China’s much anticipated international payment system is set to launch. It could be a big blow to the dollar—and America’s ability to police the world.
This year may go down as a turning point in United States economic history.
Reuters reports that three high-level Chinese officials have confirmed that China will launch its long-awaited international payment system in September or October. The system will allow foreign banks to conduct transactions in yuan instead of dollars and transfer funds across international borders without using America’s swift payment system.
This latest move by China is an effort to make the yuan a reserve currency. If successful, the newly created China International Payment System (cips) will remove the biggest hurdles to internationalizing the yuan. It will cut costs, cut processing times, and simplify the transactions associated with obtaining and using yuans. Apparently 20 Chinese banks and 13 foreign banks are currently engaged in testing the system.
Purchasing goods in yuan will soon be as simple and inexpensive as using the dollar. Reuters compared the creation of cips to a “worldwide payments superhighway” for the yuan.
Geopolitical repercussions are inevitable. The dollar’s role as global reserve currency is being challenged.
Loss of reserve currency status would leave America without the freedom to create money out of thin air to finance government spending. All things being equal, interest rates would be higher, borrowing rates would fall, banking profitability would shrink, consumer spending would constrict, corporations would become less profitable, jobs would be cut, and stock prices would fall. Additionally, America’s large debt and retirement obligations would become even less likely to be paid.
In short, America’s standard of living would trend toward the typical Chinese person’s, while China’s would trend toward America’s.
Already, China’s yuan is one of the world’s top five payment currencies. In November, it surpassed the Canadian and Australian dollars in global usage, according to swift.
China appears willing to challenge America. And many of America’s closest allies—Britain, Germany, Italy, Australia, New Zealand, France—are voting their approval.
China’s much anticipated international payment system is set to launch this year. And members of China’s new investment bank are bound to use it. Has the world reached peak dollar usage?
The dollar’s road to oblivion could be short and swift. ▪
Full article: America’s SWIFT Road to Economic Destruction (The Trumpet)