Is A Sino-US currency war imminent?

However, such predictions fail to consider the change of circumstances and history did not repeated itself precisely. The third cycle of the US was disrupted by the subprime mortgage crisis. That is why the decisive financial war will take place around 2015 rather than on 2012. During the first two cycles of the US financial strategy, European countries became economically paralyzed for five years, Soviet Union collapsed, Japan experienced a 15-year depression, South-East Asia, Russia and South Korea all failed to realize economic growth within seven years and Argentina and Mexico also were placed in stagnation for six years.

However, the United States faces two competitive enemies in the third cycle--the whole Euro-Zone and a rising China. The US has never gone directly head-to-head with China in a currency war. If China is defeated in this war, the US will find many sources of profits and all problems for its financial assets will get resolved. At that time, the Euro-Zone will be easily defeated in a currency war with the US because it cannot expand anymore.

If so, there will hardly be any obstacles for the US financial strategy in the long term and the world will be controlled by the US, as is their aim. And the G2 mode will be enlarged and continued. Hence, this is not only a great financial war, which can decide the future of the world, but also a currency war on an unprecedented scale, which can greatly influence the allocation of global assets.

Q: What differences are there between your new book and others related to currency wars? Is there any subversive idea in your book?

L: Yes, there is. I have demonstrated completely a different concept of currency wars and showed the opposite logic from others' books. Previous authors thought most wars in human history are currency wars, including the First World War, the Second World War, the American War of Independence, the Napoleonic Wars and even the wars in ancient China. But all of these are only the financial phenomenon rather than currency wars.

I think the real currency war came into beings because Nixon disconnected the US dollars with gold, which is also a new form of war in the era of cash hegemony. Currency wars cannot start without the cash hegemony because every country needs to output its own cash in the wars. However, when the gold standard or precious metal standard were popular around the globe, no country wished to export their own currencies. For example, the British prevented the exportation of the currency by all means in the 19th century--so did America before 1971. It is easy to understand that the reduction of precious metal means the decrease of the currency issue, which will bring shrinkage to the economy.

Therefore, in that era, actual war was the main way for a country to plunder treasure. The losers had to cede territory and pay an indemnity or give up their interest such as tax rights in customs. The control and robbery of finances is only the result of the wars. However, in the wake of the disconnection between dollar and gold, the most profits were obtained from outputting currency for the biggest nations, while small nations have no ability to accomplish that.

After conquering Iraq, the first thing the US did was output dollars there. From the beginning of disconnection to 2010, the United States reached a total output of 32 trillion dollars through trade deficit at an amount of 11 trillion dollar output and another 21 trillion dollars through external investments. But how many assets of the US does every country hold now? Twenty-two trillion dollars; that is to say, the debt the US owes other countries, which are in the vicinity of 10 trillion dollars, disappeared through the currency wars. The United States possesses others assets, about 10 trillion dollars' worth, for free.