Is A Sino-US currency war imminent?

The US is not taking these kinds of actions against any other country or region. Therefore, it's reasonable to make the conclusion that this currency war is being waged mainly against China.

Q: Why does the US agree to fight this battle at so BIG risks?

L: The US has to do this. America has to find sources of profits for its financial assets, which are valued at almost 700 trillion dollars, including all kinds of financial derivatives. If 1 percent of profit per annum is required, 7 trillion dollars in profits are required to support 700 trillion dollars financial assets. Otherwise, asset prices will plummet.

Finance itself cannot generate profits and the final source of profits is mainly from the real economy. The US GDP reached 15.6 trillion dollars in 2012, but the real economy accounted less than a half--approximately 7 trillion dollars. How can the US generate 7 trillion dollars in profits from the real economy every year? It is obvious that the US needs support from external real economies. China is the biggest external real economy for the US, so this is precisely why the US proposed "Sino-US" theory. The US actually regards China as the source of profits for its financial assets. But China has rejected the G2 mode characterized by "Made in China, Consumption in America".

The US intends to place China in a financial crisis, which could make China's economy paralyzed for five or even 10 years, so that they can purchase lots of assets from China at a low price and solve the problem regarding their sources of profits.

Besides, the ease in monetary policy in the US will lose its effects to enhance US GDP around 2015, as Japan had experienced in the past. After the breakdown of the economic bubble at the end of 1989, Japan finally suffered a great depression for 15 years, despite experiencing economic growth for five years by an ease in monetary policy, which outlived its usefulness in 1995.

Nowadays, the United States adopts an ease in its monetary policy in the same manner Japan did in the past. The ease will lose its effect on economic growth in 2015. In order to avoid the deflation and economic stagnation fate that Japan suffered, the US has to provoke a currency war, although it not end well for the US, either. In that respect, the United States has the unique advantage compared with Japan.

Q: Is this a "conspiracy theory"? Why do you think this is a war?

First, I object that this is a "conspiracy theory" and we should not take for granted that everything could be a conspiracy controlled by America or some elite group. Recently, in order to fight against being painted with the "conspiracy theory" brush, we didn't even recognize or believe this is the US's financial strategy. There is a saying: "awkward conspiracy theory is the best friend of conspiracy."

My new book The Great Decisive Battle: the Imminence of Sino-US Currency Wars objects to the term "conspiracy theory". But the US financial strategy objectively exists. It is reasonable for every country to adopt a similar strategic plan if it were the biggest financial empire like the US. In fact, when we look back on history, we will find that that we are now in the eve of the third cycle of the US financial strategy.

The first cycle was from 1970 to 1985; the second one was from 1986 to 2002. Coincidently, the first two cycles of the financial strategy both lasted 15 years, during which the US dollar experienced depreciation for 10 years and appreciation for another five years. As this regular pattern shows us, the US dollar should greatly appreciation in 2012. This is the main reason why both China's experts and foreign scholars made such predictions as the US will boom and China will suffer.