End of American dollar...Beijing instructs all Chinese banks to ditch the dollar

 Beijing has instructed all Chinese banks to ditch the dollar, ie not buying or accepting the dollar. What does this mean and what are its implications? The first reaction is that China does not need any more American dollar, either because it has too many or does not have any more needs for the dollar.

China has liquidated about $700 billion treasury bills and still holding on to about $750 billion, and still in the process of selling them off. China is also reported to have a reserve of more than $3 trillion, and unofficially the sum could be much more. Given the hostility of the American trade and tariff wars and the 245% tariff, the decoupling of the two economies is as good as complete. When China is no longer buying anything from the Americans, there is no more need to hold on to any American dollar as there is no more practical use for them. 

Another major reason is the dedollarisation process, to trade using local national currencies and the yuan. This means holding on to American dollar is unnecesary and a big risk with the American gangsters ready to confiscate them. The faster China gets rid of its holding of American dollars and treasury bills the better. 

The other big implication of not wanting to own American dollars is that there will be no need to sell Chinese goods to the USA in exchange for dollars that China does not want. The high trade tariffs that Trump's regime imposed on China makes selling to the American market irrelevant. Exporting to America would plunge to near zero.

Countries importing goods and services from China would also have to pay China in their own currencies or in yuan, not in American dollar. A complete decoupling and break from the American economy would become a clean break. And the dumping of treasury bills and the dollar would increase in speed in the coming days.

When China, the biggest exporter and trading partner of more than 125 countries in the world stops accepting the American dollar, whither the American dollar? Countries of the world would increasingly find that they do not need the dollar as well as they cannot use the dollar as payment for Chinese goods and services. Unless they need the dollar to buy expensive American goods and services, they too would follow China in reducing their needs and holdings of the dollar.

If this trend catches on, the dollar would turn into another banana currency, plenty in supply but no demand for it or to use it. It would be the final nail to the coffin of the American dollar.