Europe was devastated by the United States, but China, Russia and India did a big thing!

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Author: Rong ping source: official account: Rong Ping (id:rongping898) has been authorized to reprint

These days, we have witnessed too much history:

British Prime Minister Johnson resigned, former Japanese Prime Minister Shinzo Abe was assassinated, and Sri Lanka went bankrupt

Now in the global economic and financial markets, we have witnessed the history of the euro falling below parity against the US dollar, and the inflation in the United States has broken through 9%, hitting a new high in 40 years.

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Behind the rapid depreciation of the euro is the concern of the market about the economic prospects and investment environment in Europe after the war between Russia and Ukraine, which could have been avoided, but European politicians foolishly chose a path of suicide by following the United States. While lamenting, we can’t help asking why major European countries should do this?

The war between Russia and Ukraine and the US dollar interest rate hike are considered to be the two main reasons for the rapid depreciation of the euro. As the outbreak of war, Europe, due to Russia’s restriction of energy supply to Europe, caused high inflation and intensification of social contradictions, has a worrying economic prospect and is no longer a safe place for investment, which makes capital choose to flow out of Europe to a safer place to avoid risks.

Superimposed on the US dollar interest rate hike, the United States, which is far from the battlefield, has undoubtedly become the main destination for European capital outflows. The strong dollar triggered by the Federal Reserve’s interest rate hike is considered to be the main inducer of the historical depreciation of major currencies such as the euro, sterling and yen. This is the connivance of the United States. Even if these allies are determined to follow the United States to sanction Russia, they still cannot escape the fate of being harvested.

Because the US dollar is the rival currency of these currencies, if the US dollar strengthens, other currencies will inevitably fall. The reason why the RMB, ruble and rupee can get out of the relatively independent market, and some even appreciate, in addition to not being the constituent currency of the dollar index, the deep-seated reason behind it is still the economic independence and investment security (that is, the safe haven effect).

Why is Europe always injured?

It can be said that the euro was born with a golden spoon. It is the strong alliance of the old capitalist countries in Europe and is regarded as the world currency that can compete with the dollar. When the euro was introduced in 1999, each euro was worth $1.18.

However, the United States does not allow a currency that challenges the hegemony of the dollar to be born and develop smoothly. Therefore, shortly after the birth of the euro, the United States launched the Kosovo war, and NATO, with the participation of many euro zone countries, became accomplices and bombed Yugoslavia indiscriminately.

The final result is that the three-month war has made international capital, which was originally optimistic about Europe, extremely panic, and they have fled in search of a more stable economic environment. In just two months, the currency ratio of the euro to the US dollar plummeted from 1.1:1 to 0.9:1, and the status of the euro was greatly hit.

Since the beginning of the Kosovo war, Europe has shown extreme contradictions. Knowing that the war is not conducive to the euro and the European economy, it still has to cooperate to become an accomplice of the United States.

This was also reflected incisively and vividly in the Russian Ukrainian war. Not long after the war broke out, Europe followed the United States to open nuclear bomb level economic and financial sanctions against Russia, kicked Russia out of the swift system, and even followed the U.S. oil embargo against Russia for a time, while providing a steady stream of economic and military assistance to Ukraine.

As a result, Russia has reduced its energy supply to Europe. Europe, which is highly dependent on Russian energy, is facing soaring energy prices and high inflation, and the European economic outlook is facing a high risk of recession.

As the “leading brother”, the United States not only secretly bought a large amount of oil from Russia, but also started the process of radical interest rate hike in the US dollar. Originally, the war in Europe led to extreme panic in international capital. Now superimposing the US dollar interest rate hike is undoubtedly dozing off and hitting the pillow, which is bound to flow into the United States from Europe.

The previous time, the euro was hit by the war, and the euro fell below parity against the US dollar. Later, it took a long time to recover; This time, the euro stepped into the same river again and was brought into the pit by the “leading brother” of the United States.

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Why do European countries prefer to risk the depreciation of the euro and economic recession, but also to be the pig teammates of the United States?

In addition to historical and cultural values and other factors, the particularity of the EU decision-making mechanism determines the characteristics of hooligans.

The EU is a special economy with a highly unified economy and separate politics. It is like a body with nine heads. When encountering problems, even if the economic interests (body) are damaged, it is difficult to make rational choices due to the large number of decision-making forces.

Another very important factor is that Europe’s military security is highly dependent on the United States.

Europeans generally have disgust and fear for Russia, which has been aggressive in history, and they have to rely on NATO led by the United States to ensure European security. The United States happens to control Europe through NATO and the world through Europe.

Thus, when Russia launched a special military operation against Ukraine and drew a red line for the constantly expanding NATO. Europe felt the geopolitical crisis and was worried that Russia would restore the sphere of influence of the former Soviet Union. The European Union finally chose the latter under the coercion of the United States to make a comprehensive break with Russia in developing economic and trade cooperation. That is to say, the EU has put security interests in the first place.

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Then there is the existence of American troops. For Europe, there is no choice. Because the U.S. garrison is right at home, nominally for protection, but actually for deterrence and control. So European countries can only listen to the United States. Basically, what the United States says, Europe follows, and so it is now.

When the strong dollar meets high inflation, the United States itself is not easy

Although a strong dollar is beneficial to the United States, the United States is also facing historic high inflation, which is a rare situation in the previous process of harvesting global wealth with high interest dollars.

Historically, strong dollars under high inflation are rare. Because the Federal Reserve raised interest rates, global capital returned to the United States, resulting in a strong dollar, which is conducive to U.S. imports. In the strong dollar cycle, the United States can import a large number of required goods from the world at a relatively low price, which can well control domestic inflation. But this time, the dollar has stepped out of the strong dollar trajectory under the obvious high inflation.

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In the middle and late March of 2020, the highest level of the US dollar index during the global financial turmoil was about 102.8, which was the moment when the liquidity crisis in the global financial market was imminent. Now, the total assets of the Federal Reserve have increased by $4.5 trillion, more than doubled. The Federal Reserve is so draining, and the dollar is still so strong. The dollar index has been running above 100 for three consecutive months. Inflation also reached 9.1%, continuing to hit a 40 year high.

The reason for the coexistence of a strong dollar and high inflation is that the United States’ encouragement of the war between Russia and Ukraine caused the surge in international oil prices, and its domestic energy costs also rose; Second, during the trade war with China, a large number of tariffs were imposed, resulting in artificial price barriers, making the domestic price level of the United States rise; Third, the excessive issuance of US dollars caused excess liquidity. The Biden government issued money directly to the public, which increased the level of purchase, thus raising prices.

In addition, the strength of the US dollar is not only determined by the macro policy of the United States, especially the monetary policy, but also by understanding the US dollar index, the other six currencies in the global monetary and financial interest group, namely, the euro, the pound, the yen, the Canadian dollar, the Swedish Krona and the Swiss franc. Since the euro accounts for 57.6%, to a considerable extent, understanding the strength of the euro is a mirror image of understanding the strength of the dollar, and vice versa. At present, the exchange rate of the euro against the US dollar has fallen to the lowest point in nearly 20 years. There is no small probability that the exchange rate of the euro against the US dollar will continue to fall in the future.

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On the whole, it’s not how strong the US dollar is, but because there are no sustainable currencies in the US dollar index, and their relativity leads to the strengthening of the US dollar. In particular, the weakening of the euro is an important reason for the strengthening of the US dollar. Of course, the continued easing of the Bank of Japan and the regulation of the yield curve led to the continued depreciation of the yen, which also strengthened the US dollar.

In order to control high inflation, the Federal Reserve has launched a radical interest rate hike process. The previous three consecutive interest rate hikes were 25, 50 and 75 basis points, with a larger range each time. However, inflation does not seem to have peaked. This time, the market is expecting the Federal Reserve to raise interest rates by 100 basis points.

The United States tried every means to encourage the Russian Ukrainian war to contain Russia and tried to weaken China through trade war, but it never thought that it would be no better off if it offended the world’s important energy country and the largest industrial country. In addition, during the epidemic, the Federal Reserve issued an amazing amount of dollar liquidity, and even issued money directly to the public for consumption. It is strange that the inflation in the United States did not explode.

But even if the US emperor realized the reason, he would not easily bow to China and Russia. Because this is not in line with the Biden administration’s political correctness. Even if the political and economic factions in the White House quarreled bitterly, Biden’s support rate repeatedly hit new lows, and finally they were unwilling to return to the main contradiction and crux of the problem. Instead, it continues to engage in a small circle to encircle China through the so-called Indian Pacific strategy (the so-called tariff reduction is just a farce), and suppresses oil prices by putting pressure on OPEC in the Middle East, rather than choosing to ease contradictions with Russia.

The BRICs countries bypassed the dollar settlement, rising in the East and falling in the west at the right time

On June 22, when Russian President Putin attended the BRICs forum, he said that in the face of the complex international situation, BRICs countries need to develop a non Western trade settlement replacement mechanism, and in order to reduce the impact of Western sanctions, they should also study the establishment of a non Western led international reserve currency.

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Exploiting the world by using the dollar system and abusing sanctions against order challengers, it is also time to take necessary measures to safeguard their own interests in the face of the BRICs countries in Europe and the United States, which are unscrupulous in maintaining Western order, with GDP accounting for 25% of the world and population accounting for nearly 50% of the world. As the BRICs countries take the lead in establishing a new settlement system and reserve currency, the dominance of the West in the future is about to be broken.

Now, both China and India have taken action, except that Russia issued the “ruble settlement order” after the outbreak of the war.

On June 20, the people’s Bank of China issued a document entitled “notice on supporting cross-border people’s settlement of new forms of foreign trade”, which said that “supporting cross-border trade to be paid in RMB will be implemented on July 21”. China’s RMB settlement has been put on the agenda.

On July 11, the Bank of India launched the Indian “rupee settlement mechanism” for international trade. Indian media reported that this is the second country to conduct international settlement in its own currency after Russia’s “ruble settlement order” this year, which will have a great impact on the international financial system.

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Although the domestic currency settlement promoted by China and India is not mandatory, it is undoubtedly of great historical significance to promote this settlement mechanism under the hegemony of the US dollar. This shows that the global currency is no longer the dominant one in the West. With the weakening of international reserve currencies such as the euro, pound and yen, emerging countries have a full opportunity to strengthen their currencies and break through the barrier of dollar hegemony.

Russia has fought a beautiful exchange rate turnaround with oil and natural gas as capital through the “ruble settlement order”. The freezing of Russia’s foreign exchange by western countries also fully exposed the loss of its credit. This makes emerging countries realize the importance of de dollarization of foreign reserves and settlement in their own currencies.

In fact, after the outbreak of the war between Russia and Ukraine, China’s RMB showed considerable resilience and was recognized by some countries. For example, India’s largest cement manufacturer recently purchased about 157000 tons of coal from Russia’s largest coal enterprise, but used RMB settlement, about 172 million yuan; Recently, the Central Bank of Belarus said that since July 15, the RMB will be included in its currency basket. The weight of the RMB in its currency basket will be 10%, the weight of the Russian Ruble will be 50%, and the weight of the US dollar and the euro will be 30% and 10% respectively.

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The RMB has unparalleled advantages in the world. The stable and sustained growth of China’s economy is the strongest backing of the RMB. The fluctuation of the RMB exchange rate is relatively small after the war between Russia and Ukraine. The Chinese government has created a superior business environment for foreign investment, and the amount of foreign investment has continued to grow significantly for many years. China is the economy with the most stable and healthy business environment except the United States

China, Russia, India, Brazil and South Africa, the five BRICs member countries, have reached a consensus on the orderly de dollarization. Under this premise, Russia, which has made the biggest strides in the dollar, proposed at the recent BRICs summit that BRICs countries jointly build a “BRICs dollar”. If the construction is completed, this new currency will not only be used for BRICs internal transactions, but also become a new international reserve currency based on BRICs credit. Russian media pointed out that in this process, due to China’s economic strength, the proportion of RMB settlement among BRICs countries will rise significantly.

The basic attribute of money is that it can purchase goods, and the stable production of goods is based on the industrial capacity of the whole system. From this perspective, with the continuous development of China’s industrial capacity, it is inevitable that the settlement proportion of RMB will increase and the reserves of various countries will increase. Especially in the global depression caused by the epidemic and the dollar crisis, China’s increasingly veritable “world factory” is an important support for the promotion of the internationalization of the RMB.

At the end of the article, the author has something to say

The strength of the U.S. dollar index is not because of how strong the U.S. economy is, but because the opponent currency appears weaker under the dual pressure of the Russian Ukrainian war and the Fed’s interest rate hike, especially the weakness of the euro, which accounts for nearly 60% of the total, setting off the strength of the U.S. dollar. The whole western currency is in the process of collective corruption, and a strong dollar is just an illusion!

The emerging economies represented by the BRICs countries are challenging the hegemony of the US dollar in a united and independent manner. They reached a consensus in the process of going to the US dollar. Driven by the successful sniping of the west by Russia’s “ruble settlement order”, they are tending to establish a new international reserve currency similar to the “BRICs dollar”, and the RMB, supported by China, a huge economy, is likely to become the main currency for the initial settlement of the BRICs countries, or the main constituent currency of the “BRICs dollar”.

In fact, India saw the general trend of the development and change of the world currency and hoped to realize its dream of becoming a great power. The RMB settlement should be accelerated in order to ensure that China’s foreign reserve wealth will suffer less losses in the tide of going to the US dollar, and lay a solid foundation for the realization of the RMB’s ability to compete with the US dollar, break the hegemony of the US dollar, and lay a solid foundation for the long-term rejuvenation of China’s economy.

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