US Threatens to Trash the Dollar if China Does Not Uphold Sanctions Against North Korea
US Treasury Secretary laughably suggests cutting China off from the dollar would hurt the former
This is hillarious. Trump’ minister of finance, who is apparently a sniveling idiot, has threatened to cut off China from the dollar, and end US trade with it:
The US could impose economic sanctions on China if it does not implement the new sanctions regime against North Korea, the US Treasury Secretary has warned. Steven Mnuchin said the restrictions could involve cutting off Beijing’s access to the US financial system.
“North Korea economic warfare works,” Mnuchin said Tuesday at the Delivering Alpha Conference in New York City. “We sent a message that anybody who wanted to trade with North Korea – we would consider them not trading with us.”
The Treasury Secretary echoed the words of the US envoy to the UN, Nikki Haley, by calling the fresh round of sanctions against Pyongyang “historic.” Mnuchin added “if China doesn’t follow these sanctions, we will put additional sanctions on them and prevent them from accessing the US and international dollar system.”
In reality China’s huge investment in the dollar is the biggest factor keeping the US currency worth relevant. And the $350 billion worth of goods the US imports from China per annum, but does not pay for with exports, is the big prize US wins for the dollar’s status as the currency of world commerce.
Cutting off China from the dollar is not only, not possible, since Beijing is sitting on 3 trillion of them, but would also collapse it. Then China might finally stop trading perfectly good consumer goods for worthless US debt, and sell them to those who can actually afford to pay for them — such as China’s own workers. Which is exactly what would happen if China’s yuan were allowed to rise to its real value.
Truly the idea a country that can only pay for $1.4 trillion of its $2.2 trillion imports with exports can threaten a country which at $2.4 trillion is the world’s largest exporter by far is laughable. China, which actually makes real stuff, can always find other markets which will take its goods, while America’s main export are pieces of paper.
The US is $20 trillion in debt. Beijing at just under $1.5 trillion is its biggest single creditor. China reinvesting its massive trade surpluses into dollar-denominated assets is the single biggest factor keeping dollar inflation down and propping up its value. By threatening to cut off China from the dollar the US actually “threatens” to pull the leg from under its own shaky currency.