Zimbabwe says China to cancel $40 mln debt, increase yuan use

D.C. Just Lost Another Outpost in the Global Currency Fight

Another Outpost Gone

Well, well!  It seems a rather big deal on the currency scene has just gone under the radar.

For the US was just outmaneuvered in yet another currency deal that has major implications going forward.

By The Wealth Watchman

Yes, Zimbabwe and China finally hammered out a deal to fast-track the Yuan for use in Zimbabwe’s general economy. This is important for China, but even more so for the troubled south-central African country.

For years, Zimbabwe has been an utter basketcase, plagued with human rights violations, fraud, hyperinflation, and economic maladies galore. It seems the sly, old dictator, Robert Mugabe, having completely train-wrecked his country, was truly desperate to salvage his decrepit legacy.  After all, unemployment in that country had recently reached an utterly mind-blowing 80% of their populace!

Can you imagine a populace even functioning with just 1 in 5 having gainful employment? They were literally barely surviving in many cases.

Something had to be done. Thusly, several years back when Mugabe heard about China’s African strategy:involving the investment of over $40 billion in Chinese capital to create close working relationships, by building infrastructure(in exchange for trade and currency usage), Mugabe was keen to get involved.

The man personally made over 13 trips to visit the Chinese PM, and was able to secure a loan package worth $1 billion dollars, in order to build thermal power plants in Zimbabwe, and jumpstart Zimbabwe’s economy.  China’s leadership agreed to a tentative deal to fund the plant’s construction, but Beijing knew that the faltering country would need more alternatives, and special help going forward.

Beijing also knew the timeless life truth: that everyone who borrows becomes slave of the lender, and the lender(who has the capital and the leverage) will always end up making the rules.  This is especially true if the borrower comes upon hard times!

And that’s where the real value of the loan came in…

Yuan Foot in the Door

We’ve already looked at how the US/UK banking establishment’s power is a money power, which comes through having the premiere currency used in world trade(the US Dollar).  The Eastern Bloc, Eurasia, is now moving to counteract the Western bankers, in trying to unite a geopolitical/currency/trading regime between Asia and Europe. It is the most ambitious geopolitical project perhaps ever undertaken.

Many steps toward that ultimate goal have been made in the last few years alone, and this newest debt-forgiveness deal is very much a part of that process. Right now, Zimbabwe is using a basket of currencies to help its citizens trade and transact, in order to help avoid currency turbulence. They no longer really use their own former currency, the Zimbabwe Dollar(or “Zim Dollar”), as that currency was literally hyperinflated to a status about 3 notches below toilet paper.

Up until now, that currency basket included the US Dollar, the Great British Pound, and the South African Rand.  Now though, the African country will allow their citizens to take payment from Chinese tourists directly in Yuan. This is key, because China is the largest loan partner in the country now, and will only take a larger share of the trade going forward.

In this new deal, China will forgive about $40 million of the $1 billion owed them, in exchange for acceptance and facilitation of the Chinese Yuan in the Zimbabwe economy.  It also allows the Zimbabwe government to repay their Chinese loans using the Chinese Yuan that flow into its country.

That’s a good deal for Zimbabwe, who’s troubled economy could use the debt forgiveness, but it’s also a great deal for Beijing, since it secured this new huge foothold in central Africa, by giving up just 4% of its loans to Zimbabwe. Not too shabby.

Africa now does trade business with China in excess of $200 billion a year, a very sizeable chunk, and much of Africa is now looking to the East to hopefully step forward into the 21st century.

“Wait, Watchman, I don’t get it. Sure global currency share is important, but what could Zimbabwe possibly possess to make the Chinese want to secure trade/currency deals in the first place? What’s the real prize in all this?”

Ah, shield brother, I’m very glad you asked that, because as you’ve already guessed, the Yuan convertibility agreement is just icing on the cake.  The real prize for China in Zimbabwe is much more crucial than that…

A Deal as Good as Gold

In the last 10 years, Zimbabwe’s economy and hyperinflation became so bad, that many turned to an old tradition just to survive: gold panning. Much of the panning done was illegal as well. However, when people are literally starving, they’ll do anything to survive.  It is believed that the number of those who panned for gold last year, was between 100,000 and 300,000 souls.

That is true suffering.

The reason they could turn to gold panning though, is that Zimbabwe’s soil is rich in gold deposits, and enough gold could be found each day to keep each worker alive. It’s not just gold that the country has a rich reserve of.  They also have the motherload deposits of diamonds, platinum, coal, copper, nickel, tin etc.  For instance, Zimbabwe’s platinum deposits alone are the 2nd biggest in the entire world.

You name it, Zimbabwe’s got it.

The problem for Zimbabwe is that their economy and mining sector are so devastated, that they can’t even effectively extract those resources which they’re sitting right on top of.

Don’t believe me? This year their central bank gave a fresh loan of $5 million(atop the $50 million they already handed their miners) only for their entire mining sector to produce a grand total of 14 tonnes of gold, last year!

To top it all off, the artificially low price of gold and commodity prices has literally monkey-hammered their country’s already fragile mining companies, and pushed them to the brink of utter collapse.

Zimbabwe’s mining sector could show promise, if the right developed partner came in to help them develop it, and get them out of their fix… and as you may have guessed, that’s where China comes in!

China has already begun the process of formally partnering(and building up) with Zimbabwean miners, as was noted early last year:

Zimbabwe Seeks Help From China to Develop Platinum Refinery

China is keen to acquire some of the precious platinum for its industries that Zimbabwe produces, but it also knows that it could easily propel the 430,000 ounces of annual platinum production there much higher, with its formal involvement.

It doesn’t stop with platinum or gold though, as Chinese firm, Anjin Investments, recently invested $460 million dollars to develop the country’s diamond mines and deposits!

It is gold though, which remains Zimbabwe’s chief concern right now: as they’ve thrown tens of millions of dollars at its gold miners to help jumpstart their production.

In fact, Zimbabwe’s stated goal is to double their gold output from 14 tonnes to roughly 30 tonnes by 2020.  That’s a lofty number for them, but China knows it can be achieved, and as China is already the world’s premiere gold-producer, it knows that it must continue to establish a foothold in foreign gold markets to continue their gold acquisition plan.  It could easily double or triple Zimbabwean gold production in the next decade, allowing Beijing to hoover up dozens of golden tonnes for years to come.

Heed this well though: China is already a customer of Zimbabwe’s platinum and gold…but if Zimbabwe should fail to make payments on its other loans to China, you had best believe that China will demand the right to buy up major stakes in Zimbabwe’s gold mines themselves. This is the same(successful) strategy they’ve used in other parts of Africa, and even Australia as well.

The Zimbabwean government, which is now so poor, thatthey literally have zero gold reserves left, has no other choice, but to accept this new Chinese help…with all the strings that come with it.

Conclusion

This new deal between China and Zimbabwe was a slam dunk for Beijing:

They’ve secured a Yuan foothold in south-central Africa.

They’ve achieved strong leverage to eventually unseat the US Dollar in Zimbabwe.

They’ve created more goodwill, which they’ll use to amplify their mining co-operation ventures.

Empires don’t rise overnight, and likewise they don’t usually fall overnight, either.  The American empire has been falling slowly over the last several decades, and the weapon used to unseat them is de-dollarization. Without the US dollar being the ‘go-to’ currency for the world, the US’s power literally dries up.

The US Empire’s real power was always its dollar, which it used as a stick to beat other satrap nations into submission.

However, China prefers to beat the US by offering their Yuan as a carrot rather than a stick. This is an important distinction of approaches between the two world powers, and it’s the chief reason why China is winning this game hands down.

When future history books chronicle the demise of the US empire, they’ll look back upon this period where de-dollarization was so obvious, and ask two key questions:

1) How on earth DC could systematically undermine itself so completely…

2) And why on earth did American citizens not put a stop to it?

Source: The Wealth Watchman
Via: Silver Doctors

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