Sunday, September 24, 2017

Economics talk. Is China about to destroy the global system that made them powerful? UPDATE!

Thanks to Adi for the link!

The world’s top oil importer, China, is preparing to launch a crude oil futures contract denominated in Chinese yuan and convertible into gold, potentially creating the most important Asian oil benchmark and allowing oil exporters to bypass U.S.-dollar denominated benchmarks by trading in yuan, Nikkei Asian Review reports.

The crude oil futures will be the first commodity contract in China open to foreign investment funds, trading houses, and oil firms. The circumvention of U.S. dollar trade could allow oil exporters such as Russia and Iran, for example, to bypass U.S. sanctions by trading in yuan, according to Nikkei Asian Review. To make the yuan-denominated contract more attractive, China plans the yuan to be fully convertible in gold on the Shanghai and Hong Kong exchanges.

Last month, the Shanghai Futures Exchange and its subsidiary Shanghai International Energy Exchange, INE, successfully completed four tests in production environment for the crude oil futures, and the exchange continues with preparatory works for the listing of crude oil futures, aiming for the launch by the end of this year. ?

“The rules of the global oil game may begin to change enormously,” Luke Gromen, founder of U.S.-based macroeconomic research company FFTT, told Nikkei Asia Review.
Story here. 

I have an EXTREMELY limited view of how all this ties together with the global economy but at least for the last 20 years the price of energy has tied directly to boom times.

Remember how things were right after the great recession?  Oil prices were outrageous.  It made no economic sense.  But it also helped keep the economy afloat.


Now we're living in a time of relatively mild oil prices (and I believe that even now they're being artificially inflated) and China wants to start a gold/yuan trading scheme?

I don't see how this can help them.  No one will want to trade in the yuan...they keep their money artificially low.  Now gold.  People will bite on that but it just drags them back into the US dominated market.

I'm not understanding what they're thinking but I'm wondering if this could be the first real mistake the Chinese govt is making.

Is this a brilliant move to push China to even greater heights or are they about to destroy the global system that made them powerful in the first place...or is it something in between?

UPDATE!  Wow.  I asked a real deal question and instead got bullshit answers.  I'm not in the mood for even more conspiracy theories.  I don't need to hear the pet theory from the darkside of the internet that supports whatever anti-US faction you're a part of.  Comments are closed on this.  I'll simply write an economist and hope they can answer.  Seriously though.  This is getting tiresome.  Either you know or you don't.  No shame in not knowing.  MUCH SHAME in some of the bullshit that is being peddled.

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