Re: Secret moves launched by China, Russia, Japan, France, Arab States to end the Dol
Originally Posted by samizdat
Companion Post:
Here is the the follow up interview with both Kevin Freeman and Lieutenant General William G. Boykin looking into rogue nations Economic Warfare against the United States...
Glenn Beck interviews Lieutenant General Jerry Boykin and Kevin Freeman
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Nikita Khrushchev: "We will bury you"
"Your grandchildren will live under communism."
“You Americans are so gullible.
No, you won’t accept
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outright, but we’ll keep feeding you small doses of
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until you’ll finally wake up and find you already have communism.
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."
We’ll so weaken your
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until you’ll
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like overripe fruit into our hands."
Re: Secret moves launched by China, Russia, Japan, France, Arab States to end the Dol
Companion Thread:
China And Japan Currency Swap: Nail In US Dollar’s Coffin
Written by: Pambazuka New
January 27, 2012
By Horace Campbell
On 25 December 2011, the government of Peoples Republic of China and Japan unveiled plans to promote direct exchange of their currencies. This agreement will allow firms to convert the Chinese and Japanese currencies directly into each other, thus negating the need to buy dollars. This deal between China and Japan followed agreements between China and numerous countries to trade outside the sphere of the US dollar. A few weeks earlier, China also announced a 70 billion Yuan ($11 billion) currency swap agreement with Thailand.
After visiting China, the Prime Minister of Japan Yoshihiko Noda went on to India and signed another currency swap agreement with the government of India. These currency agreements in Asia came in a year when the countries of the Association of South East Asian Nations (ASEAN) (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam) were seeking to deepen ways to strengthen their firewall to protect their economies from the continued devaluation of the US dollar. In the year of the ‘Eurozone crisis’ when the future of the EURO as a viable currency was fraught with uncertainty, many states were reconsidering holding their reserves in the US dollar.
Moreover, in the face of the neo-liberal orthodoxy of the Bretton Woods institutions (especially the IMF) swap agreements were proliferating in all parts of the globe. The Latin Americans established the Bank of the South and are slowly laying the groundwork for a new currency, the SUCRE. As in Asia, the Bank of the South will be one of the fundamental institutions of the Union of South American Nations that has been launched in Latin America in order to guarantee the independence of the societies of Latin America. Not to be left as the only region holding dollars, the leaders of the oil rich states of the Gulf Cooperation Council have been buying gold while announcing as long ago as 2009 the intention to establish a monetary union with a common currency. In Africa there are plans for the strengthening of the financial basis of the African Union but so far there has not been the same kind coordinated regional plans for financial independence. During the period of the debate on the debt crisis in the USA, the Nigerian central bank governor Lamido Sanusi announced that Nigeria plans to invest 5 to 10 percent of its foreign exchange reserves in the Chinese currency – the Yuan also known as the renminbi (RMB).
These accelerated Swap agreements – (agreements between two or several countries (bilateral vs. multilateral) on exchanging currencies in times of crisis) – came a decade after the countries of ASEAN established the Chiang Mai Initiative (CMI). In the aftermath of the Asian economic crash and the currency attack by speculators of the financial services industry, the CMI had been established to promote financial cooperation among the ASEAN countries with regional collaboration on currency issues high on the agenda. Initially when the CMI was launched, the government of China had been lukewarm to the goals of the CMI but over decade, especially after the 2007-2008 Wall Street crash, the preliminary partnership that was called ASEAN plus three (Viz ASEAN countries plus China, Japan and Korea) matured to the point where the ASEAN Swap Agreements have now been expanded to the Chiang Mai Initiative Multilateralization (CMIM) agreement, and a set of rules with structured mechanisms for financial regionalism to work for the development of Asian bond markets. These three pillars of the new Asian economic cooperation – CMIM, Asian Bond Markets and bilateral swap agreements – mark a new stage in the international political order.
This week we will examine the implications of the Chinese/ Japan currency swap in the context of the internal discussions in China about the consolidation of socialism. In 2011, China overtook Japan as the second largest economy in the world, and every expansion increases internal and external pressures on the socialist goals of the People’s Republic of China. More importantly, it is crucial to recollect the competitive devaluations and currency wars of the last depression so that the decline of the dollar can be managed in a way that avoids the recourse to open confrontation of the last depression. It is worth remembering that one of the goals of the fascists in the last depression was to roll back socialism.
In our contribution this week we will examine the implications of the swap agreement between China and Japan and the pressures on other regions to delink from the dollar. The conclusion will argue that this swap is one more nail in the coffin of the dollar as the international reserve currency.
‘CHINA, JAPAN TO BACK DIRECT TRADE OF CURRENCIES’
This was the headline in the financial press as Bloomberg News and other news sheets of the financial world reported the agreement on settling trade between the two countries in Yen and RMB instead of dollar. With US $340 Billion of transactions in 2010 between the two countries, both being each other’s biggest trading partner, the deal is a clear break away from US financial domination. This Bloomberg Report stated,
‘Japan and China will promote direct trading of the Yen and Yuan without using dollars and will encourage the development of a market for companies involved in the exchanges, the Japanese government said.
Japan will also apply to buy Chinese bonds next year, allowing the investment of renminbi that leaves China during the transactions, the Japanese government said in a statement after a meeting between Prime Minister Yoshihiko Noda and Chinese Premier Wen Jiabao in Beijing yesterday. Encouraging direct Yen- Yuan settlement should reduce currency risks and trading costs, the Japanese and Chinese governments said. China is Japan’s biggest trading partner with 26.5 trillion Yen ($340 billion) in two-way transactions last year, from 9.2 trillion Yen a decade earlier.
The pacts between the world’s second- and third-largest economies mirror attempts by fund managers to diversify as the two-year-old European debt crisis keeps global financial markets volatile.
‘Given the huge size of the trade volume between Asia’s two biggest economies, this agreement is much more significant than any other pacts China has signed with other nations.’
Less than two weeks later, in the first week of January 2012, the President of South Korea Lee Myung-bak travelled to China to discuss a ‘bilateral strategic partnership.’ This discussion on bilateral partnership between South Korea and China took place in a context where the Republic of South Korea did not want to be left behind. Ostensibly the visit to China was to discuss the recent passing of Kim Jung IL of North Korea but Chinese media reported that China, Japan and South Korea were hammering out the basic framework for a free trade agreement between the three biggest economies in East Asia.
These agreements will have implications for the dollar as the global reserve currency and there will be increased pressures for the Chinese currency to be internationalized as other societies follow the lead of Japan and seek swap agreements outside of the dollar.
SLOW EROSION OF THE POWER OF THE DOLLAR AND MANAGING THIS NEW MULTIPOLAR CURRENCY ENVIRONMENT
Japan is one of closest allies of the United States. There are thousands of US troops stationed in Japan, but the Japanese, like all peoples of the world, have been losing money as the US dollar was devalued over the past three years. This devaluation has taken the form of what the US authorities called quantitative easing. There has been two such quantitative easings since the 2009 as the United States unloaded more fiat currency on the world. Whatever the name (devaluations or quantitative easing) all countries in the world were thinking of finding ways to escape being hostages to the US dollar and Central Bank governors from Brazil to India and beyond are working to protect their societies from these devaluations. Asian central banks together hold some $3,3 Trillion in reserves, amounting to an impressive 46 percent of the world’s total national reserves. The government of China has vowed to reduce its holding of US dollars and in 2011. The China Daily newspaper reported that, ‘According to data from the US Treasury Department, China’s holdings of US Treasury bonds stood at $1.1326 trillion by the end of November 2011, $1.5 billion down from the previous month. It was the second successive month that the amount had declined, and the lowest reserve level seen since July 2010. China made six monthly cuts of US debt in 2011, the department’s data showed, trimming its holdings by $27.5 billion from the end of 2010. Yet despite the reductions, China remains the top buyer of US Treasury securities.”
What was left unsaid was the plan of the political leadership of China for a deft management of the reductions so that the international political economy is not drastically affected leading to unforeseen circumstances.
Over the past decade numerous officials from the National People’s Congress, the Central Bank and the commercial sectors have been stating that China has to reduce its holdings of US bonds and diversify into other currencies. When, over five years ago, Parliamentary vice-chairman Cheng Siwei, called for the diversification of Chinese reserves away from US bonds, the implicit assumption was that China would diversify and buy European bonds. This was before the full hollowness of the European project became manifest to the world.
PRESSURES TO INTERNATIONALIZE CHINESE CURRENCY
The Chinese economy has registered an average of over 10 per cent growth in the past thirty years. This has been the most successful transformation of an economy in the recorded history of political economy, but the pundits do not like to point to the socialist foundations of China and the sacrifices made by the Chinese people to transform their society. Mao Zedong called the currency of China, the Renminbi, and the people’s currency. Renminbi is the official name of the currency introduced by the Communist People’s Republic of China at the time of its foundation in 1949. The other name for the currency is the Yuan. Hence the Chinese currency is known by a number of names (including the Kuai).
As a low wage economy, the hard work of the Chinese producers has made the society a force to be reckoned with and the currency attractive to other countries seeking a refuge from the dollar. The political leaders in China have been careful about the pace and nature of the internationalization of the currency. The leaders have slowly allowed Hong Kong to become an offshore renminbi financial centre by allowing authorized institutions in Hong Kong to offer renminbi services such as deposit taking, currency exchange, remittance and trading in RMB denominated bonds. Since 2009 when the Chinese government opened this slight door to the internationalization of its currency, other financial centres such as Macau and Singapore have been hoping to get into the offshore RMB business.
These regional pressures for the internationalization of the RMB came up against the hard reality that for the full internationalization of the currency, for the RMB to become a global currency, the government of China would have to establish capital markets and ensure the full convertibility of capital account. The balance of forces within China would then shift in favour of the one per cent who would then privatise state assets at a faster rate. In the present international system, opening such capital markets beyond the tightly controlled stock exchanges would open up the Chinese currency to the kind of full scale attack and speculation that was witnessed in the Asian financial crisis in 1997. Thus far the Chinese state has held the line against the expansion of capital markets in ways that would undermine the stability of the society.
The economy of China is a mixed economy with the state-owned enterprises dominating the economy. Of the ten largest companies on the Shanghai Stock Exchange, eight are state owned. With the growth and power of the Chinese economy, the Chinese capitalists have expanded with a large number of billionaires. These billionaires do not control political power and the Chinese state continues to subsidise food, education and transportation services. There are many limitations to the nature of the Chinese political system, especially the hothouse of growth and accumulation that is creating a fundamental environmental hazard for the majority of the citizens. The growing inequalities and the massive push for the reversal of socialist gains since 1949 are now compounded by an alliance between capitalists in Singapore and the US who are calling for speeding the internationalisation of the RMB.
It is in this context where the December 25 agreement to allow Japan to ‘apply to buy Chinese bonds next year’ becomes significant. It is again worth quoting the press reports of the December 25 agreement. According to the British Broadcasting Corporation, ‘The two leaders also agreed to allow the Japan Bank for International Cooperation to issue Yuan-denominated bonds in China, the first time a foreign government body has been allowed to do so. At the same time Japan said it was also looking to buy Chinese government bonds, a move that analysts believe may prove to be mutually beneficial to both nations. ‘By adopting Chinese bonds as a part of official foreign exchange reserves, Japan is labelling Chinese bonds as an investable asset,’ according to Takuji Okubo of Societe Generale Tokyo.
‘This should encourage Japanese private investment into Chinese bonds, as well as into other Asian emerging currencies. Such a development in turn should help develop offshore currency trading in Japan.’
This new collaboration between China and Japan has been underlined by the Japanese Foreign Minister Koichiro Gemba who on Tuesday said that ‘Japan will seek to take a less inward-looking stance when it comes to diplomacy in the Asia-Pacific region.’ In the words of the China daily newspaper the Foreign Minister said that, ‘Japan will look to enhance diplomatic ties with China based on mutually beneficial goals. With China, this year marks the 40th anniversary of normalizing diplomatic ties, we will aim to deepen the mutually beneficial relationship based on common strategic interests,’ Gemba said in his first foreign policy speech in parliament.
He went on to say that Japan plans to proactively make ‘concrete efforts’ to strengthen its ties with China and establish more ‘open and multilayered networks’ in the best interests of both countries
Ever alert to these shifts in the global currency and financial markets, the British Chancellor of the Exchequer, George Osborne, travelled to Hong Kong in January and offered London as the western base for the coming internationalization of the RMB. Osborne was vociferously making a plea to make London the leading centre for trading the Chinese currency. This conservative Chancellor was exposing the opportunism of the British and demonstrating the short memory of the British hoping that the Chinese have forgotten the Opium Wars.
UNITED STATES SENATE CURRENCY BILL
While the British were declaring their willingness to embrace the RMB, the US Senate has gone about increasing the war of words against China. In the failure to compete in the so-called ‘marketplace,’ sections of the US political leadership have for years been complaining that China should allow open markets for its currency and for its currency to appreciate more rapidly. There are two sections of the US political establishment pushing against the Chinese currency. The first are those allied to Wall Street and the currency speculators who want to be able to trade in the Chinese currency and to do to China what was done to Malaysia, Taiwan, Thailand and other Asian economies in 1997. The second pressure is coming from those sections of capital who complain that China is flooding US markets.
While these two sections do not agree they support the information war against China, this information war carries the refrain that the renminbi is undervalued by 25-30 percent against the dollar, which means Chinese exports to the US become 25-30 percent cheaper, while US goods exported to China are more expensive.
Even though China has allowed its currency to appreciate a little in the last two years, the two sections of capital in the US hostile to China have said that this is not enough. In October 2011 the US Senate passed S.1619, the Currency Exchange Rate Oversight Act of 2011, and a bill to address China’s ongoing currency manipulation, by a vote of 63-35.
One year earlier one commentator for Time Magazine had noted correctly that the real challenge for the United States was to change its consumption patterns.
‘We’ve seen this movie before. From July 2005 to July 2008, under pressure from the US government, Beijing allowed its currency to rise against the dollar by 21 percent. Despite that hefty increase, China’s exports to the US continued to grow mightily. Of course, once the recession hit, China’s exports slowed, but not as much as those of countries that had not let their currencies rise. So even with relatively pricier goods, China did better than other exporting nations.
Look elsewhere in the past and you come to the same conclusion. In 1985 the US browbeat Japan at the Plaza Accord meetings into letting the yen rise. But the subsequent 50 percent increase did little to make American goods more competitive. Yale University’s Stephen Roach points out that since 2002, the US dollar has fallen in value by 23 percent against all our trading partners, and yet American exports are not booming. The US imports more than it exports from 90 countries around the world. Is this because of currency manipulation by those countries, or is it more likely a result of fundamental choices we have made as a country to favor consumption over investment and manufacturing?’
TRANSITIONS: END OF DOLLAR HEGEMONY AND THE NEW INTERNATIONAL FINANCIAL ARCHITECTURE
This commentary on the need for the US to transform its economy and live within its means fell short of outlining a more fundamental problem, that of the military management of the international system and the outmoded imperial impulses that stem from the kind of militarism that now reflect US society. While the Japanese and the Chinese were deepening economic relations, the US political leaders were intensifying its bellicose rhetoric about Chinese military buildup in the South China Sea and pushing forward the idea of a Trans-Pacific Partnership (TPP) Agreement. Japan was being wooed to become a key anchor of the US dominated TPP.
The China/Japan currency swap was a bold move on the part of these two economic giants in Asia. There are historic difference between the Chinese and Japanese, especially the experiences of the 1930’s Japanese occupation of China and the Rape of Nanking. Notwithstanding these historic differences the US debt of over US $ 14 trillion along with the inability of the US political leaders to effectively tackle the growing debt has awoken many that the US dollar as the international reserve currency is on its last legs.
In May 2009, Nouriel Roubini in a contribution to the New York Times on the Almighty Renmimbi summed up the decline of the dollar in this way,
‘This decline of the dollar might take more than a decade, but it could happen even sooner if the US did not get its financial house in order. If China and other countries were to diversify their reserve holdings away from the dollar — and they eventually will — the United States would suffer. It would take a long time for the renminbi to become a reserve currency, but it could happen. The resulting downfall of the dollar may be only a matter of time.’
Nouriel Roubini was writing this warning to alert the US rulers to shift gears because of the rise of China. He called for a strategy of investments to recover the US economy declaring, ‘Now that the dollar’s position is no longer so secure, we need to shift our priorities. This will entail investing in our crumbling infrastructure, alternative and renewable resources and productive human capital — rather than in unnecessary housing and toxic financial innovation. This will be the only way to slow down the decline of the dollar, and sustain our influence in global affairs.’
China and Japan have taken a decisive step to diversify their reserve holdings away from the dollar. What is more fundamental is the new rush by other states to join in this new regional currency arrangement. Republic of South Korea is knocking to become central to this swap arrangement while other members of ASEAN are watching these developments carefully.
The Eurozone crisis has narrowed the ability of the US to respond negatively to the China/Japan currency swap. Importantly, the capitalist crisis in Europe has stiffened the spine of those elements of the Chinese society who proclaim that the principal task of China is to bail out its own people and transform the economy to benefit the 1.3 billion citizens.
These left forces in China are calling for the consolidation of socialism and for vigilance to halt the power of those who are calling for a speedy internationalization of the RMB. These social elements understand the realities behind the call for opening capital markets in China.
It is the left and the progressive forces in China who agree with Mao that the RMB is the people’s currency and that the most important currency is the Chinese people. It is not usual for this writer to quote from Time magazine, but in the arguments of Fareed Zakaria on the question of overvalued currency, this author would concur, ‘The Real Challenge from China: Its People, Not Its Currency.’
‘China is beginning a move up the value chain into industries and jobs that were until recently considered the prerogative of the Western world. This is the real China challenge. It is not being produced by Beijing’s currency manipulation or hidden subsidies but by strategic investment and hard work. The best and most effective response to it is not threats and tariffs but deep, structural reforms and major new investments to make the U.S. economy dynamic and its workers competitive.’
And Zakaria might have added that the US cannot be competitive as long as it imprisons the best of the young people of colour in the prison industrial complex.
The lessons learnt from the last capitalist depression are that competitive devaluations, trade wars, currency disputes and new alliances sow the seeds of hostilities and provide the climate for incidents.
Incidents then spin out of control beyond diplomacy. The contagion from the capitalist crisis will spread and the forces of socialist transformation will have to be even more alert and vigilant to balance the formation of a regional currency block while supporting the creation of the multipolar world to end the era of dollar and pound/sterling hegemony. Those regions of the world that have not awoken to the slow demise of the dollar need to pay closer attention. Planned diversification away from the dollar is preferable to rushed monetary unions. The African peoples have a lot of lessons to learn from both the capitalist crisis in Europe and the new financial arrangements between China and Japan.
Venezuela receives shipment of gold, says it has withdrawn $9 billion from foreign banks
By Associated Press, Published: January 30
CARACAS, Venezuela — Venezuela repatriated a final shipment of gold from foreign banks Monday, saying the country has withdrawn a total of $9 billion in its gold reserves and moved it to the country’s Central Bank.
The shipment of 14 metric tons (15 tons) brought the total amount of gold shipped to Venezuela since November to 160 metric tons (176 tons), Central Bank President Nelson Merentes said.
President Hugo Chavez in August initially announced a plan to retrieve about 211 metric tons (233 tons) held in U.S. and European banks.
Merentes didn’t explain the change, but said about 85 percent of Venezuela’s gold reserves are now held in the country.
State television showed images of a convoy of armored trucks guarded by soldiers as the gold was ferried from Caracas’ airport to the Central Bank.
Merentes did not say from where the shipment had arrived, nor in which foreign banks Venezuela still has gold.
While some economists have questioned the move, Chavez has said having the gold in Venezuela will help protect the oil-exporting country from economic troubles in the U.S. and Europe.
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Nikita Khrushchev: "We will bury you"
"Your grandchildren will live under communism."
“You Americans are so gullible.
No, you won’t accept
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outright, but we’ll keep feeding you small doses of
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until you’ll finally wake up and find you already have communism.
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."
We’ll so weaken your
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until you’ll
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like overripe fruit into our hands."
Re: Secret moves launched by China, Russia, Japan, France, Arab States to end the Dol
Companion Threads:
China signs $31bn currency exchange deal with Australia
Beijing has given indications that it is willing to loosen its grip slightly on the yuan
Related Stories
- China and Japan in currency deal
- City ‘to be offshore currency market for China’
- China backs Japan $10bn bond buy
China and Australia have signed a currency swap agreement in a bid to promote bilateral trade and investment.
It will allow for the exchange of local currencies between their central banks, worth up to 30bn Australian dollars ($31bn; £20bn) over three years.
The deal is expected to reduce cost for businesses, as they will be able to settle trade terms in local currency.
It is the latest in a series of similar deals signed by Beijing as it seeks a more global role for the yuan.
"The main purposes of the swap agreement are to support trade and investment between Australia and China, particularly in local-currency terms," the Reserve Bank of Australia said in a statement.
'Stamp of approval'
China has been trying to promote the yuan as an alternative global reserve currency to the US dollar.
It has signed currency deals with many of its trading partners, including Hong Kong and Japan.
That has seen a rise in the amount of Chinese trade being settled in yuan instead of US dollars.
Analysts said the latest deal with Australia, which is one of the biggest supplier of minerals and natural resources such as coal and iron ore to China, is a major step in Beijing's quest for a global role for its currency.
"It puts a major stamp of approval on the Chinese Yuan and is a shot in the arm in the process of its internationalisation," said Dariusz Kowalczyk of Credit Agricole CIB.
At the same time, analysts said the currency swap agreements would also see a slight opening up of China's tightly controlled capital markets, as trade partners with these agreements would have more options to invest in yuan-denominated assets.
Such a move has been cited as key to the yuan becoming more internationally acceptable as a reserve currency.
Related Stories
- China and Japan in currency deal 25 DECEMBER 2011, BUSINESS
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Nikita Khrushchev: "We will bury you"
"Your grandchildren will live under communism."
“You Americans are so gullible.
No, you won’t accept
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outright, but we’ll keep feeding you small doses of
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until you’ll finally wake up and find you already have communism.
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."
We’ll so weaken your
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until you’ll
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like overripe fruit into our hands."
Re: Secret moves launched by China, Russia, Japan, France, Arab States to end the Dol
Companion Thread:
Saudi Arabia And China Team Up To Build A Gigantic New Oil Refinery - Is This The Beginning Of The End For The Petrodollar?
The largest oil exporter in the Middle East has teamed up with the second largest consumer of oil in the world (China) to build a gigantic new oil refinery and the mainstream media in the United States has barely even noticed it. This mammoth new refinery is scheduled to be fully operational in the Red Sea port city of Yanbu by 2014.
Over the past several years, China has sought to aggressively expand trade with Saudi Arabia, and China now actually imports more oil from Saudi Arabia than the United States does. In February, China imported 1.39 million barrels of oil per day from Saudi Arabia. That was 39 percent higher than last February. So why is this important? Well, back in 1973 the United States and Saudi Arabia agreed that all oil sold by Saudi Arabia would be denominated in U.S. dollars. This petrodollar system was adopted by almost the entire world and it has had great benefits for the U.S. economy. But if China becomes Saudi Arabia's most important trading partner, then why should Saudi Arabia continue to only sell oil in U.S. dollars? And if the petrodollar system collapses, what is that going to mean for the U.S. economy?
Those are very important questions, and they will be addressed later on in this article. First of all, let's take a closer look at the agreement reached between Saudi Arabia and China recently.
The following is how the deal was described in a recent China Daily article....In what Riyadh calls "the largest expansion by any oil company in the world", Sinopec's deal on Saturday with Saudi oil giant Aramco will allow a major oil refinery to become operational in the Red Sea port of Yanbu by 2014.At a time when the U.S. is actually losing refining capacity, this is a stunning development.
The $8.5 billion joint venture, which covers an area of about 5.2 million square meters, is already under construction. It will process 400,000 barrels of heavy crude oil per day. Aramco will hold a 62.5 percent stake in the plant while Sinopec will own the remaining 37.5 percent.
Yet the U.S. press has been largely silent about this.
Very curious.
But China is not just doing deals with Saudi Arabia. China has also been striking deals with several other important oil producing nations. The following comes from a recent article by Gregg Laskoski....China's investment in oil infrastructure and refining capacity is unparalleled. And more importantly, it executes a consistent strategy of developing world-class refining facilities in partnership with OPEC suppliers. Such relationships mean economic leverage that could soon subordinate U.S. relations with the same countries.Essentially, China is running circles around the United States when it comes to locking up strategic oil supplies worldwide.
Egypt is building its largest refinery ever with investment from China.
Shortly after the partnership with Egypt was announced, China signed a $23 billion agreement with Nigeria to construct three gasoline refineries and a fuel complex in Nigeria.
And all of these developments could have tremendous implications for the future of the petrodollar system.
If you are not familiar with the petrodollar system, it really is not that complicated. Basically, almost all of the oil in the world is traded in U.S. dollars. The origin of the petrodollar system was detailed in a recent article by Jerry Robinson....In 1973, a deal was struck between Saudi Arabia and the United States in which every barrel of oil purchased from the Saudis would be denominated in U.S. dollars. Under this new arrangement, any country that sought to purchase oil from Saudi Arabia would be required to first exchange their own national currency for U.S. dollars. In exchange for Saudi Arabia's willingness to denominate their oil sales exclusively in U.S. dollars, the United States offered weapons and protection of their oil fields from neighboring nations, including Israel.Once you understand the petrodollar system, it becomes much easier to understand why our politicians treat Saudi leaders with kid gloves. The U.S. government does not want to see anything happen that would jeopardize the status quo.
By 1975, all of the OPEC nations had agreed to price their own oil supplies exclusively in U.S. dollars in exchange for weapons and military protection.
This petrodollar system, or more simply known as an "oil for dollars" system, created an immediate artificial demand for U.S. dollars around the globe. And of course, as global oil demand increased, so did the demand for U.S. dollars.
A recent article by Marin Katusa described some more of the benefits that the petrodollar system has had for the U.S. economy....The "petrodollar" system was a brilliant political and economic move. It forced the world's oil money to flow through the US Federal Reserve, creating ever-growing international demand for both US dollars and US debt, while essentially letting the US pretty much own the world's oil for free, since oil's value is denominated in a currency that America controls and prints.So what happens if the petrodollar system collapses?
The petrodollar system spread beyond oil: the majority of international trade is done in US dollars. That means that from Russia to China, Brazil to South Korea, every country aims to maximize the US-dollar surplus garnered from its export trade to buy oil.
The US has reaped many rewards. As oil usage increased in the 1980s, demand for the US dollar rose with it, lifting the US economy to new heights. But even without economic success at home the US dollar would have soared, because the petrodollar system created consistent international demand for US dollars, which in turn gained in value. A strong US dollar allowed Americans to buy imported goods at a massive discount – the petrodollar system essentially creating a subsidy for US consumers at the expense of the rest of the world. Here, finally, the US hit on a downside: The availability of cheap imports hit the US manufacturing industry hard, and the disappearance of manufacturing jobs remains one of the biggest challenges in resurrecting the US economy today.
Well, for one thing the value of the U.S. dollar would plummet big time.
U.S. consumers would suddenly find that all of those "cheap imported goods" would rise in price dramatically as would the price of gasoline.
If you think the price of gas is high now, you just wait until the petrodollar system collapses.
In addition, there would be much less of a demand for U.S. government debt since countries would not have so many excess U.S. dollars lying around.
So needless to say, the U.S. government really needs the petrodollar system to continue.
But in the end, it is Saudi Arabia that is holding the cards.
If Saudi Arabia chooses to sell oil in a currency other than the U.S. dollar, most of the rest of the oil producing countries in the Middle East would surely do the same rather quickly.
And we have already seen countries in other parts of the world start to move away from using the U.S. dollar in global trade.
For example, Russia and China have agreed to now use their own national currencies when trading with each other rather than the U.S. dollar.
That got virtually no attention in the U.S. media, but it really was a big deal when it was announced.
A recent article by Graham Summers summarized some of the other moves away from the U.S. dollar in international trade that we have seen recently....Indeed, officials from China, India, Brazil, Russia, and South Africa (the latest addition to the BRIC acronym, now to be called BRICS) recently met in southern China to discuss expanding the use of their own currencies in foreign trade (yet another move away from the US Dollar).Yes, the days of the U.S. dollar being the primary reserve currency of the world are definitely numbered.
To recap:
- China and Russia have removed the US Dollar from their trade
- China is rushing its trade agreement with Brazil
- China, Russia, Brazil, India, and now South Africa are moving to trade more in their own currencies (not the US Dollar)
- Saudi Arabia is moving to formalize trade with China and Russia
- Singapore is moving to trade yuan
The trend here is obvious. The US Dollar’s reign as the world’s reserve currency is ending. The process will take time to unfold. But the Dollar will be finished as reserve currency within the next five years.
It will not happen overnight, but as the U.S. economy continues to get weaker it is inevitable that the rest of the world will continue to question why the U.S. dollar should automatically have such a dominant position in international trade.
Over the next few years, keep a close eye on Saudi Arabia.
When Saudi Arabia announces a move away from the petrodollar system, that will be a major trigger event for the global financial system and it will be a really, really bad sign for the U.S. economy.
The level of prosperity that we are enjoying today would not be possible without the petrodollar system. Once the petrodollar system collapses, a lot of our underlying economic vulnerabilities will be exposed and it will not be pretty.
Tough times are on the horizon. It is imperative that we all get informed and that we all get prepared.
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Nikita Khrushchev: "We will bury you"
"Your grandchildren will live under communism."
“You Americans are so gullible.
No, you won’t accept
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outright, but we’ll keep feeding you small doses of
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until you’ll finally wake up and find you already have communism.
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like overripe fruit into our hands."
Re: Secret moves launched by China, Russia, Japan, France, Arab States to end the Dol
BRICs’ move to unseat US dollar as trade currency
2012-03-25
Thandeka Gqubule and Andile Ntingi
South Africa will this week take some initial steps to unseat the US dollar as the preferred worldwide currency for trade and investment in emerging economies.
Thus, the nation is expected to become party to endorsing the Chinese currency, the renminbi, as the currency of trade in emerging markets.
This means getting a renminbi-denominated bank account, in addition to a dollar account, could be an advantage for African businesses that seek to do business in the emerging markets.
The move is set to challenge the supremacy of the US dollar. This, experts say, is the latest salvo in the greatest worldwide currency war since the 1930s.
In the 30s, several nations competitively devalued their currencies to give their domestic economies an advantage over others.
And this led to a worldwide decline in overall trade volumes at the time.
The north will be pitted against the entire south in a historic competitive currency battle – whose terrain has moved to the Indian capital New Dehli – where the Brics (Brazil, Russia, India China and South Africa) nations will assemble next week.
China seeks to find new markets for its currency and to lobby to internationalise it throughout the Brics states.
For China this is not a new game. In 2009, senior Chinese banking officials issued a statement that the international monetary system was flawed owing to an unhealthy dependence on the US dollar and called for a “super-sovereign” international reserve currency.
Experts say Beijing’s first step is to internationalise its currency (by expanding its reach beyond China), liberalise it (to allow its value to be determined by the market instead of actively managing it as they currently do) and then make it a reserve currency for many nations in the developing world.
Africa’s largest bank, Standard Bank, says in a research document: “We expect at least $100 billion (about R768 billion) in Sino-African trade – more than the total bilateral trade between China and Africa in 2010 – to be settled in the renminbi by 2015.”
The bank anticipates that the use of the renminbi will lower transaction costs in Africa, thus lowering the barriers to doing business.
It also says that the Chinese will be more successful in transacting in renminbi in Africa than anywhere else because most currencies are weak and somewhat localised.
Not only will the US dollar be challenged, but also the entire international financial regime – led by the World Bank and the International Monetary Fund – which has been dominant since the end of World War II.
South Africa’s place in the emerging international financial regime is set to be enhanced.
Zou Lixing, vice-president of the Institute of Research of the China Development Bank, told the Brics preparatory meeting recently that “although the economic aggregate of South Africa is small relative to the Brics, South Africa provides a gate for the Brics to get access to the huge African market”.
The five-member nations have collectively called for an end to the tacit agreement between the US and Europe that ensures that the head of the World Bank is an American citizen, and the International Monetary Fund head is European.
They have proposed that an emerging market candidate be fielded when the term of the current World Bank head, Robert Zoellick, expires in three months.
Fundacao Vargas, a member of the Brazilian delegation, said Brics could confront “existing governance structures”, and seek to strengthen the blocs’ influence in established institutions like the World Bank and the International Monetary Fund, while creating alternatives.
The demand for greater political say in international affairs dovetails with China’s expected rise as a financial superpower in the next eight years.
Vargas showed the preparatory meeting projections indicating that China’s economy will have eclipsed that of the US by 2020, hence the promotion of the renminbi as the preferred currency of the south.
The renminbi has traditionally traded at a deliberately lower exchange rate, which gave a huge boost to China’s domestic economic sectors and enabled its booming industrialisation and growth.
The US and other trading partners have long accused China of being a “currency manipulator”.
Last week, Brazil declared its commitment to keep its own currency – the real – low. Its finance minister, Guido Mantega, reiterated his November 2010 declaration that a global currency war has broken out.
He said: “We do not want to lose our manufacturing sector.
We will not sit back and watch while other countries devalue their currencies.”
Brazil and China cried foul last year when, through a slew of initiatives dubbed QE2 – Quantitative Easing Two – the US indirectly devalued its currency by pumping about $600 billion into its economy to protect the economy from sliding back into recession.
South African economists were in two minds about the moves to extend the influence of the renminbi.
Economist and academic Peter Draper told City Press recently that the decision to establish a Brics development bank and to enlarge the renminbi's sphere “is political and related to the current political dynamics within the World Bank” and the established international financial system.
Tom Wheeler of the South African Institute of International Affairs said developments in New Delhi (India) were “giving substance to the previously (and) loosely arranged economic block”.
- City Press
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"Your grandchildren will live under communism."
“You Americans are so gullible.
No, you won’t accept
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Re: Secret moves launched by China, Russia, Japan, France, Arab States to end the Dol
Russia and Mexico Both Buy Nearly $1 Billion Worth of Gold in March
Published in Market Update Precious Metals Update on 24 April 2012
13
Gold’s London AM fix this morning was USD 1,638.75, EUR 1,244.68, and GBP 1,014.83 per ounce. Yesterday's AM fix was USD 1,632.00, EUR 1,240.97 and GBP 1,014.42 per ounce.
Silver is trading at $30.85/oz, €23.43/oz and £19.10/oz. Platinum is trading at $1,550.00/oz, palladium at $671.25/oz and rhodium at $1,350/oz.
Gold fell $3.80 or 0.23% in New York yesterday and closed at $1,638.20/oz.
Gold has been trading mostly sideways in Asia and within a narrow 8 point spread. In European trading it remains near the close seen in New York yesterday.
Cross Currency Table – (Bloomberg)
The perfect storm trifecta of bad political and economic news yesterday out of France, Holland and Germany led to risk off and falls in many markets. Gold performed well and was resilient considering the sell off seen in equity markets.
Dutch Prime Minister Mark Rutte speaks in parliament today after tendering his Cabinet’s resignation to break a deadlock over further austerity.
French President Nicolas Sarkozy and Francois Hollande will face off in a 2nd round ballot on May 6th and the prospect of Hollande taking power is making European markets jittery.
The euro region has government debt at 87.2% of GDP last year, which is the highest since the start of the euro in 1999.
Manufacturing data from Europe and China contracted in data released yesterday showing how economic conditions appear to be deteriorating.
With the euro zone political landscape in crisis mode and data showing business contracting many investors are putting their capital in dollars and US Treasuries.
Gold 1 Year Chart – (Bloomberg)
So far gold has not been a prime beneficiary of these risks but this will likely change soon – especially if financial conditions deteriorate which seems very likely.
Gold has recently displayed short term correlations with paper assets such as equities and bonds but these correlations will again be shown to be fleeting as gold’s long term inverse correlation with paper assets will reassert itself in the coming months.
Mexico, Russia and Central Banks Continue Diversifying into Gold
While gold demand from the western investors and store of wealth buyers has fallen in recent months, central bank demand continues to be very robust and this is providing strong support to gold above the $1,600/oz level.
IMF data released overnight shows that Mexico added 16.8 metric tons of gold valued at about $906.4 million to its reserves in March.
Russia continued to diversify its foreign exchange reserves and increased its gold reserves by about 16.5 tons according to a statement by its central bank on April 20.
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Nikita Khrushchev: "We will bury you"
"Your grandchildren will live under communism."
“You Americans are so gullible.
No, you won’t accept
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outright, but we’ll keep feeding you small doses of
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until you’ll finally wake up and find you already have communism.
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like overripe fruit into our hands."
Re: Secret moves launched by China, Russia, Japan, France, Arab States to end the Dol
I'm not savvy about $$, & or investments, the mechanics, forex, banksters, fed reserve even less comex etc. Perhaps someone can call BS on silver for instance as a hot riser, precious commodity underpriced historically by ratio & in high demand and manipulated low until "it's time" (to make $$, rise....dip, dive, sky etc. Silver for example just shot up &&& down $1.50 in about a nanosecond.
What's the real deal on the agit-prop ie. (Pan Asia Gold Exchange)June 2012...Hong Kong Mercantile Exchange?
I will post the two articles below separately which lead me to wonder about this situation, fyi.
Sorry. I could not copy the articles as they are copywrited.
What one perceives from the info, which I don't know is reliable is that big US$ like MorganStanley kept silver low to gain on their borrowed shorts...and they'll likely do the reverse pretty soon. Much inference is made of a triad collusion w/ trans asian axis sellout of the USD by bama-geithner & Bben and a "correction" of the supply-demand curve on pms w/ Hong Kong & Pan-asian performing a "shanghai" on the cmex.
http://www.marketoracle.co.uk/Article326....
http://moneymappress.com/video/mmp/mmr/m....
or video... click off the page & choose remain on page to just read the text.
__________________
canto XXV Dante
from purgatory, the lustful... "open your breast to the truth which follows and know that as soon as the articulations in the brain are perfected in the embryo, the first Mover turns to it, happy...."
Shema Israel
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Re: Secret moves launched by China, Russia, Japan, France, Arab States to end the Dol
"The Man Who Predicted the Fall of Communism is
Now Predicting the Fall of Capitalism"
On September 21, 2012, America’s Most Popular Investment Will Reach its
Use-by Date
It will be as a civilization-altering development that will jam up our credit lines…mute the roar of our mighty military engine…topple the world’s biggest monopoly…and send shockwaves across markets…finally bringing the Curtain down on Capitalism…
Dear Reader:
My name is James Dale Davidson.
In 1984, I launched a financial newsletter called Strategic Investment with Lord William Rees-Mogg (former Editor-in-Chief of The Times London, Vice Chairman of the BBC and confidant of powerful figures like Margaret Thatcher and Lord Rothschild).
With the launch of this newsletter I made an equally “outrageous” prediction.
At the height of Soviet power, I predicted that Communism would fall by the end of the decade.
So radical was my forecast at the time that it was rendered rank nonsense by the “guardians of conventional thinking.”
A reviewer in Newsweek dismissed it as “an unthinking attack on reason.”
And the Wall Street Journal categorically denounced it as no more than the natterings of a “dopey aunt.”
Then on January 1, 1989, I told my sometimes friend Bill Clinton (we had the same tutor at Oxford) and a room full of other skeptical political titans, that the Berlin Wall would soon fall.
To the shock of almost the entire planet, on the eve of the new decade, the Wall came down, and revolutions swept away communist regimes from Budapest to Bucharest.
This was an event that according to the so-called experts “no one could have predicted.”
Yet for readers of Strategic Investment, it came as no surprise at all.
In fact, we had been preparing for this momentous event for the better part of the decade.
We knew exactly why Communism was doomed to collapse. We also knew that when it did, that although it would be seen by many as a triumphant event, it would also cause violent disruptions in the global marketplace, and alter the equation of the game for many an economic player. And if you weren’t on the right side of this shift, you might find yourself scrambling for new meaning and methods in an entirely new world order…
But if you were on the right side, you could seize opportunities that only come along once or maybe twice in a century…
I come to you today, to make the same kind of polarizing market prediction I made back then…
And although I’m sure the media mafia will once again be swift to reject my proclamation, I implore you to hear me out and listen to my reasoning…
For I believe, just like the Fall of the Berlin Wall became the defining moment that marked the end of Communism, so too will this event become the defining moment that will mark the end of Capitalism…at least as we know it…
So passionate and assured of my reasoning (and I believe you will be too once I present the evidence) that it has compelled me to come out of retirement and release this video, to fire the distress flare (if you will) about the titanic event that could erupt just weeks from now…
So destabilizing is this event that the biggest names in politics and finance have tried everything in their power to prevent it…and for some years they succeeded. But due to America’s weakening economic and military muscle, we are finally coming up against resistance from our neighbors and trading partners…
For generations it appeared that the Empire’s power and reach knew no bounds. But in the past few years, we have been crushed under the monumental financial stress of policing the globe, launching failed wars, securing oil and other strategic assets, bailing out “buddies” and zombie banks.
And this has all been at a time when our Social Security and Medicare costs are sky-rocketing (Their unfunded liabilities have been growing by $5 trillion annually - at a rate of more than 33% of GDP – while the economy has grown at a rate of less than 1% annually over the past four years). And our tax revenues and T-Bill sales are plummeting…
In short: We have lost our leverage…
We have reached the physical limit on our exercise of power…and we are no longer having as much success at bullying the world into getting what we want, whether it be oil, gas, credit, trading agreements…or any other such strategic assets…
Our Bloated Empire is starting to feel the pains and consequences of Her Crimes of Consumption…
But now, since we are losing the war on the physical front, our leaders are igniting a new war on the cyber-front…employing “virtual vandalism” and other acts of info-terrorism, in order to delete any kind of evidence that might suggest that major swings in sentiment are occurring right now in the demand for America’s most powerful investment…even going so far as to propose censorship laws so draconian that it has moved China, and more than 10,000 Internet sites, including ones as big and as powerful as Wikipedia to strike out against them…
But I have tapped into my contacts and my sources from across the global geopolitical plains, and gathered inside intelligence from some of the highest offices and from some of the biggest money-movers-and-shakers in the business (it’s probably why Strategic Investment was often referred to as “An Investors CIA”), and I have uncovered a pivotal development, which I believe will set off the most violent economic reversal we’ve ever known…
“Final Curtain for Capitalism”
Civilization is about to confront its greatest crisis ever.
It’s why I have been impelled to return from retirement…and produce this video…for I have been warning that this day would arrive for many years now.
And I am returning to the public eye to complete the job I began long ago…It will be the fulfillment of my life’s work. It’s why I founded institutions like the National Taxpayers Union, Agora Publishing, and Newsmax. It’s why I advocated through eight administrations…and why I helped move 32 States to call for a balanced budget amendment to the US Constitution – (a change which if it had not been squelched by Washington’s powerful lobby groups could’ve spared you from the terrible day of reckoning that could now be only weeks away…)
And though this day will usher in one of the most tumultuous transitions in all of human history, it doesn’t mean you have to get crushed by it. If you understand the events going on in the world at the moment, including the fundamental reasons that are driving them, then you need not panic. You can start preparing right now for the cataclysmic upheaval ahead. While you may have to do some immediate and dramatic repositioning of your portfolio, and maybe even your life, you could stand to reap great rewards in the era ahead…
In fact, I believe more money will be lost (and made) in the 18 months following this event than ever before.
And in this video I’ll tell you how it will be done…I’ll even give you the names of some of the exact investments that I predict will be on the winning side of the equation…
That’s where subscribers to Strategic Investment always had an extraordinary edge over the average investor who relies on mainstream information flows.
In fact, even once the world finds out about this event , the media and its mollified listeners will still fail to truly understand the fundamental forces behind it…
The media with all its bells and whistles, sensational sound-bites and meaningless montages, is designed not to educate you, but to entertain you…not to answer questions, but to question answers…to detract and distract…amuse and confuse…paralyze and terrorize…motivating investors to make decisions based on their emotions and not on logic…which almost always, as I’ve witnessed through four decades of crises, cause investors to make all the wrong choices at all the wrong times…selling when they should buy…and buying when they should sell…
The media’s employees are like birds skimming for bugs on the surface of the water, shying too far away from the deeper currents and undertows, to know, care or dare where they are tending…
But at Strategic Investment, we are like marine biologists, diving deep to discover the secrets beneath the surface…
And we do it, by applying a completely novel approach to the art of forecasting…
It’s an approach we call Megapolitics.
Predicting “the Impossible”
Lord William Rees-Mogg and I first invented the theory of Megapolitics in the ‘80s, and it is one on which we have based all our forecasts to date, including the ones we set out in our 3 best-selling books (Blood in the Streets, The Great Reckoning and The Sovereign Individual.)
And we believe it is the reason behind our success, and the reason why we have been able to predict (and even profit) off events that others claimed were “impossible”…and why everyone from the World Bank to Heads of State…from the titans of yesterday to the titans of today have subscribed to our advice…
It’s how we predicted:
Black Monday (over 6 months before it happened.) We warned readers that America would soon experience another 1929-style stock market crash that would catch investors with the shock of their lives, erasing virtually overnight all the profits (and more) that it had taken them the better part of the decade to gain. Experts were almost unanimous in denying such a thing could happen. Caught in the throes of what was at the time our greatest market boom ever, they refused to see reason. But come October 1987, world markets began to hemorrhage in what became the most violent sell-off of the century.
The Japanese Depression of the '90s and 2000s. Once again, at the height of the unprecedented Japanese stock and real estate market boom of the ‘80s, experts got completely blinded by Japan’s Rising Sun! In fact, the consensus was almost unanimous. Japan was about to take over the world.
We said otherwise. We forecast that it would slip into a deep depression…from which it would be difficult to return. We even went so far as to say that Japan’s stock market crash would match or exceed the 89% loss that Wall Street suffered after its 1929 crash. Decades later, Japan’s stock market is still 80% off its 1989 high!
The Rise of a Whole New Wave of Islamic Terrorism in the 90s and 2000s…and how it would displace Marxism as the new ideology of confrontation with the West. This again was at a time when no one wanted to hear it, let alone report on it…and we forecast that they wouldn’t really start hearing about it until our tallest buildings were toppled. Once again, this was a Megapolitical event that we knew would impact global markets on a profound scale, and for which few would be prepared. Caught atop the dizzying heights of the dotcom boom, no one could even see that war was brewing on the geopolitical ground…let alone understand the profound implications it would have on their investments…But a momentous reversal in sentiment was about to occur, as New Economy type stocks were about to be dumped for Strategic assets…war and oil would become the new names of the game again…
The Micro-Media Revolution. And in my book The Sovereign Individual published on the eve of the millennium I made sweeping predictions about how the rise of the Internet, and other such micro-media technologies would have the power to subvert and destroy the macro-state…and redefine media (and life) at the margin. The events I wrote about in my book back then are beginning to unfold right now at a breath-taking pace…
This is the power of Megapolitics.
And once you understand the theory behind it, you’ll start to see the world as it really is….
Megapolitics is the prism through which we look back into the past…in order so that we can peer into the future…
I’ll tell you about this radical new way of looking at the world in this video.
Armed with this unique and powerful forecasting tool, the mysteries of the markets’ muddied waters will start to clear…and the geopolitical and economic fog will begin to lift…
By understanding the fundamental reasons that drive economies and shape markets, you can take back control of your life and your finances…
In fact, in one of my favorite reviews to date, the famous Internet billionaire Peter Thiel (co-founder and creator of revolutionary innovations such as Paypal and Facebook) recently wrote me and said:
“I am an extremely big fan of your writings, which have shaped my thinking about the markets (and the macro world as a whole) perhaps more than anything else.”
The Biggest Moment in Megapolitics Maybe Just Weeks Away Now
In an overlooked article published in the Tehran Times on January 12th, 2012 Iran (the world’s second largest oil producer) made a shocking announcement…one that the western media establishment has suppressed…
It stated that starting this Iranian calendar year (which began March 20th) Iran would make its first dramatic move away from the Petrodollar…
This is a game-changing move…one that I believe will spread around the world like wildfire…and which I predict by the end of summer will bring an end to the 39-year secular bull market in dollars.
America’s most popular investment will have finally reached its use-by date.
And the consequences for every single American will be so dire, it will be difficult at first to accept, let alone believe.
It’s why Washington has spent over ten years and four trillion dollars trying to thwart it.
And until recently it succeeded (if only just)…
The preservation of Petrodollar Power was the real reason we went to war with Iraq.
It is the real reason behind all the strife we are igniting today with Iran…
It’s the real reason why all our trade and economic, information and military wars are now reaching a boiling point…
It’s the real reason why – in yet another history-making event - Wikipedia and over 10,000 other web sites recently went dark…
And it’s the real reason why the wife of my sometimes friend Bill Clinton (and current Secretary of State) is trying to create draconian laws that (if passed) would deliver a terrible blow against the freedom of information…and why Hillary recently announced that “we are in an information war. And we are losing that war.”
In the past, western media outlets enjoyed a monopoly on the coverage of world news.
But today a growing number of viewers from across the world tune into various alternative foreign media outlets to get a fresh take on current events.
It’s a numbers game. And we are clearly losing that game.
For instance, the most striking example of this comes from the launch of the RT Media Empire…which within just seven years has become the most dominant and pervasive force in media of all time.
RT stands for Russia Today.
It currently holds a record number of viewers on YouTube, boasting over two thirds of a billion hits…
CNN International in contrast is struggling to reach an audience of just 1% of RT’s size!
And,more viewers in Washington and New York today tune into the English version of RT than tune into almost any other foreign-based international news channel.
The days of American media monopolies are over.
I predicted, 25 years ago, that this Megapolitical event would occur…long before the producers of these alternative media empires had even graduated from high school!
But mark my words: It is merely the symptom (and not the cause) of the real transformation that is going on in the world right now…and while this transformation will bring great peril, it will also bring great promise…and for those who keep listening - an opportunity for great profits too!
The Petrodollar Was the Ultimate Monopoly
The Petrodollar was a game-changing deal that Washington made with OPEC 39 years ago.
At the time OPEC wanted to create a Petrocurrency in which to trade its oil. This currency however was to be made up of a basket of currencies, which although was to include the dollar, was also to include gold, the Japanese yen, the French franc, the British pound and the German mark.
America had recently hit peak oil and had abandoned the gold standard.
After racking up enormous debts on a failed war (Vietnam)…we were fast running out of oil…of gold…and of money…
And the inflation monster, which had barely raised its head since World War II, was suddenly back from the grave…terrorizing the streets again…
Plus our supremacy was being challenged by the remarkable rise of the emerging markets of the East (like Japan, South Korea and Taiwan)…
Something had to be done.
And the Powers that Be, spied an ingenious little way to keep the empire’s engine running….
President Nixon convinced King Faisal of Saudi Arabia to accept U.S. dollars (and only dollars) as payment for oil. In exchange, he pledged to protect the Saudi Monarchy, and all its oil fields, from anyone who might choose to seize them…enemies like the Soviet Union, Libya and Israel, and many other interested parties.
The King agreed.
And by 1975, he had got all the other OPEC members to agree too.
The Petrodollar Was Born
And so successful was it, that it made the dollar go viral…and mounted Capitalism’s biggest monopoly ever…
It was a Megapolitical innovation that won for the Empire, and each and every citizen in it, all kinds of special privileges…
Megapolitics are the big events that change history.
They are usually either a technological or monetary innovation that tip the balance of power into the hands of its creators and alter the equation of the game.
Two of the greatest Megapolitical innovations of all time were gunpowder and Guttenberg’s printing press.
But they were technological innovations.
The Petrodollar is a monetary innovation.
But its impact in the last 39 years has been equally as powerful.
It was the deal that would rewrite history and shift the balance of power back heavily into America’s favor.
What it did was essentially create a 39-year secular bull market for dollars…as all oil-importing countries would now have to stuff their Central bank vaults full of dollars so they could pay for their oil.
Now in order to acquire those dollars, they would either have to borrow them off America, or they would have to work for it, by manufacturing and selling all manner of goods and products to us…
The Japanese sold us Kawasaki’s and luxury cars.
The Taiwanese sold us TVs, telephones and electronics.
The South Koreans sold us air-conditioners, fridges, washing machines and all manner of modern conveniences.
And the Chinese sold us toys and trinkets, gadgets and gizmos.
And while all these foreign oil-importing nations had to toil through sweat, blood and tears to earn their Petrodollars in order to pay for their oil, we merely had to print them…
A New World War Was Launched
But this war wasn’t a military one fought with guns and grenades.
This one was a consumer war fought with low-cost unskilled labor and mega-manufacturing plants.
The goal was to simply win the custom of the American consumer.
The reward was not kingdoms and countries, or gold and precious metals, but rather it was merely paper dollars, printed without limit, at virtually no cost, by the only institution in the world with the power to do so: the Federal Reserve.
It became like Christmas every day for the American consumer.
Santa would arrive at ports all over America, with sea-containers full of all sorts of goodies and gadgets, made by his worker elves at home…and sold at mercifully modest costs to the American consumer.
But it wasn’t just cheap goods that Americans won.
We also won cheap credit!
You see all these nations who were competing to sell goods to us began to accumulate vast stores of surplus dollars in their vaults. And rather than let these dollars just sit there and gather dust, they decided to lend them back to America and collect the albeit pithy (yet better than nothing) interest rate we gave them on the loan.
And thus the phenomenon, now infamously known as Petrodollar Recycling, was born.
And it was this phenomenon that gave birth to our unprecedented 30-year secular bull-market in U.S. bonds…(one Warren Buffett is quoted to have dubbed as one of the most “extraordinary” bubbles in financial history…a bubble by the way that is just moments away from bursting…with terrifying implications for every single American, particularly retirees and baby boomers whose pension funds and retirement accounts are simply stuffed with them – whether they know it or not! I’ll tell you how to prepare for the bursting of the American bond bubble in just a moment.)
The Petrodollar Privilege Had Power
In short: it allowed us to live beyond our means…print unlimited amounts of money at virtually no cost…spend more than we earned… consume more than we produced... import more than we exported…
It allowed us to borrow excessive amounts of money at obscenely low rates…and build up enormous trade and budget deficits with few adverse effects…
It allowed us to build a mighty military machine and undertake expensive missions right round the globe…
We expanded our Empire…and extended its reign…
Seen in this light, the importance of the Petrodollar comes into perspective.
You can see why we would be prepared to go to war over it.
The Petrodollar is now the last thread that is holding the American Empire together.
But it’s about to go poof…Capitalism is About to Find Itself
Without a Currency
Iran has announced its historic launch of the world’s first commodity exchange that will trade oil in currencies other than the U.S. dollar…
This will mark OPEC’s latest attempt to move away from the Petrodollar.
In fact, in 2006, a report titled Iran Next U.S. Target sighted the launch of this exchange as Americas #1 threat, hailing it to be the real “economic weapon of mass destruction.”
The report was voted by alternative media outlet, Project Censored as one of the top 10 censored stories of the year.
By 2008, despite all U.S. efforts to crush it, Iran managed to successfully and silently get a version of this exchange up and running…
This first version of it, however, was merely to establish its validity on global commodity markets…So rather than actively engage in Petrodollar Warfare with America by selling its oil and gas in other non-dollar denominated currencies, it merely offered petroleum-based products instead…
But this year that is set to change.
Iran’s Oil Bourse will offer oil on the open market for the first time in currencies other than the U.S. dollar.
This is the real reason why we are levying sanctions on Iran, and anyone else who dares do business with them.
This is the real reason why we’re sending warships to the Strait of Hormuz, and why we’re accusing Iran of building Weapons of Mass Destruction.
But it doesn’t make sense.
The IAEA (International Atomic Energy Association) has just completed a full inspection of Iran’s nuclear capabilities, and confirmed that there is no evidence Iran has decided to actually build nuclear weapons.
What’s more, we have 2,150 nuclear warheads. And even by the most ambitious of estimates it would take Iran about 10 years to build two at most.
And if Iran’s two nuclear warheads by 2020 are so dangerous, then why have we allowed North Korea and Pakistan to build literally hundreds of them!
So now Washington is bullying the entire globe to boycott all trade with Iran.
But that doesn’t make sense either.
For example, Iran has been trading with mega-economies like India, Japan, South Korea for over two decades. These are not relationships that are going to be severed anytime soon by third-party sanctions. They’ve been trading over hundreds of billions of dollars worth of oil and other commodities with Asia alone for a long time…not to mention dozens of other nations.
Iranian oil is an integral part of many nations’ lifeblood.
And while America is running around bullying everyone with sanctions and saber rattling, nations the globe over are quietly and silently doing their own private little deals…deals that are collectively worth over a trillion dollars…
The World Has Begun to Blindside the Dollar
China, Russia, Brazil, Venezuela, Argentina, South Africa, Malaysia, Indonesia, South Korea, Columbia, to name but a few, are all doing direct deals and swaps with one another.
They’re basically blindsiding the dollar.
For example:
The Dollar Has Drowned In The Yellow Sea! Hands down, Japan and China landed the biggest punch to the Petrodollar in December 2011 when the two G20 giants announced plans to dump the dollar and trade only in Yuan and Yen. Value: Minimum $339 billion.
The BRICS Are Now Glued Together! Brazil, Russia, India and China (South Africa too) agreed to establish mutual lines of dollar-free credit. According to IMF figures – Value: $170 billion.
You’ll Hear of Asian Contagion No More! Watch out for the “Chiang-Mai Multi-lateralized Initiative”! It is already in effect. And it links the economies of the 10 ASEAN nations – plus China, Japan, South Korea and the Monetary Authority of Hong Kong in a super-liquid juggernaut kitty of non-dollar credit and local currencies. Value: $120 billion.
Weeks Ago, Tsunami-Tattered Japan Threw India A $15 billion Lifeline. This “little” agreement gives India immediate access to $15 billion worth of yen to help it buy its Iranian oil.
And the Silk Road is Now Being Paved With Yuan and Dirhams. On Tuesday, January 17th, 2012, China threw the dollar into one more ditch, when it penned yet another “greenback-less” agreement – this time with the United Arab Emirates. Value: $5.5 billion. And this is just one of more than ten such deals that we’ve seen inked by the Asian Giant in recent years.
The world has begun to enter an unprecedented new era of monetary co-operation. Instead of raising voices and guns – they are raising solutions.
And U.S. sanctions to curb the flow of Iranian oil are now hitting a kink. Though you won’t hear about this from the mainstream media (where the word Petrodollar has been practically banned since 2007).
But the word Petrodollar and the details of new Swap Lines are bandied about every day on alternative media stations like RT, Al Jazeera and China Central Television.
And this is just the beginning…
Commerce is Freeing Itself of Fiat Currencies
We are re-entering a New Era of Barter and Exchange.
To circumvent U.S. sanctions, Iran and China, even back in 2010, started their own little “oil-for-refineries” program. You see, Iran is not only far from atomic; it’s also far from modern…
With its creaky and crumbling infrastructure, OPEC’s second largest oil and gas producer can’t even refine its most abundant natural resource: crude oil... To this day, it still has to export nearly all of its crude and later import it back as gasoline, kerosene and other petroleum products – and they usually do this at a loss.
What’s more, it has new Super-Fields (that were discovered in 1999) that have boosted its country’s proven reserves to150 billion barrels – but this “little” asset has still hardly been developed.
So as China’s thirst for Iranian oil continues to grow (49% last year alone) and trade mechanisms to pay for it keep getting cut off, the two are swapping oil for infrastructure.
China’s already signed up to build what will become two of the largest oil projects Iran’s seen in years.
And this is just but one example, where the dollar has been cut out of foreign trade, and has been replaced by good old barter and exchange.
Iran’s oil swaps with various nations are projected to reach 500,000 barrels per day once the third phase of an ambitious plan to further barter and refine oil is completed. That’s more energy than the Department of Defense (the world’s largest single oil consumer) burns each day! These new pumps and pipelines are slated to come online in the next 12 months.
But it’s not only foreigners that are dumping the dollar.
Americans, displeased with Washington’s fiscal recklessness, are dumping it too!
A recent report in The New York Times has announced the birth of an entirely new currency in the U.S. – the BerkShare.
Also, Jim Rogers (one of the world’s shrewdest investors) has denounced the dollar too, saying if something isn’t done soon to resurrect it, it will “lead to a huge decline in the standard of living of U.S. citizens like nothing we’ve seen in nearly a century.”
And Bill Gross, the world’s biggest bond investor has advised all his clients that if they had just one investment idea, it should be an investment in a non-dollar, non-euro currency.
As Brazilian economist and strategist Ricardo C. Amaral, recently said:
“The US dollar served its purpose since the end of WWII and became the major foreign exchange reserve currency…(but) the days of the U.S. dollar playing that special role…has reached the end of the line…today that system is very sick.”
The Fiats are Falling
But all this is part of a much wider trend…one I predicted would occur in my book The Sovereign Individual in 1998.
In this book I alerted readers that we were about to go from an era of macro-states to micro-states…macro-currencies to micro-currencies…
In Europe in the 16th Century there were literally thousands of forms of exchange, and thousands of states (feudal systems).
Now Europe is down to 16 major states and one major currency.
But I believe the trend is about to reverse.
In fact, just like the break up of the Soviet Union, so too will we now see the break up of the European Union…and of the Euro…
But the greatest (and most shocking) event of all…the one that most Americans will not even be able to imagine, let alone believe…will be the break up of our own Confederacy, and of our own Currency…and of Capitalism itself. Sure the word will be bandied about, but it will take on a whole new form…
I’ll tell you about that new form in a moment…
...
People everywhere are hesitant and worried. You see it in their faces. Hear it in their conversations. See it reflected in polls and see it registered in the ballot box.
Just as an invisible, physical change of ions in the atmosphere signals that a thunderstorm is imminent, even before the clouds darken and lightning strikes, so too are there now premonitions in the air. One person after another, each in his own way, senses that time is running out on a dying way of life…
As I talk to you now, the walls of my den are lined with diplomas, awards and personalized photos of me with some of the mightiest Mega-political figures in living memory.
I’m surrounded by my gilded achievements – the snapshots from the greatest moments of my of my life’s work. A legacy, that if I’m honest, I am quite proud of.
But one thing I’ve learned from studying 6,000 years worth of history is that being encircled by plaques and shelves of the world’s best books means nothing if they are merely part of some “estate”…
And why just rust, when things are really starting to get interesting…and when 40 years of my forecasts are coming to a head…
The airplane and Internet have brought us closer together but Washington and the worker have never been further apart.
This is why I’m coming out of retirement.
I don’t want to be tucked safely away in my home in Buenos Aires… or rambling around my vineyard in New Zealand.
That’s too easy.
That’s not what I’ve strived for.
It’s been great gravy, yes, but that’s not what it’s all about…
It’s about: You... Your family… Your friends… Your future…
That’s why I’m hoping you’re hearing me right now.
And I’d argue with Shakespeare’s Hamlet. The “Undiscovered Country” is NOT the end – but merely the beginning…
Yes, the transition ahead will be rough.
Punters will guess…
Politicians will lie…
History will repeat...
It is repeating right now…
Rome is burning…
But that’s precisely why I’m breathing fire back into what I believe is my crowning achievement… Strategic Investment…
In 1969, when I started airing Washington’s dirty secrets – fighting for those who didn’t have the sway or access that I did – I quietly questioned my role…
Was I being fierce or foolish?
But like all things, time did tell...
Turns out, young and brash (along with 3 bestsellers) has lead to bold and brazen…
...
All the best,
James Dale Davidson
(Author of Blood in the Streets, The Great Reckoning and The Sovereign Individual)
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Nikita Khrushchev: "We will bury you"
"Your grandchildren will live under communism."
“You Americans are so gullible.
No, you won’t accept
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outright, but we’ll keep feeding you small doses of
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until you’ll finally wake up and find you already have communism.
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."
We’ll so weaken your
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until you’ll
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like overripe fruit into our hands."
Re: Secret moves launched by China, Russia, Japan, France, Arab States to end the Dol
Communism/Socialism are FORCED markets. Capitalism is not a forced situation.
People will still TRADE, BARTER and BUY things regardless of the economic situation.
So, Capitalism "will not fall" like Communism. It might fall apart, but it will never be gone.
Libertatem Prius!
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Re: Secret moves launched by China, Russia, Japan, France, Arab States to end the Dol
A fascinating editorial from a Chinese Communist Economist on the US Dollar
by John Galt
June 5, 2012 23:00 ET
I think this might be a good time for Americans to start paying more attention to not just Europe, but what is happening in the Far East. The following editorial is from China Daily, the Communist Chinese Party newspaper for foreign consumption.
Escaping the dollar trap
By Zhang Monan (China Daily)
Direct yen-yuan trading is another step in China’s bid to extricate itself from excessive dependence on US currency
As part of efforts to boost bilateral trade and investment, China and Japan started direct trading of their currencies in Shanghai and Tokyo on June 1.
Allowing the yuan to directly trade with another major currency other than the US dollar will help China in its efforts to acquire a wider trading and financial presence.
The biggest lesson China has learned from the global financial crisis is that it should push for reforms of the international monetary system and accelerate the internationalization of the yuan. It has also become increasingly evident that the dollar-dominated global monetary system has not only interrupted the world’s normal economic growth mechanism, but also caused global economic and financial chaos. The “dollar trap” can be found in every corner of the world.
The establishment of the “dollar era” during the latter half of the 20th century was to a large degree a consequence of the United States’ decisive role in the making of global market rules and institutions. The US dollar has thus become the center of the world’s monetary system while other countries, either export or resources-dependent, have to peg their currencies to the dollar, thus weakening the independence of their monetary policies.
Such an imbalance has resulted in “appreciation against the dollar, but depreciation at home” for some currencies and aggravated the imbalances in global trade. Against this backdrop, how to gradually depeg their currencies from the dollar and increase their monetary independence has become a pressing concern for some countries.
For a long time, China only allowed the yuan to be directly traded with the dollar and all transactions with other currencies had to be via the greenback. As a result, the value of the yuan and its issuance have been influenced by the monetary policies of the US. This has made it difficult for a real exchange rate of the yuan to be established.
The internationalizing of the yuan has accelerated since 2010, especially this year with the HSBC issuing yuan bonds in London in April, a move that started the establishment of another offshore financial center of the yuan besides Hong Kong, and the World Bank’s agreement with China’s central bank for commissioned investment in China’s inter-bank securities market.
China remains Japan’s largest trading partner. In 2011, the bilateral trade volume increased to a record high of $344.9 billion, an increase of 14.3 percent year-on-year. However, 60 percent of the bilateral trade volume between the two countries is settled via the dollar, thus bringing both countries increased transaction costs and settlement risks and prompting them to raise the ratio of trade settlements via their own currencies.
There have been great motivations within Japan for direct trading of yen with the yuan. Japan’s accelerated industrial and population ageing over the past decade has been a key factor in its failure to pull out of a lingering recession. To alleviate the impact of the yen’s appreciation upon its economy, Japan began moving its focus of economic growth overseas in the 1980s. Under such a strategy, some Japanese enterprises that have lost advantages at home have moved their manufacturing and operation bases overseas in pursuit of bigger profits.
Since the catastrophic earthquake and the ensuing tsunami in March last year, Japan has accelerated the shift of its industrial development and investment to other countries, especially to China. In this context, direct yuan-yen trading without the involvement of the US dollar will not only offer more opportunities for Japan’s industrial and trade growth, it will also promote deeper Asian economic integration.
Past practices indicate that if a currency is to become a leading international currency, it starts from acquiring pricing and settlement position in the trade of international bulk commodities, especially energy sources, as indicated by the establishment of the dollar’s hegemony in world’s energy trade over the past decades. The formation of a “dollar, oil dollar and commodity dollar” cycle, a closed cycle of global capital flow, has to a large extent decided the distribution of global wealth.
A key element to judge whether a country’s currency is a leading international currency is its share in global foreign reserves. According to the International Monetary Fund, more than 60 percent of global foreign reserves was in US dollars by the end of the third quarter of 2011. Behind the dollar are the euro, sterling and the yen, the yuan is only accepted by a few countries as a reserve currency.
Despite facing a tortuous path before its internationalization, the yuan’s direct trading with the yen marks a substantial step forward in China’s bid to extricate itself from excessive dependence on the US dollar. Depegging from the dollar will facilitate its process of free conversion with other currencies and make it play a bigger role in global wealth distribution.
The author is an economics researcher with the State Information Center.
(China Daily 06/06/2012 page 8 )
- I took the liberty of putting the last portion of the editorial in bold so as to highlight the phrase “global wealth distribution.” This is an important issue going forward as the West collapses due to indebtedness and incompetence.
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Nikita Khrushchev: "We will bury you"
"Your grandchildren will live under communism."
“You Americans are so gullible.
No, you won’t accept
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outright, but we’ll keep feeding you small doses of
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until you’ll finally wake up and find you already have communism.
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."
We’ll so weaken your
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until you’ll
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like overripe fruit into our hands."
Re: Secret moves launched by China, Russia, Japan, France, Arab States to end the Dol
The USD Trap Is Closing: Dollar Exclusion Zone Crosses The Pacific As Brazil Signs China Currency Swap
Submitted by Tyler Durden on 06/22/2012 08:23 -0400
When the US Dollar is ultimately dethroned as the world's reserve currency (and finally gets rid of all those ridiculous three letter post-Keynesian economic "theories") nobody will have seen it coming. Well, nobody except for the following headlines: ""World's Second (China) And Third Largest (Japan) Economies To Bypass Dollar, Engage In Direct Currency Trade", "China, Russia Drop Dollar In Bilateral Trade", "China And Iran To Bypass Dollar, Plan Oil Barter System", "India and Japan sign new $15bn currency swap agreement", "Iran, Russia Replace Dollar With Rial, Ruble in Trade, Fars Says", "India Joins Asian Dollar Exclusion Zone, Will Transact With Iran In Rupees."
And while the expansion of the "dollar exclusion zone" was actually quite glaring to anyone who dared to look, one thing was obvious: it was confined to Asia. No more courtesy of the following FT headline: "Brazil and China agree currency swap."
More: "Brazil has provided a vote of confidence in China’s efforts to promote the renminbi as a reserve currency by becoming the biggest economy yet to agree a swap deal with Beijing.
Brazil and China announced the R$60bn (US$29bn) local currency swap after a bilateral meeting between Wen Jiabao, the Chinese premier, and Dilma Rousseff, Brazil’s president, on the sidelines of the Rio+20 environmental summit in Rio de Janeiro."“It is a measure that reinforces the economies of both countries,” Guido Mantega, Brazil’s finance minister, said late on Thursday night.Well, that... and also a measure which shows that one by one every country in the world is starting to think of the post-dollar world.China has launched an aggressive campaign of “currency swap diplomacy”, signing about 20 such agreements over the past four years with countries ranging from Argentina to Australia and the United Arab Emirates.They are inactive only as long as they are not activated. And that, as the Federal Reserve bank of JPMorgan the United States has shown can be done with just the flip of a switch.
While these have been largely symbolic – only Hong Kong so far has had to activate its swap line after a shortage of renminbi in the territory in 2010 – they are seen as helping the long march of the internationalisation of the Chinese currency.
What happens next is usually best summarized by the following chart which has long been one of our favorites.
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Nikita Khrushchev: "We will bury you"
"Your grandchildren will live under communism."
“You Americans are so gullible.
No, you won’t accept
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outright, but we’ll keep feeding you small doses of
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until you’ll finally wake up and find you already have communism.
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."
We’ll so weaken your
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until you’ll
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like overripe fruit into our hands."
Re: Secret moves launched by China, Russia, Japan, France, Arab States to end the Dol
The final straws I guess?
The dollar is going down, war is going up.
Wow.
Libertatem Prius!
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Re: Secret moves launched by China, Russia, Japan, France, Arab States to end the Dol
The Axis are working in every region on the planet to diminish US influence...
The Ending of America's Financial-Military Empire
By MICHAEL HUDSON | June 15th
The city of Yekaterinburg, Russia's largest east of the Urals, may become known not only as the end of the road for the tsars but of American hegemony too; as the place not only where US U-2 pilot Gary Powers was shot down in 1960, but where the US-centered international financial order was brought to ground.
Challenging America is the prime focus of extended meetings in Yekaterinburg, Russia (formerly Sverdlovsk) today and tomorrow (June 15-16) for Chinese President Hu Jintao, Russian President Dmitry Medvedev and other top officials of the six-nation Shanghai Cooperation Organization (SCO). The alliance is comprised of Russia, China, Kazakhstan, Tajikistan, Kyrghyzstan and Uzbekistan, with observer status for Iran, India, Pakistan and Mongolia. It will be joined on Tuesday by Brazil for trade discussions among the so-called BRIC nations—Brazil, Russia, India and China.
The attendees have assured American diplomats that it is not their aim to dismantle the financial and military empire of the United States. They simply want to discuss mutual aid—but in a way that has no role for the United States, for NATO or for the US dollar as a vehicle for trade. US diplomats may well ask what this really means, if not a move to make US hegemony obsolete. After all, that is what a multipolar world means. For starters, in 2005 the SCO asked Washington to set a timeline to withdraw from its military bases in Central Asia. Two years later the SCO countries formally aligned themselves with the former CIS republics belonging to the Collective Security Treaty Organization (CSTO), established in 2002 as a counterweight to NATO.
Yet the Yekaterinburg meeting has elicited only a collective yawn from the US and even European press despite its agenda—nothing less than the replacement of the global dollar standard with a new financial and military defense system. A Council on Foreign Relations spokesman has said he hardly can imagine that Russia and China can overcome their geopolitical rivalry, suggesting that America can use the divide-and-conquer that Britain used so deftly for many centuries in fragmenting foreign opposition to its own empire. But George W. Bush ("I'm a uniter, not a divider") built on the Clinton administration's legacy in driving Russia, China and their neighbors to find a common ground when it comes to finding an alternative to the dollar and hence to the US ability to run balance-of-payments deficits ad infinitum.
What may prove to be the last rites of American hegemony began already in April at the G-20 conference, and became even more explicit at the St. Petersburg International Economic Forum on June 5, when Mr. Medvedev called for China, Russia and India to "build an increasingly multipolar world order." What this means in plain English is: We have reached our limit in subsidizing the United States' military encirclement of Eurasia while also allowing the US to appropriate our exports, companies, stocks and real estate in exchange for paper money of questionable worth.
The artificially maintained unipolar system," Mr. Medvedev spelled out, is based on "one big center of consumption, financed by a growing deficit, and thus growing debts, one formerly strong reserve currency, and one dominant system of assessing assets and risks." At the root of the global financial crisis, he concluded, is the fact that the United States makes too little and spends too much, particularly its vast military outlays, such as the stepped-up US military aid to Georgia announced just last week, the NATO missile shield in Eastern Europe and the US buildup in the oil-rich Middle East and Central Asia.
The sticking point for all these countries is the ability of the United States to print unlimited amounts of dollars. Overspending by U.S. consumers on imports in excess of exports, U.S. buy-outs of foreign companies and real estate, and the dollars that the Pentagon spends abroad all end up in foreign central banks. These banks then face a hard choice: either to recycle these dollars back to the United States by purchasing US Treasury bills, or to let the "free market" force up their currency relative to the dollar—thereby pricing their exports out of world markets and hence creating domestic unemployment and business insolvency.
Tuesday, June 23, 2009
The Coming Economic Cold War
For anyone to believe the United States will soon return to a state of economic stability, I am afraid you have not been reading your herbal tea leaves correctly. Not only is there a new American paradigm emerging, but there is a new world paradigm on the horizon. For many Americans it is unlikely that they will ever return to a state of economic stability. And, for others, they may get closer to where they were before the big collapse, but not close enough.
The powerful economic forces in the world are all fighting for recognition as dominant players, while strategizing to become master players through their political maneuvers in order to position themselves in such a way so their currencies will evolve as the major trading reserve currencies above all others. It has become more visible and apparent that the United States has not been fully included in the current Eurasia summit conferences. As a matter-of-fact, we are being excluded, at this time. It not only has to do with the instability of the United States dollar and economy, but equally as much as it involves U.S. dollar hegemony, it is also about how other world powers are now realizing they can finally subdue its domination, without firing a shot, as well as reducing the sphere of influence by the world’s largest debtor nation—the U.S.
This overwhelming paradigm shift will be jettisoned by Russia and China supplanting the U.S. dollar as the world’s major reserve currency with, instead, other sovereign currencies. This dramatic change will be initiated as foreign central banks pull back their purchases of U.S. treasurys, especially those that are considered longer term investments—anything beyond a 10 year maturation.
The days of China and Russia subsidizing U.S. military expansion (approximately half of the U.S. budget) through the purchase of U.S Treasurys is coming to an end. Another way that the U.S redirects it currency back into the budget is by circulating it through the host nation’s central bank via the 737 military bases and installations established around the world. This, too, may be coming to an end. The U.S. may be finding Russia, China, Brazil, Pakistan, India, Iran, and Malaysia removing its pawns, knights and bishops from the world’s chessboard. The nations with budgetary surpluses now have greater control over the one country, which was so willing to destroy its real economy, and replace it with a phony financial-monopoly based economy full of fake securitized debt instruments, which were given fake high AAA ratings, and insured against their failures through Ponzi-style credit default swaps; and, as a result of such foolhardy willingness shown by Reagan, Bush, Clinton, Bush, and now, Obama, the U.S. will more than likely find itself in a continuous decline as it throws more of its economic resources into the burn-barrel of financial institutions.
For President Obama to even think of giving Federal Reserve Chairman, Ben Bernanke any oversight powers, is to give a pyromaniac oversight control of the burn-barrel. And, to allow his voice to structure new regulatory rules over the financial sector would be like letting a bank’s personnel director hire professional bank robbers as night janitors!
Bernanke is culpable in this economic collapse. He has been deeply embedded in the plot by the top 20 banks to take over the Treasury, and the Federal Reserve’s resources.
We have now learned that 10 financial banks want to pay back $68 billion of the $700 billion allocated TARP funds. Now Kevin Hall of McClatchy News has spun propaganda by stating that “the TARP bailout turns out to have been good business for the U.S” in his article of the same name. He says that out of the $68 billion, the U.S government received $1.8 billion in dividends. “That translates to an annualized rate of return of about 4.64 percent on the $68 billion.”
Out of the $700 billion allocated for TARP, there still remains $134 billion still remaining in the program’s account. Subtract the $68 billion, and there still remains $498 billion still outstanding by the remaining 9 financial banks. $566 billion was actually lent out. Only around 15% is now planning to be paid back.
The question is what kind of impact did this $1.8 billion have on the GDP? Or, on the productivity of the country, for that matter? The answer is zero! Did it improve the plight of the suffering working American? NO! I am sorry Kevin, but I don’t see how the bank bailout was good business for the U.S.
Had the banks been allowed to fail, and all the funds that were handed over to the zombie financial banks, including the measly $566 billion out of the $11 trillion total amount of money made available to the zombie financial banks, the U.S. government might have been able to gather a return by investing nothing, but instead, taking control of the bank’s assets, and once taken over through receivership, then the toxic mortgage debt could have been auctioned off for around 22 cents on the dollar. Bank receivership would have been better business for the U.S. in the long run. And, better for working people. In spite of all the party favors given to the financial banks, credit is still frozen because the banks are hoarding the money for their own protection.
Now, had the government made available the $11 trillion to those companies in the real economy, as loans, to, once again, build up a Green and vibrant manufacturing sector, workers would have been hired, who would be paying income taxes, and stimulating the economy through spending. Foreclosures would have slowed months ago. The peripheral economy that surrounds the manufacturing economy, such as services, would hire workers and the nation’s productivity would grow, as well. And, the businesses would be paying back the government in taxes. Such a plan would have been a real stimulus improving the GDP far better than lending money to the hoarding financial banks that were responsible for the economic collapse in the first place!
Another weak aspect of President Obama’s regulatory plan would allow credit default swaps to go unregulated only if they were considered to be “custom” by the insurer—our government protected financial crime syndicate. And, of course, “custom” swaps would be the majority issued. Credit default swaps continue to amount to $30 trillion, and were a major player in the collapse of our economy because they went unregulated. So, for the most part, President Obama wants to continue walking the path toward the Gates of Hell!
The path President Obama has chosen will very likely embolden the neo-fascist Right wing hate-talk media voices doing what they can to bring about a sea change of civil unrest the likes of which many of us have never seen. He will deliver it to them because his decisions allowed for it to evolve. For a person as smart as he seems, he lacks the ability to see the cause and affect, 3 or 4 moves ahead, of his decisions. Some believe the opposite, that he sees moves forward, but I must differ with that observation.
The foreign countries mentioned above are sick and tired of being forced to buy Treasurys through the cycling of dollars they receive from U.S. corporate business sectors buying up their cheap goods and services, and foreign corporations, as well as having dollars circulated into their banks as a result of U.S. military installations situated in their countries, which is then used to further support these same U.S. military bases and facilities they would like to see closed up and moved out.
Foreign central banks don’t have very much they can buy with dollars except Treasurys and American corporations, only when the U.S government permits it.
This change will likely happen. China and Russia have seriously created a plan during their BRIC (Brazil, Russia, India, and China) summit in Katerinburg, Russia. The U.S. was told “No” you are not invited, even as a passive observer.
President Obama’s actions have advanced the Economic Cold War. [Read Dr. Michael Hudson’s enlightening article, “Appointment in Yekaterinburg: The Ending of America’s Financial-Military Empire”, Counterpunch.org, 6-20-09.]
The result of the U.S.’s possible loss of the dollar as the world’s central reserve currency will be hyper-inflation because the Federal Reserve will print much more money. It is likely that there will be more job losses, significant rollbacks with state and local budgets and a shake-up in the way President Obama has been doing business, as well a Republican uprising inside Congress.
In the June 17, 2009 Wall Street Journal, there was an article about how hedge funds are foreseeing inflation with regard to commodity prices in the nation’s future and investors are betting on it happening. Such news materializing would be bad for the average working person. I have my doubts that commodity prices could inflate much more without higher wages being realized. Consumers would just cut back on spending forcing commodity prices to fall. It is a hedge fund gamble.
China, Russia and the other foreign nations realize they cannot kill their consumer export market in the U.S., but will be able to bring it to its knees as they begin to dictate new rules. They will capitulate and continue to buy U.S. Treasurys, but it will be on their terms, as they “negotiate” a reduction in U.S. military expenditures reducing our dominant influence in Eurasia.
Without the U.S government’s ability to borrow from the world’s budget surplus nations, it will not be able to spend and expand its own budget deficits. Government spending reductions will squeeze the economy, and shrink government programs, services, and entitlements, along with contributions to the states. But rest assured, the Bush-Obama bail-out/rescue plan delivered to the financial banking sector occurred as a result of demands they made to be protected from the coming squeezes, such as with luxurious wages, once the economy begins to further fold in on itself. These oligarchs have demanded they be insulated from any of the financial suffering the rest of the population will experience.
Are Major Countries Preparing to Financially Dismantle the United States and its Empire
By Richard Clark
February 16, 2010 at 21:34:15
Here are the main points of an important answer to that question by economist and former Wall Street honcho, Michael Hudson: The six-nation Shanghai Cooperation Organization (SCO) is comprised of Russia, China, Kazakhstan, Tajikistan, Kyrghyzstan and Uzbekistan, with observer status for Iran, India, Pakistan and Mongolia. It was joined recently by Brazil, for trade discussions among the BRIC nations (Brazil, Russia, India and China), all of which seek a multi-polar world.
If it's not a move to make US hegemony obsolete, then what's the purpose of this new organization? US diplomats may well wonder. After all, this is exactly what a multi-polar world means: no hegemony by any one country. Another clue as to what's about to happen: in 2005 the SCO asked Washington to set a timeline to withdraw from its military bases in Central Asia.
It seems that the US has inadvertently driven Russia, China and their neighbors to find common ground by developing an alternative to the dollar as a dominant or reserve currency, and hence an end to the US ability to run balance-of-payments deficits ad infinitum.
Mr. Medvedev called for China, Russia and India to "build an increasingly multi-polar world order." What this means in plain English is: We have reached our limit in subsidizing the United States' military encirclement of Eurasia while also allowing the US to appropriate our exports, companies, stocks and real estate -- in exchange for paper money of questionable long-term worth!
"The artificially maintained unipolar system," Mr. Medvedev says, is based on "one big center of consumption, financed by a growing deficit, and thus growing debts, one formerly strong reserve currency, and one dominant system of assessing assets and risks." At the root of the global financial crisis, he concluded, is simply that the United States manufactures too little and spends too much. Especially upsetting to Russia is U.S. military spending, such as the stepped-up US military aid to Georgia, the NATO missile shield in Eastern Europe and, to all the other BRIC and SCO members as well, the huge US military and commercial buildup in the oil-rich Middle East and Central Asia.
The main worry of all these countries is America's ability to print unlimited amounts of dollars. Overspending by US consumers on imports (way in excess of US exports), US buy-outs of foreign companies and real estate, and the many billions of dollars that the Pentagon spends abroad . . all end up in foreign central banks. These central banks then face a hard choice: either recycle these dollars back to the United States by purchasing US Treasury bills, or to let the "free market" force up their currency relative to the dollar thereby pricing their exports out of world markets and hence creating domestic unemployment and business insolvency.
So, when China and other countries recycle their dollar inflows by buying US Treasury bills to "invest" in the United States, this buildup is not really voluntary. It does not reflect faith in the U.S. economy enriching foreign central banks for their savings, or any calculated investment preference, but simply a lack of alternatives. "Free markets," US-style, has maneuvered many countries into a system that forces them to accept dollars without limit. But now they want out.
Central banks now hold $4 trillion of U.S. bonds in their international reserves and these huge loans to the U.S. have financed most of the US Government's domestic budget deficits for over three decades! Consider that about half of US Government discretionary spending is for military operations including the operation of more than 750 foreign military bases as well as increasingly expensive operations in the oil-producing and oil-transporting countries.
The international financial system is organized in a way that finances the Pentagon, along with US buyouts of foreign assets expected to yield much more than the Treasury bonds that foreign central banks hold. Therefore, the main political issue confronting the world's central banks is this: How to avoid adding yet more dollars to their reserves and thereby financing ever more US deficit spending including military spending on their borders.
For starters, the six SCO countries, plus the BRIC countries, intend to trade in their own currencies so as to get the benefit of mutual credit that the United States until now has monopolized for itself. Toward this end, China has struck bilateral deals with Argentina and Brazil to denominate their trade in renminbi rather than the dollar, sterling or euros, and two weeks ago China reached an agreement with Malaysia to denominate trade between the two countries in renminbi.
China, Russia and other countries would no doubt like to get the same kind of free ride that America has been getting. As matters stand, they see the United States as a lawless nation, financially as well as militarily.
How else to characterize a nation that holds out one set of laws for others on war, debt repayment and treatment of prisoners but ignores those very laws in regard to itself? The United States is now the world's largest debtor, yet has avoided the pain of the "structural adjustments" that it so rigorously imposes on other debtor economies. In view of the austerity programs that Washington forces on other countries via the IMF and other Washington vehicles, US interest-rate and tax reductions (in the face of exploding trade and budget deficits) are seen as the height of hypocrisy.
The United States tells debtor economies to sell off their public utilities and natural resources, raise their interest rates and increase taxes while gutting their social safety nets so as to squeeze out money to pay creditors. And at home, Congress blocked China's CNOOK from buying Unocal on grounds of national security, much as it blocked Dubai from buying US ports and other sovereign wealth funds from buying into key infrastructure. Foreigners are invited to emulate the Japanese purchase of white elephant trophies such as RockefellerCenter, on which investors quickly lost a billion dollars and ended up walking away.
Foreigners see the IMF, World Bank and World Trade Organization as Washington surrogates in a financial system backed by American military bases and aircraft carriers encircling the globe. But this military domination is a vestige of an American empire no longer able to rule by economic strength. On the economic front there is no foreseeable way in which the United States can work off the $4 trillion it owes foreign governments, their central banks and the sovereign wealth funds set up to dispose of the global dollar glut. America has become a deadbeat and indeed, a militarily aggressive one as it unrealistically seeks to hold onto the great power it once earned by economic means.
At present it is foreign savings, not the savings of Americans, that are financing the US budget deficit, by buying most Treasury bonds. The effect is taxation without representation for "foreign voters" no representation with regard to how the US government uses their forced savings. Meanwhile the US national debt continues into the stratosphere. Example: Fannie Mae and Freddie Mac were recently taken over by the US, thereby formally adding their $5.2 trillion in obligations onto our national debt.
So where is all this money coming from that the Fed is spending and therefore adding onto the already frightening national debt?
We are of course borrowing it from the central banks of Japan and China, and from other investors the world over. And, as investors around the world become ever more reluctant to buy our treasury notes -- at the interest rates being offered -- our own Federal Reserve is loaning money to the Treasury Dept by buying those notes (i.e. treasury certificates and bonds). In other words the US government is loaning money to the US government! This boggles the mind of any sane person because what this amounts to is that the US has started to simply create a kind of 'magic' money out of thin air -- which means that the value of the dollar must continue to fall internationally as investors around the world become ever more reluctant to buy US Treasury certificates and bonds -- which means that interest rates will have to rise in order to get people to buy them -- which means that interest rates, generally, will rise (on mortgages, auto loans, business loans etc., which in turn means that businesses will be ever more reluctant (at those high interest rates) to borrow money for new equipment, employees and expansion, which then means ever higher unemployment rates and ever lower wages.
"In 2008 and 2009, 50 separate Federal programs offered $23 trillion in loans, grants, or asset guarantees to the financial sector." This statement was buried in paragraph 11 of 12 paragraphs in a joint statement that California Senator Barbara Boxer and Virginia Senator Jim Webb issued demanding taxing TARP monies executives used to compensate themselves. That's more than 30 times more than the official $700 billion that Congress authorized to bail out the big banks and failed Wall Street financial houses. The $700 billion figure tossed out quickly became etched in financial stone. President Bush, President Obama, Congress, Wall Street and the banking industry, and every financial pundit, duly cited the $700 billion payout as the maximum that taxpayers would be stuck with. Now, almost as an afterthought, Webb and Boxer casually toss out the $23 trillion number. What kind of sleight of hand is going on here?
The agencies that seem to have shoved vastly more money to the banks than widely disclosed, were known as early as April, 2009. In testimony before the House Oversight and Government Reform Committee Tarp's Inspector General listed the agencies and the projected dollar amounts.
Because of all this, foreign nations are starting to see themselves as likely being stuck with largely worthless IOUs under conditions where, if they move to stop the US free lunch, the dollar will plunge and their dollar holdings will fall in value relative to their own domestic currencies and other currencies.
So when Mr. Geithner put on his serious face and told an audience at Peking University in early June that he believed in a "strong dollar" and China's US investments therefore were safe and sound, he was greeted with derisive laughter.
The nations meeting at Yekaterinburg are taking steps to avoid being the unwilling recipients of yet more dollars. Seeing that US global hegemony cannot continue without spending power that they themselves supply, governments are attempting to hasten what Chalmers Johnson called "the sorrows of empire" in his book by that name he's referring of course to the bankruptcy of the US financial-military world order. If China, Russia and their non-aligned allies have their way, the United States will no longer live off the savings of others (in the form of its own recycled dollars) nor have the money for unlimited military expenditures and adventures.
~snip~
US officials wanted to attend the Yekaterinburg meeting as observers. They were told No. it's a word that Americans will hear much more in the future.
China vows to further military ties with Cuba
Chinese and Mexican defense ministers hold talks on military cooperation
Panama, Venezuela, Brazil...
China Has Basically Purchased Its Own Latin American Country
Jun. 25, 2010, 8:03 AM | 11,209 | comment 38
China now finances a majority of the public energy projects underway in Ecuador. Recent deals include an 85% stake in a hydroelectric dam that will cover a third of the country's energy needs by 2016. Chinese firms will also take charge of most construction.
Advances in China – Latin America Space Cooperation
Brazil ready to retaliate for US move in ‘currency war’
By John Paul Rathbone in London and Jonathan Wheatley in São Paulo
Published: November 4 2010 18:28 | Last updated: November 4 2010 18:28
Brazil, the country that fired the gun on the so-called “currency wars”, is girding itself for further battle.
Brazilian officials from the president down have slammed the Federal Reserve’s decision to depress US interest rates by buying billions of dollars of government bonds, warning that it could lead to retaliatory measures
BRICS Plan to Challenge U.S. Dollar
By PATRICK SMITH, The Fiscal Times April 20, 2011
New eras do not announce themselves with billboards or welcoming brochures. They arrive by way of many disparate events. Last week we witnessed one: the gathering in southern China of leaders from the world’s most dynamic emerging economies --the nations we now call the BRICS (Brazil, Russia, India, China, and South Africa). The summit in Hainan most persuasively is a determination to use the BRICS' global clout to take some of the intellectual initiative away from the advanced industrial nations.
There is a long history behind such ambitions, beginning with the Non–Aligned Movement in the mid–1950s. More recently, after the Asian financial crisis in the late–1990s, the region was alive with ideas intended to make room for an alternative to the neoliberal economic strategy the West was urging: an Asian monetary fund, a regional central bank, bilateral currency swaps, an “Asian Davos.”
Some of these concepts have taken root, notably swap agreements intended to protect local currencies from a sudden rush (or departure) of speculators. There are now half a dozen of these pacts in effect around East Asia.
As a circle of power such as the European Union, the BRICS bloc is a work in progress, to be sure. But their summit was a loud, clanging bell telling the rest of the planet that their increasing sway in global affairs is not to be underestimated.
BRICs’ move to unseat US dollar as trade currency
2012-03-25
Thandeka Gqubule and Andile Ntingi
South Africa will this week take some initial steps to unseat the US dollar as the preferred worldwide currency for trade and investment in emerging economies.
Thus, the nation is expected to become party to endorsing the Chinese currency, the renminbi, as the currency of trade in emerging markets.
This means getting a renminbi-denominated bank account, in addition to a dollar account, could be an advantage for African businesses that seek to do business in the emerging markets.
The move is set to challenge the supremacy of the US dollar. This, experts say, is the latest salvo in the greatest worldwide currency war since the 1930s.
In the 30s, several nations competitively devalued their currencies to give their domestic economies an advantage over others.
And this led to a worldwide decline in overall trade volumes at the time.
The north will be pitted against the entire south in a historic competitive currency battle – whose terrain has moved to the Indian capital New Dehli – where the Brics (Brazil, Russia, India China and South Africa) nations will assemble next week.
China seeks to find new markets for its currency and to lobby to internationalise it throughout the Brics states.
For China this is not a new game. In 2009, senior Chinese banking officials issued a statement that the international monetary system was flawed owing to an unhealthy dependence on the US dollar and called for a “super-sovereign” international reserve currency.
Experts say Beijing’s first step is to internationalise its currency (by expanding its reach beyond China), liberalise it (to allow its value to be determined by the market instead of actively managing it as they currently do) and then make it a reserve currency for many nations in the developing world.
Africa’s largest bank, Standard Bank, says in a research document: “We expect at least $100 billion (about R768 billion) in Sino-African trade – more than the total bilateral trade between China and Africa in 2010 – to be settled in the renminbi by 2015.”
The bank anticipates that the use of the renminbi will lower transaction costs in Africa, thus lowering the barriers to doing business.
It also says that the Chinese will be more successful in transacting in renminbi in Africa than anywhere else because most currencies are weak and somewhat localised.
Not only will the US dollar be challenged, but also the entire international financial regime – led by the World Bank and the International Monetary Fund – which has been dominant since the end of World War II.
South Africa’s place in the emerging international financial regime is set to be enhanced.
Zou Lixing, vice-president of the Institute of Research of the China Development Bank, told the Brics preparatory meeting recently that “although the economic aggregate of South Africa is small relative to the Brics, South Africa provides a gate for the Brics to get access to the huge African market”.
The five-member nations have collectively called for an end to the tacit agreement between the US and Europe that ensures that the head of the World Bank is an American citizen, and the International Monetary Fund head is European.
They have proposed that an emerging market candidate be fielded when the term of the current World Bank head, Robert Zoellick, expires in three months.
Fundacao Vargas, a member of the Brazilian delegation, said Brics could confront “existing governance structures”, and seek to strengthen the blocs’ influence in established institutions like the World Bank and the International Monetary Fund, while creating alternatives.
The demand for greater political say in international affairs dovetails with China’s expected rise as a financial superpower in the next eight years.
Vargas showed the preparatory meeting projections indicating that China’s economy will have eclipsed that of the US by 2020, hence the promotion of the renminbi as the preferred currency of the south.
The renminbi has traditionally traded at a deliberately lower exchange rate, which gave a huge boost to China’s domestic economic sectors and enabled its booming industrialisation and growth.
The US and other trading partners have long accused China of being a “currency manipulator”.
Last week, Brazil declared its commitment to keep its own currency – the real – low. Its finance minister, Guido Mantega, reiterated his November 2010 declaration that a global currency war has broken out.
He said: “We do not want to lose our manufacturing sector.
We will not sit back and watch while other countries devalue their currencies.”
Brazil and China cried foul last year when, through a slew of initiatives dubbed QE2 – Quantitative Easing Two – the US indirectly devalued its currency by pumping about $600 billion into its economy to protect the economy from sliding back into recession.
South African economists were in two minds about the moves to extend the influence of the renminbi.
Economist and academic Peter Draper told City Press recently that the decision to establish a Brics development bank and to enlarge the renminbi's sphere “is political and related to the current political dynamics within the World Bank” and the established international financial system.
Tom Wheeler of the South African Institute of International Affairs said developments in New Delhi (India) were “giving substance to the previously (and) loosely arranged economic block”.
The USD Trap Is Closing: Dollar Exclusion Zone Crosses The Pacific As Brazil Signs China Currency Swap
Submitted by Tyler Durden on 06/22/2012 08:23 -0400
When the US Dollar is ultimately dethroned as the world's reserve currency (and finally gets rid of all those ridiculous three letter post-Keynesian economic "theories") nobody will have seen it coming. Well, nobody except for the following headlines: ""World's Second (China) And Third Largest (Japan) Economies To Bypass Dollar, Engage In Direct Currency Trade", "China, Russia Drop Dollar In Bilateral Trade", "China And Iran To Bypass Dollar, Plan Oil Barter System", "India and Japan sign new $15bn currency swap agreement", "Iran, Russia Replace Dollar With Rial, Ruble in Trade, Fars Says", "India Joins Asian Dollar Exclusion Zone, Will Transact With Iran In Rupees."
And while the expansion of the "dollar exclusion zone" was actually quite glaring to anyone who dared to look, one thing was obvious: it was confined to Asia. No more courtesy of the following FT headline: "Brazil and China agree currency swap."
More: "Brazil has provided a vote of confidence in China’s efforts to promote the renminbi as a reserve currency by becoming the biggest economy yet to agree a swap deal with Beijing.
US Economy: Inflation Raging - As are the People
Written by Peter Kent Friday, 22 April 2011 13:50
As gas prices go over the $4 mark and consumers are shocked at the new prices of food and other essential items as inflation continues to rage; tensions and tempers of the people have also begun to rise in the United States as the mood of the country has fallen to Jimmy Carter type levels from the late 1970’s. There seems to be no end in sight for the US economy and especially relief at the pump as the traditional summer driving season is set to commence.
Many families are being forced to make difficult choices about whether or not to cut summer vacations, cut piano lessons or sports for their children and address other quality of life issues as the misery is spreading like wild fire. The Obama Administration has continued to print money to the point where many US economists and leaders fear the dollar will become as worthless as the paper it was printed on. The dollar has fallen to a 2.5-year low which is right around the time that Barrack Obama took office as President.
China's alliance strategy aims to contain U.S.
Beijing to press for wide-ranging ties with NATO members
WASHINGTON – China is considering a change in its historical policy of avoiding alliances and is looking to establish military and strategic ties with other countries in an effort to counter U.S. military influence worldwide, according to a report in Joseph Farah’s G2 Bulletin.
Chinese strategists suggested the move in a conference sponsored by China’s National Security Policy Commission, which is led by senior military officers who are virulently anti-American.
Already, recent Chinese strategic decisions have indicated a new policy already is under way.
“History of the world tells us that, whether it’s in political, economic or military arenas, Western nations, without any exception, always resorted to alliances,” said one Chinese security analyst.
“China must change its non-alliance policy,” he said. “We must consider forming alliances. Otherwise, in a future war with the U.S., we will not be able to politically or militarily counter America’s global alliance network just by ourselves.
Flaherty Says Russia, China May Buy Canada Dollars
By Theophilos Argitis and Christopher Fournier
Dec. 23 (Bloomberg) -- Canada’s Finance Minister Jim Flaherty said China, with the world’s largest currency reserves of $2.3 trillion, may be poised to buy Canadian dollars as it seeks to shield its reserves against the U.S. dollar’s decline.
“It does not surprise me that China and Russia would take greater positions in the Canadian dollar than they have previously,” Flaherty, 59, said during an interview in his office in Ottawa. “I would expect countries looking around the world to invest in market currencies that are reliable.”
Canada Hints Russia, China to Shun U.S. Dollar
Wednesday, 23 Dec 2009 12:17 PM
Article Font Size
By: Dan Weil
Russian and Chinese officials have been warning for months that they plan to diversify away from the U.S. dollar.
And Canadian Finance Minister Jim Flaherty says his country may be a beneficiary.
“It does not surprise me that China and Russia would take greater positions in the Canadian dollar than they have previously,” Flaherty told Bloomberg.
“I would expect countries looking around the world to invest in market currencies that are reliable.”
The Canadian dollar has jumped 15 percent against its U.S. counterpart this year.
Russia diversifies into Canadian dollars
By Peter Garnham
FT.com
Published: January 20 2010 16:46 | Last updated: January 20 2010 16:46
Russia’s central bank announced on Wednesday that it had started buying Canadian dollars and securities in a bid to diversify its foreign exchange reserves.
Analysts said the move could be a sign of increased diversification of emerging market central bank assets away from the dollar and into investments denominated in other commodity-linked currencies, such as the Australian dollar.
Adam Cole at RBC Capital Markets said if taken in isolation, Russia’s announcement that it was buying Canadian dollars was not significant, but if it was part of a broader trend, then it was an important step.
“If it is a barometer for the activity of other central banks, then its is structurally positive for the currencies of countries like Canada and Australia that have a commodity bias in their economies,” he said.
Although not officially confirmed, traders said that other emerging market central banks, including some in Asia which hold large foreign exchange reserves, have also been active in the foreign exchange market in recent weeks buying both Canadian dollars and Australian dollars.
Alexei Ulyukayev, first deputy chairman of Russia’s central bank, said that it would invest in Canadian dollar-denominated deposits and bonds.
“The Canadian financial market is not very deep, so we can invest in deposits in significant volumes, while the bond market is limited,” he said.
Will Canada follow the U.S. into China's seas?
By Brian Stewart, special to CBC News
Posted: May 17, 2012 7:16 PM ET
Last Updated: May 18, 2012 10:03 AM ET
Read 138 comments
China's defence spending, the second highest after the U.S., is set to rise 11 per cent in 2012 to $106 billion, according to recent reports. (Reuters)
This summer, the largest international naval exercise in the world will see Canada's navy take on the second-largest role and Canadian officers share key commands — a remarkable prominence that Ottawa seems uncharacteristically reluctant to boast about.
~snip~
But in the world of military alliances, actions always speak far louder than words.
China Doubles Korea Bond Holdings as Asia Switches From Dollar
By Frances Yoon - Aug 18, 2010 12:57 AM CT
Play Video
Aug. 17 (Bloomberg) -- Kenneth Lieberthal, a senior fellow at the Brookings Institute, a Washington policy group, talks about the outlook for China's economy and the mainland's holdings of U.S. Treasuries. China cut its holdings of Treasury notes and bonds by the most ever, raising speculation the plunge in U.S. yields that sent two-year rates to a record low has made government securities too expensive for some investors. Lieberthal talks with Bloomberg's Rishaad Salamat from Washington. (Source: Bloomberg)
China more than doubled South Korean debt holdings this year, spurring the notes’ longest rally in more than three years, as policy makers shifted part of the world’s largest foreign-exchange reserves out of dollars.
China, Japan, S. Korea agree to consider settling trade in their own currencies
05-05-2011 10:23 BJT
Finance ministers from China, Japan and South Korea have agreed to consider settling trade in their own currencies. It was just one outcome from the trilateral ministers forum, on the sidelines of the Asian Development Bank's annual meeting in Hanoi.
A statement from the Finance ministers said China, Japan and South Korea have agreed to study the use of their own currencies in trade settlement. Analysts say if the three countries start to settle trade with their own currencies, that will reduce dependence on the US dollar.
The statement from the ministers also says the three countries are mindful of challenges, like growing inflationary pressures in Asia, rising global commodity prices and increasingly volatile capital flows into the region.
Finance ministers from China, Japan and South Korea have agreed to
consider settling trade in their own currencies.
The three Asian giants will continue to implement appropriate macro-economic policies and strengthen policy cooperation to achieve strong, sustainable and balanced economic growth in the three countries.
The three parties also agreed to investigate regional infrastructure financing and disaster risk insurance.
Related stories
- ADB meeting to address inflation 2011-05-04
- ADB annual meeting in Hanoi to focus on inflation control 2011-05-02
- China, Japan S Korea hold Economic, Trade Ministers' Meeting 2011-04-24
Japan's young turn to Communist Party as they decide capitalism has let them down
With its gleaming designer stores, the world's second largest economy and an insatiable appetite for luxury labels, Japan has long been regarded as the land of the rising capitalist.
By Danielle Demetriou in Tokyo
Last Updated: 9:19AM BST 18 Oct 2008
But a wave of discontent among its younger workers is fuelling a change in the nation's political landscape: communism is suddenly back in fashion.
What many young Japanese view as an erosion of their economic security and employment rights, combined with years of political stagnation, are propelling droves of them into the arms of the Japanese Communist Party (JCP), the nation's fourth largest political party.
New recruits are signing up at the rate of 1,000 a month, swelling its ranks to more than 415,000. Meanwhile a classic proletarian novel is at the top of the best-seller lists, and communist-themed "manga" comics are enjoying soaring success...
China, Japan launch world's biggest online marketplace
by Staff Writers
Tokyo (AFP) June 1, 2010
The combined number of users on the new service is expected to eclipse the 90 million active users at US online marketplace eBay, which last year sold goods valued at 60 billion dollars.
China's largest retail website Taobao and Yahoo Japan launched a joint service Tuesday in a deal expected to create the world's biggest online marketplace by harnessing Asia's surging ranks of e-consumers. The service is expected to dwarf US rival eBay in terms of users and products on offer, attracting 250 million customers and offering 450 million products.
"This marks the birth of the world's largest e-commerce market," Masayoshi Son, chairman of Yahoo! Japan and CEO of mobile phone carrier Softbank, told a packed hall in a Tokyo hotel.
Japan's Disaster Brings Sino-Japanese Relations Closer
March 22, 2011
At times succour in adversity can open up fresh avenues to normalize strained relations between two countries locked in distrust and enmity. This seems to be happening between China and Japan in the wake of disaster that befell Japan recently.
Chinese, Japanese leaders unveil deals on bond sales, currency to tighten finance ties
By Joe McDonald, The Associated Press | December 26, 2011
BEIJING, China - Chinese and Japanese leaders have unveiled initiatives to tighten financial links between East Asia's economic giants and sometime rivals — measures that could expand use of China's tightly controlled currency abroad.
During a visit to Beijing by Japanese Prime Minister Yoshihiko Noda, the two governments said in a surprise announcement Sunday they will encourage use of their own currencies in bilateral trade, which now is conducted mostly in U.S. dollars.
They also agreed to support the sale of bonds denominated in China's yuan by Japanese companies in Tokyo and foreign markets and by the state-owned Japan Bank of International Cooperation in mainland China's markets, which are closed to most foreign investors.
The pledges were a striking step for China and Japan, which are the world's second- and third-largest economies and are bound by billions of dollars in trade but whose political relations often are strained over conflicting territorial claims and other disputes.
"To support the growing economic and financial ties between China and Japan, the leaders of China and Japan have agreed to enhance mutual co-operation in financial markets of both countries and encourage financial transactions between the two countries," the governments said in identically worded statements.
Monday, Dec. 26, 2011
Japan to start purchasing Chinese government bonds
Kyodo
BEIJING — Prime Minister Yoshihiko Noda and Chinese Premier Wen Jiabao agreed Sunday to step up cooperation in international finance, with Japan to begin purchases of Chinese government bonds and both to encourage the use of their own currencies instead of the dollar when settling bilateral trades, officials said.
The two leaders also decided during their talks in Beijing to set up a working group composed of officials from both countries to discuss private-sector requests on deregulation and other issues.
Chinese authorities control capital inflows and allow only designated countries to purchase limited amounts of their government bonds. Japan is now expected to join that process.
Yen-Yuan Trade Plan to Cut Dollar Dependence of China, Japan
December 26, 2011, 10:06 AM EST
By Toru Fujioka
(Adds Chinese foreign ministry comment in 7th paragraph.)
Dec. 26 (Bloomberg) -- Japan and China will promote direct trading of the yen and yuan without using dollars and will encourage the development of a market for companies involved in the exchanges, the Japanese government said.
Japan will also apply to buy Chinese bonds next year, allowing the investment of renminbi that leaves China during the transactions, the Japanese government said in a statement after a meeting between Prime Minister Yoshihiko Noda and Chinese Premier Wen Jiabao in Beijing yesterday. Encouraging direct yen- yuan settlement should reduce currency risks and trading costs, the Japanese and Chinese governments said.
Japan, China to launch direct yen-yuan trade on June 1
Mon May 28, 2012 8:41pm EDT
* Move aimed at facilitating trade, financial transactions
* Deal is part of agreement at bilateral summit in December
By Tetsushi Kajimoto
TOKYO, May 29 (Reuters) - Japan and China will launch direct yen-yuan trade in the Tokyo and Shanghai markets from June 1 to facilitate trade and financial transactions between Asia's two biggest economies, Japanese Finance Minister Jun Azumi said on Tuesday.
The step follows an agreement between the leaders of the two countries in December to promote direct trading of their currencies without the interim step of using dollars to set exchange rates.
"By conducting transactions without using the third country's currency, it will bring merits of reducing transaction costs and lowering risks involved in settlements at financial institutions," Azumi told reporters after a cabinet meeting.
"That will contribute to improve convenience of the both countries' currencies and reinvigorate the Tokyo market," he said.
China And Japan Currency Swap: Nail In US Dollar’s Coffin
Written by: Pambazuka New
January 27, 2012
By Horace Campbell
On 25 December 2011, the government of Peoples Republic of China and Japan unveiled plans to promote direct exchange of their currencies. This agreement will allow firms to convert the Chinese and Japanese currencies directly into each other, thus negating the need to buy dollars. This deal between China and Japan followed agreements between China and numerous countries to trade outside the sphere of the US dollar. A few weeks earlier, China also announced a 70 billion Yuan ($11 billion) currency swap agreement with Thailand.
After visiting China, the Prime Minister of Japan Yoshihiko Noda went on to India and signed another currency swap agreement with the government of India. These currency agreements in Asia came in a year when the countries of the Association of South East Asian Nations (ASEAN) (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam) were seeking to deepen ways to strengthen their firewall to protect their economies from the continued devaluation of the US dollar. In the year of the ‘Eurozone crisis’ when the future of the EURO as a viable currency was fraught with uncertainty, many states were reconsidering holding their reserves in the US dollar.
Moreover, in the face of the neo-liberal orthodoxy of the Bretton Woods institutions (especially the IMF) swap agreements were proliferating in all parts of the globe. The Latin Americans established the Bank of the South and are slowly laying the groundwork for a new currency, the SUCRE. As in Asia, the Bank of the South will be one of the fundamental institutions of the Union of South American Nations that has been launched in Latin America in order to guarantee the independence of the societies of Latin America. Not to be left as the only region holding dollars, the leaders of the oil rich states of the Gulf Cooperation Council have been buying gold while announcing as long ago as 2009 the intention to establish a monetary union with a common currency. In Africa there are plans for the strengthening of the financial basis of the African Union but so far there has not been the same kind coordinated regional plans for financial independence. During the period of the debate on the debt crisis in the USA, the Nigerian central bank governor Lamido Sanusi announced that Nigeria plans to invest 5 to 10 percent of its foreign exchange reserves in the Chinese currency – the Yuan also known as the renminbi (RMB).
These accelerated Swap agreements – (agreements between two or several countries (bilateral vs. multilateral) on exchanging currencies in times of crisis) – came a decade after the countries of ASEAN established the Chiang Mai Initiative (CMI). In the aftermath of the Asian economic crash and the currency attack by speculators of the financial services industry, the CMI had been established to promote financial cooperation among the ASEAN countries with regional collaboration on currency issues high on the agenda. Initially when the CMI was launched, the government of China had been lukewarm to the goals of the CMI but over decade, especially after the 2007-2008 Wall Street crash, the preliminary partnership that was called ASEAN plus three (Viz ASEAN countries plus China, Japan and Korea) matured to the point where the ASEAN Swap Agreements have now been expanded to the Chiang Mai Initiative Multilateralization (CMIM) agreement, and a set of rules with structured mechanisms for financial regionalism to work for the development of Asian bond markets. These three pillars of the new Asian economic cooperation – CMIM, Asian Bond Markets and bilateral swap agreements – mark a new stage in the international political order.
This week we will examine the implications of the Chinese/ Japan currency swap in the context of the internal discussions in China about the consolidation of socialism. In 2011, China overtook Japan as the second largest economy in the world, and every expansion increases internal and external pressures on the socialist goals of the People’s Republic of China. More importantly, it is crucial to recollect the competitive devaluations and currency wars of the last depression so that the decline of the dollar can be managed in a way that avoids the recourse to open confrontation of the last depression. It is worth remembering that one of the goals of the fascists in the last depression was to roll back socialism.
In our contribution this week we will examine the implications of the swap agreement between China and Japan and the pressures on other regions to delink from the dollar. The conclusion will argue that this swap is one more nail in the coffin of the dollar as the international reserve currency.
‘CHINA, JAPAN TO BACK DIRECT TRADE OF CURRENCIES’
This was the headline in the financial press as Bloomberg News and other news sheets of the financial world reported the agreement on settling trade between the two countries in Yen and RMB instead of dollar. With US $340 Billion of transactions in 2010 between the two countries, both being each other’s biggest trading partner, the deal is a clear break away from US financial domination. This Bloomberg Report stated, ‘Japan and China will promote direct trading of the Yen and Yuan without using dollars and will encourage the development of a market for companies involved in the exchanges, the Japanese government said.
Japan will also apply to buy Chinese bonds next year, allowing the investment of renminbi that leaves China during the transactions, the Japanese government said in a statement after a meeting between Prime Minister Yoshihiko Noda and Chinese Premier Wen Jiabao in Beijing yesterday. Encouraging direct Yen- Yuan settlement should reduce currency risks and trading costs, the Japanese and Chinese governments said. China is Japan’s biggest trading partner with 26.5 trillion Yen ($340 billion) in two-way transactions last year, from 9.2 trillion Yen a decade earlier.
The pacts between the world’s second- and third-largest economies mirror attempts by fund managers to diversify as the two-year-old European debt crisis keeps global financial markets volatile.
‘Given the huge size of the trade volume between Asia’s two biggest economies, this agreement is much more significant than any other pacts China has signed with other nations.’
Less than two weeks later, in the first week of January 2012, the President of South Korea Lee Myung-bak travelled to China to discuss a ‘bilateral strategic partnership.’ This discussion on bilateral partnership between South Korea and China took place in a context where the Republic of South Korea did not want to be left behind. Ostensibly the visit to China was to discuss the recent passing of Kim Jung IL of North Korea but Chinese media reported that China, Japan and South Korea were hammering out the basic framework for a free trade agreement between the three biggest economies in East Asia.
These agreements will have implications for the dollar as the global reserve currency and there will be increased pressures for the Chinese currency to be internationalized as other societies follow the lead of Japan and seek swap agreements outside of the dollar.
SLOW EROSION OF THE POWER OF THE DOLLAR AND MANAGING THIS NEW MULTIPOLAR CURRENCY ENVIRONMENT
Japan is one of closest allies of the United States. There are thousands of US troops stationed in Japan, but the Japanese, like all peoples of the world, have been losing money as the US dollar was devalued over the past three years. This devaluation has taken the form of what the US authorities called quantitative easing. There has been two such quantitative easings since the 2009 as the United States unloaded more fiat currency on the world. Whatever the name (devaluations or quantitative easing) all countries in the world were thinking of finding ways to escape being hostages to the US dollar and Central Bank governors from Brazil to India and beyond are working to protect their societies from these devaluations. Asian central banks together hold some $3,3 Trillion in reserves, amounting to an impressive 46 percent of the world’s total national reserves. The government of China has vowed to reduce its holding of US dollars and in 2011. The China Daily newspaper reported that, ‘According to data from the US Treasury Department, China’s holdings of US Treasury bonds stood at $1.1326 trillion by the end of November 2011, $1.5 billion down from the previous month. It was the second successive month that the amount had declined, and the lowest reserve level seen since July 2010. China made six monthly cuts of US debt in 2011, the department’s data showed, trimming its holdings by $27.5 billion from the end of 2010. Yet despite the reductions, China remains the top buyer of US Treasury securities.”
What was left unsaid was the plan of the political leadership of China for a deft management of the reductions so that the international political economy is not drastically affected leading to unforeseen circumstances.
Over the past decade numerous officials from the National People’s Congress, the Central Bank and the commercial sectors have been stating that China has to reduce its holdings of US bonds and diversify into other currencies. When, over five years ago, Parliamentary vice-chairman Cheng Siwei, called for the diversification of Chinese reserves away from US bonds, the implicit assumption was that China would diversify and buy European bonds. This was before the full hollowness of the European project became manifest to the world.
PRESSURES TO INTERNATIONALIZE CHINESE CURRENCY
The Chinese economy has registered an average of over 10 per cent growth in the past thirty years. This has been the most successful transformation of an economy in the recorded history of political economy, but the pundits do not like to point to the socialist foundations of China and the sacrifices made by the Chinese people to transform their society. Mao Zedong called the currency of China, the Renminbi, and the people’s currency. Renminbi is the official name of the currency introduced by the Communist People’s Republic of China at the time of its foundation in 1949. The other name for the currency is the Yuan. Hence the Chinese currency is known by a number of names (including the Kuai).
As a low wage economy, the hard work of the Chinese producers has made the society a force to be reckoned with and the currency attractive to other countries seeking a refuge from the dollar. The political leaders in China have been careful about the pace and nature of the internationalization of the currency. The leaders have slowly allowed Hong Kong to become an offshore renminbi financial centre by allowing authorized institutions in Hong Kong to offer renminbi services such as deposit taking, currency exchange, remittance and trading in RMB denominated bonds. Since 2009 when the Chinese government opened this slight door to the internationalization of its currency, other financial centres such as Macau and Singapore have been hoping to get into the offshore RMB business.
These regional pressures for the internationalization of the RMB came up against the hard reality that for the full internationalization of the currency, for the RMB to become a global currency, the government of China would have to establish capital markets and ensure the full convertibility of capital account. The balance of forces within China would then shift in favour of the one per cent who would then privatise state assets at a faster rate. In the present international system, opening such capital markets beyond the tightly controlled stock exchanges would open up the Chinese currency to the kind of full scale attack and speculation that was witnessed in the Asian financial crisis in 1997. Thus far the Chinese state has held the line against the expansion of capital markets in ways that would undermine the stability of the society.
The economy of China is a mixed economy with the state-owned enterprises dominating the economy. Of the ten largest companies on the Shanghai Stock Exchange, eight are state owned. With the growth and power of the Chinese economy, the Chinese capitalists have expanded with a large number of billionaires. These billionaires do not control political power and the Chinese state continues to subsidise food, education and transportation services. There are many limitations to the nature of the Chinese political system, especially the hothouse of growth and accumulation that is creating a fundamental environmental hazard for the majority of the citizens. The growing inequalities and the massive push for the reversal of socialist gains since 1949 are now compounded by an alliance between capitalists in Singapore and the US who are calling for speeding the internationalisation of the RMB.
It is in this context where the December 25 agreement to allow Japan to ‘apply to buy Chinese bonds next year’ becomes significant. It is again worth quoting the press reports of the December 25 agreement. According to the British Broadcasting Corporation, ‘The two leaders also agreed to allow the Japan Bank for International Cooperation to issue Yuan-denominated bonds in China, the first time a foreign government body has been allowed to do so. At the same time Japan said it was also looking to buy Chinese government bonds, a move that analysts believe may prove to be mutually beneficial to both nations. ‘By adopting Chinese bonds as a part of official foreign exchange reserves, Japan is labelling Chinese bonds as an investable asset,’ according to Takuji Okubo of Societe Generale Tokyo.
‘This should encourage Japanese private investment into Chinese bonds, as well as into other Asian emerging currencies. Such a development in turn should help develop offshore currency trading in Japan.’
This new collaboration between China and Japan has been underlined by the Japanese Foreign Minister Koichiro Gemba who on Tuesday said that ‘Japan will seek to take a less inward-looking stance when it comes to diplomacy in the Asia-Pacific region.’ In the words of the China daily newspaper the Foreign Minister said that, ‘Japan will look to enhance diplomatic ties with China based on mutually beneficial goals. With China, this year marks the 40th anniversary of normalizing diplomatic ties, we will aim to deepen the mutually beneficial relationship based on common strategic interests,’ Gemba said in his first foreign policy speech in parliament.
He went on to say that Japan plans to proactively make ‘concrete efforts’ to strengthen its ties with China and establish more ‘open and multilayered networks’ in the best interests of both countries.
Ever alert to these shifts in the global currency and financial markets, the British Chancellor of the Exchequer, George Osborne, travelled to Hong Kong in January and offered London as the western base for the coming internationalization of the RMB. Osborne was vociferously making a plea to make London the leading centre for trading the Chinese currency. This conservative Chancellor was exposing the opportunism of the British and demonstrating the short memory of the British hoping that the Chinese have forgotten the Opium Wars.
UNITED STATES SENATE CURRENCY BILL
While the British were declaring their willingness to embrace the RMB, the US Senate has gone about increasing the war of words against China. In the failure to compete in the so-called ‘marketplace,’ sections of the US political leadership have for years been complaining that China should allow open markets for its currency and for its currency to appreciate more rapidly. There are two sections of the US political establishment pushing against the Chinese currency. The first are those allied to Wall Street and the currency speculators who want to be able to trade in the Chinese currency and to do to China what was done to Malaysia, Taiwan, Thailand and other Asian economies in 1997. The second pressure is coming from those sections of capital who complain that China is flooding US markets.
While these two sections do not agree they support the information war against China, this information war carries the refrain that the renminbi is undervalued by 25-30 percent against the dollar, which means Chinese exports to the US become 25-30 percent cheaper, while US goods exported to China are more expensive.
Even though China has allowed its currency to appreciate a little in the last two years, the two sections of capital in the US hostile to China have said that this is not enough. In October 2011 the US Senate passed S.1619, the Currency Exchange Rate Oversight Act of 2011, and a bill to address China’s ongoing currency manipulation, by a vote of 63-35.
One year earlier one commentator for Time Magazine had noted correctly that the real challenge for the United States was to change its consumption patterns.
‘We’ve seen this movie before. From July 2005 to July 2008, under pressure from the US government, Beijing allowed its currency to rise against the dollar by 21 percent. Despite that hefty increase, China’s exports to the US continued to grow mightily. Of course, once the recession hit, China’s exports slowed, but not as much as those of countries that had not let their currencies rise. So even with relatively pricier goods, China did better than other exporting nations.
Look elsewhere in the past and you come to the same conclusion. In 1985 the US browbeat Japan at the Plaza Accord meetings into letting the yen rise. But the subsequent 50 percent increase did little to make American goods more competitive. Yale University’s Stephen Roach points out that since 2002, the US dollar has fallen in value by 23 percent against all our trading partners, and yet American exports are not booming. The US imports more than it exports from 90 countries around the world. Is this because of currency manipulation by those countries, or is it more likely a result of fundamental choices we have made as a country to favor consumption over investment and manufacturing?’
TRANSITIONS: END OF DOLLAR HEGEMONY AND THE NEW INTERNATIONAL FINANCIAL ARCHITECTURE
This commentary on the need for the US to transform its economy and live within its means fell short of outlining a more fundamental problem, that of the military management of the international system and the outmoded imperial impulses that stem from the kind of militarism that now reflect US society. While the Japanese and the Chinese were deepening economic relations, the US political leaders were intensifying its bellicose rhetoric about Chinese military buildup in the South China Sea and pushing forward the idea of a Trans-Pacific Partnership (TPP) Agreement. Japan was being wooed to become a key anchor of the US dominated TPP.
The China/Japan currency swap was a bold move on the part of these two economic giants in Asia. There are historic difference between the Chinese and Japanese, especially the experiences of the 1930’s Japanese occupation of China and the Rape of Nanking. Notwithstanding these historic differences the US debt of over US $ 14 trillion along with the inability of the US political leaders to effectively tackle the growing debt has awoken many that the US dollar as the international reserve currency is on its last legs.
In May 2009, Nouriel Roubini in a contribution to the New York Times on the Almighty Renmimbi summed up the decline of the dollar in this way,
‘This decline of the dollar might take more than a decade, but it could happen even sooner if the US did not get its financial house in order. If China and other countries were to diversify their reserve holdings away from the dollar — and they eventually will — the United States would suffer. It would take a long time for the renminbi to become a reserve currency, but it could happen. The resulting downfall of the dollar may be only a matter of time.’
Nouriel Roubini was writing this warning to alert the US rulers to shift gears because of the rise of China. He called for a strategy of investments to recover the US economy declaring, ‘Now that the dollar’s position is no longer so secure, we need to shift our priorities. This will entail investing in our crumbling infrastructure, alternative and renewable resources and productive human capital — rather than in unnecessary housing and toxic financial innovation. This will be the only way to slow down the decline of the dollar, and sustain our influence in global affairs.’
China and Japan have taken a decisive step to diversify their reserve holdings away from the dollar. What is more fundamental is the new rush by other states to join in this new regional currency arrangement. Republic of South Korea is knocking to become central to this swap arrangement while other members of ASEAN are watching these developments carefully.
The Eurozone crisis has narrowed the ability of the US to respond negatively to the China/Japan currency swap. Importantly, the capitalist crisis in Europe has stiffened the spine of those elements of the Chinese society who proclaim that the principal task of China is to bail out its own people and transform the economy to benefit the 1.3 billion citizens.
These left forces in China are calling for the consolidation of socialism and for vigilance to halt the power of those who are calling for a speedy internationalization of the RMB. These social elements understand the realities behind the call for opening capital markets in China.
It is the left and the progressive forces in China who agree with Mao that the RMB is the people’s currency and that the most important currency is the Chinese people. It is not usual for this writer to quote from Time magazine, but in the arguments of Fareed Zakaria on the question of overvalued currency, this author would concur, ‘The Real Challenge from China: Its People, Not Its Currency.’
‘China is beginning a move up the value chain into industries and jobs that were until recently considered the prerogative of the Western world. This is the real China challenge. It is not being produced by Beijing’s currency manipulation or hidden subsidies but by strategic investment and hard work. The best and most effective response to it is not threats and tariffs but deep, structural reforms and major new investments to make the U.S. economy dynamic and its workers competitive.’
And Zakaria might have added that the US cannot be competitive as long as it imprisons the best of the young people of colour in the prison industrial complex.
The lessons learnt from the last capitalist depression are that competitive devaluations, trade wars, currency disputes and new alliances sow the seeds of hostilities and provide the climate for incidents.
Incidents then spin out of control beyond diplomacy. The contagion from the capitalist crisis will spread and the forces of socialist transformation will have to be even more alert and vigilant to balance the formation of a regional currency block while supporting the creation of the multipolar world to end the era of dollar and pound/sterling hegemony. Those regions of the world that have not awoken to the slow demise of the dollar need to pay closer attention. Planned diversification away from the dollar is preferable to rushed monetary unions. The African peoples have a lot of lessons to learn from both the capitalist crisis in Europe and the new financial arrangements between China and Japan.
China signs $31bn currency exchange deal with Australia
Beijing has given indications that it is willing to loosen its grip slightly on the yuan
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China and Australia have signed a currency swap agreement in a bid to promote bilateral trade and investment.
It will allow for the exchange of local currencies between their central banks, worth up to 30bn Australian dollars ($31bn; £20bn) over three years.
The deal is expected to reduce cost for businesses, as they will be able to settle trade terms in local currency.
It is the latest in a series of similar deals signed by Beijing as it seeks a more global role for the yuan.
"The main purposes of the swap agreement are to support trade and investment between Australia and China, particularly in local-currency terms," the Reserve Bank of Australia said in a statement.
Chinese PLA Official to Australia: Choose between us or America
Philip Wen, Beijing
May 16, 2012
AUSTRALIA cannot juggle its relationships with the United States and China indefinitely and must choose a ''godfather'' to protect it, according to a prominent Chinese defence strategist.
The warning by Song Xiaojun, a former senior officer of the People's Liberation Army, comes after Foreign Minister Bob Carr was told by his Chinese counterpart that Australia's close military alliance with the US was a throwback to the Cold War era.
Senator Carr yesterday met the man expected to become China's next premier, Li Keqiang, in Beijing. Discussions centred on more comfortable matters including furthering trade and investment and the 40th anniversary of diplomatic relations between the two nations.
But Australia's strategic position in the Asia-Pacific region remains contentious. "Australia has to find a godfather sooner or later," Mr Song told The Age.
"Australia always has to depend on somebody else, whether it is to be the 'son' of the US or 'son' of China," he said. "[It] depends on who is more powerful, and based on the strategic environment."
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Nikita Khrushchev: "We will bury you"
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Re: Secret moves launched by China, Russia, Japan, France, Arab States to end the Dol
Yuan tipped to replace U.S. dollar, Euro in southeast Asia
Source: China Daily
China’s currency could be eventually used as an alternative to the U.S. dollar and Euro by southeast Asian countries, experts said.
Phathanaphong Phusuwan, a senior official of the Bank of Thailand, said in a seminar on Thai-Chinese trade, investment and finance relations on Saturday that the yuan would likely be used more between China and ASEAN member states in the long run.
In the panel discussion co-hosted by the National Research Council of Thailand, Huaqiao University and the Thai-Chinese Culture & Economy Association here, the official of the Thai central bank commented the Chinese currency could possibly replace the U.S. dollar and Euro when it comes to trade, financial and money-exchange dealings throughout the ASEAN community, due in part to the unresolved economic and financial problems in the United States and the European Union.
“In the long run from 2015 onwards, trade with Asia will largely increase under the ASEAN-China Free Trade Area agreement, which will influence the use of the yuan and the local currencies. The yuan is then a good alternative for the international trade in the future,” said the official, referring to the year in which the regional bloc will become an ASEAN Economic Community.
Nevertheless, he said, the role of the Chinese currency in Thailand and other ASEAN states will remain limited in the short and medium terms.
Thai merchants have increased their use of the yuan in trade, following the easing of restrictions by the Chinese government, he said. A dozen Thai commercial banks and foreign banks’ branches here currently offer yuan-based services, including foreign currency deposits, money exchange, fund transfers and purchases of Chinese banknotes.
The Chinese currency has accounted for 10.8 percent of China’s trade dealings with the world during the first half of this year, according to a report of the Thai central bank.
Professor Ridong Hu of Huaqiao University’s College of Economics and Finance remarked in the seminar that last year’s total trade between China and Thailand amounted to 64.7 billion U. S. dollars, 22.3 percent increase over the previous year, turning Thailand into China’s second largest trading partner in the regional bloc.
Thailand plays a leading role in promoting integration of the Asian economy as well as serves as a link and helps in the development of strategic partnership between China and ASEAN, the Chinese academic said.
Asst. Prof Kai Yuan of Huaqiao University’s School of Law described the Sino-Thai trade and economic cooperation as a win- win option for both sides and that such bilateral relationship is the touchstone of success for trade, investment and financial sectors under the China-ASEAN Free Trade Area treaty.
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Nikita Khrushchev: "We will bury you"
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No, you won’t accept
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Re: Secret moves launched by China, Russia, Japan, France, Arab States to end the Dol
China, Germany plan to settle more trade in yuan, euros
Related News
- German leader looks to reassure Chinese on euroTue, Aug 28 2012
BEIJING | Thu Aug 30, 2012 1:23am EDT
Aug 30 (Reuters) - Germany and China plan to conduct an increasing amount of their trade in euros and yuan, the two nations said in a joint statement after talks between Chancellor Angela Merkel and Chinese Premier Wen Jiabao in Beijing on Thursday.
"Both sides intend to support financial institutions and companies of both countries in the use of the renminbi and euro in bilateral trade and investments," said the text of the statement.
It also said that both parties welcomed investments in China's interbank bond market by German banks and supported the settlement of business in the yuan by German and Chinese banks and the issuance of yuan-denominated financial products in Germany.
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Re: Secret moves launched by China, Russia, Japan, France, Arab States to end the Dol
Taiwan, China sign currency deal to bypass the US Dollar
By Annie Huang on August 31, 2012
Taiwanese banks will be allowed start handling China's tightly controlled currency this year under an agreement signed Friday, paving the way for the island to become an offshore center for yuan trading.
After the deal becomes effective in about two months, Taiwanese banks will be able to take yuan deposits and convert yuan into the New Taiwan dollar. The conversion will allow Taiwanese investors on the mainland to cut foreign exchange costs by skipping the current process of first converting their yuan earnings into U.S. dollars.
The long anticipated memorandum of understanding was signed separately by Governor Zhou Xiaochuan, the head of the People's Bank of China in Beijing and his counterpart, central bank governor Perng Fai-nan in Taipei.
"We will continue to work with the other side so this service can be open as soon as possible," Perng told reporters in Taipei, noting that clearing banks are yet to be picked by either side for the conversion.
Perng said the deal will also clear the way for Taiwanese banks to tap into new businesses, such as yuan-denominated bonds or derivatives.
Those lucrative activities are now handled by Hong Kong banks or underground local lenders.
Taiwan hopes the deal will enable it to develop into another yuan offshore center after Hong Kong. London and Singapore are among cities seeking to develop a similar yuan market.
Perng said local banks will have to significantly build up the amount of their yuan trading before the offshore market is established.
Taiwan has a clear advantage in this regard — its $150 billion annual bilateral trade with China, with about $80 billion in Taiwan's favor.
The trade volume was built mainly on the more than $120 billion which Taiwanese have invested on the mainland over the past three decades.
China is gradually relaxing its tight foreign exchange control, and the slow progress has given rise to the business of yuan offshore centers.
Taipei has pushed Beijing for signing a currency clearing pact as the former political foes eased their hostilities in recent years to promote stronger economic ties. The two sides split amid civil war in 1949, but Beijing still claims the self-ruled island a part of its own territory.
Taiwan also hopes to attract wealthy Chinese to park their yuan funds on the island, said Norman Yin, professor of finance at Taiwan's National Chengchi University, noting that China has seen an increasing amount of capital outflow despite its foreign exchange control.
"Compared with Hong Kong, Taiwan has more advantage in the wealth management business because its transactions do not come under China's watchful eyes," Yin said.
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Re: Secret moves launched by China, Russia, Japan, France, Arab States to end the Dol
China And Russia Are Ruthlessly Cutting The Legs Out From Under The U.S. Dollar
The mainstream media in the United States is almost totally ignoring one of the most important trends in global economics. This trend is going to cause the value of the U.S. dollar to fall dramatically and it is going to cause the cost of living in the United States to go way up. Right now, the U.S. dollar is the primary reserve currency of the world. Even though that status has been chipped away at in recent years, U.S. dollars still make up more than 60 percent of all foreign currency reserves in the world. Most international trade (including the buying and selling of oil) is conducted in U.S. dollars, and this gives the United States a tremendous economic advantage. Since so much trade is done in dollars, there is a constant demand for more dollars all over the globe from countries that need them for trading purposes. So the Federal Reserve is able to flood our financial system with dollars without it causing a tremendous amount of inflation because the rest of the world ends up soaking up a lot of those dollars. But now that is changing. China and Russia have been spearheading a movement to shift away from using the U.S. dollar in international trade. At the moment, the shift is happening gradually, but at some point a tipping point will come (for example if Saudi Arabia were to declare that it will no longer take U.S. dollars for oil) and the entire global financial system is going to change. When that tipping point comes the global demand for U.S. dollars is going to absolutely plummet and nightmarish inflation will come to the United States. If such a scenario sounds far out to you, then you have not been paying attention. In fact, China and Russia have been working very hard to move us toward exactly such a scenario.
China and Russia are not the "buddies" of the United States. The truth is that they are both ruthless competitors of the United States and leaders from both nations have been calling for a new global currency for years.
They don't like that the United States has a built-in advantage of having the reserve currency of the world, and over the past several years both countries have been busy making international agreements that seek to chip away at that advantage.
Just the other day, China and Germany agreed to start conducting an increasing amount of trade with each other in their own currencies.
You would think that a major currency agreement between the 2nd and 4th largest economies on the face of the planet would make headlines all over the United States.
Instead, the silence in the U.S. media was deafening.
At least there were some reports in the international media about this. The following is from a Reuters article about this very important deal....
Germany and China plan to conduct an increasing amount of their trade in euros and yuan, the two nations said in a joint statement after talks between Chancellor Angela Merkel and Chinese Premier Wen Jiabao in Beijing on Thursday.By itself, this deal would not be that alarming.
"Both sides intend to support financial institutions and companies of both countries in the use of the renminbi and euro in bilateral trade and investments," said the text of the statement.
However, the truth is that both Russia and China have been making deals like this all over the globe in recent years. I detailed 11 more major agreements like the one that China and Germany just made in this article: "11 International Agreements That Are Nails In The Coffin Of The Petrodollar".
In that article I listed a few of the things that will likely happen when the petrodollar dies....
-Oil will cost a lot more.
-Everything will cost a lot more.
-There will be a lot less foreign demand for U.S. government debt.
-Interest rates on U.S. government debt will rise.
-Interest rates on just about everything in the U.S. economy will rise.
So enjoy going to "the dollar store" while you can.
It will turn into the "five and ten dollar store" soon enough.
Okay, so if you are China and Russia and you are working hard to undermine the dollar, how do you get prepared for the fiat currency crisis that your hard work will eventually create?
You guessed it. You hoard gold and other precious metals.
And that is exactly what China and Russia has been doing.
A recent MarketWatch article detailed the massive hoarding of gold that Russia has been doing....
I can’t imagine it means anything cheerful that Vladimir Putin, the Russian czar, is stockpiling gold as fast as he can get his hands on it.Of course Russia is not alone in hoarding gold. According to Zero Hedge, China has quietly been importing gigantic mountains of gold....
According to the World Gold Council, Russia has more than doubled its gold reserves in the past five years. Putin has taken advantage of the financial crisis to build the world’s fifth-biggest gold pile in a handful of years, and is buying about half a billion dollars’ worth every month.
In July, Chinese gold imports from HK, after two months of declines, have picked up once more and hit a 3-month high of 75.8 tons. While it is notable that this number is double the 38.1 tons imported a year prior, and that year-to-date imports are now a record 458.6 tons, well over four times greater than the seven month total in 2011 which was 103.9 tons, what is far more important is that in the first seven months of 2012 alone China has imported nearly as much gold as the total holdings of the hedge fund at the heart of the Eurozone, elsewhere known simply as the European Central Bank, and just as importantly considering the import run-rate has hardly slowed down in August, which data we will have in a few weeks, it is now safe to say that in 2012 alone China has imported more gold than the ECB's entire official 502.1 tons of holdings.And all over the world Chinese companies are buying up gold producers. China National Gold Group Corporation has put in a $3.9 billion bid to buy African Barrick Gold PLC, but that is only one example.
A recent Fox Business article listed a bunch of other similar transactions that have taken place recently....
Zijin Mining Group Co. (2899.HK), China's second-largest gold producer by output, said last week that its subsidiary has acquired more than 50% of Kalgoorlie's Norton Gold Fields (NGF.AU).You would have to be blind to not see what is happening.
That deal gives it a foothold in the Australian market, the world's second-largest source of gold output after China itself. In 2011, Zijin bought 60% of Kazakhstan-based miner Altynken, which has access to a gold mine in Kyrgyzstan.
Since 2008, Chinese companies have completed 10 US$20-million-plus acquisitions of Australian gold assets, worth a combined $1.6 billion, according to Dealogic. Half were initiated since last year.
In November, Shandong Gold-Mining Co. (600547.SH) launched a bid to acquire Brazilian gold miner Jaguar Mining Inc. (JAG.T) for $1 billion.
Other big names have been hoarding gold as well. In a previous article I detailed how George Soros, John Paulson and central banks all over the planet have been hungrily accumulating gold.
So what does all of this mean for the price of gold?
That's right - it is likely to keep heading up.
In fact, Citi analyst Tom Fitzpatrick believes that the price of gold will likely hit $2500 within 6 months.
Personally, I believe that there will be times when precious metals both fall and rise in price dramatically. It is going to be a wild ride. But in the long-term I believe that all precious metals will be going up as fiat currencies such as the U.S. dollar fail.
Sadly, most Americans have no idea just how incredibly vulnerable the U.S. dollar really is.
The following is an excerpt from a recent piece by investigative journalist Bob Woodward. It shows just how worried our leaders are about a crash of U.S. Treasuries....
Another possible outcome, Geithner said, was perhaps worse. “Suppose we have an auction and no one shows up?”What happens someday if the rest of the world decides to reject our currency and our debt?
The cascading impact would be unknowable. The world could decide to dump U.S. Treasuries. Prices would plummet, interest rates would skyrocket. The one pillar of stability, the United States, the rock in the global economy, could collapse.
Right now we are able to trade our dollars for the things that we "need" such as oil from the Middle East and cheap plastic consumer products from China.
But what happens if the Federal Reserve keeps printing and printing and printing and the rest of the world eventually decides that the U.S. dollar is not even worth the paper it is printed on?
The truth is that the amount of printing the Federal Reserve has been doing and the amount of borrowing the federal government has been doing are both completely and totally unsustainable.
At this point, Moody's is threatening to cut the credit rating of the federal government if a deal is not reached soon to reduce our debt to GDP ratio.
And Moody's is not the only one concerned about our exploding debt.
German Finance Minister Wolfgang Schaeuble recently stated that he believes that "there is great uncertainty about the course American politics will take in dealing the U.S. government's debts, which are much too high".
Just because the economy is relatively stable right now does not mean that it is always going to be that way.
If we keep debasing our currency like this, at some point the rest of the world is going to decide that China and Russia have been right all along and that we need a new global reserve currency.
That day is coming. It might not come tomorrow or next week or next month but it is definitely coming.
Once the U.S. dollar loses reserve currency status, that will be a major turning point in the history of our country. We will never fully recover from that, and we will never get back to the same level of prosperity that we are enjoying today.
So enjoy spending those dollars while you can. The party is almost over.
http://theeconomiccollapseblog.com/a...the-u-s-dollar
Re: Secret moves launched by China, Russia, Japan, France, Arab States to end the Dol
China in closed door negotiations to purchase Mexican crude oil without using US dollars
September 21, 2012
Source: Indy Media - Von Helman
Mexican crude oil to be sold to China without using the US dollar as its trading currency
Sources inside the Mexican government refuse to confirm that the Mexico government has been in secret negotiations with China over possible crude oil sales to China without using the US dollar.
China officials claim meetings held with the Mexican government and Petróleos Mexicanos (or Pemex) are for investment and economic growth inside Mexico. Crude oil purchases fall under this heading however officials on both sides in the past have stopped short of publicly discussing crude oil or any talks related to any special agreements relating to crude oil purchases.
Sources inside Mexico claim this week that China has in fact brokered a secret deal with Pemex to purchase crude oil using currency means other than the US Dollar. The details of this agreement are still unknown at this time but China is expected to make a public announcement within the next few days.
Over the past ten years with new trade agreements China has invested billions of dollars inside Mexico. China has helped the Mexican government create jobs and has financially supported investments in the privatization of ports and infrastructure throughout Mexico. Mexico continues to privatize large sectors of its economy and China is line to benefit from additional investments inside Mexico.
Since the 2009 global economic crisis Mexico's central bank has been quietly purchasing large quantities of gold. Mexico Central bank buys 100 tonnes of gold
http://www.ft.com/cms/s/0/cbc02e10-7...#axzz27287HHy0
Then again in May 2012 Mexico Central Bank boost gold holdings yet again and some of this gold purchased by Mexico’s Central bank has come from China.
These large gold purchases by the Mexican Central bank and the successful restriction of the US dollar from use inside Mexico (as already reported) along with a closer relationship with China and speculation of secret petroleum deals that do not include using the US dollar are sure to raise new concerns in global markets as this story continues to unfold. These strategic moves on the part of Mexico’s Government and Mexico’s Central bank are said to be protective measures to shield Mexico from what it sees as the imminent and unavoidable devaluation of the US dollar. (In layman’s terms the collapse of the US Dollar)
These large gold purchases by the Mexican Central bank and the successful restriction of the US dollar from use inside Mexico (as already reported) along with a closer relationship with China and speculation of secret petroleum deals that do not include using the US dollar are sure to raise new concerns in global markets as this story continues to unfold. These strategic moves on the part of Mexico’s Government and Mexico’s Central bank are said to be protective measures to shield Mexico from what it sees as the imminent and unavoidable devaluation of the US dollar. (In layman’s terms the collapse of the US Dollar)
Global finical markets are very concerned with trading oil in other currencies other than the US Dollar as doing so is actually helping to rapidly destabilize the US dollar even further. Russia and China announced this week that they have also entered into an agreement between the two countries to trade crude oil using their own currencies and not the US dollar.
Many experts have warned such actions of replacing the US dollar as the trade currency for crude oil in any country will cause the US immediate, sever, and devastating consequences that could lead to the US Dollar losing its value almost overnight. Factoring in that Mexico is one of the largest exporters of crude oil to the USA this news is especially troubling for the US Dollar.
The US government has voiced these same concerns but with the continued and uncontrollable escalating US debt the United Sates is no longer in a position to prevent other countries from taking these preemptive measures to protect themselves against the devaluation of the US Dollar which is excepted to occur with this next round of quantitative easing (also referred to as QE3) which coincidentally was also announced was underway as of this week.
As more countries around the world openly admit they are losing confidence in the US dollar there is no doubt that the US dollar is in grave peril of imminent and total collapse. In a news conference last week before federal policy makers the Federal Reserve Chairman Ben Bernanke said; “I don't think our tools are strong enough to offset the effects of a major fiscal shock, so we'd have to think about what to do in that contingency"
Re: Secret moves launched by China, Russia, Japan, France, Arab States to end the Dol
Asian economies turn to yuan
Updated: 2012-10-24 00:57 By Gao Changxin ( China Daily)
Comments(4)
A "renminbi bloc" has been formed in East Asia, as nations in the region abandon the US dollar and peg their currency to the Chinese yuan — a major signal of China's successful bid to internationalize its currency, a research report has said.
The Peterson Institute for International Economics, or PIIE, said in its latest research that China has moved closer to its long-term goal for the renminbi to become a global reserve currency.
Since the global financial crisis, the report said, more and more nations, especially emerging economies, see the yuan as the main reference currency when setting their exchange rate.
And now seven out of 10 economies in the region — including South Korea, Indonesia, Malaysia, Singapore and Thailand — track the renminbi more closely than they do the US dollar. Only three economies in the group — Hong Kong, Vietnam, and Mongolia — still have currencies following the dollar more closely than the renminbi, said the report, posted on the institute's website.
The South Korean won, for example, has appreciated in sync with the renminbi against the dollar since mid-2010.
China has long vowed to raise its currency's global sway, along with the rise of its economy, which became the world's second-biggest last year.
The goal has seen significant development in recent years as the country promotes renminbi-denominated cross-border trade and gradually loosens control over its capital accounts.
As a result, Hong Kong has quickly risen to be the world's biggest offshore renminbi trading center, with about 600 billion yuan ($95 billion) in deposits.
According to the latest report by the Society for Worldwide Interbank Financial Telecommunication, or SWIFT, renminbi-denominated trade accounted for 10 percent of China's total foreign trade in July. The figure was zero just two years ago.
From July 1 to Aug 31, global payments in the renminbi rose 15.6 percent, according to SWIFT, as payments in other currencies fell 0.9 percent on average.
The renminbi had a market share of 0.53 percent in August and has overtaken the Danish krone to become the 14th-highest global payment currency, the member-owned cooperative said.
Cross-border trade settled in renminbi will triple to 6.5 trillion yuan ($1.03 trillion) within three years as relations with the world's second-largest economy grow, Royal Bank of Scotland Group PLC was quoted as saying by Bloomberg on Oct 9.
Settlements will grow 12 to 20 percent this year, reaching $1.03 trillion in two years, up from $330.8 billion in 2011, said Janet Ming, head of the China desk for RBS in Europe, Middle East and Africa.
"We're seeing a lot more customers starting to practice in renminbi," Ming was quoted as saying by Bloomberg. "For most companies and banks, China and India is where the growth is. If you're dealing with China, ignoring renminbi is not the right thing to do."
Wang Jianhui, chief economist with Southwest Securities Co Ltd, agreed. "Investors are looking for new reserve currencies at a time when both the dollar and euro are under pressure. This is a good opportunity for the yuan," he said.
The Royal Bank of Scotland predicted in a report on Monday that renminbi will become a fully convertible currency in 2015.
The PIIE said that renminbi could rise to the status of an international currency in 10 to 15 years if the country can reform its financial market and allow greater access for foreigners via capital account liberalization.
Forming the new renminbi bloc is the result of China's rise as the main trading partner in the region. China's share in East Asian countries' manufacturing trade has risen from 2 percent in 1991 to about 22 percent this year, according to the PIIE report.
In fact, trade is also propelling the rise of the renminbi outside East Asia. The currencies of India, Chile, Israel, South Africa and Turkey all now follow the renminbi closely, in some cases, more so than the dollar.
The renminbi would be more attractive if the country could further liberalize its financial and currency markets, the report said.
Some fear that China might follow Japan's rise and fall over the past decades, but the institute thinks otherwise.
"They should take note that even during the heady days of the Japanese miracle, the yen never came close to rivaling the dollar as a reference currency. There was never anything close to a yen bloc in East Asia," the report said.
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Nikita Khrushchev: "We will bury you"
"Your grandchildren will live under communism."
“You Americans are so gullible.
No, you won’t accept
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outright, but we’ll keep feeding you small doses of
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until you’ll finally wake up and find you already have communism.
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."
We’ll so weaken your
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until you’ll
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like overripe fruit into our hands."
Re: Secret moves launched by China, Russia, Japan, France, Arab States to end the Dol
-- Posted Wednesday, 26 September 2012 | | Source: GoldSeek.com
The recent decision by the US Federal Reserve to contaminate the financial body until it responds favorably was the last straw in my book. Witness a declaration of permanent QE and hyper monetary inflation of the most virulent strain, unsterilized. The USFed is essentially admitting failure. The signal serves as the loudest death knell for the USDollar among many in a sequence. On a similar parallel note, lighter and more humorous, one might be reminded of the pirate swash buckling style of yelling at the swabbies that the beatings will continue until morale improves. The QE bond monetization of USGovt debt has turned viral and entrenched. It is sold as stimulus, when in fact it acts like a giant wet blanket on the USEconomy. It is intended as stimulus to businesses, but the effect is felt on the financial speculation and on Asian direct business investment. In the past the emergency lever device had been successful only because it was used on a temporary basis. But now the USFed high priest assures it is a permanent fixture, a sign of their failure. The public is too ignorant to comprehend the ruin. They can only see the threat to their personal ruin.
The bankers are determined to ruin the entire system in order to retain power, all while dispensing increasingly nonsensical dogma like from heretical high priests about the effectiveness of their solutions. Theirs is heresy built upon alchemy laced with arrogance, with no precedent of success in past history. A definition of insanity comes to mind, offered by a psychologist who works in a clinical practice. Let's stick with the layman translation. Insanity is defined as repeating the same action but expecting a different result. So the USFed conducted QE, then QE2, then Operation Twist (a deceptive QE), now is set for QE3. It expects a different result from the rising costs and debasement of the currencies. Somehow by enlisting the cooperation of the Euro Central Bank, the Bank of England, the Bank of Japan, and the Swiss National Bank, together they can pull off QE3 in a veritable ongoing QE to Infinity when all previous efforts have failed to produce a solution or economic recovery. The high priests from the central bank altars do admit that liquidity does not address the insolvency ills, yet they hit the monetary levers and accelerators more quickly. The central bankers are in a panic, and it is beginning to show clearly. Their solutions solve nothing. They will next attempt to rule more formally over the ruins.
MONEY VELOCITY
Money velocity is going down as quickly as money supply is going up. This report card is a grand contradiction of the USFed actions for a generation. The American Weimar experiment is turning into a tornado of financial ruin with inadequate recognition. As industry was dispatched and forfeited to Asia, the USEconomy lost its base for traction. New money has lost its effect in producing economic activity following a series of asset bubble busts, a spinning of capitalist gears, now stripped gears. New money is devoted to the financial sector in perverse fashion, as a reward for the past destruction of capital itself. The central bankers cannot dictate the speed at which money moves. They can only create it and drop it in the mix, speak their incantations, sprinkle pixie dust, offer some loony fiat prayer to the duped public, and continue with the next paper dump. The Untied States will gradually achieve systemic failure from redoubled efforts, suffer debt default from inability to manage the debt structure, and fall into the Third World. The nation will experience the monsters of high prices and acute shortage without comprehension of its source. It is toxic money.
The growth of the monetary base has been staggering high since the financial crisis broke in September 2008 with the collapse of Lehman Brothers. Since the end of August 2008, the monetary base has risen from $877 billion to $2,651 billion as of September 2012. That is a giant 3-fold rise. Witness the American Weimar era, its final chapter. The massive increase in new money has done nothing to foster growth in the USEconomy. The main reason is that fiat paper money destroys capital, a concept the hapless corrupted US economists cannot comprehend, either from compromise to their masters or lack of intellect due to years of exposure to the ass backwards preachings. The USEconomy is stuck in a powerful recession based in grotesque insolvency and bond fraud. As the USFed is poised to kick in another round of QE bond monetization, the money supply will ramp sharply up again. Do not expect much of any economic benefit, since the cost structure will rise again, then shrink profit margins. This capital destruction factor is a great blind spot to the hack economists who operate more as marketing harlots for Wall Street and the USGovt than analysts and advisors. The Ponzi Scheme theory dictates that an acceleration in new money is required to keep a constant speed. Expect more wreckage from the stripped gears of the USEconomic engine.
The money velocity chart shows a deadly decline since 1980, and a powerful decline since the 2007 outbreak of the absolute bond crisis. The new money is going to the big banks in bond redemption, derivative coverage, and Black Hole (Fannie Mae, AIG) fills under the USGovt supervision. The money is not finding its way into the USEconomy for further circulation. The plague is insolvency, soaked by endless applications of tainted money from central bank fire hoses. The velocity of money has been falling for years, in reflection of an economy that is not turning over much at all. Think of a car missing its cylinders, spinning its gears, burning itself out, going nowhere. The above chart serves as pictorial evidence that the root cause of ruined money was the war. In the current decade, the wars are endless. America chose war over industry. A fuller explanation is offered in the September Hat Trick Letter.
Three eras are worth identifying in my view. The Vietnam War era and its aftermath saw huge expansion in money supply, huge nominal income growth, and huge increases in price inflation. The USFed did not interrupt the expanded USGovt debt from reaching Main Street, simply put. For consecutive years, the Consumer Price Index rose over 10%, which led to big worker pay hikes. The result was that US corporations began to send industry overseas. It started with Intel going to the Pacific Rim. The money velocity fell, as income fell on a real basis. The climax event was China being given the Most Favored Nation status in 1999, which released the gates for foreign direct investment. China made a deal with the Wall Street devils that has yet to gain publicity. The hidden motive was for Wall Street firms to borrow the Chinese gold hoard from the Chairman Mao era, so as to continue the great gold suppression game that has bankrupted the Untied States and betrayed the nation. US and London bankers skimmed and stole the gold.
HOUSE OF SAUD STARTS TO UNRAVEL
More loyal Jackass wannabee followers will recall a story (repeated often) that on the Easter Sunday weekend of April 2010, a secret gathering of over 200 Arab billionaires convened in Abu Dhabi.
They arrived in unmarked jets. My source was one of only two or three white faces in the crowd, invited by his clients.
One result of the meeting was an accord struck between the Persian Gulf oil producers, led by the Saudis, to work toward a pact with Russia and China as protector of the gulf in return for financial cooperation, economic construction, and forward progress.
The implicit message was that the Untied States would be phased out in the protectorate. In the balance would lie the Petro-Dollar defacto standard as victim. Events continue to this day in movement toward that end.
However, since the Syrian uprising, a new lethal element has entered the mix. Account will be kept brief, since so volatile and controversial. Just some bare notes. The Assad family in Syria has suffered some assassinations. Apparently, the Saudis had a hand in the killings. HezBollah has vowed retaliation. Their ties to Iran might be longstanding, but perhaps are exaggerated. My view is their home is in Lebanon.
In August, Prince Bandar was assassinated. He was the Saudi head of security, and long-time ally to the USGovt. The Saudi regime is concealing his death, with outdated photos and false statements. They are working toward a transition. The House of Saud has been unstable from threats to the south in Yemen. It is unstable from internal threats tied to the fundamentalists. Although cooperation and respect has been shown between Riyadh and Tehran, the Bandar hit has created an entirely new environment. The Saudi regime with high likelihood is in its final months.
More importantly, the Petro-Dollar is losing its all important Saudi leg. Implications are vast. The US public takes the USDollar for granted, with almost no concept of FOREX exchange rates.
If the House of Saud falls, when it falls, the impact crater will include the entire waistline of the USEconomy and its financial dog tail that wags it.
The USGovt and its banker handlers have relied heavily upon the Petro-Dollar in general, and on the Saudis in particular, ever since Henry Kissinger signed an accord that governs over the grand surplus recycling back in the 1973-1974 era. Watch the Saudis convert USTBonds to Gold, then bug out of the desert to their new mansions in Southern Spain.
CHINA AS INTERMEDIARY AGAINST PETRO-DOLLAR
Reports swirl that China is attempting to act as intermediary in global oil transactions, for Yuan currency settlement. The rebellion globally is picking up momentum against the USDollar. The Petro-Dollar defacto standard is slowly unraveling. The denizens of the Untied States have no idea the ravaging impact of a lost global reserve currency. It will unleash price inflation when the USFed central bank is letting loose the monetary flood gates. This declaration is an act of financial war directed at the US by China.
To fortify the rear flank, Russia has promised to meet all requests for crude oil made by China, with settlement in Yuan and Ruble currencies. Take the pledge as a protection from any sudden USGovt threat or retaliation. The Russia-China Axis is forming more clearly in opposition to the USDollar, the Syndicate behind it, the many Embassies that offer sanctuary for espionage, and the global rules that enforce its hegemony.
Crude oil payments are the critical core of global trade. The rest of global trade will follow in non-USDollar payments, all in time. Entire banking systems will gradually make a transition away from the USTreasury Bond in its reserves managements. The banking practices will follow the trade payment structures, as it should be. The profound effect on the USEconomy will be clear, as blame is shifted as usual to external factors, even to extremists. In reality the US is up against vengeful Cossacks and the angry Mongol Horde. The entire world is moving against the USDollar, seen increasingly as a toxic agent within their internal domestic systems. They see the lack of solutions, the spreading bank insolvency, the accelerated debasement of currency, and the corrupted grants of multi-$trillion banker grants. They are taking action in response. They are following the Chinese lead with the Russians acting as a quasi-Rasputin.
Gerald Celente reported in early September, "On September the 6th of 2012, China officially announced that any country in the world that wishes to sell crude oil using its currency the Renminbi instead of the USDollar can do so. The following day September the 7th, Russia announced that the nation will sell China all the crude oil they need, no limitations whatsoever.
They will not use the USDollar for their trade."
The claim by Celente is far reaching. The USDollar is dying a slow death. Its antagonists do not wish to speed the death process too rapidly, for fear of quickening the ravage to their own nations. They also do not wish to invoke the wrath of the USGovt, which since 2003 has enforced the USDollar as global reserve currency via its war machinery.
What China is offering is an intermediary clearing house role to sidestep the Petro-Dollar, where crude oil payments can be made in the Chinese Yuan currency. This offer is a financial act of war against the Untied States currency, where China will backstop all transactions. It is a violent offer to disrupt the USDollar. Look to see if any Saudi oil sales are settled in Yuan currency as alternative, even the Euro currency as expedient. The superpowers are openly attempting to isolate the USDollar, the clear victim to be the USEconomy, the land of consumption excess. The move is a tacit push of the US into an isolated place where it can very easily slide into the Third World.
MEXICO CUTS A DEAL WITH CHINA FOR OIL
Mexico is in the process to make concrete a major deal to sell crude oil to China, but not in USDollar terms. The Chinese declaration of financial war against the Untied States has reached both the northern border in Canada and the southern border in Mexico. To be sure, the Canadian oil is not sold outside the USDollar. But other factors are hard at work. The bulk of Athabasca oil produced from the oil sands in Western Canada (Alberta) output is directed to China, by way of the Vancouver ports owned 100% by China. In fact, the Chinese influence is so strong in the beautiful city on the Pacific coast that it has earned the nickname of Hongkouver. Some shallow analysts attribute a wayward motive to the decision by the USGovt to abandon the Keystone Oil Pipeline several months ago. The more realistic hidden motive was to assure the Western Canada oil output would be sent to China. The cutoff to the pipeline came with spurious official accounts, all quite humorous to the informed. The pipeline was abandoned to accommodate China, owner of significant USTBond holdings. They are the largest USGovt creditor. The tipping point was passed many years ago when the majority of USGovt debt was held by foreign creditors. Its consequence is vivid and unmistakable. The Untied States is converted into a colony, a killing field, as pathways are fashioned for entry into the Third World.
China through closed door negotiations is sealing deals to purchase Mexican crude oil without using USDollars as its trading currency.
The Yuan is slowly moving toward global reserve status, not by a summit meeting and signed accord, but rather by numerous bilateral deals.
Consider the bilateral swap accords signed by China with partners in Brazil, Japan, and elsewhere.
The list grows, and beyond oil trade. As it does, the net is cast over the USDollar in isolation. Officials claim meetings were held with the Mexican Govt and PEMEX, the state owned oil giant.
They are in progress with a brokered secret deal to purchase crude oil using currency means other than the USDollar. Expect a public announcement soon by Chinese Govt and PEMEX firms. In the past decade, China has planted seeds in trade while ignoring politics with numerous major players in global trade. The USGovt prefers the heavy handed financial banking games, backed by the heavy handed military maneuvers, all part of the sickening Full Spectrum Dominance that has blossomed in ruin.
The Chinese have responded with an archipelago of trade pacts, best viewed as a Full Spectrum Encirclement of the USDollar. It cannot be conquered. So their plan apparently is to isolate it, to starve it, to let it suffer the Weimar consequences of its own high pitched debasement, and to permit it to become a Third World currency by default.
Over the past ten years with new trade agreements China has invested $billions inside Mexico.
China has helped the Mexican Govt create jobs and has financially supported investments in the privatization of ports and infrastructure throughout Mexico.
As the movement toward privatization of large sectors of its economy continues, China is in line to benefit from additional investments inside Mexico. Since the 2009 global economic crisis, Mexico's central bank has been quietly purchasing large quantities of gold.
In fact, some of the recent boost in May for Mexico Central Bank gold holdings was gold purchased from Chinese sources.
The gold sales belie a closer relationship building with Mexico on the southern US border.
While the USGovt is occupied with the Mexican Govt on matters pertaining to gun running, to handling illegal immigrants, and to shielding vast narcotics sales, the Chinese are busily working on trade, with a gold foundation and crude oil blood system.
Those are the stuff of a stable currency. Perhaps Mexican leaders are preparing for the imminent and unavoidable devaluation of the USDollar. In more practical terms, regard the movement as the collapse of the USDollar in a vast sea of liquidity, better identified as toxic fiat paper currency.
STRIKES HINDER GOLD OUTPUT
Not in sufficient focus is the radical impact on gold supply. The gold investment demand has been on a tear in recent months. A sinister effect has been realized from the vast QE bond monetization conducted by the USFed and its partners at the Euro Central Bank and the Bank of Japan. The effect is of rising food and energy costs. The impact is particularly hard felt in poorer areas of the world. The great majority of major gold and silver mines are located in the poorer nations. The labor strikes at mining facilities are as much based upon unsafe worker conditions as they are based upon a higher cost of living, centered on food costs. The workers need more to survive at home, as they provide more precious metal output that satisfies mining company production targets. The end result is lower output in pockets of South America such as Bolivia, but more importantly in South Africa. A whopping 39% of South African Gold production has been taken offline. The impact on global output will be seen in the next few quarters. The fast rising investment Gold demand will be met by a significant decline in Gold supply. Price pressures will force a much higher Gold price. But first comes the depletion of the COMEX, as its paper contract merchants continue to ply their trade. Their new specialty is stealing client accounts that stand ready for contract delivery. See MFGlobal and the JPMorgan thefts, all fully blessed by the tainted US Court system.
THIRD WORLD THREAT
The implications are vast. A lost Petro-Dollar standard would mean a grand shift in payment for oil transactions, the most important of all global trade. In the last 20 years, all has been turned upside down. A global phenomenon of a powerful nature has been at work since the Lehman Brother failure, the Fannie Mae adoption, and the AIG redemption in 2008. The entire world is losing trust in the USGovt and its financial institutions. Personal email exchanges cite a regular occurrence of US corporations not receiving return phone calls, and of open disrespect in Europe for American businesses. The debt rating agencies do their part in upholding the paper fortress walls, but they must over time deliver the downgrades. An important catalyst took place when the USGovt imposed trade sanctions against Iran. The result was angering US trade partners more than anything else, well, except for causing severe price inflation on the Iranian Economy. The movement in reaction has been swift by global trade partners, in establishing bypass routes for payment systems between nations. The workarounds against the SWIFT bank payment system have been remarkable. The climax will be the non-US$ payment system to emerge, with no centralization, complete independence, relying upon non-bank devices like mobile communications.
Another bypass event just hit the news wires. The Swiss-based Vitol is the latest oil firm bypassing the USGovt sanctions against Iran. They exploit a legal loophole in Swiss law, since the nation did not abide by the US-led sanctions, a notable resistance. Vitol boasts being the largest oil trader in the world. It buys and sells Iranian fuel oil, undermining Western efforts to choke the flow of flow of money to Tehran. In August alone, Vitol purchased two million barrels of fuel oil, used for power generation, from Iran and offered it to Chinese traders. The Vitol firm is not obliged to comply with a ban imposed in July by the European Union on trading oil. The tale of the cargo for Iranian fuel oil involves tanker tracking systems being switched off, frequent ship-to-ship transfers, and the blending of the oil with fuel from another source to alter the physical specification of the cargo. How crafty.
Global finical markets are acutely aware that oil trade outside the USDollar will rapidly destabilize the USDollar even further. With Russia and China having entered into an agreement to trade crude oil using their own currencies, the Mexican news of a Chinese oil deal has potentially devastating consequences. The eventual effect is that the USDollar will lose its prestigious reserve currency status. In the process, it will lose value gradually. My view is that the defense of the USDollar will lead to all major fiat paper currencies to implode, step by step, taking down the banking systems and economies of major nations. The prevailing currency will be what is used in global trade. All signposts point to Gold. A new global trade system is ready to be installed, based upon gold in special notes. The transition awaits further collapse of the current currency regimes, the further collapse of the sovereign bonds, and the further collapse of the banking systems, which all assures the collapse of the global economy.
The QE fallout by the desperate central bankers has been seen in fast rising demand for gold bars and gold coins. The phenomenon is primarily in the Eastern world but also in Europe. The American crowds remain transfixed on their dwindling paper assets locked in stock accounts, many not easily altered due to tax rules. They remain transfixed on home equity losses, in a mindnumbing effect that the Jackass described in years 2005 and 2006 and 2007. The American Home was not a hard asset at all. Since its value was largely determined by the mortgage loans and mortgage bonds, together with the vast network of devices like MERS among bankers and the hidden caches with slush funds at Fannie Mae. The entire criminal history of Fannie Mae has been safely buried under the USGovt roof. Ten years ago, people would laugh at comments that the largest and most powerful criminal syndicate was operating under the USGovt label. They do not laugh anymore, including my own family. They protect themselves with the real deal currency for storing life savings, GOLD. They will soon enjoy the benefits, safety, and efficiency of trade systems based upon GOLD also.
GOLD PRICE READY TO EXPLODE UPWARD
Gold market instability could be a tremor before a burst upward. The same appears true for the silver market. On a single day last week, JPMorgan dumped two years worth of US silver mine output in the form of paper silver supply on the COMEX market. The corruption went largely unnoticed. They defend the important $36 level. Volatility has returned to the Gold price. The current pause could be interrupted very quickly with a strong upward leg in both precious metals. The announced QE3 bond monetization program cannot be sterilized any longer. A powerful USDollar decline is imminent. As the USDollar reserve status is threatened, the gold price will zoom upward. Notice the occasional propaganda and basic lies regarding sterilization of new bond purchases. The USFed is fast running out of short-term USTBills to fund long-term USTBonds in the Quantitative Easing shell game that is more reminiscent of the Weimar Republic.
Fortunately for the USFed paper mache artisans, the American public is a lousy student of history and especially the concept of money, even the nature of economics and capitalism. The dumbing down of the public has reached a critical mass, but hope lies in the Gold sanctuary if people have any savings left after the busted bubbles and the parade of banners to join. They joined asset bubble parades instead of lines to enter factories. Across the world, an army of Gold soldiers is awakening after a 16-month slumber. They react to the stark awareness that QE not only ruins money, but its purpose is to redeem the toxic bonds owned by banks. The QE programs are not intended to bolster, stimulate, or fortify the economy. In fact, they render the USEconomy incredibly deep harm by raising the cost structure, reducing profit margins, wrecking business segments, and killing jobs. But the hard sell sure is fun to watch, as the central bankers squirm. The Jackson Hole conference was a gathering of buffoons without the clown suits. The public must seek refuge in Gold & Silver or face personal ruin.
The USFed mandate on inflation moves next to an absurd mandate on jobs. They will fail on both. Inflation will be permitted by the USFed central bank in order to produce jobs, in the most heretic and misguided folly ever seen in modern times. The 0% rate will stick until economic growth arrives, but it will never arrive, due to the damaging effect from the 0% rate itself. The dog's tail is eating the entire dog in a perverse reverse effect of modern alchemy. The USFed ignores all Weimar chapters, after having rewritten the Great Depression chapter. The nation emerged from the depression only due to the Gold Standard and ample industry. The nation has neither today, and will therefore plunge into a systemic failure. The Third World awaits. Watch for the pressure points of tens of thousands of gasoline stations and food supermarkets, certain to erupt as the frustration and disorder spread.
The response in the Gold price has smelled a QE3 in bond monetization since the summer months. The difference is that this time, unlike the deceptive Operation Twist, the bond purchases will be unsterilized with new money injected into the system. That is a Golden supercharge to recognizable inflation. A major intermediate reversal is underway, with a 1570 base, a 1780 top, which indicates a 1990 Gold price target. The kicker in the market is the broad mining industry strike, which extends from South Africa to South America. Gold supply will be inhibited. Expect some regrouping with a pause at the 1720-1770 area, as a critical consolidation takes place before a breakout that captures the world's attention. The right side handle is being formed, carved out. During this time, the doubters are tossed off the train. The new believers join. A recycle process is underway, as the monetary dumb are unloaded and new intelligent soldiers join the ranks. The renewal will permit a run over $2000. Once over 1800 price level, the 1900 resistance will be overrun like a paper fortress by angry mobs bearing torches and sticks. But in the meantime, a big battle is being waged at the right side handle, a consolidation before breakout.
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Nikita Khrushchev: "We will bury you"
"Your grandchildren will live under communism."
“You Americans are so gullible.
No, you won’t accept
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outright, but we’ll keep feeding you small doses of
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until you’ll finally wake up and find you already have communism.
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."
We’ll so weaken your
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until you’ll
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like overripe fruit into our hands."
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