Welcome to AfricanPod, and in this episode, we look at the relentless march of China towards global supremacy, this time with a newly-empowered arsenal – its currency, the Yuan, also called Renminbi.
It is a big topic because the International Monetary Fund has now recognised the Yuan as a Global Reserve Currency. Africa, on the other hand retains the top medal in mediocrity, at least when it comes to currency, finance and economics.
So its Hello Africa, here comes China! And the question is do African leaders even understand what has just happened? Find out, right here on the AfricanPod – the good news and the bad news about Africa.
On the last day of November 2015, the International Monetary Fund made an earth-shattering announcement: China’s currency, the Yuan has been approved to join the elite group of global reserve currencies.
This means, China will be in a position to activate the same leverage the United States and its paper currency, the Dollar has enjoyed for about four decades.
Other currencies that enjoy reserve status include the Swiss Francs, the Euro, British Pounds Sterling, the Japanese Yen, the Australian Dollar and the Canadian Dollar.
It is important to point that the United States Dollar takes the Lion’s share – the Leviathan’s share of the privilege that comes with being the source of global reserve currency, with more than 60% of World Trade settled in US Dollars.
So what privilege comes with being a global reserve currency?
It is not a question asked very often, and the answer is very rare. Even where you hear the it is often only as clear as mud, because it is presented in economic and financial jargons that barely one in a million people understand.
So let’s attempt to get some clarity:
A reserve currency is used in international transactions – or paying for goods and services around the globe. This means, the person or persons who print that currency have enormous financial advantage, because they can purchase goods and services cheaply. They can access funds cheaply. The cost of getting goods and services for the one who prints the currency is exactly what it costs to print the paper.
Since the world operates on exchange of goods and services – a situation described as trade, the one who gets the cheapest money on the scale of printing in exchange for goods and services is the one who laughs all the way to be bank.
If you had a choice which one will you choose – the ability to print money and exchange it for whatever you want or sweat all day long for what you need?
Don’t get this wrong – it is very complicated, but the above is the simplest way to put it in order to begin to understand the advanced circus that the global monetary system is.
The International Monetary Fund presides over the system and allows some to print paper in exchange for very valuable goods and services.
It also allows the same people to print what is called money, lend it and collect interest on it. Imagine collecting dividends on something that costs you almost nothing to print.
It is the sweetest deal on planet Earth, and it takes the smartest and the most powerful people to own the process the keeps it in the hands of the few.
Invariably, this means Africans are not among the smartest and the most powerful people as far as economics and finance is concerned.
Africans, in this sense are deeply ignorant of the mechanisms that result in the creation of currency – or what is erroneously called money.
It explains why no African currency forms part of the global reserve currency. Perhaps, at a basic level, it is the reason why the continent has no common currency like the Euro. Remember the Euro? Once invented, it quickly found its place on the global reserve currency.
China understood the game of currencies and worked very hard to be admitted into the elite group.
To put China’s effort into perspective, consider that the IMF meets only twice in a decade to consider whether a new currency qualifies to be given a privileged status in the International Cartel.
Guided by focussed determination expressed through widespread industrialisation and economic modernisation, China rose right to the top as the world’s leading exporter, raking in billions of Yuan, the sheer volume which cannot be quantified.
The country’s rise and influence could not be ignored any further, even if the IMF still found a way to deny China the reserve currency status five years ago.
With China reigning as the undisputed second biggest economy in the World after the United States, the IMF could no longer keep the door shut.
To be sure, China’s new currency reserve status will not come into effect until October 2016. But the country’s leaders will all be smiles as they look forward to taking a chunk of influence from the American Dollar.
Africa and its leaders on the other hand remain as spectators with no clue about what is going on. In fact, many of the leaders wouldn’t even understand what just happened.
There might always be great expectations for Africa, but the realisation seems to be constantly postposed.
Smart people make things happen. Those who are not watch things happen – and even worse, there are others who fail to understand what happened and how it affects them.
You see, Currency Wars is the new frontier in global competition and domination.
Its just that Africa has not been invited to be party. The continent doesn’t even know there is a party going on, otherwise, it might perhaps gate-crash.
Worse, there is also no evidence that Africa will consider organising its own party.
The continent finds it easier to beg and to blame others than to carve its own destiny.
The matter of currencies and their global reserves status taken up today on AfricanPod is among the biggest topic on planet Earth.
I cannot pretend I understand it all. So I will happily refer you to a few experts.
Here are two names:
1. James Rickards, author of two amazing books, Currency Wars and the Death of Money.
2. Mike Maloney, an expect of global monetary history and author of the book “Guide to investing in Gold and Silver” as well as the video series called Hidden Secrets of Money.
For more on the good news and band news of Africa, subscribe to the AfricanPod on iTunes Podcast, on Youtube, search for AfricanPod, and also on our website, www.AfricanPod.com as well as Twitter @africanpod
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My name is Phillip Nyakpo, and thanks for listening.