“There’s an old saying, a wise man points at the moon and the idiot looks at the finger,” says Charles Gave, founding partner and chairman of Gavekal Research.
Tariffs, soybeans, and rare earth metals steal the headlines when it comes to US-China trade tensions, but these are just tools or weapons of warfare in a much larger battle over money and sovereignty, and China is playing the long game, Gave told Financial Sense in a recent interview on FS Insider (see China Preparing for a Monetary War, says Charles Gave).
- Felix Zulauf on US-China Relations, Macro Outlook
- Peter Zeihan on Huawei, China Surveillance and Collapse in Trade Talks
- Russell Napier on Widening Cracks in the Global Monetary System
The US dollar serves as the world’s reserve currency and is used for pricing and trade by a majority of nations around the globe. However, Americans have decided to weaponize the dollar, Gave stated, making any transactions between two nations susceptible to US action or scrutiny.
This is a “big loss of sovereignty” by other nations, Gave said, and China is taking the lead in forming an “alternative trading currency to the dollar.”
This is a real fight, he told listeners, and China is playing the long game.
“The fight that you hear about semiconductors and all that isn’t so important—the real fight is to know who will have the imperial money in Asia. Will the Chinese be able to buy their oil in renminbi from Russia, for example, and not priced in dollars? That will change the geopolitics of oil big time.”
Gave said China is also creating a new IMF, a new World Bank, and opened a futures market for oil in Shanghai, which now has the 3rd largest trading volume in the world, allowing people to buy oil in renminbi instead of the US dollar.
This is basically “a blow to the sovereignty of the US dollar as a reserve currency,” he said. In terms of a trade deal, if one were to occur, it’ll be a temporary victory in a power struggle for years to come.