressuring their main
rival
now hold on just a moment because China will have to introduce many reforms to
achieve these objectives not only will they have to give more freedom to
foreign investors they'll also have to give them more legal security because
let's be honest if you have to save money right now you're probably not
gonna be doing it in a Chinese bank but well that is a topic for another video
so I really hope you enjoyed this video please do hit that like button if you
did and don't forget to subscribe for brand new videos also don't forget to
check out our friends at the reconsider Media podcast they provided the vocals
in this episode that were not mine also this channel is possible because of our
patreon and our patrons on that platform please consider joining them and
supporting our mission of providing independent political coverage and as
always I'll see you in the next video the time has come for a new economic
policy for the United States you know we're there the United States it borders
is located in this building in Trump Tower I love China