In 2014, China held over a third of U.S. debt, amounting to nearly 18 trillion USD. In just four years, that number has dwindled to a paltry 1.18 trillion, due in large part to China’s rapid sell-off of American currency. In the past, nations sought U.S. dollars as a guarantee to ensure fiscal stability due to the implied reliability of the US Dollar. For decades, the petrodollar had been the only currency used for buying and selling petroleum, it made the U.S. dollar a coveted commodity. No one questioned it; except maybe a few notables, like Saddam Hussein who sought to sell oil in Euros and Muammar Gadhafi who hoped to create a gold backed African currency.
Not until the 2013 government shutdown under U.S. President Barack Obama and the 2011 U.S. downgrading of the United States’ credit worthiness by Standard and Poor (S&P) did the squabbling among America’s political factions have an international impact. China sent an open letter printed in the New York times, admonishing the U.S. to pay its bills. In what might have been a great political move for Congressional politicians, had become an international warning sign to fiscally prudent nations around the world.
In the next four years, China had divested nearly 90 percent of the U.S. Debt it held. In 2015, just as the U.S. had settled its fraud case against Standard & Poor for A-listing bad debt contributing to the 2008 financial collapse, the International Monetary Fund granted China’s Renminbi special drawing rights—the ability to be used as a world currency. The Trade War was coming. The 2008 U.S. economic collapse and the ensuing European Union’s austerity measures created a Molotov cocktail of events. In addition to its divestment, China also began an ambitious campaign of widening trade through its Belt and Road Initiative in 2017. It was in that same year in a curious turn of events, that S&P also downgraded China’s Credit worthiness, citing increased lending by the republic.
When March 2018 rolled around, the U.S. Administration levied 60 billion dollars in tariffs at China trade; a thinly veiled attempt to close the 53 billion-dollar U.S. trade deficit. Currently the US. exports 134 billion in goods annually, mostly in agriculture and petroleum products. With the advent of fracking, according to the IEA (International Energy Agency), the U.S. is on track to become the largest producer of oil in the world. This means stiff trade competition for Oil Producing Economies like Saudi Arabia and Nigeria.
As competition on the world scene continues to heat up, so does the currency bubble. China’s Belt and Road continues to power through the world, offering opportunities and partnerships once unattainable in certain sectors. With the advent of crypto-currencies and the dawn of a gold-backed Yuan, the need for the U.S. dollar has begun to dwindle in the world. As confidence in the dollar begins to wane, currencies backed by real value will dominate. Billionaires in U.S. dollars could soon become paupers overnight. Since the 2008 financial crisis, there is less confidence in the fiscal machinations driving banking systems that produce fiat currency with no intrinsic value. The commodity once again begins to take primacy—a trade war is born.