What’s the most terrifying weapon in the world?
Is it a nuclear warhead?
Perhaps a MQ-1 Predator or MQ-9 Reaper drone?
What about the F-35 Lightning II aircraft?
An M1 Abrams tank?
Or what about something smaller? An M4 Carbine or M14 battle rifle?
These are all the kinds of weapons you wouldn’t want pointed at you. You certainly wouldn’t want the first couple to be gliding across the skies about to unleash a hell storm on you.
They are in their own right all quite terrifying when aimed at you. But they’re not the most terrifying weapon in the world. The most terrifying weapon isn’t even technically a weapon in the traditional sense.
The real weapon of choice
Money is the world’s most terrifying weapon. The ability to control it, supply it, cut it off, that’s what puts real fear into people, countries, economies.
And it’s the most powerful tool in the arsenal of the world’s biggest military superpower, the United States of America.
Last week President Trump made a public announcement about the de-escalation of force in Iran. This was after the assassination of General Soleimani. The world was waiting with bated breath after Iran responded by aiming some missiles and firing them at a US base.
As it pans out the US claim Iran intentionally missed key personnel targets. As such there were no US casualties in the strike.
This pleased President Trump as it would appear the US have indeed gained the upper hand in the tensions between Iran and the US. Albeit there are still plenty of people who decry the actions…they seem to have worked.
Still this isn’t an analysis of military strategy. It is however a look at the economic weaponry the US employ as a key aspect of their military action.
You see while Trump said he wasn’t intending to escalate force against Iran, he was only talking about physical force. However he did note the US would be increasing and putting in place further economic sanctions against Iran.
He also made point that the US was energy independent and did not need Middle Eastern oil. These notes were significant. He was in effect saying that the US was prepared to economically strangle the Middle East.
That’s because the US dollar is still (for now) the world’s strongest reserve currency. It is and has been the currency to which all others rely on as part of global trade.
While this suits the US just fine, there are plenty of others it doesn’t suit. Namely any nation that doesn’t agree with US actions or would perhaps like to take that top position of global economic warlord.
A nuclear strike you didn’t see coming
There’s a very good reason we believe that China has decided to press hard on creating and launching their own state-backed digital currency system. It’s not to liberate their citizens. It’s not to increase efficiency and reduce cost in the monetary system.
It’s to track and trace — and importantly control — with granular detail, the flow of their currency around the world. Also it’s designed to give them an alternative measure to work around and escape economic weaponry the US might decide to employ against China or Chinese allies.
It also potentially gives China the capacity to move their digital currency to places that the US would find difficult to detect, track, and trace. Instead of dropping suitcases of cash off to organisations that perhaps they don’t want known, they could just digitally send encrypted packets faster, with greater anonymity.
It would allow them to build what becomes in effect a third parallel payments and monetary system that sits on new ‘rails’ outside of the traditional financial system.
Think of the Chinese foray into a digital currency as their own attempt to rebuild a financial system whereby they’re at the heart of it, and using their existing digital reach are able to almost instantly become the dominant, global reserve currency in this new system.
How they achieve that is to liberate their digital currency through existing Chinese digital networks. When you consider that Alipay estimates their monthly active user base at around 1.2 billion people, that’s about 15% of the world’s population already using a Chinese payment network.
WeChat’s network has over one billion users and their WeChat Pay wallet has around 900 million active users. What’s interesting is WeChat is available in over 100 countries. Alipay says they’re available in over 110 countries.
These two Chinese payment giants have the kind of network effect and reach that Facebook has. The key differential is that the Chinese players already have baked in digital wallets and payments.
Facebook through the standalone organisation Libra is trying to replicate this. But US lawmakers aren’t budging. They can see that Libra would be a domestic threat to the US dollar.
What they fail to see however, is that without a US response to China’s digital currency, the US will fall behind. China is doing this. There is no doubt they’re going to use a state-backed digital currency to cut the US off at the pass.
This is actually China launching an economic nuclear warhead at the US — and the US still don’t see it coming.
When China gets this going, it’s going to change the fabric of the global economy. It’s going to shake up political allegiances because China will swiftly have control and leverage over this new system.
And they’ll likely use applications like WeChat Pay and Alipay to almost instantly push this out to billions of users worldwide.
Where does this leave Australia? In an even harder position between the US and China. Already the likes of WeChat Pay and Alipay are permeating into the Australian economy. To flick the ‘on switch’ for the DigiYuan won’t be much of a stretch.
And when China requires payments to be made in their new currency, Australia will have no choice but to join in the fun. This all sounds a little ominous. And it’s going to change the game globally over the next decade.
But the same thing can be said of the US control over the dollar over the last 100 years. This is coming and it’s going to require change. But it doesn’t mean you have to conform to the Chinese economic way.
Get yourself a person nuclear bunker
You’ll still have Aussie dollars, but eventually they’ll likely become digital as well, and on the same ‘rails’ that China has built for their own currency. Unless the US pulls their finger out and decides perhaps this is something they should be taking action on.
Still by then it’ll be too late, China will have made their global move.
What it also does is give people even greater reason to look at the best, most disruptive technology to impact the 21st century: cryptocurrency.
In a world becoming more centralised, more controlled by government and vested interest parties, there is a way out of that system. And it’s why we think as China deploys their economic digital weapon, more and more people will shift into cryptocurrency as an escape from control.
It reinforces our point that the future of cryptocurrency remains strong. The potential value creation on offer is unparalleled. We think you should be holding cryptocurrency for this fast approaching outcome. You should also hold it to help protect yourself from the coming controls that government wants over your money.
The new battleground isn’t Iran and the Middle East. It’s the global economy. And the ‘nuclear bunker’ that everyone should have is cryptocurrency.
Editor, Money Morning
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