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Diversification of reserves will hit the US dollar hard

July 24, 2020

July 24, 2020

Euro gave China a free handDmitri Demidenko

Truth springs from argument, but fight does so more often

If the Chinese say they didn’t take a thing, it means they won’t give it back. According to Financial Times, the FBI files a new counterintelligence case related to China every 10 hours. Beijing’s thefts of American intellectual property are estimated at $225 to $600 billion a year. When Washington closed the Chinese consulate in Huston, it continued smoking for a few hours: the papers meant to be burnt were burning. We may think that China will soon outrun the USA just because there are so many Chinese people in the world, but there are many Indians too. Do they steal technologies, though?

![LiteForex: Diversification of reserves will hit the US dollar hard][1]

We may choose whatever ways to find our own blind alley.  Not only did the US-China “blind cooperation” policy lead to a big imbalance, which somehow the US wants to correct just now. Also, it can lose the USA its global economic leadership. The yuan will hardly replace the dollar, but China may easily replace the greenback with the euro. That will be quite a different story. I can only feel sorry for Donald Trump who thinks about his Asian colleagues day and night:

- My husband called me Li Xiu this night…

- Melania, you should talk to him when he wakes up.

- He won’t.

![LiteForex: Diversification of reserves will hit the US dollar hard][2]

It’s so interesting to watch the culpable looking for the guilty! First, Trump accused Jerome Powell of not willing to cut rates, which consolidated the dollar. He said, that deprived the US of competitive advantages. Then he accused China of the pandemic.  The president totally forgot that the main factor in the greenback’s consolidation in 2018-2019 was his own trade wars. And the main covid problems were due to the White House’s late reaction to the large-scale global issue. Try saying that to the guilty one, he will immediately reply:

- Do I look like an idiot?

- Well, only in profile. Full face, you look like a regular asshole.

![LiteForex: Diversification of reserves will hit the US dollar hard][3]

When the US was brandishing a stick in 2018-2019, China was waiting patiently. And I must say, it worked! Now it’s a very good time for taking vengeance. For example, deporting Americans from Chengdu  in retaliation for the Houston closure. Ahead of the presidential election, Trump is praying to stock indexes, which may slump if the US-China trade war resumes. Trump’s hands are tied. The only thing he can do is bark at the caravan. Which keeps going.

China can take offence at the US protectionism policy, but we need to understand that it doesn’t keep its nose clean either. The stronger people get, the more insolent they become. China has got a perfect opportunity to keep the White House on a short leash. And it’s not only about stock indexes. The EU bonds may easily replace the American ones. The more pressure Beijing gets, the higher chance of diversification is. If the trade war made the dollar stronger, the cold war will weaken it. Don’t be surprised when it happens.

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Price chart of EURUSD in real time mode

![Euro gave China a free hand][6]

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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