Americans have had it good for a long time. Since the end of WWII, it has been a privilege to be an American. Since the United States took over the Global Reserve Currency from Britain in 1944 at Bretton Woods, life couldn’t be better for an American. When you have a license to print money that everyone else in the world must use, you can do a lot of things the rest of the world can’t do.
You can create the biggest, baddest military in history. Your culture can flourish with the latest technology in automobiles, computers, sports, media, and Hollywood. You can create, in essence, the world’s most dominant empire since the Romans. For Americans, that’s generally a good thing. Not knowing what real inflation is like (the rest of the world gets that), or to have the indignity of a foreign military base built in your cities because the ruling American empire feels like it. These are things the privileged American has never had to know. Alas, all good things must come to an end. There’s a new global empire growing. It’s been slowly changing the world for the last fifty years. And now, it’s about ready to change everything forever.
The Era of the Red Dragon Begins
China, up until about 50 years ago, was a small-time player on a global scale. They have had legendary wars with Japan, but they did not have any real influence over global markets of commerce. Long story short, their ability to manufacture goods of high quality at low prices, almost exclusive land rights to mine the critical “Rare Earth Elements” (The secret ingredients that make your hybrid, cellphone, and laptop so epic), and create economies of scale in food production and manufacturing has begun to bear fruit. China is now the world’s largest economy, and given their population is four times that of the U.S., there is more where that came from.
Bitcoin is largely an American invention. While no one knows who Satoshi Nakamoto is, it is believed that Satoshi primarily spoke and worked on Bitcoin in English, resided on the west coast, and refined his protocol with the late Hal Finney over six years ago. Yet just 18 months ago, China began to get a taste of the wonders of Bitcoin, and it blew the roof off of the market, driving prices to over $1100 USD within a couple of months. Bitcoin never had that level of fervor as a new currency/investment in the U.S. because Americans have been so privileged as to have the global reserve currency as their national currency. Bitcoin is just a cute speculative investment for Americans. For anyone outside of the U.S., it can represent much, much more. The average Chinese investor quickly saw a decentralized currency not manipulated by the People Bank of China as a wonderful thing and acted on it. The average American should be just as hyped by the invention of economic freedom, but, again, there goes that privileged upbringing again.
The Chinese government got wind of the financial shift in the markets and countered, making Bitcoin persona non grata when it came to banking and regulatory authority. They have also censored Bitcoin rallies and conferences, to keep a lid on Bitcoin’s publicity and level of interest nationwide. Coupled with the Mt. Gox collapse, this started a financial market crash that only now Bitcoin is starting to recover from. This is just a taste of the power China can exert on ANY financial market within a matter of months.
Oddly, restrictions were either navigated around or lessened, and Bitcoin is not seen as an insurgent threat to their national currency, but an online commodity to be traded. Throughout 2014 until the current day, China has increased and maintained a massive market share in Bitcoin. According to global financial giant Goldman Sachs, currently around 80% of all Bitcoin is traded in Chinese Yuan. China has maintained more than 50% of the global Bitcoin market ever since Q4 of 2013, when Bitcoin prices exploded almost overnight. It’s like a light came on; Bitcoin was seen as available for purchase, and a stampede that would make Wal-Mart on Black Friday blush began. You can see below Bitcoin was almost exclusively a US Dollar investment from the beginning, but the US Dollar has faded fast since Chinese found out about it.
Is this level of interest and dominance a good thing for Bitcoin? You can argue yes, based upon the next section we must discuss, shortly. And having one billion people potentially gravitate towards Bitcoin is better than being dominated by a country a quarter of the size. Or no, since China is a well-established and highly restrictive totalitarian regime that makes the growing “Police State” in the U.S. look like a Cub Scout meeting. You can see a downside, since the People Bank of China, directly run and managed by the Chinese government, has dropped the hammer on Bitcoin investors and owners before. They can do it again. At least in the U.S., the government has carried a “laissez-faire” approach to Bitcoin due to corporate business interest and a need for tax revenue by the government. American greed and fascism have gone a long way in protecting Bitcoin in the West.
Also, American legislation has defended Bitcoin well. The Citizens United Case has made the legal precedent of money as a form of speech and information, which has huge ramifications for Bitcoin. If the U.S. Government wants to ban Bitcoin, they risk creating a solid legal precedent that Bitcoin is money and is a legal form of information and speech in accordance with Constitutional law and current legal constructs. Not a road any government bureaucrat wants to head down. Plus, Bitcoin is used in religious tithings as donations, and there are many American laws protecting the freedom of religion. And politicians also have little incentive to attack Bitcoin, as they can now legally get donations in Bitcoin via a judgment by the Federal Election Commission, so why close a potential long-term stream of income? Politicians love getting bought off, so Bitcoin is on pretty solid legal ground in the fifty States.
Bitcoin and Rare Earth Elements are just the beginning for China
So, in effect, China has taken a global leadership role, somewhat quietly, in many industries. Food production (mostly rice and noodles), manufacturing (in multiple industries), Rare Earth Element mining (around 90% of the world’s capacity), the overall #1 global economy, a leading global market buyer of many top resources like oil, steel, and concrete, and now Bitcoin. That’s quite a jump up in status in a couple of generations, but that’s all foreplay. What China is really all about is this, according to an article by Tyler Durden at Zerohedge.com.
As you can plainly see, a Renminbi is being advertised by the People’s Bank of China, which is mostly owned by the Chinese Government as the future “World currency”. Does this mean the US Dollar is in immediate peril of losing it’s cherished Global Reserve Currency status? Not exactly, as China needs to build a demand and infrastructure for the RNB to become a “global” currency. It is currently the #5 most-traded currency worldwide, when five years ago it wasn’t in the Top 10. China has successfully struck deals in Toronto, Canada, Britain, Japan and other international financial hubs to get the RMB moving globally. And considering how much of an economic force China is already, few countries will stand in their way to get over in the financial markets. Everybody needs China for something, at this point. China right now really needs this one thing to pull it all together.
In order to become the Global Reserve Currency, they need some other infrastructure, like the BRICS Development Bank, which they created with Russia, India, Brazil and South Africa last year. This will become an effective alternative to the West’s IMF and World Bank hegemony. They also need an international bank transfer system, so they are creating the China International Payment System (CIPS), which should be fully operational by year’s end. Think of it as a PayPal for central banking. Many, many nations are looking for a way off the Western-run SWIFT monopoly, and once an option arrives, many will flee to the first legitimate global competitor. Chinese super-partner Russia also is mounting a similar “Double Eagle” system, to counter the economic sanctions fostered by the U.S. and the U.K. against them, so SWIFT is under attack on multiple fronts.
So China is not-so-slowly, but surely, looking to take over the world economically, and it’s only a matter of time before they succeed. I give them two years before they can overthrow the US Dollar’s monopoly on global economic power. When, not if, the Dollar falls, life in the West will not be so privileged anymore. American mismanagement, really abuse, of the currency is the biggest factor. The arrogance, and the lack of forethought about the ramifications of their actions is the leading factor in these upcoming changes that will affect Bitcoin, fiat currency, inflation, banking, and your retirement account.
Everything having to do with economics in this world will change by decade’s end. The US Dollar and every American’s bank account will suffer for all the years of “living high on the hog.” Call it economic backlash. Bitcoin is a part of that change. Bitcoin was created to decentralize the economic power of the US Dollar.
In closing, the world isn’t going to sit idly by as America runs roughshod over them at will for generations. The Red Dragon has awaken and has decided enough is enough. China growing into an economic superpower was only a matter of time. Their aspirations and ambition will come to fruition. Global Reserve Currency status only lasts about 65-70 years, on average. The US Dollar sits at almost 71 years. It’s time was running out. All good things must come to an end. You also reap what you sow. These changes are a long time coming, and the whole world is watching, and waiting.
Bitcoin was designed to be a part of the future of money. And now China is definitely a part of Bitcoin’s future. Only time will tell if it is for better or worse.
Images provided by Wikimedia commons and Shutterstock.
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