Winter is coming! India and the world better watch out!
It could be good news, or it could be terrible; one thing is for sure, the world will never be the same again.
The game is about to change; new players, new rules, and a unique playground, utterly unfamiliar to all. The outcome is anybody’s guess. It’s a disruption set to redefine the 21st century.
Gold is back, and China is getting ready to change the rules of the game. The rest of the world will be left gasping with no choice but to adapt and figure out how to play the game or die.
Get ready for the big announcement from China. It is preparing to launch its cryptocurrency, which will be backed by its gold reserves!
Why is that big news?
Take a look at the nation-wise gold reserves, and we will see why China is the giant elephant in the room.
Top 10 nations by Gold reserves in 2019:
Change from Q1 2000 and Q3 2019 (Twenty Years):
|United States||Q1 2000||8138.82||–|
|United States||Q3 2019||8133.53||-5.29 Tonnes|
|Germany||Q3 2019||3369.75||-98.85 Tonnes|
|Italy||Q3 2019||2451.85||+0.01 Tonnes|
|France||Q3 2019||2436.09||-588.54 Tonnes|
|Russia||Q3 2019||2241.88||+1819.28 Tonnes|
|China||Q3 2019||1942.41||+1547.399 Tonnes|
|Switzerland||Q3 2019||1040.01||-1550.17 Tonnes|
|Japan||Q3 2019||765.22||+11.671 Tonnes|
|India||Q3 2019||618.17||+260.41 Tonnes|
|Netherlands||Q3 2019||612.46||-299.362 Tonnes|
China ranks 6th with the United States holding 4x of China’s reserves. 6th? Really?
So why is China’s decision to enter the cryptocurrency game so important?
Before addressing that, let’s see why Facebook tried to enter the crypto game with its proposed currency Libra.
Bitcoin is the leader in terms of valuation among all cryptocurrencies. Still, its see-saw valuations have seen it move from $10 in 2010 to the highs of $19,000 in 2017, falling to $3,194 in December 2018 before hovering around $7,266 on 21 December 2019.
Despite Bitcoin’s high valuation, lack of stability and credibility of stakeholders makes global financial markets nervous about cryptocurrencies. It’s one of the reasons why central banks and international markets are yet to embrace cryptocurrency.
Facebook tried to address it by roping in large fintech players like MasterCard, PayPal, PayU, Stripe, and Visa, along with several other credible firms across industries, all coming together to form the Libra Association. It would have been an influential cryptocurrency if various governments weren’t sceptical of allowing a private player (Facebook) to wield so much influence.
How does cryptocurrency play into China’s global?
China has held a clear vision of emerging as the most dominant nation in all spheres – military, economic, diplomatic, and cultural. Since the days when it began opening its economy, the central leadership has single-mindedly worked for setting up a path towards that objective.
Today, China is the world’s second-largest economy and set to displace the United States at the top in a few years. Same in military and diplomatic areas. On the cultural front, it will take a bit longer, but strategic moves are already in play to achieve all its objectives.
The only thing coming in its way is the dominance of the US dollar, which is helping the United States stay a global leader and set the terms of global order. China wants to break that power, and the only way it can achieve it is by creating a world without the US Dollar.
In 1971, the US delinked the US Dollar from Gold as a reserve asset and linked its value to the petroleum business by forcing OPEC to conduct trade of crude oil in the US Dollar. Since then, the US dollar has witnessed strong demand by all nations to pay for their respective oil imports and has kept the US dollar riding high despite the US economy struggling in different periods.
The emergence of Blockchain and Cryptocurrency has given China a window of opportunity. Let’s see how.
China ranked 6th in the world in gold reserves with just 1942.41 tonnes; it is planning to introduce a cryptocurrency which will have the power to displace the US Dollar.
However, 1942.41 tonnes of gold (one-fourth of the US reserves) is not good enough to power a cryptocurrency AND mount a challenge to the US Dollar.
What is giving China the confidence to take on the US dollar using crypto?
As per unofficial reports, China’s gold reserves in NOT 1942.41 tonnes but around 20,000 TONNES!
If true, that’s over 2.5 times the gold reserves of the United States. And if its gold backs the Chinese crypto, it will destroy the value of the US dollar.
China has been steadily building road connectivity between eastern China and the western end of Europe. It understands profitable trade and easy finance will overcome any ideological positions, and, as more countries sign-up, they open themselves to Chinese influence, direct or indirect.
But oil is China’s most significant cause of forex drain, as is for India. A large part of its US dollar reserves flows out to buy fuel. Also, it hates being held to trade ransom by the US. It’s holding back China’s plans.
The China-backed crypto is all set to change the existing order.
China is diligently building a trade block to counter the US-led western economies, comprising Russia, Iran, Venezuela, Qatar, Malaysia, and recently Turkey. It aims to offer options for barter trade and payments using its crypto. These countries face US sanctions in one form or another and are desperately looking for alternatives to the US dollar. The Chinese crypto offers them a way out.
Death of the PetroDollar
China is moving away from dependence on oil and coal and looking to develop its economy on the back of natural gas, and renewable energy. For this, it has signed a significant deal with Russia, wherein, it is investing in a US $55 billion gas pipeline, connecting far-east Russia with the eastern end of China.
Once China introduces the crypto, it will power all Russia-China trade, further pushing its value. As more nations who despise the US join in, the rising cost of the crypto will drive other countries to make the switch, a move many secretly dreamt about but had no options.
On oil, China will force the Saudi-influenced OPEC to switch over to Chinese crypto. The incentive? Low-cost funding along with China’s vast market and access to markets of all nations signing up for the BRI!
It’s an attractive proposition when one considers the underlying hostility to the United States among most Arab and many non-Arab nations. The value of the US dollar will crash, one way or the other.
When it begins, other nations of the world will be left holding reserves of a worthless dollar. They will have no choice but to join the emerging global trade backed by the Chinese crypto. Thereby further fueling its value.
The world slept while China bought gold!
China began its play a long time back. Look at the chart above. While the US and its western allies slept, Russia and China started building their gold reserves.
Since 2000, Russia and China have steadily added 1819.28 tonnes and 1547.399 tonnes of gold, respectively! Barring Russia, China, and India, all other nations in the Top 10 list above have reduced their gold reserves!
Now, the unofficial news of China’s massive unreported gold reserves of around 20,000 tonnes is set to shake the world like never before. The announcement can come in 2020 or 2021.
How India can make or spoil China’s play?
In this emerging game, India is a marginal player with just $ 618.17-tonne of gold reserves, but there’s more to it.
As per World Gold Council (WGC) estimates, various estimates, temples, trusts, and Indian households collectively hold between 24,000 and 25,000 tonnes of gold! That’s more than China’s.
Enough for India to either come out with its cryptocurrency to counter China’s or adopt the Chinese crypto by adding to its stability and value using its gold strength.
Imagine a cryptocurrency backed by 45,000 tonnes of gold (China’s 20,000 plus India’s 25,000 tonnes together). If that happens, the US story is over.
India can, for the first time since its Golden age, dominate the world order, along with China. It is the most significant leverage India has over China.
The time has come for the Indian government to take control of the private gold by incentivizing all holders and educating them on the benefits of the new world order.
Imagine the implications of the Indian Rupee value higher than the US dollar backed by the power of crypto reserves with skyrocketing values!
It could be India’s rare window of opportunity to regain lost glory.
But first, India needs to come out of the quicksands of myopic political thinking, and follow the Chinese strategy of preparing not for tomorrow or the day after but two lifetimes ahead.