China is mobilizing resources & gathering allies around the globe in preparation for this war. In league with a small group of rogue nations, they have one purpose: to crush the economic, political & military strength of the US by targeting America's Achilles heel: the petrodollar. Their plan is to (by that means and others) send the USdollar (today the world's reserve curreny) into the dustbin of history, at great cost to us.

::::::::

You haven't heard even a whisper about it in the mainstream media.   Yet it's an event  that historians will point to as the first sign of the approaching war.   Unlike previous wars, however, this one will not be fought with bombs and guns.   And yet it could trigger the most cataclysmic destruction of personal wealth in our lifetime.

As we speak, China is mobilizing resources and gathering allies around the globe in preparation for this war.   In league with a small group of "rogue' nations, they have one purpose in mind:   to crush the economic, political and military strength of the United States, around the globe, by targeting America's Achilles heel:   the petrodollar.   Their plan is to (by that means and others) send the USdollar (today the world's reserve currency) into the dustbin of history -- which will, among other things, crush the retirement dreams of millions of American citizens.

America's last great export about to go bust?

We all know that the US is heavily in debt to China.   And the US trade deficit with China keeps growing, up to $558 billion in 2011.   In fact, it's now the largest, ongoing nation-on-nation trade deficit in the history of the world.   But what most Americans don't understand is that because of this huge trade deficit, each year the Chinese Central Bank collects billions of excess dollar reserves that they have, until recently, had no good idea what to do with.

For years China simply piled these dollars into their purchase of US treasury bonds.   Washington has long loved this arrangement because it helps the US run trillion-dollar deficits, as it spends like crazy without having to raise taxes.   But the Chinese are too smart to let this losing arrangement continue -- it's costing them way too much money.   With Washington continually creating more trillions out of thin air (click here and here), and record low interest payments being received by the Chinese, for the Treasury bonds they've purchased, China understands full well how much they are losing.   According to Beijing officials, China lost $271 billion between 2003 and 2010 by holding US Treasuries.   And in June of 2011, China's National Development and Reform Commission announced it could lose another $578 billion if it continues to hold these huge US debts.  

Not surprisingly then, the Chinese government has begun to take drastic measures to protect their wealth:   Two high-level officials   (Zhou Xiaochuan, the head of the Chinese central bank and Xia Bin, a member of the monetary policy committee of the central bank)   recently made it clear that they are ready to take action.   But China isn't simply planning to pull all their money out of Treasuries.   There's much more to their plan than that.

China is willing to take some short-term losses for long-term gains, which is why it was no surprise when an overlooked article in the International Business Times revealed a shocking announcement, one that the mainstream media has refused to acknowledge.  This article stated that, in a secret alliance with Russia, China has launched what will prove to be the ultimate attack on US supremacy, i.e. an attack on the United States' last great export machine and its key to global domination for the last 40 years:   the petrodollar.   Here then was the shot across the bow that has kicked off an economic war between the US and China, one that will lead to the end of the 30-year bull market in US bonds.

Understand that America has gone to great lengths to prevent this from happening.   It's the reason we took down Saddam Hussein, Muammar Gaddafi and why we're now imposing sanctions on Iran.   But with our weakened military and our bloated national debt, China now has the perfect opportunity to take us down.   And unfortunately for us, their $3.5 trillion in holdings of US currency helped them launch their first wave of assaults on September 6, 2012.   But first, before describing this in more detail, we need to briefly review the history that has led to this assault.  

The biggest financial con in history

The year was 1944 and bankers from all the 44 Allied nations gathered in Bretton Woods, New Hampshire.   Their mission was to create a set of agreements to manage international trade after WWII.   Their agreement, known as The Bretton Woods agreement, established the dollar as the world's reserve currency.

This international game-changer gave the United States a distinct economic advantage, but with one caveat:   every dollar the Fed printed would be redeemable for gold at the rate of $35/oz.   This part of the agreement was put in place to ensure that the Fed wouldn't print dollars with reckless abandon.   But of course, the Fed eventually printed and distributed more dollars than it had in gold to exchange.   Finally, with massive expenditures on the Vietnam War, the rest of the world became suspicious of America's ability to pay.   So nations began to demand the gold they were promised for their US dollars.

So, in 1971, President Nixon recognized that the US would not be able to meet its obligations and closed the so-called gold window.   It was the first American default and it set off a rapid decline in the value of the dollar.   Oil prices soared.   Inflation soared to 15% and higher.   At the same time, GDP fell 3.2% and unemployment rose to 9%.   Price/Earnings ratios crashed down, from 16 to 8, and stocks had the worst 15-year period in history -- even worse than during the Great Depression.   The government then imposed wage and price controls which caused gas shortages around the country.

Then, in 1973, Secretary of State Henry Kissinger hatched a brilliant plan  

America had great military might and Saudi Arabia needed protection for its vast oil empire.   So, in a stroke of genius, Kissinger exchanged America's military might for Saudi Arabia's promise to sell oil for US dollars only.   This meant that any country wanting to purchase oil from OPEC was forced to use US dollars.   In other words, anytime another country wanted to buy oil from the Middle East, they had to first convert their currency into US dollars and take a loss in that conversion process.   And since oil is required in modern economies -- and the Saudis are a main player in the oil trade -- this put the US in a unique and very powerful position:   Countries around the world were hereby pressured into exporting goods and services to the USA in order to get the dollars they needed to buy oil.   And where would we get those dollars?   Mostly by borrowing money from the central bank of China, the central banks of Japan and the UK, and from all other investors, foreign and domestic, public and private, who wanted to buy US treasury certificates.   And to the extent that such purchases of our treasury bonds finally began to lag, our own Federal Reserve would simply create money out of thin air and buy those bonds itself, thereby supplying the US Treasury with unlimited amounts of dollars.

Therefore, to that extent, in order to get its oil, America's government could, to whatever degree necessary, simply create out of thin air the dollars it needed to buy that oil -- which meant that the US could run massive trade deficits.   Why did this work so well?   It worked because we were exporting the most valuable "commodity' in the world at that time, the US dollar -- the currency that was needed for any other country to buy oil.  

The terrible side-effect that eventually came to accompany this racket

Up until the early 1970s, America was the world's largest creditor.   But by the early 1980s we had begun to run our first trade deficits.   And since the 1990s our trade deficits have grown to trillions of dollars.   How did this happen?   In order to get the dollars they needed to buy oil, countries flooded the US market with cheap cars, cheap TVs, cheap clothes ...   and we simply flooded the world with cheap (cheap for us) US currency in return.

Meanwhile, the OPEC countries were required, per our agreement with them, to invest their profits in US treasury bonds, thereby helping create and sustain worldwide investor demand for those same US treasury bonds.   This allowed the US government to start borrowing with reckless abandon, and created the greatest bull market, for (US treasury) bonds, the world had ever seen.

But it wasn't just our government that borrowed.   Consumers borrowed $14 trillion, on top of that.   And now add in $11 trillion in corporate debt, $17 trillion in financial debt, $1 trillion in student loan debt,   and up to $90 trillion in unfunded liabilities like Social Security and Medicare.   It all adds up to more than $140 trillion in total debt -- which is about 10 times greater than the worth of our entire annual domestic production.

And the whole house of cards is maintained by this simple petrodollar agreement made in 1973.

So, do you see why it's so important the US maintains the petrodollar arrangement?   Do you see why we're willing to go to war with anyone who challenges that arrangement and that privilege of ours?   And do you see why this is the biggest opportunity that China has, by taking steps that will end this arrangement, to end the golden age of America and usher in the age of Chinese dominance?

In 2008 we saw a prime example of what happens when the national credit card is shredded.

From the late 1990s until early 2007, housing prices grew three times faster than median income as the Fed pushed interest rates down to 1% and banks gave mortgages to anyone with a pulse.   But as we saw, this rapid rise in housing prices was unsustainable.   Eventually and inevitably the market ran out of credit-worthy buyers.   And as soon as that became clear to enough investors, the housing bubble had to pop.   And, as derivatives (credit default swaps etc.) losses multiplied, and the insolvency of banks grew, credit froze up and the entire economy came close to collapse!   (Click here for more info on this.)

Our government spent trillions on bailouts and stimulus to get the economy moving again because the nation's leaders understood an important and horrifying new truth:   our entire economy could very well collapse.   And this same dynamic, of a bubble leading to possible economic collapse, is happening right now, but on a much, much larger scale -- this time in the bond markets.

Explanation:   China is plotting to take away our biggest source for the demand of our most precious commodity.   I refer of course to the seemingly inexhaustible international demand for US Treasury bonds, on which our entire debt-dependent economy is propped up.   However, while Americans are stuck in the past, burdened by the obsolete promises made and entitlements arranged years ago, China is preparing for the future.   As already stated, their goal is an all-out assault on the petrodollar and thereby on American supremacy.

China doesn't, however, want to broadcast its intentions and thereby agitate the citizens of the United States, which is why you won't find widespread media reaction to China's plans.   But if you take a close look at the actions of the Chinese government, the evidence of what is about to happen is overwhelming.

China has implemented a very simple plan to ensure global domination.   First, they're taking steps to monopolize the gold supply around the world.   Second, they're looking to build global alliances to help with their plan.   And third, they're working to eliminate the dollar from its commanding position in the international oil trade.

First, then, let's take a quick look at how China has been hoarding gold supplies around the globe.  

They know that they will soon have the economic power to take over the role as suppliers of the world's reserve currency, but they also know the Chinese currency -- the yuan -- will never beat the US dollar if it's nothing more than another "fiat" currency, i.e. a currency backed with nothing but promises.    So, instead, over the last few years, China has been secretly stockpiling gold with the intent of creating something that's been missing from the global economy for 30 years -- a gold-backed reserve currency, with yuan redeemable (exchangeable) for gold.

According to a recent Forbes article, "China is preparing for a world beyond the inconvertible paper dollar, a world in which the renminbi (yuan), buttressed by gold, becomes the dominant reserve currency."

Not surprisingly then, high-level US government officials are worried about this possibility.   They know for a fact that China has been purchasing massive amounts of gold for the past few years.   They also know that China is the world's largest gold producer, cranking out more than 350 tons of gold a year -- almost 20% more than the world's second largest producer.   And yet, according to major bullion dealers, China isn't exporting a single ounce of gold.   Instead they've been importing huge amounts of gold.   In fact, in 2012 China imported roughly 500 tons of gold --   that's more than the entire holdings of the European Central Bank.

Even more importantly, this year will mark the first time in history that China has, dollars-worth for dollars-worth, imported twice as much gold as it has purchased in US treasuries.   (How has it paid for this gold?   With the very US dollars that it once used to by US Treasury bonds.)   But this still isn't enough gold to satisfy China's growing demand for the stuff.   How so?   Because it's not just the central bank that's hoarding gold anymore.   Personal gold ownership was outlawed for many years in China, but in 2002 China finally allowed its citizens to legally own gold.   In fact, you can now buy gold bars in retail banks all across China ...   and the government has even set up retail stores that sell decorated gold bars like the 2012 Lunar Gold Bars.   Gold sales are now so commonplace that the stuff is sold in stores that are the Chinese version of our 7-11s.

Which may be why Song Xin, chief executive of China Gold International, one of the country's biggest gold producers recently revealed that China is importing so much gold that they can't purchase any more on the open market for fear of bidding up the prices.   So they've found another way to add to their reserves:   buying gold mines around the world.   To wit:

*    In August of 2010, China Gold International put in a $742 million bid to buy Skyland mining ...

*    In November of 2011, Zijin Mining Group put in a $227 million bid to buy Gold Eagle mining ...

*    In August 2011, Stone Resources put in a bid to take control of Crescent Gold, an Australian gold miner.

*    In November 2011, Baiyin Group bid on the South African miner, Gold One International.

*    And in April 2012, Sovereign Gold partnered with Jiangsu Geology & Engineering to buy two gold mines in Australia.

So how much gold does China now have, in total?   No one knows for sure because China hasn't revealed the amount of its gold reserves since 2009, when China Youth Daily quoted State Council advisor Ji Xiaonan as saying, "We suggested that China's gold reserves should reach 6,000 tons in the next 3-5 years and perhaps 10,000 tons in 8-10 years."

That would make China's central bank the largest gold holder in the world, ahead of the US's approximate 8,000 tons of gold reserves -- which would put them in perfect position to take over the role of an international economic leader -- a role that the US gained through the Bretton Woods Agreement.   And with our bloated entitlements, out-of-control spending, and gridlocked Congress, there appears to be nothing we can do to stop them.   But this is just the first step in China's quest for global domination.

The second step in their quest for dominance:   China knows it can't do this alone.   Just like the US, 60 years earlier, they need to build global support for their plan.   To succeed, they need partners in this endeavor.   So they've already started to invest heavily in securing oil supplies from Africa, investing $6 billion to secure oil rights in Nigeria and $7 billion on oil and mining infrastructure in Guinea.   They've also been making aggressive moves in Canada, America's leading oil supplier, recently investing over $6 billion to secure rights to various Canadian tar sands projects.   Meanwhile in Brazil they loaned the state oil company Petrobras $10 billion in a deal that will more than triple the oil that Brazil exports to China.   And in Peru they paid $3 billion for the rights to mine a mother lode of copper underneath Mount Toromocho.   Not to be outdone, the state-owned Chinese company Chinalco paid $13 billion for rights to Australia's aluminum sector.   And recently Sinopec paid $7.2 billion for Addax Petroleum, which has sizeable assets in Iraq and Nigeria.

But China's doing more than just purchasing resources on the open market.   It's also supplying aid and investments in resource-rich countries.   This supplies China with three immediate benefits:

First, they obtain the resources they need to sustain a rapidly growing economy ...

Second, they rid themselves of the huge war chest of rapidly devaluing USdollars ...

And third, they gain powerful allies across the globe in their quest for world domination ...

China has also been handing out billions through its China Export-Import Bank.

President Jiang Zemin argues as follows: "Regions like Africa, the Middle East, Central Asia, and South America, [have] very big markets and abundant resources;   we should take advantage of the opportunity to get in."   And China has been taking advantage of this opportunity in a big way.   For instance, in the last 7 years China has invested as much as $75 billion in Latin American countries -- more than the World Bank, Inter-American Development Bank and the United States Export-Import Bank combined.   Plus, they've directed a lot of those resources to countries that the West has ignored, like Ecuador, Venezuela and Argentina -- countries right in our own back yard.   Examples:   China has pledged to lay down $12 billion in railway lines in Argentina, gave $1.6 billion for a hydroelectric dam in Ecuador, as well as $20 billion for infrastructure construction in Venezuela.

But it's not just Latin America where the Chinese are investing so heavily.   They recently agreed to grant Russia $6 billion loan for infrastructure in exchange for the Russian coal supplies over the next quarter century.   Plus they recently struck a deal to expand the capacity of the Greek port of Piraeus up to 250%,   in exchange for easier access to European shipping lanes.   They've also recently pledged $20 billion in investments across Africa, which will go to build roads, railways, schools, hospitals, agriculture and manufacturing projects, and to small and medium-sized business development.

The Chinese are clearly on a mission to not only secure resources around the globe but to establish goodwill as well.   As stated at the outset of this article, they're obviously looking for partners and "friends.'   And they've been doing this for the past decade:   Using their massive war chest of USdollar reserves to buy allegiances around the world -- which they have decided is a much better investment than ever more US Treasury bonds!   They understand they'll need a strong global backing, with plenty of partners and "friends,' to secure the final step in their plan to take down America and take its place as the world's preeminent superpower, and be the new supplier of the world's reserve currency.

If history has taught us anything, it's that no empire lasts forever

And so it is that America's reign of economic dominance is teetering on the brink, because of how China is positioning itself to shakedown America in 2013.   The Chinese government is blazing a new trail in the international energy trade, and a recent agreement with Russia and Iran may be the final dagger in the heart for the US dollar.   As already mentioned, China is plotting to end the reign of the petrodollar, and they are leading this assault with the help of what some are inclined to call "the new axis of evil":   Russia, Iran, Venezuala, Nigeria and others.

Doubtful about this?   Then take a look at this recent article at Examiner.com.   Here's its key announcement:

    "Just a few days ago, China made the official announcement ...   as of that day, Thursday, Sept. 6, 2012, any nation in the world that wishes, from this point on, to buy, sell, or trade crude oil, can do so using the Chinese currency, not the American dollar."

And they've already begun making deals with big oil exporters to ensure this new way of buying oil internationally.   For example:

    "Major African oil producer Nigeria has agreed to swap a major portion of its dollar reserves for Yuan reserves.   Standard Bank researcher Simon Freemantle says, "We, rather conservatively, anticipate that around 40 percent of [Chinese]-African trade would be settled in [Yuan] by 2015.

*    Similarly, China and Brazil have signed a currency swap worth $30 billion, in a deal which, according to the Wall Street Journal is said to encourage Chinese investment in Brazil's oil sector.

*    Iran has signed major deals to drop the dollar from oil deals with China, Russia and India.

*    China signed a $5 billion deal to buy oil from the United Arab Emirates in Yuan.

*    Russia recently announced it will supply China with all the crude it needs or wants and they won't transact using the US dollar.

*   Finally, China state-run oil company Sinopec recently completed an $8.5 billion deal in Saudi Arabia to help build oil infrastructure."

Therefore the writing is on the wall:   If Saudi Arabia walks away from our petrodollar arrangement with them, America is doomed.

And why wouldn't they walk away from it?   Commodity producing countries around the world suffer the same fate as any American investor:   If you simply put your dollars in the bank, your savings will get ravaged by inflation.   You could leave it in the stock market, and then suffer violent booms and busts from the Fed's mismanagement of our economy.   Or you can park your money in government bonds and treasuries and pray for the best, which is likely to be rather meager.  

Yet that's exactly what most investors have been doing.   In recent years, more than $400 billion in hot money has abandoned the stock markets and moved into bonds.   And so it is that for the last 30 years most of these countries have been pouring their excess dollars into government bonds and Treasuries.   That's created the greatest 30-year run for US government bonds in history.   It's allowed us Americans to run up unprecedented Federal deficits and live way beyond our means, consuming trillions-of-dollars-worth more stuff than we produce as a country.   The Fed has kept our taxes abnormally low by borrowing trillions (from investors around the world), and these low tax rates we've enjoyed have enabled most of us to live much larger and more luxury-filled lives than otherwise we could have.

But in doing that we've also created an enormous bubble, 4-times the size of the internet bubble and real estate bubble combined.   And when countries decide to say "no mas" to the petrodollar requirement, this mega-bull market will see its day of reckoning.    When that happens, it will make the stock market collapse of 2008 look like a cake walk.

Countries like Greece and Spain have already shown us the devastation that can happen when the national credit card runs out:   According to the New York Times, Greece's economy shrunk almost 12% between 2009 and 2011 and will plummet another 6% this year.   In the past few years, Greece has seen 25% unemployment , massive strikes and even violence erupt throughout the country.   People are now even worried about the resurgence of the neo-Nazi party there.   In Spain a million homes stand vacant after their owners were taken into foreclosure.

But America has run up even bigger debts, per capita;   has bigger deficits;   and has an even bigger bond bubble than all of Europe combined.   So when our bubble bursts, you could see American stocks, bonds and your savings go up in smoke.   Interest rates will soar on everything from home loans to credit cards, sending real estate plummeting to new lows, throwing millions more Americans into bankruptcy and foreclosure.   The Federal government will be thrown into turmoil, unable to meet its financial obligations, and the record-high 43 million Americans who now rely on government assistance will take to the streets and riot.   Prices on everything from food to gasoline will soar, sending millions of middle class workers into poverty.

So, yes, this is economic war.   And China will do its damnedest to come out on top, with the least collateral damage to their dollar reserves -- which is why they've quietly been moving their dollars out of US Treasuries and into gold and commodities.   They know that on the day the dollar falls, investors will lose faith in fiat currencies. 

Investors will no longer want to buy and hold assets like US stocks, bonds and currencies, which are based on nothing but the soon-to-be-revealed empty promises of CEOs, central bankers and government leaders.   Instead they will, more than ever, be turning to real assets like gold and silver -- assets with intrinsic value -- which are poised to skyrocket when the aforementioned empty promises unravel.   Similarly, any currency that happens to be gold-backed will hold its value.   And that currency will be Chinese.

===============================================================

The article you've just read was derived from another one, which you may wish to review in order to confirm the validity of any statistics that have here been cited but not referenced.

Authors Bio:

Several years after receiving my M.A. in social science (interdisciplinary studies) I was an instructor at S.F. State University for a year, but then went back to designing automated machinery, and then tech writing, in Silicon Valley. I've always been more interested in political economics and what's going on behind the scenes in politics, than in mechanical engineering, and because of that I've rarely worked more than 8 months a year, devoting much of the rest of the year to reading and writing about that which interests me most.