Is A Sino-US currency war imminent?

In fact, the output of paper money means the temporary possession of other nations' assets. The United States, a nation of currency hegemony, depending on its privilege in currency output, intends to change the trend of current asset, increase volatility to the exchange rate, and cause more asset bubbles, where it can finally take possession of other nations' assets. Accordingly, US assets held in other countries will be offset, which contributes to the permanent possession of other's property. This is a perfect transformation from the "temporary" possession to a "permanent" robbery.

This is real currency war without blood and fire. But the result is similar to the aftermath of actual war, albeit without blood.

Q: Who will win this war?

L: Before we discuss this question, we shall define the victory and failure first. In this war, the US has to obtain victory, otherwise it means failure. If they failed in this war, the US will fail to find the sources of profits for its 700 trillion dollar assets and will suffer the same deflation Japan did in the late 80s. Meanwhile, it will also face a debt-increase and lose its hegemony in currency. But China only needs to remain undefeated, which means China's victory is more attainable.

As long as China can avoid the big financial crisis, our GDP could remain increasing at a rate of 7.5 percent in the next 10 years. So we will soon surpass the US in the near future.

We cannot imagine that the United States, as a great financial empire, could allow itself to be surpassed in GDP. Otherwise, there is a big question to ask: If ranked second in GDP, how does the United States sustain the price of its financial assets? Nowadays, US financial assets valued at almost 700 trillion dollars, while China only possesses 30 trillion dollars of those assets. Once surpassed by China in GDP, the US will face the big crash of its financial asset price. So the US pays close attention to this problem and, through changing the method to calculate GDP, increased its GDP by 3 percent overnight. But it is said that the change will lead to a five-year delay for China to surpass the US in terms of GDP. It also reflects the US's concern regarding this challenge.

I'm very optimistic about this war. I think the United States will fail in this long-term financial strategy and also in the reversal of the US dollar. This is because the reversal of the US dollar index will not exceed 103, which was once a critical point to trigger Thailand's financial crisis in 1997 and also important to overthrow the financial asset price of the Western European countries in the 1980s. In fact, if the Federal Reserve cannot take a substantive strong dollar policy, such as increasing the interest rate of federal funds, the US dollar index could barely exceed 95.

It is unwise to simply accept the ideas of bull market and reversal of the US dollar, which is temporarily rebounding. These ideas will vanish around 2015 and bear market of the US dollar will be popular. This would signal the failure of the third cycle of the US financial strategy.

The United States cannot continue the success it saw in the last two cycles and will fail to possess other nations' properties, especially in China. China is the biggest economic driver and contributes to the world's economy three times more than the US. As long as China can get far away from a big financial crisis, other developing countries will not face big financial depression and the strong dollar policy will lose its effect. Finally, we will come to a de-Americanized world, where the US economy will gradually disconnect from the globe.