Could China Become the New World Superpower?
What Would that do to the United States?
March 1, 2021
I have bad news for the 50% of Americans who are not globalists, those who want us to remain a free, sovereign nation. Communist China is well on its way to eating our lunch. For those of you who may not be familiar with that term, it refers to the school bully who likes what your mom packed for your lunch, so he just takes yours and eats it.
THE WORLD RESERVE CURRENCY
Prior to the end of the Second World War, the Great British Pound (GBP) had been the World Reserve Currency (WRC) for over 200 Years. In 1944, by agreement among the 44 nations that attended the Bretton Woods Conference in Connecticut, the US Dollar (USD) took Great Britain’s place as the world’s leading economy. This was because we had more of the world’s gold reserves.
This was the first – and only – time when a body selected a currency to be the WRC. The United Nations doesn’t have the authority to do it. The World Bank can’t do it. Even the International Monetary Fund can’t decide which nation’s currency will be the World Reserve Country. The marketplace decides – as it should.
How does the marketplace make this pronouncement? Simply look at the majority of currencies or debt instruments from all the nations’ Central Banks held as Reserves, and you have your answer. Every one of the close to 200 Central Banks in the World has BOTH US Dollars or US Treasury Debt and gold in its reserves. US paper is the most widely held, with paper from the European Union (EU) in second place.
There is no such thing as a world currency, and there won’t be until the entire world is under government. Almost all nations, large and small, have a Central Bank which – like all banks – has reserves. There is a World Reserve Currency, which is the currency most widely held by the majority of the Central Banks of the world.
For the first 157 years of the United States existence, we had basically no inflation, deflation, stagflation, (or any of the other “-ations”) because our money was gold, or it was paper money that could be exchanged for gold. Since we were taken off the gold Standard the US Dollar is worth just a few pennies compared to the last real US Money we had until 1933.
WINNING THE GOLD WAR
At Bretton Woods, it was decided to back the US Dollar with only 20% gold – what I call the “gold Standard Light.” The other nations at the Conference agreed to “peg” their currencies to the USD. For the next 40 years American citizens were not allowed to own gold, much less exchange their worthless paper money for gold. It was actually illegal for Americans to own gold except in the form of jewelry and rare coins, with the punishment being 10 years in prison or a massive fine.
In the meantime, other nations could exchange US paper instruments for gold. Finally, with our gold reserves being rapidly depleted, Nixon closed what is referred to as the “Gold Window” in 1971, and foreign nations could no longer demand our gold at prices far below the world market price. Many people believe that this was when the Gold Standard ended. But in reality, it ended in 1933 when Americans were cut off from getting real money for the paper money that had no real value.
Today no one knows the real amount of US gold reserves. We know that European nations – primarily France and Germany – redeemed billions of dollars of our gold up until 1971. We know that the gold that is supposed to be in Fort Knox has not been audited. In fact, no one except military or government officials has even been allowed to look at the gold in three decades. And we all saw the debacle when Germany tried to get us to send back several tons of gold they left with the US for “safekeeping” decades ago. At first, our government said it couldn’t locate the gold. Then it said it would take some time to do the paperwork. After six years, Germany received a small part of its gold, and then the whole issue was quietly dropped.
Meanwhile, China has become the both the world’s largest producer, and the world’s largest importer of gold. It doesn’t export an ounce. The Chinese Communist Party owns 21 tons of gold, with another 13 tons owned by citizens. By contrast, the US owns a paltry 8 tons, about half of the 17 tons we had when we started allowing the world to drain our reserves.
FOUR WAYS SUPERPOWERS EXERT THEIR INFLUENCE
There are four measures of the strength – and therefore the influence – of a nation in relation to the rest of the world. The include Economic Power, Military Power, Ideological Power, and Technological Power. For most of US history, we have been Number One in all these categories, but that is rapidly changing.
So, what nation currently has the world’s largest economy? It’s a toss-up between the US and China. In many areas, the US still holds the lead. But these are numerous important measures of the strength and health of an economy. In several of these, China has surpassed the United States.
For instance, in 2019 China contributed $22.5 trillion, or 17.3%, of the world's $130 trillion in gross domestic product (GDP), according to estimates by the World Bank. The U.S. was second, with $20.5 trillion, or a 15.8% share.
We don’t have enough time to look at all the indicators. It is sufficient to say that China is ahead of the US in several key areas, but the US is still the big dog in the most important areas – for now. Some economists estimate that China will surpass the US in all the key areas sometime between 2030 and 2040. That would make with Communist nation the top economic power in the world, hands down.
OK, Communist China is on track to be the leading economic power in the world. But how could they possibly become a greater military power than the US? Easily. They have the largest standing military forces in the world. But we have the best fighting force the world has ever known.
Personnel are vital. As a Marine, I can tell you that the patriotism, determination, and courage of the American military would crush any Chinese soldier in one-on-one combat. But today that is secondary. Now it’s all killing from a distance. Death can take you before you see or hear it.
Today, it’s all about money. If the Chinese back their currency with gold, they will be able to buy better missiles than ours, better aircraft, and better long-range nuclear missiles. Money, not brave fighting men and women, will win the next armed conflict. We have to stop China from getting enough gold to become the next world superpower.
“Well, what’s this about being an ideological power? We never hear anything about that.” That’s probably the most important when it comes to preventing wars. Alliances between tribes (the precursors and building blocks of nations) and sovereign nations have prevented wars for thousands of years.
Sometimes these alliances came as a result of having a common enemy that threatened several nations. Although they might otherwise have had little in common, the ability to band together against a threat – real or imagined – caused nations to unite. Often commonalities such as a shared heritage or religion would be the catalyst for a union of nations.
The desire for peace was another strong motivator. Oftentimes a young prince from one nation and a princess from another were pushed into arranged marriages in the name of peace. Most kings would be loathe to attack a neighbor if it meant that their daughter, son, or grandchildren might die in the conflict.
China has taken a different path. It is one that the United States has used successfully in the past. Unfortunately, China is currently beating us at our own game. It is calling “winning hearts and minds.” We have used it primarily after defeating enemies in wars. We rebuilt Europe – both Allied and Axis powers – using the Marshall Plan. While much of the focus on the expensive effort – over $200 Billion in today’s dollars – was on rebuilding infrastructure and industry, we also spent time and money to reduce the influence of Communism on the continent. We did similar work to rebuild Japan so well that for many years they provided formidable economic competition for the U.S., particularly in the field of electronics.
China, which not long ago was considered a developing nation, is now taking over many developing nations using a combination of loans, infrastructure projects, coercion, and indoctrination into Communism.
South and Southeast Asian nations such as North Korea, Pakistan, Cambodia, Mongolia, Indonesia, Laos, Malaysia, Myanmar (Burma), and Kazakhstan are in the Chinese orbit in varying degrees. The next to fall will be the Philippines, Singapore, Sri Lanka and Thailand if the United States fails to support their efforts to be free.
There is a fourth way China is taking leadership on the world stage away from the U.S.: the area of technology. They developed important technology hundreds and even thousands of years before the rest of the world. To name just a few, they invented the first mechanical clock in the Song Dynasty – in the 8th century.
They invented many things that changed the face of combat, including gunpowder and the crossbow. Navigation was advanced with their development of the rudder and the compass. They even invented paper – and paper money. Finally, move over Gutenberg. He was born 800 years after the beginning of the Tang Dynasty in 618 AD during which China invented printing and started printing little texts that people could carry with them. In 868 the first dated, printed book was published – in China.
These amazing inventions and innovations were largely forgotten, and China devolved into a third-world nation. What happened? Mao and the Communists took over China in 1949 after decades of civil war. The nation was in a horrible state. Their entire gold reserves had been taken by the Nationalists who opposed the Communists love to destroy nations, and then promise to save them and bring prosperity. Does that sound familiar? It’s happened in many nations.
As in all Communist regimes, the Chinese Communist Party (CCP) began to murder or imprison anyone who opposed them. They called their great purge “The Cultural Revolution.” They purged professors, writers, intellectuals, educators, anyone who was literate and could gather citizens to oppose the autocratic Communists. Their great “Cultural Revolution” plunged the nation into darkness and ignorance. For 800 years they were leaders on the world stage. Then the Communists turned them into an isolated nation of ignorant peasants.
Today the CCP is still strongly Communists and autocratic. They are one of the most brutal violators of human rights on the planet. But they have allowed limited Capitalism because they have seen their command economy fail utterly. Now innovation is flourishing again. They have great scientists who produce great products. But they are lazy.
Most of the products they produce are based on technology stolen from the West, and mainly from the U.S. They still have thousands of military spies in the U.S. But they have found that they can gain far more in industrial espionage. So, they have infiltrated our universities, famous scientific institutions, and even military scientific facilities. And we are so politically correct that we allow it. Heaven forbid that we keep our greatest enemy from stealing the technology that has helped make us the greatest nation on earth. That would be “racist.”
They have another trick up their sleeves. Greedy U.S. corporations look at the most populace country on earth and become blinded by dollar signs. Cheap labor, and millions of new consumers who want everything. What could go wrong? So, when the Communists tell them that in order to do business there, they have to open all their technological and trade secrets to the CCP, they betray their nation and all the scientists who have made their technology possible and give it all to the Red Chinese.
THE GRAVEST DANGER CHINA POSES TO THE UNITED STATES
But there is another, greater danger facing us. If the Chinese currency, the Renminbi (known in Chinese as the Yuan) becomes the World Reserve Currency, it will also become the triple threat I mentioned earlier: the leading Economic, Military, and Ideological Power.
How is that possible? China has made no secret of the fact that it believes money should be backed by gold. For years it tried to influence the world economic community to produce a gold-backed currency. This would be good for the world because money would once again have the stability it has had for 6,000 years. But China doesn’t care about the world. They wanted it because it would be a huge benefit to China, since it holds such vast gold reserves.
Realizing that this wasn’t going to happen, the rulers of China, the Communist Party decided it would back its own currency with gold – and destroy the US economy as China became fabulously wealthy.
The instant the Chinese back their currency with gold, the Renminbi will become the WRC. “Wait a minute,” you may say. People hate Communism. Why would they use Communist money? While there may be some principled people who wouldn’t want to use such a currency, I believe the majority will.
I feel very strongly about the moral implications of the U.S. buying cheap Chinese goods produced in many cases with slave labor. I remember years ago trying to find a $10 USB drive that wasn’t made in China. After visiting a half dozen stores and spending more in gas that the price of the drive, I finally bought a Chinese drive – because nothing else was available.
Another time I was at an investor conference when a speaker was encouraging investment in Chinese companies. I told him I would never buy Chinese stocks, not just because I objected to their constant industrial espionage against the U.S. in which they have stolen tens of millions of dollars of intellectual property developed at great cost by American companies. I also hated the fact that they used slave labor to produce goods and murdered any citizens who protested against their murderous regime, including the Tiananmen Square massacre of 10,000 Chinese.
His answer? “Don’t let moral objections get in the way of making huge profits.”
Of course, not everyone will feel that way. Put yourself in the place of a merchant. In its Frequently Asked Questions section on www.FederalReserve.gov, this question stands out:
Is U.S. currency still backed by gold?
“Federal Reserve notes are not redeemable in gold, silver, or any other commodity. Federal Reserve notes have not been redeemable in gold since January 30, 1934, when the Congress amended Section 16 of the Federal Reserve Act to read: "The said [Federal Reserve] notes shall be obligations of the United States….They shall be redeemed in lawful money on demand at the Treasury Department of the United States, in the city of Washington, District of Columbia, or at any Federal Reserve bank." Federal Reserve notes have not been redeemable in silver since the 1960s.”
Well, that’s a relief. But wait: The US Treasury website says Federal Reserve Notes are “backed by nothing.” (Remember that a Note is just an I.O.U.) I was happy to learn that the Federal Reserve website stated that the I.O.U.’s could be redeemed for “lawful money” – until I realized that that “lawful money” just meant more paper. Before 1933 the government was obligated by law to give a citizen for an ounce of gold for a $20 gold Certificate bill. That ounce of gold is worth $2,000 today. But if you present a $20 Federal Reserve Note, the government is only required to give you two tens, four fives, or 20 $1 bills. So, the Federal Reserve Notes in your pocket or purse are worth just what the US Treasury has admitted – nothing.
As always, my goal is to never describe a problem without providing an answer…
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