Macro investor Luke Gromen says that the dollar’s dominance in the global trading of oil is a threat to the existence of China and a number of other nations.
In an interview with Peter McCormack on the What Bitcoin Did podcast, Gromen explains why China is spearheading a global campaign to get other countries to move away from the dollar in trading certain commodities like oil.
According to the investment strategist, China’s immense demand for energy leaves the country with very little choice but to convince other nations to de-dollarize oil.
“The de-dollarization of commodities is largely defensive in nature. It is an existential threat to them to get away from the dollar monopoly in commodities… The Chinese are buying more and more oil. They’re importing more and more oil. They’re consuming more and more oil every year, and that oil is only priced in dollars.
As oil gets more expensive, and they consume more of it, they’re going to need to have more dollars every year just to keep their economy going or else all the debt they have, their economy will implode. The debt will implode. You’ll have a huge crisis.”
Gromen says that China’s finite amount of US dollar reserves are eventually going to run out as its government tries to support the growing demand for energy while the price of oil rises. According to the macro guru, China could face a repeat of a crisis witnessed over two decades ago if it continues to purchase oil solely in US dollars.
“They’re going to have a 1997 South East Asia crisis, where they run out of reserves to buy oil and either they have to shrink their economy, and they (witness their) own economic crisis, or they devalue the yuan… Then you have inflation. It’s a crisis.
Ultimately, for China in particular on side of it and some others, it is a matter of national security for them to gain the ability to import their energy at least partially in their own currency, and they have done that.”
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