Secret moves launched by China, Russia, Japan, France, Arab States to end the Dollar

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Putin Called Saudi King, Next US Ally Lost?

Russian President Putin calls Saudi King Abdullah, talk hints Saudi Arabia like Egypt abandoning US for Russia.

By Ari Yashar First Publish: 11/13/2013, 12:42 AM



Russian President Vladimir Putin called King Abdullah of Saudi Arabia on Sunday, according to Al Arabiya. The overture hints that Saudi Arabia, like Egypt, is poised to shift alliances from the US to Russia.

The two leaders discussed ties between the two countries as well as regional issues such as the Syrian conflict and Iranian nuclear talks. Russian officials told AFP that the two leaders "expressed a mutual interest in furthering cooperation and maintaining contacts at various levels."

Bill would outlaw U.S. dollar in Russia

By Marc Bennetts - Special to The Washington Times

Wednesday, November 13, 2013



MOSCOW — Predicting the imminent collapse of the U.S. dollar, a Russian lawmaker submitted a bill to the country’s parliament on Wednesday that would ban the use or possession of the American currency.

Mikhail Degtyarev, the lawmaker who proposed the bill, compared the dollar to a Ponzi scheme. He warned that the government would have to bail out Russians holding the U.S. currency if it collapsed.

“If the U.S. national debt continues to grow, the collapse of the dollar system will take place in 2017,” said Mr. Degtyarev, a member of the nationalist Liberal Democrat Party who was a losing candidate in Moscow’s recent mayoral election.

“The countries that will suffer the most will be those that have failed to wean themselves off their dependence on the dollar in time. In light of this, the fact that confidence in the dollar is growing among Russian citizens is extremely dangerous.”

The bill would partially revive a Soviet-era ban on the dollar. It would prohibit Russians from holding dollars in the country’s banks, and banks also would be unable to carry out transactions in the dollar.

However, Russians still would be able to buy or sell dollars while abroad, as well as hold dollar accounts in foreign banks.

The Central Bank of the Russian Federation and the government would be exempt from the law.

Russian financial experts were largely critical of the bill, which they suggested was more about making political capital on the back of rising anti-U.S. sentiments in Russia than protecting the country’s economy.

“The American financial system, despite all its existing problems, remains the most stable and low-risk in the world,” financial analyst Andrei Shenk said.
He also warned that the bill would harm Russia’s investment climate.

Another expert warned that the bill would strip Russians of the ability to flee the country to seek greater political and social freedoms.

“The right to the free exchange of currencies is a fundamental element of capitalism,” said Moscow-based economics expert Igor Suzdaltsev. “It allows citizens to leave the country when a dictatorship is imposed by selling their property and exchanging their assets for the necessary currency.”




Russian lawmaker seeks to ban US dollar, predicts 2017 collapse

Published time: November 13, 2013 19:53
Edited time: November 13, 2013 21:03


RIA Novosti / Mikhail Mordasov


To protect Russians against the “collapsing US debt pyramid”, a Russian legislator has filed a draft bill to ban circulation of the currency in Russia.

Once a Moscow mayoral hopeful, Mikhail Degtyarev, 32, likens the US dollar to a worldwide ponzi scheme which he says is scheduled to end in 2017.

“If US national debt continues to grow at its current rate, the dollar system will collapse in 2017,” the submitted draft legislation says.

“In light of this, the fact that confidence in the US dollar is growing among Russian citizens is extremely dangerous,” Degtyarev wrote in his explanatory note attached to the bill.

The bill would impose a ban on dollars within a year of its passage, and any private citizen holding accounts in dollars would either need to spend the money or convert it to another currency. There is no proposed ban on the euro, British pound, yen, or yuan.

If one doesn’t exchange or transfer dollars within a year, the dollars will be seized by officials, and reimbursed in rubles within 30 calendar days.

Under the proposed legislation, Russians would still be able to use dollars abroad and have foreign bank accounts, as well as buy goods on the Internet in dollars.

The Russian government, Central Bank, Foreign Ministry, Federal Treasury, Federal Security Service, and other state branches would be exempt from the law.

To protect Russian nationals, Degtyarev proposes to end dollar transactions and deposits at Russian banks, which would give rise to the ruble, and end dependence on the world’s dominant currency.

Part of the bill aims to restore the prestige of the ruble, which has weakened as the Russian economy battles inflation and slow growth.

Raising the prestige of the ruble by nixing foreign currency isn’t a novel idea- it was practiced during the Soviet Union when holding foreign currencies was illegal. A similar ‘anti-dollar’ proposal was filed by Duma deputies in 2003, but completely flopped.

Moscow, a developing financial center is home to several international corporations, and many companies pay their employees in dollars, or ruble salaries pegged to the dollar.

If the bill garners enough support, it will continue onto as many as three preliminary hearings before being passed into law.

Degtyarev has made a name for himself with his outlandish proposals- from giving women extra holidays during menstruation, to his declaration Russia would lead the fight in defeating the antichrist. He serves as the head of the science and technology committee in the lower house of the Duma.

The populist Liberal Democratic Party (LDPR) is a political platform for Vladimir Zhirinovsky, who is famous for political antics and outlandish bills.

On the same day, November 13, Belarus issued a statement denying rumors they were mulling a similar currency ban, after an opposition group reported a currency circulation ban that would get rid of dollars and euros in two months.

Citing Alexander Timoshenko, a representative of the Belarus’s National Bank, Interfax reported the rumors were “absolute nonsense” for a country with an open economy.

Dollars in demand

Public demand for foreign banknotes in Russia, especially dollars, has greatly increased as the ruble continues its slow devaluation.

The Russia’s Central Bank (CBR) said they believe the ruble has stabilized, but that hasn’t curbed investors, both private and public, to not put all their rubles in one basket.

The aggregate demand for foreign currency in September 2013 increased $9.1 billion, up 7 percent from August, according data from the the Bank's September 2013 Review of State and Domestic Foreign Currency Market report, available on its website.

The Bank has allowed the ruble to flow more freely to accommodate foreign investment and financial markets, but this has created a tough inflation balancing act for the CBR.

Demand for dollars in September 2013 rose $5.9 billion, up 11 percent from August. Over the last year, aggregate demand for dollars has dropped 1 percent, but has jumped 12 percent by individuals greenbacks via purchase and conversion.

The ruble’s daily trade range is 32.45–39.45, which the regulator increased on Tuesday. The bank buys between $200 and $400 million in rubles per day to counter losses. At 20:15 Moscow time, the ruble was trading 32.7643 per one US dollar.

Consumer prices rose 6.3 from October, year-on-year, which is within the bank’s target inflation range of 5 to 6 percent. Inflation fears have prevented the bank from cutting the official interest rate for the last 14 month.

Over $13.3 billion in foreign currency flowed into (bought, acquired) authorized Russian banks in September, and nearly $13.1 billion flowed out.
In foreign currencies, total demand for the dollar in September was 65 percent, and 34 percent for euros.

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China Announces That It Is Going To Stop Stockpiling U.S. Dollars

by Michael Snyder • November 21, 2013

China just dropped an absolute bombshell, but it was almost entirely ignored by the mainstream media in the United States. The central bank of China has decided that it is "no longer in China’s favor to accumulate foreign-exchange reserves". During the third quarter of 2013, China's foreign-exchange reserves were valued at approximately $3.66 trillion. And of course the biggest chunk of that was made up of U.S. dollars. For years, China has been accumulating dollars and working hard to keep the value of the dollar up and the value of the yuan down. One of the goals has been to make Chinese products less expensive in the international marketplace. But now China has announced that the time has come for it to stop stockpiling U.S. dollars. And if that does indeed turn out to be the case, than many U.S. analysts are suggesting that China could also soon stop buying any more U.S. debt.

Needless to say, all of this would be very bad for the United States. For years, China has been systematically propping up the value of the U.S. dollar and keeping the value of the yuan artificially low. This has resulted in a massive flood of super cheap products from across the Pacific that U.S. consumers have been eagerly gobbling up.

For example, have you ever gone into a dollar store and wondered how anyone could possibly make a profit by making those products and selling them for just one dollar?

Well, the truth is that when you flip those products over you will find that almost all of them have been made outside of the United States. In fact, the words "made in China" are probably the most common words in your entire household if you are anything like the typical American.

Thanks to the massively unbalanced trade that we have had with China, tens of thousands of our businesses, millions of our jobs and trillions of our dollars have left this country and gone over to China.
And now China has apparently decided that there is not much gutting of our economy left to do and that it is time to let the dollar collapse. As I mentioned above, China has announced that it is going to stop stockpiling foreign-exchange reserves...

The People’s Bank of China said the country does not benefit any more from increases in its foreign-currency holdings, adding to signs policy makers will rein in dollar purchases that limit the yuan’s appreciation.

“It’s no longer in China’s favor to accumulate foreign-exchange reserves,” Yi Gang, a deputy governor at the central bank, said in a speech organized by China Economists 50 Forum at Tsinghua University yesterday. The monetary authority will “basically” end normal intervention in the currency market and broaden the yuan’s daily trading range, Governor Zhou Xiaochuan wrote in an article in a guidebook explaining reforms outlined last week following a Communist Party meeting. Neither Yi nor Zhou gave a timeframe for any changes.

It isn't going to happen overnight, but the value of the U.S. dollar is going to start to go down, and all of that cheap stuff that you are used to buying at Wal-Mart and the dollar store is going to become a lot more expensive.

But of even more importance is what this latest move by China could mean for U.S. government debt. As most Americans have heard, we are heavily dependent on foreign nations such as China lending us money. Right now, China owns nearly 1.3 trillion dollars of our debt. Unfortunately, as CNBC is noting, if China is going to quit stockpiling our dollars than it is likely that they will stop stockpiling our debt as well...

Analysts see this as the PBoC hinting that it will let its currency fluctuate, without intervention, thus negating the need for holding large reserves of the dollar. And if the dollar is no longer needed, then it could look to curb its purchases of dollar-denominated assets like U.S. Treasurys.

"If they are looking to reduce these purchases going forward then, yes, you'd have to look at who the marginal buyer would be," Richard McGuire, a senior rate strategist at Rabobank told CNBC in an interview.

"Together, with the Federal Reserve tapering its bond purchases, it has the potential to add to the bearish long-term outlook on U.S. Treasurys."

So who is going to buy all of our debt?

That is a very good question.

If the Federal Reserve starts tapering bond purchases and China quits buying our debt, who is going to fill the void?

If there is significantly less demand for government bonds, that will cause interest rates to rise dramatically. And if interest rates rise dramatically from where they are now, that will set off the kind of nightmare scenario that I keep talking about.

In a previous article entitled "How China Can Cause The Death Of The Dollar And The Entire U.S. Financial System", I described how China could single-handedly cause immense devastation to the U.S. economy.

China accounts for more global trade that anyone else does, and they also own more of our debt than any other nation does. If China starts dumping our dollars and our debt, much of the rest of the planet would likely follow suit and we would be in for a world of hurt.

And just this week there was another major announcement which indicates that China is getting ready to make a major move against the U.S. dollar. According to Reuters, crude oil futures may soon be priced in yuan on the Shanghai Futures Exchange...

The Shanghai Futures Exchange (SHFE) may price its crude oil futures contract in yuan and use medium sour crude as its benchmark, its chairman said on Thursday, adding that the bourse is speeding up preparatory work to secure regulatory approvals.

China, which overtook the United States as the world's top oil importer in September, hopes the contract will become a benchmark in Asia and has said it would allow foreign investors to trade in the contract without setting up a local subsidiary.

If that actually happens, that will be absolutely huge.

China is the number one importer of oil in the world, and it was only a matter of time before they started to openly challenge the petrodollar.

But even I didn't think that we would see anything like this so quickly.

The world is changing, and most Americans have absolutely no idea what this is going to mean for them. As demand for the U.S. dollar and U.S. debt goes down, the things that we buy at the store will cost a lot more, our standard of living will go down and it will become a lot more expensive for everyone (including the U.S. government) to borrow money.

Unfortunately, there isn't much that can be done about any of this at this point. When it comes to economics, China has been playing chess while the United States has been playing checkers. And now decades of very, very foolish decisions are starting to catch up with us.

The false prosperity that most Americans are enjoying today will soon start disappearing, and most of them will have no idea why it is happening.

The years ahead are going to be very challenging, and so I hope that you are getting ready for them.

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Can a China-Russia Axis Bankrupt the US?

Russia and China have studied the end of the Cold War and how the US ultimately defeated the USSR by bankrupting it.

By J. Michael Cole
December 20, 2013



According to Chinese State Councilor Yang Jiechi and Secretary of the Security Council of the Russian Federation Nikolai Platonovich Patrushev, 2013 was “a year of harvest” for Sino-Russian relations. It was also a year of new lows for the countries’ relations with the West — and from the look of it, things could get worse in 2014.

Much has been said in recent years about how two difficult wars in Iraq and Afghanistan and a sagging economy cut the U.S. at the knees and created space for China. During this same period, China was enjoying double-digit economic growth and a relatively stable security environment, emerging as a hegemon in Asia. As the U.S. was struggling to extricate itself from, and was pouring billions of dollars into, unwinnable wars, Beijing was reaping the benefits of its “peaceful rise” by building its economy, resolving longstanding territorial disputes with neighbors, consolidating ties with smaller powers within the region, and neutralizing Taiwan as a potential source of armed conflict.

Thus, when China began flexing its muscles in the East and South China Seas, Beijing was not cowed by the U.S. “pivot,” or “rebalancing,” to Asia. For one thing, it was apparent that Washington’s renewed interest in East Asia would not — at least not in the medium term — be accompanied by a willingness to allocate sufficient capital and resources to make the pivot a credible counter to China. As Beijing and many U.S. defense experts saw it, the rebalancing was more a wish list and academic exercise than an actual strategy, let alone one that was anywhere near implementation. That is the reason why Beijing suffered little consequences when it threatened to alter the status quo within the region, such as with the November 23 declaration of its extended Air Defense Identification Zone (ADIZ) in the East China Sea. (There is every reason to believe that a credible U.S. pivot to Asia would have deterred Beijing, which ostensibly does not seek war at this point in time, from embarking on such adventurism.)
Now by working together, China and Russia could make sure that the U.S. rebalance to Asia, if it ever materializes, remains a diluted, and therefore ineffective, affair. They could do so by enlarging the spatial scope of U.S. security responsibilities and further stretching its military’s diminished resources. A few years ago, Bobo Lo, an associate fellow at Chatham House, proposed the term “axis of convenience” to describe the relationship between China and Russia. Five years after the publication of his book of the same title, the relationship has never been more convenient. For the time being at least, Beijing and Moscow appear to have set their own territorial disputes aside, and by cooperating at the strategic level they are hoping to force the U.S. out of Asia altogether.

A substantial amount of attention has been paid to China’s Anti-Access/Area Denial (A2/AD) strategy, with the DF-21D anti-ship ballistic missile (ASBM) serving as one of its principal components, and to which we can now perhaps add the ADIZ. Less, however, has been said of Russia’s ongoing efforts to keep the U.S. out of its backyard. It is interesting to note that two weeks after China’s ADIZ announcement, Russian President Vladimir Putin, meeting top military officers, stated that Russia would bolster its presence in the potentially resource-rich Arctic. Earlier that month and a little more than a week after China sprung its ADIZ surprise, the Russian navy announced that the Arctic would be its priority in 2014. As The Diplomat reported earlier this month, Russia is currently deploying aerospace defense and electronic warfare units to the area, and is now building a comprehensive early-warning missile radar system near Vorkuta in the extreme north, among other developments.

The growing presence of the Russian military in the Arctic — which stands to turn into a region of strategic importance — will surely prompt a countervailing response from the U.S. (it has already indicated plans to increase its foothold in the region). However, doing so — let’s call it a “rebalancing to the Arctic” — would further strain the U.S. military budget and thereby take resources away from the “pivot” to Asia.

Simultaneously, the Russian military confirmed on December 16 that it had deployed nuclear-capable Iskander-M tactical ballistic missile systems, with a range of approximately 400km, into its Baltic exclave of Kaliningrad and along its border with NATO members Poland, Estonia, Latvia, and Lithuania. The news followed reports the previous weekend that satellite imagery had unveiled the presence of 10 such launchers in the exclave. Although President Putin denied the deployment on December 19, Russia has shown every indication that it seeks to expand its operations in its Western Military District, which aside from Kaliningrad also includes much of the European part of Russia.

There are questions over whether Washington can afford to substantially increase defense spending without bankrupting the country. It will find itself unable to counter both a resurgent China in East and Southeast Asia, where it has been speculated that China could eventually announce a second ADIZ, and a more muscular Russian presence in the Arctic and near the Baltic states. Either the U.S. will focus on one, or it will attempt to meet all contingencies, but do so with less-than optimal resources. With Washington feeling it has little choice but to choose the latter course of action, China and Russia will both benefit by confronting a diffuse and distracted opponent or succeed in breaking the U.S.’s back by forcing it to overspend — unless other countries like Japan and NATO members agree to greatly expand their defense spending, which appears unlikely. Furthermore, there are also doubts about whether the Japanese would agree to constitutional changes of the sort that would allow for military burden sharing of the type envisaged here.

Whether the U.S. has a “right” to be an actor in what Russia and China consider as their backyard is a question we’d better seek to answer elsewhere. But what is clear is that a weakened U.S., whose ability to meet the challenge of China’s “rise” is already very much in doubt, now seems on the brink of facing a multi-pronged challenge from a Sino-Russian axis that, if it is to be countered effectively, will require a number of “pivots.”

Whether Russia’s economy can sustain a military expansion on the scale necessary to prompt a U.S. realignment is questionable, though the increasingly authoritarian nature of its leadership means that Moscow will be far less vulnerable than Washington to public discontent with huge defense spending in times of austerity.

Both Russia and China have closely studied the end of the Cold War and how the U.S. ultimately defeated the U.S.S.R. by bankrupting it. Two decades later, it looks like Moscow and Beijing are trying to return the favor.

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China Starts To Make A Power Move Against The U.S. Dollar

By Michael Snyder, on February 20th, 2014



In order for our current level of debt-fueled prosperity to continue, the rest of the world must continue to use our dollars to trade with one another and must continue to buy our debt at ridiculously low interest rates. Of course the number one foreign nation that we depend on to participate in our system is China. China accounts for more global trade than anyone else on the planet (including the United States), and most of that trade is conducted in U.S. dollars. This keeps demand for our dollars very high, and it ensures that we can import massive quantities of goods from overseas at very low cost. As a major exporting nation, China ends up with gigantic piles of our dollars. They lend many of those dollars back to us at ridiculously low interest rates. At this point, China owns more of our national debt than any other country does. But if China was to decide to quit playing our game and started moving away from U.S. dollars and U.S. debt, our economic prosperity could disappear very rapidly. Demand for the U.S. dollar would fall and prices would go up. And interest rates on our debt and everything else in our financial system would go up to crippling levels. So it is absolutely critical to our financial future that China continues to play our game.

Unfortunately, there are signs that China has now decided to start looking for a smooth exit from the game. In November, I wrote about how the central bank of China has announced that it is "no longer in China’s favor to accumulate foreign-exchange reserves". That means that the pile of U.S. dollars that China is sitting on is not going to get any higher.

In addition, China has signed a whole host of international currency agreements with other nations during the past couple of years which are going to result in less U.S. dollars being used in international trade. You can read about many of these agreements in this article.

This week, we learned that China started to dump U.S. debt during the month of December. Many have imagined that China would try to dump a flood of our debt on to the market all of a sudden once they decided to exit, but that simply does not make sense. Instead, it makes sense for China to dump a bit of debt at a time so that the market will not panic and so that they can get close to full value for the paper that they are holding.
As Bloomberg reported the other day, China dumped nearly 50 billion dollars of U.S. debt during the month of December...

China, the largest foreign U.S. creditor, reduced holdings of U.S. Treasury debt in December by the most in two years as the Federal Reserve announced plans to slow asset purchases.
The nation pared its position in U.S. government bonds by $47.8 billion, or 3.6 percent, to $1.27 trillion, the largest decline since December 2011, according to U.S. Treasury Department data released yesterday.

This is how I would do it if I was China. I would try to dump 30, 40 or 50 billion dollars a month. I would try to make a smooth exit and try to get as much for my U.S. debt paper as I could.

So if China is not going to stockpile U.S. dollars or U.S. debt any longer, what is it going to stockpile?

It is going to stockpile gold of course. In fact, China has been voraciously stockpiling gold for quite some time, and their hunger for gold appears to be growing.

According to Bloomberg, more than 80 percent of the gold that was exported from Switzerland last month went to Asia...

Switzerland sent more than 80 percent of its gold and silver bullion and coin exports to Asia last month, the Swiss Federal Customs Administration said today in an e-mailed report. It imported most from the U.K.
Hong Kong was the top destination at 44 percent on a value basis, with India at 14 percent, the Bern-based customs agency said in its first breakdown of the gold trade data since 1980. Singapore accounted for 8.6 percent of exports, the United Arab Emirates 7.9 percent and China 6.3 percent.

When China imports gold, most of it goes through Hong Kong. We know that imports of gold from Hong Kong into China are at an all-time record high, but we don't know exactly how much gold China has accumulated at this point because they quit reporting that to the rest of the world a number of years ago.
When it comes to global finance, China is playing chess and the United States is playing checkers. China knows that gold is a universal currency that will hold value over the long-term. As the paper currencies of the world race toward collapse, China could end up holding most of the real money and that would be a huge game changer when they finally reveal that fact...

The announcement of China's new gold hoard will send shockwaves through the financial markets, and make China and the Chinese yuan (their national currency) even bigger players at the international table.
International banking expert James Rickards compared it to a game of Texas Hold 'Em poker:
"You want a big pile of chips. The U.S. has a big pile of chips, Europe has a big pile of chips. The U.S. has 8,000 tonnes [metric tons] of gold, 17 members of the euro system have 10,000 tonnes. China at 1,000 tonnes is not a player, but at 5,000 tonnes, they are a player."

There are some really good points made in the quote above, but I do take exception with a couple of things. First of all, I believe that China now has far more than 5,000 tons of gold. Secondly, I seriously doubt that the U.S. still actually has 8,000 tons of gold or that Europe still actually has 10,000 tons of gold.

As China (and eventually the rest of the world) moves away from a U.S.-based financial system, the consequences are going to be dramatic.

For instance, right now the average rate of interest that the U.S. government pays on debt is just 2.477 percent. That is ridiculously low and it is way below the real rate of inflation. It is simply not rational for anyone to lend the U.S. government money so cheaply, and at some point we are going to see a dramatic shift.

When that day arrives, interest rates are going to rise dramatically. And if the average rate of interest on U.S. government debt rises to just 6 percent (and it has been much higher than that in the past), we will be paying out more than a trillion dollars a year just in interest on the national debt.

Even more frightening is what a rapidly changing interest rate environment would mean for our banking system. There are four large U.S. banks that each have exposure to derivatives in excess of 40 trillion dollars. You can find the identity of those banks right here. Interest rate derivatives make up the biggest chunk of those derivatives contracts. As John Embry told King World News just the other day, when that bubble bursts the carnage is going to be unprecedented...

"Stockman brought up a brilliant point, the fact that we have hundreds of trillions of dollars of interest rate swaps, which are polluting the world’s banking system. If we see growing volatility in interest rates, and I think that’s inevitable with what’s going on, that would cause spasms in the financial system. And if something goes wrong in the derivatives market, Heaven help us because the leverage that is imparted to the banking system through these derivatives is unholy."

Unfortunately, very few of the "experts" will ever see this crash coming.
Very few of them saw it coming in 2000.
Very few of them saw it coming in 2008.
And very few of them will see it coming this time.
I really like what Paul B. Farrell had to say about this...

Early warnings of a crash are dismissed over and over (“just a temporary correction”). They gradually numb us about the inevitable. Time after time we forget history’s lessons. Until finally a big surprise catches us totally off-guard. Financial historian Niall Ferguson put it this way: Before the crash, our world seems almost stationary, deceptively so, balanced, at a set point. So that when the crash finally hits — as inevitably it will — everyone seems surprised. And our brains keep telling us it’s not time for a crash.

Till then, life just goes along quietly, hypnotizing us, making us vulnerable, till a shocker like Lehman Brothers upsets the balance. Then, says Ferguson, the crash is “accelerating suddenly, like a sports car ... like a thief in the night.” It hits. Shocks us wide awake.

Don't let the upcoming crash take you by surprise.

The warning signs are very clear.

Get ready while you still can.




http://theeconomiccollapseblog.com/a...the-u-s-dollar

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Did China and Russia Just Sell Off A Record Amount, Over $100 Billion, Of Treasurys Held By The Fed In This Past Week?

03/14/2014

A month ago we reported that according to much delayed TIC data, China had just dumped the second-largest amount of US Treasurys in history. The problem, of course, with this data is that it is stale and very backward looking. For a much better, and up to date, indicator of what foreigners are doing with US Treasurys in near real time, the bond watchers keep track of a less known data series, called "Treasury Securities Held in Custody for Foreign Official and International Accounts" which as the name implies shows what foreigners are doing with their Treasury securities held in custody by the Fed on a weekly basis. So here it goes: in the just reported latest data, for the week ended March 12, Treasurys held in custody by the Fed dropped to $2.855 trillion: a drop of $104.5 billion. This was the biggest drop of Treasurys held by the Fed on record, i.e., foreigners were really busy selling.

This brings the total Treasury holdings in custody at the Fed to levels not seen since December 2012, a period during which the Fed alone has monetized well over $1 trillion in US paper.

So is this the proverbial beginning of foreign dumping of US paper? Could Russia simply have designated a different custodian of its holdings? No, because as of most recently it owned $139 billion in US paper, or well above the number "sold" and a custodial reallocation would mean all holdings are moved, not just a portion. For another view, here is what the bond experts at Stone McCarthy had to say:

We don't have a ready explanation for the plunge in custody account holdings. One thing that is striking about the drop is that the last several days was not a period of heavy market buzz about "central bank selling" of Treasuries, at least to the best of our knowledge. China and Japan are by far the largest holders of Treasuries, with holdings of $1.269 trillion and $1.183 trillion in holdings at the end of December, respectively. China's holdings are more skewed to central bank holdings. Selling of Treasuries would appear to be at odds with China's recent effort to depreciate its currency, although on March 5 and 6 there was a brief correction in that trend.

As for the timing:

... the Wednesday-to-Wednesday decline was much larger than the weekly average decline in Treasury holdings of $46.6 billion. That implies that the plunge in Treasuries occurred later in week rather than earlier.

So China. Or Russia, which may be dumping USTs to support the ruble... Or dumping just because.

http://www.zerohedge.com/news/2014-0...asurys-held-fe

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Putin Has Nuclear Economic Bomb-Jim Sinclair

By Greg Hunter On March 16, 2014 In Economy, Media, News, Politics 125 Comments

By Greg Hunter’s USAWatchdog.com (Early Sunday Release)

World renowned gold expert Jim Sinclair is worried about the crisis in Ukraine. Sinclair says, “Welcome back to the cold war that can get hot overnight.” It appears President Obama has brought back the Cold War, and Sinclair contends, “He’s brought it back by changing to a new normal diplomacy, making outrageous threats on a continuing basis rather than seeking a solution.” The referendum vote in Crimea that is overwhelmingly in favor of joining Russia, and yet, officials in the West say it is illegal or illegitimate. Sinclair says, “To say that is to deny the reality the government in the Ukraine is a government created by a coup. To say that is to bring us to the brink of war. . . . Mistakes can happen. War can start anytime you have two entities together with weapons of war looking at each other with lots of hate. I am concerned about the mistake of aggressive machinery and aggressive people looking right at each other.”

On possible U.S. sanctions on Russia, such as excluding them out of the international payment system called the SWIFT system, Sinclair says, “The use of the SWIFT system (Society for Worldwide Interbank Financial Telecommunication) to create a difficulty, almost a prohibitive difficulty in doing business by preventing bank wires, that would be one of the possibilities. Already, the BRICS nations are developing their own SWIFT system. So, the mistake of using the SWIFT system, short of absolute war, is that it has created a competitor that all the BRICS will be using.” Sinclair also thinks, “To sanction Russia is to forget that Russia supplies Europe with its gas supplies. To sanction Russia is to forget there are many U.S. and European corporations operating within Russia right now. I honestly believe sanctioning Russia is the same as shooting yourself in the foot.” Sinclair goes on to say, “When you think you can push an ex-colonel of the KGB, you are not making a proper analysis of the personality of the person. The whole idea that Russia is only a regional power–where in the world did that come from? Anybody that is nuclear capable to the degree that Russia is with its delivery systems is a world power. We hear constantly Russia is only a regional power. We hear lies. We hear untruths. We don’t have a clear picture to what is taking place.”

On Russia countering Western sanctions, Sinclair says watch the “struggling dollar” and Russia accepting any currency for oil and natural gas. Sinclair explains, “It’s struggling . . . because it smells the real teeth of retaliation for sanctions being in the simple acceptance of any currency whatsoever for payment for gas to Europe. Believe me, they will settle in other currencies. . . . It makes energy cheaper. Why in the world would anyone want to pay in dollars if they can pay in their own currency? Russia could retaliate in a way that would have phenomenal impact on the U.S. dollar. . . . Russia has the upper hand. They have it in their ability to turn the U.S. economy upside down and into collapse. There is no question whatsoever. Putin doesn’t need a nuclear bomb. He has a nuclear economic bomb that he can set off at any time.”

What would the price of gold be this year? Sinclair predicts, “Gold has $2,000 an ounce in its sights in 2014.” On silver, Sinclair says, “Silver is gold on steroids. When gold takes off, silver goes up faster. . . . So, the idea you are going to get an old high on silver or better is a given.”

Last year, Sinclair, predicted gold will hit $50,000 an ounce sometime in the next several years. Is he still sticking with that prediction? Sinclair says, “I am still sticking by that, and the $50,000 per ounce is predicated on a shift in the mechanism on determining gold’s value from the paper markets to the physical markets. Should that emancipation take place, it is a possibility and could become a reality.” Sinclair goes on to explain, “Something has to happen. Emancipation of gold from the paper market will be a product of the drawdown of the inventories of the warehouses. I don’t believe for a moment that the COMEX is going to default, but I believe quite certainly that the COMEX will go from settling in gold to settling in cash.” So, how can the gold market be manipulated up or down in price? Sinclair says, “I can tell you exactly how it’s done. You just offer or demand supply . . . that is beyond any capacity that can be met. We’ve already had one day where two and a half years production was offered for sale. It couldn’t be in a physical market that has to deliver within three days. It can only be in a paper market that doesn’t have to deliver.”

Join Greg Hunter as he goes One-on-One with Jim Sinclair of JSMinset.com.
(There is much more in the video interview)




After the interview:
Sinclair added, “We’re in a hell of a mess. If the world drops the ‘Petrodollar,’ we’ll have a hot war in a week. We will go to war over the Petrodollar.” To visit Mr. Sinclair’s site click here for JSMineset.com.


The Nuclear Option: Russia's Threat To Dump Treasuries

Mar. 14, 2014 8:15 AM ET | Includes: GLD, SPY, TLT, UUP

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...)

Summary

• An advisor to President Putin suggested that if the US dares to impose sanctions on Russia for invading Crimea, Russia and its allies should retaliate by dumping US Treasury bonds.
• Should US policy-makers take this threat seriously? Should investors factor this risk into their assessments of the US economy and US financial asset prices?
• The answers to these questions are clear, although they will surprise many people.

Last week it was widely reported in the press that Sergei Glazyev, a man described as an "advisor" to President Putin, issued the following "threat" in response to the possibility of US sanctions on Russia:

"We hold a decent amount of treasury bonds - more than $200 billion - and if the United States dares to freeze accounts of Russian businesses and citizens, we can no longer view America as a reliable partner," he said. "We will encourage everybody to dump US Treasury bonds, get rid of dollars as an unreliable currency and leave the US market."

I have decided to address Mr. Glazyev's threat because many people around the world fear (or hope) that large holders of US sovereign debt such as Russia and China could inflict major damage on the US economy if they decided to dump their Treasury bonds onto the market all at once. Indeed, many analysts believe that the mere threat of engaging in such "financial warfare" provides US rivals with significant leverage that can enable them to further certain geopolitical and strategic objectives.

Should investors worry about this sort of threat? What would happen to the US economy and financial system if Russia and/or other nations dumped their US Treasury bonds on the market? What would be the effect on US financial assets such as Treasury bonds (TLT), stocks (SPY), gold (GLD) and the US Dollar (UUP)?

Some Background On The Source Of The Threat

Later in this article, I will address what would happen if Russia were to actually dump its holdings of US Treasury bonds. However, before exploring such an eventuality, I think it may be worthwhile to situate Mr. Sergei Glazyev's comments within the context of Russian politics and policymaking, and in light of his particular background.

First, it is important to understand that Mr. Glazyev does not serve in any kind of policy-making role nor is he part of Putin's inner circle of advisors. Glazyev is a Ukrainian born Russian politician that, after suffering through a long succession of failures as an opposition figure, was appointed by the Putin administration in 2012 to a minor advisory post that is charged with advising the president on the creation of a Customs Union between Russia, Belarus and Kazakhstan.

Another factor that may be of relevance in evaluating the significance of Glazyev's statements is that he has recently been subjected to a series of very public humiliations as a result of events in Ukraine. First, in late 2013, Glazyev issued very public blackmail threats that were aimed at discouraging Ukrainians from joining the European Union. Glazyev's public threats were ignored, and in a rare show of unity, Ukrainian political parties almost unanimously joined forces to approve of the country's entry into the EU. Second, Glazyev was actively involved in the effort to get former President Viktor Yanukovich to back out of the EU agreement after it had been reached. Third, during the Ukrainian popular revolt that was sparked by Yanukovich's unpopular decision to back out of the EU agreement, Glazyev staunchly supported the embattled Ukrainian president and urged him to violently suppress protesters. Finally, during the revolt, Mr. Glazyev made various unsupported and hysterical-sounding public accusations that the USA was supplying Ukrainian rebels with massive amounts of money, arms and even training.

Thus, it may be useful to keep in mind that Sergei Glazyev is a man that carries quite a bit of personal and professional "baggage" when it comes the subject of Russia's and the US's involvement in Ukraine. Interestingly, the same news outlet that reported Glazyev's "threat" (RIA Novosti) also reported that high-level Kremlin sources were quick to distance Putin's government from Glazyev's statements, saying that his comments represented his personal views as an academic and were not made in his capacity as a presidential advisor.

What If Russia Dumped Its US Treasury Bonds?

There is little reason to believe that Glazyev's ideas regarding "financial warfare" are being seriously considered by the Kremlin. But what if they were? Many people fear that the US is vulnerable, as Glazyev suggests. If implemented, would the dumping of US Treasury bonds actually inflict any damage on the US and/or advance Russian interests? I will briefly outline some facts and important considerations:

1. Russia's holdings are not very significant. Contrary to what Glazyev's said and implied, Russia is a relatively minor player when it comes to US Treasury holdings. Russia is the US's 11th largest creditor, holding about $139 billion in US Treasuries as of December 2013.

2. Market impact temporary, at best, due to global arbitrage. If Russia dumped all of its US Treasuries into the market at once, US Treasury bond prices would fall and interest rates would rise modestly for only a few days, at most. The long-term impact would be minimal. Why? First, one must understand that the global market for bonds is worth significantly more than 100 trillion USD; Russia's holdings of US Treasury bonds barely represent more than 0.14% of the entire global market for all bonds. Furthermore, Russian US Treasury holdings represent an even smaller percentage of total global fixed income instruments. Any decline in the value of US Treasuries by Russian "dumping" would very quickly be reversed by global market arbitrage. How? Given that the relative credit fundamentals of the US would in no way be affected by Russia's politically motivated sales, traders would quickly act to profit from the temporary and unsustainable spread between US Treasuries and other global fixed income assets, bringing their relative valuations back into line.

For example, if the yield on US Treasury bonds rose significantly relative to Italian sovereign bonds or French corporate bonds, traders would sell those non-US securities and buy US Treasuries until spreads narrowed once again to reflect relative fundamentals. The Russians would essentially be shooting themselves in the foot by destroying wealth they have accumulated through oil sales, naively handing these riches to global bond traders that would be more than happy to disabuse the Russians.

Then, after the Russians sold US Treasuries at undervalued prices to very grateful bond traders, the Russians would have to figure out what to do with the US dollars they received in exchange (US Treasury bonds are sold in exchange for US dollars). Let's assume just for fun that the US dollar immediately fell in value due to speculation that the Russians would want to "dump" those dollars as soon as possible. Presumably, the Russians would want to get something of value in exchange for those dollars and not burn them or throw them down a proverbial garbage can (if they did, total dollars in circulation would actually fall and the value of the dollar might actually rise).

Assuming the Russians did not want to directly help stimulate the US economy by spending those dollars on US goods and services (how ironic that would be), Russians would have to use temporarily devalued dollars and bid up the value of other reserve assets such as Yen, German Bunds, gold or other such assets. Again, due to global arbitrage, the price of those assets would quickly fall after the Russians bid them up causing even further losses and humiliation for the Russians. Thus, Russia would essentially "screw itself" on both sides of the trade (sell side and buy side) while ultimately achieving no lasting impact on the value of US assets.

3. The US Fed could easily buy up bonds. The Fed could easily buy up any bonds the market was not able to fully absorb immediately. The purchase of all of Russia's bonds would only equal about 2 months worth of 2013 QE (65 billion per month). In the highly unlikely event that the Fed felt like it needed to purchase US Treasuries in the face of Russian sales to keep interest rates from temporary spiking, Fed action would merely increase their balance sheet by a negligible 1.5% in the worst case scenario where they were forced to buy 100% of those bonds. Indeed, a mere statement by the Fed that they stood ready to buy these bonds would probably be sufficient to support the prices of US Treasury bonds and to keep interest rates down.

4. The US Fed controls short-term interest rates and strongly influences long-term rates. Russian sales of short-term US Treasury bonds would have virtually zero impact on short-term interest rates in the US since the Fed essentially controls short-term interest rates via the Fed Funds system and other instruments. Since banks can borrow short-term funds at near zero in the interbank market, the yield on the short-term Treasury bonds sold by the Russians will quickly be bid down competitively to near zero by banks that are able to obtain funding at near zero. Furthermore, due to arbitrage effects and the carry-trade, long-term yields of any bonds the Russians sold would be very quickly bid down to previously prevailing levels.

5. Excess bank reserves could help mop up dumped bonds. US banks currently hold $2.5 trillion in excess reserves. - i.e. customer deposits that banks possess in excess of their mandatory liquidity requirements that banks choose to deposit at the US Fed and which currently earn only 0.25%. In theory, if US Treasury yields rose substantially due to Russian fire-sales, banks might be very happy to increase their profit margins by purchasing these bonds gifted to them by the Russians. Such a "mop up operation" could be fairly easily carried out by US banks in coordination with the Fed (which could guarantee duration-matched cheap funding for said purchases). Please note that due to the nature of the fractional reserve banking system, the existence of excess reserves is not a prerequisite for banks to buy massive amounts of undervalued Treasury bonds, nor will total reserves decline if this were to occur. However, the existence of mass quantities of excess reserves in the US financial system would make such an operation relatively more profitable for banks and easier to carry out than under normal circumstances.

6. Dumping US Treasuries could easily backfire. In a scenario in which severe economic sanctions were imposed on Russia, the Russian economy and that of some of its major trade and investment partners would be significantly disrupted. There is little doubt that the value of the Ruble, Russian stocks and other Russian financial assets would significantly decline in value relative to the US dollar. Furthermore, the resulting capital flight from Russia and its trade and investment partners could lead to a global "flight to safety" that would result in a strengthened USD, higher prices for US Treasury bonds and lower US interest rates. Finally, increased QE from the US Fed or the mere prospect of it could support the prices of risk assets in the US in the short term and ironically could even fuel them to even greater heights in the long term.

What if Russia Got China To Join Them In Dumping Treasuries?

Many analysts believe that Chinese interests are allied with those of Russia in their desire to undermine the role of the US Dollar as the world's reserve currency. Although this premise is far from certain, let us assume it to be true. The problem is that politically motivated fire-sales of US Treasury bonds would not be a viable way for China to achieve this objective.

Assume for a moment that the Chinese joined the Russians in dumping US Treasury bonds: Simply wash, rinse, repeat steps 1 through 6 above. China's US Treasury bond holdings are insignificant in proportion to the global market for bonds and fixed income assets, representing significantly less than 1.0% of the total. Therefore, any decrease in the price of US Treasury bonds or increase in yields caused by Chinese fire-sales would be transitory and modest due to global arbitrage of fixed income assets. Furthermore, any temporary inability of global markets to absorb Chinese bond sales in the short term could be easily handled by a combination of US Fed and/or US bank purchases as described above.

The Chinese would be even more foolish than the Russians if they were to implement such a fire-sale strategy. Indirectly, the Chinese would be doing the US a major favor by doing something that the US has been requesting that the Chinese do for a very long time: Sever the link of their currency to the USD. Divorcing the Yuan from the USD would have highly unpredictable consequences for the stability of the Chinese economy from both a trade and capital flow perspective. Fear of currency instability is precisely one of the reasons why the Chinese linked their currency to the USD in the first place and why they have strict capital controls that prohibit Chinese citizens from moving money out of China. By contrast, the US has very little to fear from a lower volume of bilateral trade and investment with China not only because this represents a very small portion of the US economy, but because the China-US economic relationship as it currently is structured may actually be a net negative for the US economy. Once any "finance war" wound down, the US would have an opportunity to restructure this particular relationship, demanding significant concessions from China before allowing any future access to US trade and capital markets.

Thus, assuming that the Chinese would ever be foolish enough to join the Russians in a politically motivated sale of US Treasury bonds, very little damage would be inflicted upon the US economy, financial markets or even the role of the USD in the world. To the contrary, Russia and China would become laughing stocks for having squandered away massive amounts of wealth and damaging their trade and financial competitiveness. Furthermore, the US and the USD would probably emerge strengthened in the long run via a more competitive trade position and a more balanced current account. Most importantly, the USD would emerge strengthened by the lesson learned through experience: The US dollar cannot be undermined by from foreign financial manipulation.

Conclusion

The mere threat that Russia or China could inflict major damage to the US economy by dumping US Treasury bonds has captured the imaginations of many individuals around the world - including some very intelligent people. For example, a distinguished analyst recently warned of this threat in a recent Seeking Alpha article and in response to reader questions. At one point, this particular analyst advised a reader that, "If they wanted to destroy us China would simply dump a trillion in US Treasuries on the market all at once. It would be that easy."

The truth is very nearly the opposite of what this analyst claims: If Russia or China were so incredibly foolish as to dump a trillion in US Treasuries on the market all at once, global bond traders, US banks and the US Fed will be there to very happily disabuse them of their accumulated riches. Such a move by the Russians and Chinese would go down as one of the most stupid strategic blunders in the history of international affairs. The mistake would be the product of a lack of understanding regarding how global fixed income and currency markets work. I advise investors to not make the same blunder by basing any part of their investment decisions on the prospect of such dystopian fantasies. In my 2014 Outlook to be published soon, I will focus on the issues that really matter for investors.

Source: The Nuclear Option: Russia's Threat To Dump Treasuries


Russia: OUT of the Swift System Starting TODAY?

Submitted by goldenequity on Mon, 03/17/2014 - 06:31in

• Daily Paul Liberty Forum

►Kremlin: If The US Tries To Hurt Russia's Economy, Russia Will Target The Dollar

"If we didn't re-instate them into the swift system (and Russia would, in retaliation, reject the petro-dollar and allow other trade currencies) then the ENTIRE financial system would (begin) collapse.

-- Jim Sinclair

►US would soon see $4-5 gas at the retail pumps

►Europe would see CHEAPER natural gas, being able to pay in EURO now, not $$

The clock starts ticking today.

Lots more including HOT war prospects and GOLD in this excellent discussion.

Well does Today start it?

Ron Paul sees the sanctions as an act of war, I think most of us in the 'tireless minority' of the DP agree.

Neocons, McCain, Rand, Obama see Russia simply as an invading, beligerent 'Gas station, masquerading as a Country'. Hubris.

One minute everybody is cheering Russia because 'what they are doing is lawful and what the west is doing is illegal'.

But IF 'Sanctions' result in 'allowing' other 'PetroCurrencies' the S might really HTF.

If our government messed up, our way of life starts changing drastically.

The economy has been on the cliffedge for a long time now and we let it happen.

Now (as a Country) we swallow the pill and take it like a man.

We KNOW it is going to happen sooner or later.

You know this. I know this. It's not Putin who caused this.

We systematically helped overthrow an elected government, and we are now threatening and sanctioning Russia.

Russia will do what it needs to do to survive... just like any other country.

If it gets hot, it gets worse.. a lot worse.

535 will have defeated 300 million for 30 pieces of Silver.

There is no 'Praetorian Guard' in the Capitol to stop the insanity.

They gamble with our lives.



Another Russian Factor - Russian Central Bank Gold Reserves



If the chart doesn't show up, go to and scroll down to the 8th chart in the column.

The accompanying text says

Since yesterday was the 20th of the month, The Central Bank of the Russian Federation updated their website with the data for February. It showed that they added 200,000 troy ounces to their official gold reserves during the month---and here's Nick Laird's excellent chart updated with the appropriate number.

Now I know those numbers could be total fabrications, and the actual holdings could be much less. They could also be much more ... keep that possibility in mind as well. There are LOTS of different power games being played on the world stage today - gold holdings, actual fully owned metal free and clear - are just one of them.

[Avvakum]

Jim Sinclair is right, the stupid hubris of our political/financial elite is going to destroy us, not the Russians. I think the Bolsheviks aren't so much in the Kremlin now (hard-eyed, pragmatic nationalists) but in Washington.

[Ryan Ruck]

That Time Russia Tried To Team Up With China To Destroy The US Economy

March 18, 2014

They say you shouldn't kick a man when he's down, but that's exactly what Russia tried to do back in 2008 when the United States was at its lowest point in recent history.

You'll remember the housing crisis, of course.

In a recent BBC documentary called 'How China Fooled The World' then-Treasury Secretary Hank Paulson recalls doing all he could to ensure that mortgage insurers Fannie Mae and Freddie Mac's biggest outside investors — the Chinese — didn't sell their stake in the companies.

At the same time, however, Paulson learned that Russian officials were working to ensure the opposite. They were trying to get the Chinese to join them in selling Fannie and Freddie holdings to gang up on the U.S.

Here's what he said in the documentary:

"Here I'm not going to name the senior person, but I was meeting with someone… This person told me that the Chinese had received a message from the Russians which was, 'Hey let's join together and sell Fannie and Freddie securities on the market.' The Chinese weren't going to do that but again, it just, it just drove home to me how vulnerable I felt until we had put Fannie and Freddie into conservatorship [the rescue plan for them, that was eventually put in place]."

The Chinese didn't end up doing any of that, but this just goes to show how ready and willing Russia has been to hurt the United States at any point.

A year later, then-Secretary of State Hillary Clinton and her counterpart would hit the "reset button" on Russia-U.S. relations.

It's hard to imagine that button coming out again any time soon.






‘Jaw-Dropping’: Former U.S. Treasury Secretary Makes Bombshell Claim About Russia and 2008 Financial Crisis (and Why It May Sound Familiar)

March 18, 2014

Editor’s Note: Back in September of 2013, For The Record looked at the possibility that countries hostile to the U.S., including China and Russia, may have artificially driven up the price of oil and intentionally crashed the stocks of some financial institutions to throw the American economy into chaos prior to the 2008 economic crisis. Subscribers to TheBlaze TV can watch "For The Record: Unrestricted Warfare"​ now for more on China and Russia's history of economic warfare.

The Chinese “received a message from the Russians” back in 2008 suggesting a pact to sell Fannie Mae and Freddie Mac securities on the market, which would have nudged down the price of the debt of Fannie and Freddie and also maximized the chaos on Wall Street, a former U.S. official told BBC. It confirms a report that TheBlaze TV’s For the Record first aired back in September 2013.

It’s a bombshell claim that only underscores the mistrust between the U.S. and Russia in a time when tensions are high. BBC’s Robert Peston describes the cynical relationship between the two nations as “deep, rooted in history” and one that shows that the “triumph of capitalism over communism wasn’t the end of the power game between these two nations.”

Talking about the 2008 financial crisis, particularly the issues with Fannie Mae and Freddie Mac, former U.S. Treasury Secretary Hank Paulson explained that the Chinese were the “biggest external investor holding Fannie and Freddie Securities.” Because of this, China was “very, very concerned” when Fannie and Freddie began to melt down.

That’s when the Russians allegedly tried to iron out a pact with the Chinese.

“Here I’m not going to name the senior person, but I was meeting with someone… This person told me that the Chinese had received a message from the Russians which was, ‘Hey let’s join together and sell Fannie and Freddie securities on the market.’ The Chinese weren’t going to do that but again, it just, it just drove home to me how vulnerable I felt until we had put Fannie and Freddie into conservatorship [the rescue plan for them, that was eventually put in place],” Paulson said.

Though Peston reports that the “guerrilla skirmish in markets by the Russians and Chinese didn’t happen,” he says the claim is still “jaw-dropping.”

“For me this is pretty jaw-dropping stuff – the Chinese told Hank Paulson that the Russians were suggesting a joint pact with China to drive down the price of the debt of Fannie and Freddie, and maximize the turmoil on Wall Street – presumably with a view to maximizing the cost of the rescue for Washington and further damaging its financial health,” he writes.

In September, Michael Scheuer — former chief of the CIA’s Osama bin Laden unit — told For The Record that economic warfare is a very real threat to the country.

“Unrestricted warfare of the Chinese is very similar to Osama bin Laden, Al Qaeda and its allies generally,” Scheuer said at the time. “They realize what an enormous military power they’re up against and want to avoid a direct confrontation.”




TheBlaze also reported on the tactic as far back as 2011.

Paulson’s comments were obtained during interviews for the BBC Two documentary “How China Fooled the World.” The comments didn’t make the film.

Read the full BBC report here.

[vector7]

Petrodollar Alert: Putin Prepares To Announce "Holy Grail" Gas Deal With China

Submitted by Tyler Durden on 03/21/2014 09:41 -0400

If it was the intent of the West to bring Russia and China together - one a natural resource (if "somewhat" corrupt) superpower and the other a fixed capital / labor output (if "somewhat" capital misallocating and credit bubbleicious) powerhouse - in the process marginalizing the dollar and encouraging Ruble and Renminbi bilateral trade, then things are surely "going according to plan."

For now there have been no major developments as a result of the shift in the geopolitical axis that has seen global US influence, away from the Group of 7 (most insolvent nations) of course, decline precipitously in the aftermath of the bungled Syrian intervention attempt and the bloodless Russian annexation of Crimea, but that will soon change. Because while the west is focused on day to day developments in Ukraine, and how to halt Russian expansion through appeasement (hardly a winning tactic as events in the 1930s demonstrated), Russia is once again thinking 3 steps ahead... and quite a few steps east.

While Europe is furiously scrambling to find alternative sources of energy should Gazprom pull the plug on natgas exports to Germany and Europe (the imminent surge in Ukraine gas prices by 40% is probably the best indication of what the outcome would be), Russia is preparing the announcement of the "Holy Grail" energy deal with none other than China, a move which would send geopolitical shockwaves around the world and bind the two nations in a commodity-backed axis. One which, as some especially on these pages, have suggested would lay the groundwork for a new joint, commodity-backed reserve currency that bypasses the dollar, something which Russia implied moments ago when its finance minister Siluanov said that Russia may refrain from foreign borrowing this year. Translated: bypass western purchases of Russian debt, funded by Chinese purchases of US Treasurys, and go straight to the source.

Here is what will likely happen next, as explained by Reuters:

Igor Sechin gathered media in Tokyo the next day to warn Western governments that more sanctions over Moscow's seizure of the Black Sea peninsula from Ukraine would be counter-productive.

The underlying message from the head of Russia's biggest oil company, Rosneft, was clear: If Europe and the United States isolate Russia, Moscow will look East for new business, energy deals, military contracts and political alliances.

The Holy Grail for Moscow is a natural gas supply deal with China that is apparently now close after years of negotiations. If it can be signed when Putin visits China in May, he will be able to hold it up to show that global power has shifted eastwards and he does not need the West.

More details on the revelation of said "Holy Grail":

State-owned Russian gas firm Gazprom hopes to pump 38 billion cubic meters (bcm) of natural gas per year to China from 2018 via the first pipeline between the world's largest producer of conventional gas to the largest consumer.

"May is in our plans," a Gazprom spokesman said, when asked about the timing of an agreement. A company source said: "It would be logical to expect the deal during Putin's visit to China."

Summarizing what should be and is painfully obvious to all, but apparently to the White House, which keeps prodding at Russia, is the following:

"The worse Russia's relations are with the West, the closer Russia will want to be to China. If China supports you, no one can say you're isolated," said Vasily Kashin, a China expert at the Analysis of Strategies and Technologies (CAST) think thank.

Bingo. And now add bilateral trade denominated in either Rubles or Renminbi (or gold), add Iran, Iraq, India, and soon the Saudis (China's largest foreign source of crude, whose crown prince also happened to meet president Xi Jinping last week to expand trade further) and wave goodbye to the petrodollar.

As reported previoisly, China has already implicitly backed Putin without risking it relations with the West. "Last Saturday China abstained in a U.N. Security Council vote on a draft resolution declaring invalid the referendum in which Crimea went on to back union with Russia. Although China is nervous about referendums in restive regions of other countries which might serve as a precedent for Tibet and Taiwan, it has refused to criticize Moscow.

The support of Beijing is vital for Putin. Not only is China a fellow permanent member of the U.N. Security Council with whom Russia thinks alike, it is also the world's second biggest economy and it opposes the spread of Western-style democracy."

This culminated yesterday, when as we reported last night, Putin thanked China for its "understanding over Ukraine." China hasn't exactly kept its feelings about closer relations with Russia under wraps either:

Chinese President Xi Jinping showed how much he values ties with Moscow, and Putin in particular, by making Russia his first foreign visit as China's leader last year and attending the opening of the Winter Olympics in Sochi last month.

Many Western leaders did not go to the Games after criticism of Russia's record on human rights. By contrast, when Putin and Xi discussed Ukraine by telephone on March 4, the Kremlin said their positions were "close".

The punchline: "A strong alliance would suit both countries as a counterbalance to the United States." An alliance that would merely be an extension of current trends in close bilateral relations, including not only infrastructure investment but also military supplies:

However, China overtook Germany as Russia's biggest buyer of crude oil this year thanks to Rosneft securing deals to boost eastward oil supplies via the East Siberia-Pacific Ocean pipeline and another crossing Kazakhstan.

If Russia is isolated by a new round of Western sanctions - those so far affect only a few officials' assets abroad and have not been aimed at companies - Russia and China could also step up cooperation in areas apart from energy. CAST's Kashin said the prospects of Russia delivering Sukhoi SU-35 fighter jets to China, which has been under discussion since 2010, would grow.

China is very interested in investing in infrastructure, energy and commodities in Russia, and a decline in business with the West could force Moscow to drop some of its reservations about Chinese investment in strategic industries. "With Western sanctions, the atmosphere could change quickly in favor of China," said Brian Zimbler Managing Partner of Morgan Lewis international law firm's Moscow office.

Russia-China trade turnover grew by 8.2 percent in 2013 to $8.1 billion but Russia was still only China's seventh largest export partner in 2013, and was not in the top 10 countries for imported goods. The EU is Russia's biggest trade partner, accounting for almost half of all its trade turnover.

[/QUOTE] And as if pushing Russia into the warm embrace of the world's most populous nation was not enough, there is also the second most populated country in the world, India.

Putin did take time, however, to thank one other country apart from China for its understanding over Ukraine and Crimea - saying India had shown "restraint and objectivity".

He also called Indian Prime Minister Manmohan Singh to discuss the crisis on Tuesday, suggesting there is room for Russia's ties with traditionally non-aligned India to flourish.

Although India has become the largest export market for U.S. arms, Russia remains a key defense supplier and relations are friendly, even if lacking a strong business and trade dimension, due to a strategic partnership dating to the Soviet era.

Putin's moves to assert Russian control over Crimea were seen very favorably in the Indian establishment, N. Ram, publisher of The Hindu newspaper, told Reuters. "Russia has legitimate interests," he added.

To summarize: while the biggest geopolitical tectonic shift since the cold war accelerates with the inevitable firming of the "Asian axis", the west monetizes its debt, revels in the paper wealth created from an all time high manipulated stock market while at the same time trying to explain why 6.5% unemployment is really indicative of a weak economy, blames the weather for every disappointing economic data point, and every single person is transfixed with finding a missing airplane.

[Avvakum]

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Forget Russia Dumping U.S. Treasuries … Here’s the REAL Economic Threat

By Washington's Blog
Global Research, March 21, 2014
Washington's Blog

Region: USA
Theme: Global Economy


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581



Russia Could Crush the Petrodollar
Russia threatened to dump its U.S. treasuries if America imposed sanctions regarding Russia’s action in the Crimea.
Zero Hedge argues that Russia has already done so.
But veteran investor Jim Sinclair argues that Russia has a much scarier financial attack which Russia can use against the U.S.
Specifically, Sinclair says that if Russia accepts payment for oil and gas in any currency other than the dollar – whether it’s gold, the Euro, the Ruble, the Rupee, or anything else – then the U.S. petrodollar system will collapse:
Indeed, one of the main pillars for U.S. power is the petrodollar, and the U.S. is desperate for the dollar to maintain reserve status. Some wise commentators have argued that recent U.S. wars have really been about keeping the rest of the world on the petrodollar standard.
The theory is that – after Nixon took the U.S. off the gold standard, which had made the dollar the world’s reserve currency – America salvaged that role by adopting the petrodollar. Specifically, the U.S. and Saudi Arabia agreed that all oil and gas would be priced in dollars, so the rest of the world had to use dollars for most transactions.
But Reuters notes that Russia may be mere months away from signing a bilateral trade deal with China, where China would buy huge quantities of Russian oil and gas.
Zero Hedge argues:

Add bilateral trade denominated in either Rubles or Renminbi (or gold), add Iran, Iraq, India, and soon the Saudis (China’s largest foreign source of crude, whose crown prince also happened to meet president Xi Jinping last week to expand trade further) and wave goodbye to the petrodollar.

As we noted last year:
The average life expectancy for a fiat currency is less than 40 years.

But what about “reserve currencies”, like the U.S. dollar?
JP Morgan noted last year that “reserve currencies” have a limited shelf-life:

As the table shows, U.S. reserve status has already lasted as long as Portugal and the Netherland’s reigns. It won’t happen tomorrow, or next week … but the end of the dollar’s rein is coming nonetheless, and China and many other countries are calling for a new reserve currency.
Remember, China is entering into more and more major deals with other countries to settle trades in Yuans, instead of dollars. This includes the European Union (the world’s largest economy) [and also Russia].
And China is quietly becoming a gold superpower…

Given that China has surpassed the U.S. as the world’s largest importer of oil, Saudi Arabia is moving away from the U.S. … and towards China. (Some even argue that the world will switch from the petrodollar to the petroYUAN. We’re not convinced that will happen.)
In any event, a switch to pricing petroleum in anything other than dollars exclusively – whether a single alternative currency, gold, or even a mix of currencies or commodities – would spell the end of the dollar as the world’s reserve currency.
For that reason, Sinclair – no fan of either Russia or Putin – urges American leaders to back away from an economic confrontation with Russia, arguing that the U.S. would be the loser

[vector7]

Russia Returns Favor, Sees Chinese Yuan As World Reserve Currency

Submitted by Tyler Durden on 03/23/2014 18:32 -0400

Following China's unwillingness to vote against Russia at the UN and yesterday's news that China will sue Ukraine for $3bn loan repayment, it seems Russia is returning the favor. Speaking at the Chinese Economic Development Forum, ITAR-TASS reports, the Chief Economist of Russia's largest bank stated that "China's Yuan may become the third reserve currency in the in the future."

Managing Director and Chief Economist of investment company Sberbank Yevgeny Gavrilenkov said at the 15th governmental Chinese economic development forum in the Chinese capital on Sunday (via ITAR-TASS):

"China’s yuan (renminbi) may become a third reserve currency in the world in the future"

"This forecast can be made on figures of domestic economic growth. Probably the country will keep high GDP growth rate and the GDP volume will increase to around 14-16 trillion U.S. dollars for a brief period of time, the indicators comparable to the European Union and the United States.

Meanwhile, Chinese securities are more attractive for the countries that have a surplus in economy, particularly the Middle East states; and China will obviously follow the path of securing the country’s assets,"

The forum which opened in the Chinese capital on March 22 discusses a broad range of issues of economic reforms and China’s stronger role as the second largest world economy. First Deputy Prime Minister of the Chinese State Council Zhang Gaoli, Managing Director of the International Monetary Fund Christine Lagarde and top managers of major world corporations participate in the forum as honorary guests.

Of course, as we noted previously, nothing lasts forever...



and with Friday's "Petrodollar Alert" perhaps things are moving faster than many assumed.

[Avvakum]

Russia Returns Favor, Sees Chinese Yuan As World Reserve Currency

Submitted by Tyler Durden on 03/23/2014 18:32 -0400

Following China's unwillingness to vote against Russia at the UN and yesterday's news that China will sue Ukraine for $3bn loan repayment, it seems Russia is returning the favor. Speaking at the Chinese Economic Development Forum, ITAR-TASS reports, the Chief Economist of Russia's largest bank stated that "China's Yuan may become the third reserve currency in the in the future."

Managing Director and Chief Economist of investment company Sberbank Yevgeny Gavrilenkov said at the 15th governmental Chinese economic development forum in the Chinese capital on Sunday (via ITAR-TASS):

"China’s yuan (renminbi) may become a third reserve currency in the world in the future"

"This forecast can be made on figures of domestic economic growth. Probably the country will keep high GDP growth rate and the GDP volume will increase to around 14-16 trillion U.S. dollars for a brief period of time, the indicators comparable to the European Union and the United States.

Meanwhile, Chinese securities are more attractive for the countries that have a surplus in economy, particularly the Middle East states; and China will obviously follow the path of securing the country’s assets,"

The forum which opened in the Chinese capital on March 22 discusses a broad range of issues of economic reforms and China’s stronger role as the second largest world economy. First Deputy Prime Minister of the Chinese State Council Zhang Gaoli, Managing Director of the International Monetary Fund Christine Lagarde and top managers of major world corporations participate in the forum as honorary guests.

Of course, as we noted previously, nothing lasts forever...



and with Friday's "Petrodollar Alert" perhaps things are moving faster than many assumed.

Note that they did not suggest the Ruble as the world reserve currency?

China runs the script of the Russian politicians.

[vector7]

Russia prepares to attack the petrodollar
4 April 2014, 14:34


Фото: РИА Новости

The US dollar's position as the base currency for global energy trading gives the US a number of unfair advantages. It seems that Moscow is ready to take those advantages away.

The existence of “petrodollars” is one of the pillars of America's economic might because it creates a significant external demand for American currency, allowing the US to accumulate enormous debts without defaulting. If a Japanese buyer want to buy a barrel of Saudi oil, he has to pay in dollars even if no American oil company ever touches the said barrel. Dollar has held a dominant position in global trading for such a long time that even Gazprom's natural gas contracts for Europe are priced and paid for in US dollars. Until recently, a significant part of EU-China trade had been priced in dollars.

Lately, China has led the BRICS efforts to dislodge the dollar from its position as the main global currency, but the “sanctions war” between Washington and Moscow gave an impetus to the long-awaited scheme to launch the petroruble and switch all Russian energy exports away from the US currency .

The main supporters of this plan are Sergey Glaziev, the economic aide of the Russian President and Igor Sechin, the CEO of Rosneft, the biggest Russian oil company and a close ally of Vladimir Putin. Both have been very vocal in their quest to replace the dollar with the Russian ruble. Now, several top Russian officials are pushing the plan forward.

First, it was the Minister of Economy, Alexei Ulyukaev who told Russia 24 news channel that the Russian energy companies must should ditch the dollar. “ They must be braver in signing contracts in rubles and the currencies of partner-countries, ” he said.

Then, on March 2, Andrei Kostin, the CEO of state-owned VTB bank, told the press that Gazprom, Rosneft and Rosoboronexport, state company specialized in weapon exports, can start trading in rubles. “ I've spoken to Gazprom, to Rosneft and Rosoboronexport management and they don't mind switching their exports to rubles.

They only need a mechanism to do that ”, Kostin told the attendees of the annual Russian Bank Association meeting.

Judging by the statement made at the same meeting by Valentina Matviyenko, the speaker of Russia's upper house of parliament, it is safe to assume that no resources will be spared to create such a mechanism. “ Some ‘hot headed' decision-makers have already forgotten that the global economic crisis of 2008 - which is still taking its toll on the world - started with a collapse of certain credit institutions in the US, Great Britain and other countries. This is why we believe that any hostile financial actions are a double-edged sword and even the slightest error will send the boomerang back to the aborigines,” she said.

It seems that Moscow has decided who will be in charge of the “boomerang”. Igor Sechin, the CEO of Rosneft, has been nominated to chair the board of directors of Saint-Petersburg Commodity Exchange, a specialized commodity exchange. In October 2013, speaking at the World Energy Congress in Korea, Sechin called for a "global mechanism to trade natural gas" and went on suggesting that " it was advisable to create an international exchange for the participating countries, where transactions could be registered with the use of regional currencies ". Now, one of the most influential leaders of the global energy trading community has the perfect instrument to make this plan a reality. A Russian commodity exchange where reference prices for Russian oil and natural gas will be set in rubles instead of dollars will be a strong blow to the petrodollar.

Rosneft has recently signed a series of big contracts for oil exports to China and is close to signing a “jumbo deal” with Indian companies. In both deals, there are no US dollars involved. Reuters reports, that Russia is close to entering a goods-for-oil swap transaction with Iran that will give Rosneft around 500,000 barrels of Iranian oil per day to sell in the global market. The White House and the russophobes in the Senate are livid and are trying to block the transaction because it opens up some very serious and nasty scenarios for the petrodollar. If Sechin decides to sell this Iranian oil for rubles, through a Russian exchange, such move will boost the chances of the “petroruble” and will hurt the petrodollar.

It can be said that the US sanctions have opened a Pandora's box of troubles for the American currency. The Russian retaliation will surely be unpleasant for Washington, but what happens if other oil producers and consumers decide to follow the example set by Russia? During the last month, China opened two centers to process yuan-denominated trade flows, one in London and one in Frankfurt. Are the Chinese preparing a similar move against the greenback? We'll soon find out.

Read more: http://voiceofrussia.com/2014_04_04/...rodollar-2335/

[vector7]

Obama forced to concede new 'international order': Duowei

• Staff Reporter
• 2014-05-02
• 10:00 (GMT+8)

Xi Jinping meets Vladimir Putin in Sochi for the Winter Olympics on Feb. 6, 2014. (Photo/Xinhua)

The rise of China and Russia is forcing the US president, Barack Obama, to concede the dawn of a new "international order" that is no longer controlled by the United States, reports Duowei News, an outlet run by overseas Chinese.

Delivering a commencement speech over the weekend at the US Military Academy at West Point, Obama said he would seek a new international order with more international cooperation, stronger international standards and institutions and alliances to help resolve challenges ranging from terrorism, nuclear proliferation, climate change to economic decline.

"Our adversaries would like to see America sap its strength by overextending our power," Obama said. "So we have to shape an international order that can meet the challenges of our generation."

Obama's words come following a four-stop trip to Asia. Part of the purpose of the trip, according to Duowei, was for Obama to check on its "little brother" allies of Japan and the Philippines to help the US rekindle the status of world leader, but it is becoming increasingly clear that the US is no longer capable of maintaining international order alone, Duowei added.

The phrase international order has also been used by both Xi and Putin, albeit with a different meaning. For Xi and Putin, it means creating a multipolar world, whereas for Obama it means maintaining the United States' unipolar era, alleged Duowei.

Starting from the end of World War II and particularly after the collapse of the Soviet Union, the US has not had any real challengers to its power, leading it to make decisions that disrupt international order, such as its ill-based decision to invade Iraq without United Nations approval, without many repercussions, Duowei said.

As such, the US idea of international order is one in which the global rules don't apply to themselves but do apply to the rest of the world, Duowei added.

History has proven, however, that there is no power that can maintain its hegemony forever and there are signs that the US is losing its grip, Duowei said, adding that the impact of the global financial crisis on the US and Europe has paved the way for China and Russia to re-emerge.

According to Duowei, the rise of China will be the most important factor in the changing international landscape of the 21st century. The eventual outcome of this rise is not clear at this stage, but what has become evident is that China's strategies seemed to have changed since Xi took over the reins, Duowei said, adding that while China may be an "awakened lion," it is a peaceful, amiable and civil lion.

Duowei goes on to say that China is a "protector" of international order as opposed to a "challenger," blaming the ongoing territorial dispute between China and Japan over the Diaoyutai islands (Diaoyu to China, Senkaku to Japan) in the East China Sea solely on Japan, saying it is refusing to face the errors of its past and the outcome of history.

China is not the only country protecting international order, Duowei says. Russia and other four BRICS countries– Brazil, India and South Africa–are also starting to play their part as the group gradually develops from an economic entity to a political one.

The United States is not sitting idly by as the power of China and Russia rises, but rather they have continued to strengthen their presence in the Asia-Pacific region, however, through strategic alliances with Japan and the Philippines, both of which are embroiled in tense terrritorial disputes with China.

While the Philippines has little effect on international order apart from being a constant headache to China, Japan presents a different story especially after Obama affirmed its commitment to defending Tokyo in the event of a conflict over the Diaoyutai, Duowei said.

Faced with losing its place in the global pecking order, the United States can no longer continue to act as though it is the leader of the world, Duowei said, adding that the only option is for Washington to ditch its double standards and jointly safeguard international order by respecting the political systems and development path of different countries.

[Avvakum]

BRICS creating parallel Monetary Fund disillusioned with IMF and World Bank - expert

© Collage: Voice of Russia


Frustrated by the IMF and World Bank controversial policy, the BRICS nations go on creating the alternative financial supranational institutions for emerging economies. In recent years the IMF has discredited itself, becoming a completely politicized and "odd" structure, which supports interventionist "super state" ambitions of the EU and the US, stresses Patrick L Young, an expert in global financial markets, referring to the ongoing events in Ukraine.


Brazil, Russia, India, China and South Africa are fed up with the US failure to ratify a four-year-old agreement aimed at reforming the IMF system. Thus the post war consensus on financing bodies appears to be breaking down, writes the expert in his RT Op-Ed ‘BRICS building parallel IMF.’
"The US and Europe have maintained a stranglehold on the IMF/World Bank C-suite not only in the face of a massive eastern renaissance but also with a certain degree of abject hypocrisy given the abysmal financial management of spendthrift US governments for decades let alone the travesty of recent European economic governance," he notes.
According to Patrick Young the IMF is gradually losing its significance as an international financial arbiter. First Dominique Strauss-Kahn and then Christine Lagarde have been entrapped by the "flawed policies of big debt and big government," utterly ruinous for the European economy.
"During recent European bailout negotiations, IMF minutes suggest the political classes managed to ride roughshod over the IMF in order to maintain the flawed (and still crumbling) euro currency at all costs. In that sense, having a weak European with ambitions for higher political office makes a mockery of the idea that the International Monetary Fund is anything more than an overdraft facility to be rigged in favor of perceived western political interests," Patrick L Young explains, adding, "No wonder the rising East is disillusioned."
It should be noted that the BRICS bloc of emerging economies is expecting all preparatory work for setting up its Development Bank to be done by July, 2014, according to Reuters. Political neutrality of the BRICS-Monetary Fund appears to become its unquestionable "competitive advantage." It will help the new structure to operate without fear or favor, deems the expert.
"What the IMF really needs," he stresses, "are strong technocrats as opposed to the spineless politicians who generally operate with (at the very least!) one eye on their next political position."

Ekaterina Blinova
World, economy, finances, BRICS, Economy
Read more: http://voiceofrussia.com/news/2014_0...k-expert-0502/

[Avvakum]

• Multimedia

Russia

Putin Signs Law on National Card Payment System

Putin Signs Law on National Card Payment System
© Fotolia/ ldprod


17:59 05/05/2014
Tags: national payment system, Vladimir Putin, Russia
MOSCOW, May 5 (RIA Novosti) – Russian President Vladimir Putin has signed into law a bill to create a national card payment system, the Kremlin press service said Monday.
The Russian parliament approved the bill last month.
Plans to establish a national card payment processing system emerged in response to Ukraine-related sanctions that saw several Russian banks denied service by global powerhouses Visa and MasterCard, troubling the general public and raising concern over the security of the country’s financial system.
As a reaction to Crimea reunifying with Russia in mid-March, the US introduced targeted sanctions against Russian officials and Rossiya Bank, considered by the US Treasury to be a private bank for many Russian government officials.
Following the move, Visa and MasterCard stopped client operations for cardholders at Rossiya Bank, SMP Bank, as well as their subsidiaries Sobinbank and Investkapitalbank with no prior notice, causing a serious drop in the consumer confidence of the banks.
According to Russian Central Bank estimates, building the infrastructure for the launch of the national payment system may take up to six months, but the distribution of the cards to the public could take up to two years.
Visa and MasterCard have announced they were concerned about the future of their business in Russia in light of the new legislation.

[Avvakum]

Frankfurt issues first bond backed by Chinese currency

China’s currency was once so immovable nobody saw much sense in owning it. But the more Beijing loosens its grip, the more investors want to get their hands on it. The rags-to riches currency now comes to Frankfurt.

Frankfurt is joining London, Singapore and Hong Kong in the fast-moving market for bonds denominated in the Chinese currency, the renminbi. Germany's KfW development bank announced it was issuing a two-year bond with the volume of 1 billion renminbi at the Frankfurt Stock Exchange.
The development underpins Frankfurt's bid to become a key offshore center for facilitating trade transactions and investments in renminbi. It is also the latest success in Beijing's drive to internationalize its once tightly-controlled currency, which is also called yuan.
Top ten currencies
China first authorized the sale of bonds denominated in yuan in 2007. They are called “Dim Sum” bonds after the bite-sized delicacies in Chinese cuisine. But they have become a huge boost to the popularity of the currency. The Society for Worldwide Interbank Financial Telecommunication says the renminbi is now among the top ten most-used currencies for global trade payments, overtaking the Swiss Franc to occupy position seven in February.
The fate of the Goethe Bond will be closely watched in Frankfurt

Germany signed agreements with Chinese financial authorities in March that permit the sale of Dim Sum bonds at the Frankfurt Stock Exchange. The deal also means Frankfurt will become the first offshore “clearing center” for exchanging euros for renminbi, which are needed for buying Dim Sum bonds.
Investment information company Dealogic reports a sharp increase in the number of Dim Sum bond issuers around the world in the first quarter of this year. There was a record 35 offerings by companies including Caterpillar, BP, and Volkswagen.
No place to go
Bond issuers are increasingly denominating their debt in renminbi for a variety of reasons. First, there is a large pool of the currency lying around in banks that is all dressed up, but has no place to go. Restrictions remaining on the renminbi still make it difficult to move it around.
Also, companies with large businesses in China can use the currency to help fund expansion. Take automakers selling cars in China; Volkswagen, BMW and Ford all have financing operations lending renminbi to hungry Chinese consumers.
KfW is targeting institutional investors. The bank says it is issuing its Dim Sum bond because of growing demand for the currency as a global asset, but also to support Frankfurt's drive to become continental Europe's hub for renminbi transactions.The Frankfurt-based bank is calling its renminbi-backed bond the "Goethe Bond" in a nod to the city's famous poet.


DW.DE

China to drop interest rate controls within two years

China is about to fully liberalize its interest rates, the central bank governor has said. By 2016, rates on deposits and interbank lending will be set by market forces rather than state authorities. (11.03.2014)

Deutsche Börse and Bank of China announce strategic partnership

German stock market operator Deutsche Börse is set to boost ties with China’s biggest private lender, Bank of China. The deal includes expansion of trading in the Chinese currency and access to EU capital markets. (02.12.2013)

[vector7]

13 May 2014, 23:45
Russia strives to exclude the dollar from energy trading

Фото: РИА Новости

Russian press reports that the country's Ministry of Finance is ready to greenlight a plan to radically increase the role of the Russian ruble in export operations while reducing the share of dollar-denominated transactions. Governmental sources believe that the Russian banking sector is "ready to handle the increased number of ruble-denominated transactions".

According to the Prime news agency, on April 24th the government organized a special meeting dedicated to finding a solution for getting rid of the US dollar in Russian export operations. Top level experts from the energy sector, banks and governmental agencies were summoned and a number of measures were proposed as a response for American sanctions against Russia.

The"de-dollarization meeting” was chaired by First Deputy Prime Minister of the Russian Federation Igor Shuvalov, proving that Moscow is very serious in its intention to stop using the dollar. A subsequent meeting was chaired by Deputy Finance Minister Alexey Moiseev who later told the Rossia 24 channel that"the amount of ruble-denominated contracts will be increased”, adding that none of the polled experts and bank representatives found any problems with the government's plan to increase the share of ruble payments.

It is interesting that in his interview, Moiseev mentioned a legal mechanism that can be described as"currency switch executive order”, telling that the government has the legal power to force Russian companies to trade a percentage of certain goods in rubles. Referring to the case when this level may be set to 100%, the Russian official said that "it's an extreme option and it is hard for me to tell right now how the government will use these powers".

Of course, the success of Moscow's campaign to switch its trading to rubles or other regional currencies will depend on the willingness of its trading partners to get rid of the dollar. Sources cited by Politonline.ru mentioned two countries who would be willing to support Russia: Iran and China. Given that Vladimir Putin will visit Beijing on May 20, it can be speculated that the gas and oil contracts that are going to be signed between Russia and China will be denominated in rubles and yuan, not dollars.

Read more: http://voiceofrussia.com/2014_05_13/...-trading-5138/

[vector7]

Who Needs The United States? Not Russia And China

By Michael Snyder, on May 21st, 2014



Russia and China have just signed what is being called "the gas deal of the century", and the two countries are discussing moving away from the U.S. dollar and using their own currencies to trade with one another. This has huge implications for the future of the U.S. economy, but the mainstream media in the United States is being strangely quiet about all of this. For example, I searched CNN's website to see if I could find something about this gas deal between Russia and China and I did not find anything. But I did find links to "top stories" entitled "Celebs who went faux red" and "Adorable kid tugs on Obama's ear".

Is it any wonder why the mainstream media is dying? If a particular story does not fit their agenda, they will simply ignore it. But the truth is that this new agreement between Russia and China is huge. It could end up fundamentally changing the global financial system, and not in a way that would be beneficial for the United States.

Russia and China had been negotiating this natural gas deal for ten years, and now it is finally done. Russia is the largest exporter of natural gas on the entire planet, and China is poised to become the world's largest economy in just a few years. This new $400 billion agreement means that these two superpowers could potentially enjoy a mutually beneficial relationship for the next 30 years...

Russia reached a $400 billion deal to supply natural gas to China through a new pipeline over 30 years, a milestone in relations between the world’s largest energy producer and the biggest consumer.

President Vladimir Putin is turning to China to bolster Russia’s economy as relations sour with the U.S. and European Union because of the crisis in Ukraine. Today’s accord, signed after more than a decade of talks, will allow state-run gas producer OAO Gazprom (GAZP) to invest $55 billion developing giant gas fields in eastern Siberia and building the pipeline, Putin said.

It’s an “epochal event,” Putin said in Shanghai after the contract was signed. Both countries are satisfied with the price, he said.

Of course countries sell oil and natural gas to each other all the time. But what makes this deal such a potential problem for the U.S. is the fact that Russia and China are working on cutting the U.S. dollar out of the entire equation. Just check out the following excerpt from a recent article in a Russian news source...

Russia and China are planning to increase the volume of direct payments in mutual trade in their national currencies, according to a joint statement on a new stage of comprehensive partnership and strategic cooperation signed during high-level talks in Shanghai on Tuesday.

“The sides intend to take new steps to increase the level and expansion of spheres of Russian-Chinese practical cooperation, in particular to establish close cooperation in the financial sphere, including an increase in direct payments in the Russian and Chinese national currencies in trade, investments and loan services,” the statement said.

In my recent article entitled "De-Dollarization: Russia Is On The Verge Of Dealing A Massive Blow To The Petrodollar", I warned about what could happen if the petrodollar monopoly ends. In the United States, our current standard of living is extremely dependent on the rest of the world continuing to use our currency to trade with one another. If Russia starts selling natural gas to China without the U.S. dollar being involved, that would be a monumental blow to the petrodollar. And if other nations started following the lead of Russia and China, that could result in an avalanche from which the petrodollar may never recover.

And it isn't just the national governments of Russia and China that are discussing moving away from the U.S. dollar. For example, the second largest bank in Russia just signed a deal with the Bank of China "to pay each other in domestic currencies"...

VTB, Russia’s second biggest lender, has signed a deal with Bank of China, which includes an agreement to pay each other in domestic currencies.

“Under the agreement, the banks plan to develop their partnership in a number of areas, including cooperation on ruble and renminbi settlements, investment banking, inter-bank lending, trade finance and capital-markets transactions,” says the official VTB statement.

The deal underlines VTB Group’s growing interest in Asian markets and will help grow trade between Russia and China that are already close trading partners, said VTB Bank Management Board Vasily Titov.

You can almost feel the power of the U.S. dollar fading.

A few months ago, when I wrote about how China had announced that it no longer planned to stockpile more U.S. dollars, I speculated that it may be evidence that China planned to start making a big move away from the U.S. dollar.

Well, now China's intentions have become even more clear.

The Chinese do not plan to allow the United States to indefinitely dominate the globe financially. In the long run, the Chinese plan to be the ones calling the shots, and that means that the power of the U.S. dollar must decline.

These days, instead of piling up mountains of U.S. currency, China has started accumulating hard assets instead. In the past, I have written about how China is rapidly stockpiling gold, and it turns out that the Chinese have also been very busy stockpiling oil as well...

China is stockpiling oil for its strategic petroleum reserve at a record pace, intervening on a scale large enough to send a powerful pulse through the world crude market.

The move comes as tensions mount in the South China Sea and the West prepares possible oil sanctions against Russia over the crisis in eastern Ukraine. Analysts believe China is quietly building up buffers against a possible spike in oil prices or disruptions in supply.

The International Energy Agency (IEA) said in its latest monthly report that China imported 6.81m barrels per day (bpd) in April, an all-time high.

Once upon a time, China was extremely dependent on the United States economically. The same was true with most of the rest of the world.

But now economic power has shifted so dramatically that nations such as Russia and China are realizing that they don't really need to be dependent on the United States any longer.

And with each passing year, the relationship between Russia and China is becoming stronger. As Pepe Escobar recently observed, this emerging alliance is causing quite a bit of consternation in Washington...

And no wonder Washington is anxious. That alliance is already a done deal in a variety of ways: through the BRICS group of emerging powers (Brazil, Russia, India, China, and South Africa); at the Shanghai Cooperation Organization, the Asian counterweight to NATO; inside the G20; and via the 120-member-nation Non-Aligned Movement (NAM). Trade and commerce are just part of the future bargain. Synergies in the development of new military technologies beckon as well. After Russia’s Star Wars-style, ultra-sophisticated S-500 air defense anti-missile system comes online in 2018, Beijing is sure to want a version of it. Meanwhile, Russia is about to sell dozens of state-of-the-art Sukhoi Su-35 jet fighters to the Chinese as Beijing and Moscow move to seal an aviation-industrial partnership.

Meanwhile, the relationship that the U.S. has with both nations is quickly going sour. The crisis in Ukraine has caused relations with Russia to drop to the lowest point since the end of the Cold War, and now China is deeply offended by charges that Chinese military officers have been involved in cyberspying on the United States...

China on Tuesday warned the United States was jeopardizing military ties by charging five Chinese officers with cyberspying and tried to turn the tables on Washington by calling it "the biggest attacker of China's cyberspace."

China announced it was suspending cooperation with the United States in a joint cybersecurity task force over Monday's charges that officers stole trade secrets from major American companies. The Foreign Ministry demanded Washington withdraw the indictment.

The testy exchange marked an escalation in tensions over U.S. complaints that China's military uses its cyber warfare skills to steal foreign trade secrets to help the country's vast state-owned industrial sector.

The divide between the East and the West is growing.

But the Obama administration has not figured out that we need the East more than they need us.

Right now, the number one U.S. export is U.S. dollars. Our massively inflated standard of living is very heavily dependent on the rest of the world using our currency to trade with one another and lending it to us at super low interest rates.

If the rest of the world quits playing our game, our debt-based financial system will quickly fall apart.

Unfortunately, nobody in the Obama administration seems to have much understanding of global economics, and they will probably continue to antagonize Russia and China.

In the end, the consequences for antagonizing them could end up being far greater than any of us ever imagined.




Russia Buys 900,000 Ounces Of Gold Worth $1.17 Billion In April

Published in Market Update Precious Metals on 21 May 2014
By Mark O’Byrne

Today’s AM fix was USD 1,292.00, EUR 942.65 and GBP 764.81 per ounce.

Yesterday’s AM fix was USD 1,291.50, EUR 943.46 and GBP 767.56 per ounce.

Gold climbed $1.10 or 0.08% yesterday to $1,294.70/oz. Silver rose $0.03 or 0.15% to $19.42/oz.

Gold is marginally lower today at $1,293.50/oz and remains in lock down in an unusually tight range between $1,287/oz and $1,306/oz this week. Gold in Singapore, which often sets the price trend in Asia, traded at $1,292.23/oz prior to a bounce to just over $1,295/oz.


President Putin holds a London Gold Delivery Bar

Gold has been in a very narrow range between $1,283/oz and $1,310/oz for a month now. There are a lot of things going on underneath the surface of the calm gold market this month. That superficial calm is likely to give way in the coming days as we appear on the verge of a sharp move to the upside or downside once gold breaks out of the recent range.

A break below $1,283/oz is possible and this could see gold quickly fall to test longer term support at $1,200/oz. This is likely if the technical traders and computer manipulations continue to dominate. However, should physical demand pick up on rising geopolitical tensions and the return of Indian demand with the easing of import duties, gold should quickly challenge resistance at $1,385/oz and $1,418/oz.

Russia Buys 900,000 Ounces Of Gold Worth $1.17 Billion In April

The Russian central bank has again increased its gold reserves by another 900,000 ounces worth $1.17 billion in April.

Russia's gold reserves rose to 34.4 million troy ounces in April, from 33.5 million troy ounces in March, the Russian central bank announced on its website yesterday. The value of its gold holdings rose to $44.30 billion as of May 1, compared with $43.36 billion a month earlier, it added.

The following is a summary from Bloomberg of the April data template on international reserves and foreign currency liquidity from the Central Bank of Russia in Moscow:




Russia's gold & foreign exchange reserves remained virtually unchanged at USD 471.1billion in the week ending May 9. Russia’s reserves have fallen since the crisis began but remain very sizeable. The reserves include monetary gold, special drawing rights, reserve position at the IMF and foreign exchange.

The 900,000 ounce purchase is a lot of physical gold in ounce or tonnage terms but as a percentage of Russian foreign exchange reserves it is a very small 0.24%.

Gold as a percentage of the overall Russian reserves is now nearly 10%. This remains well below the average gold holding as a percentage of foreign exchange reserves of major central banks such as the Bundesbank, Bank of France and the Federal Reserve which is over 65%.

The Russian central bank has been gradually increasing the Russian reserves since 2006 (see chart above). On average they have been accumulating 0.5 million troy ounces every month. Therefore, the near 1 million ounce purchase in April is a definite increase in demand.

This was to be expected given the very pronounced geopolitical tension with the U.S. and west over Ukraine.

Indeed the TIC data shows that Russia has been aggressively divesting themselves of U.S. Treasuries.

Russian holdings of U.S. Treasuries fell very sharp, by nearly $50 billion, between October and March 2014 or nearly a third of Russia’s total holdings. Over half of the plunge came in March, when $26 billion was liquidated as western sanctions were imposed. TIC Data for April won’t be available until June and will make for very interesting reading.

Especially given the mysterious huge U.S. Treasury buying that is being done by little Belgium. This has analysts scratching their heads and has aroused suspicions that the Fed and or the ECB may be behind the huge Belgian purchases.


Russian Gold Reserves in Million Fine Troy Ounces - 1995-2014 - Monthly Chart (Bloomberg)

Russia has already made their intentions regarding gold very clear. Numerous high ranking officials have affirmed how they view gold as an important monetary asset and Putin himself has had many publicised photos in which he very enthusiastically holds large gold bars.

On May 25th 2012, the deputy chairman of Russia's central bank, Sergey Shvetsov, said that the Bank of Russia plans to keep buying gold in order to diversify their foreign exchange reserves.

"Last year we bought about 100 tonnes. This year it will be less but still a considerable figure," Shvetsov told Reuters at the time.

The World Gold Council reported yesterday that central bank purchases were 70% above their 5-year quarterly average, led by Iraq and Russia. The Eurozone actually became a net buyer thanks to Latvia joining the single currency union, adding its gold to the Eurozone reserves as part of the Euro treaty.

Russia may be planning to give the ruble some form of gold backing in order to protect the ruble from devaluations and protect Russia from an international monetary crisis and the soon to return currency wars.

Russian central bank demand and indeed global central banks demand is set to continue as macroeconomic, monetary and geopolitical uncertainty is unlikely to abate any time soon. Indeed, it may escalate substantially in the coming months as we move into the next phase of the global debt crisis.

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Russia Is Doing It – Russia Is Actually Abandoning The Dollar

By Michael Snyder, on June 10th, 2014



The Russians are actually making a move against the petrodollar. It appears that they are quite serious about their de-dollarization strategy. The largest natural gas producer on the planet, Gazprom, has signed agreements with some of their biggest customers to switch payments for natural gas from U.S. dollars to euros. And Gazprom would have never done this without the full approval of the Russian government, because the Russian government holds a majority stake in Gazprom. There hasn't been a word about this from the big mainstream news networks in the United States, but this is huge. When you are talking about Gazprom, you are talking about a company that is absolutely massive. It is one of the largest companies in the entire world and it makes up 8 percent of Russian GDP all by itself. It holds 18 percent of the natural gas reserves of the entire planet, and it is also a very large oil producer. So for Gazprom to make a move like this is extremely significant.

When Barack Obama decided to slap some meaningless economic sanctions on Russia a while back, he probably figured that the world would forget about them after a few news cycles.

But the Russians do not forget, and they certainly do not forgive.

At this point the Russians are turning their back on the United States, and that includes the U.S. dollar.

What you are about to read is absolutely stunning, and yet you have not heard about it from any major U.S. news source. But what Gazprom is now doing has the potential to really shake up the global financial landscape. The following is an excerpt from a news report by the ITAR-TASS news agency...

Gazprom Neft had signed additional agreements with consumers on a possible switch from dollars to euros for payments under contracts, the oil company's head Alexander Dyukov told a press conference.

"Additional agreements of Gazprom Neft on the possibility to switch contracts from dollars to euros are signed. With Belarus, payments in roubles are agreed on," he said.

Dyukov said nine of ten consumers had agreed to switch to euros.

And Gazprom is not the only big company in Russia that is moving away from the U.S. dollar.

According to RT, other large Russian corporations are moving to other currencies as well...

Russia will start settling more contracts in Asian currencies, especially the yuan, in order to lessen its dependence on the dollar market, and because of Western-led sanctions that could freeze funds at any moment.

“Over the last few weeks there has been a significant interest in the market from large Russian corporations to start using various products in renminbi and other Asian currencies, and to set up accounts in Asian locations,” Pavel Teplukhin, head of Deutsche Bank in Russia, told the Financial Times, which was published in an article on Sunday.

Diversifying trade accounts from dollars to the Chinese yuan and other Asian currencies such as the Hong Kong dollar and Singapore dollar has been a part of Russia’s pivot towards Asian as tension with Europe and the US remain strained over Russia’s action in Ukraine.

And according to Zero Hedge, "expanding the use of non-dollar currencies" is one of the main things that major Russian banks are working on right now...

Andrei Kostin, chief executive of state bank VTB, said that expanding the use of non-dollar currencies was one of the bank’s “main tasks”. “Given the extent of our bilateral trade with China, developing the use of settlements in roubles and yuan [renminbi] is a priority on the agenda, and so we are working on it now,” he told Russia’s President Vladimir Putin during a briefing. “Since May, we have been carrying out this work.”

“There is nothing wrong with Russia trying to reduce its dependency on the dollar, actually it is an entirely reasonable thing to do,” said the Russia head of another large European bank. He added that Russia’s large exposure to the dollar subjects it to more market volatility in times of crisis.

“There is no reason why you have to settle trade you do with Japan in dollars,” he said.

The entire country is undergoing a major financial conversion.

This is just staggering.

Meanwhile, Russians have been pulling money out of U.S. banks at an unprecedented pace...

So in March, without waiting for the sanction spiral to kick in, Russians yanked their moolah out of US banks. Deposits by Russians in US banks suddenly plunged from $21.6 billion to $8.4 billion. They yanked out 61% of their deposits in just one month! They'd learned their lesson in Cyprus the hard way: get your money out while you still can before it gets confiscated.

For those that don't think that all of this could hurt the U.S. economy or the U.S. financial system, you really need to go back and read my previous article entitled "De-Dollarization: Russia Is On The Verge Of Dealing A Massive Blow To The Petrodollar". The truth is that the U.S. economic system is extremely dependent on the financial behavior of the rest of the globe.

Because nearly everyone else around the rest of the planet uses our currency to trade with one another, that keeps the value of the U.S. dollar artificially high and it keeps our borrowing costs artificially low.

As Russia abandons the U.S. dollar that will hurt, but if other nations start following suit that could eventually cause a financial avalanche.
What we are witnessing right now is just a turning point.

The effects won't be felt right away. So don't expect this to cause financial disaster next week or next month.

But this is definitely another element in the "perfect storm" that is starting to brew for the U.S. economy.

Yes, we have been living in a temporary bubble of false stability for a few years. However, the long-term outlook has not gotten any better. In fact, the long-term trends that are destroying our economic and financial foundations just continue to get even worse.

So enjoy the "good times" while you still can.

They certainly will not last too much longer.

http://theeconomiccollapseblog.com/a...ing-the-dollar