Is the US Dollar’s global process of rejection gathering pace?

China might be making overt moves toward a convertible Yuan currency. (…) Consider the recent acceleration in Chinese gold accumulation, either the basis core for a gold-backed Yuan alternative to the crippled toxic USDollar, or the basis core for a new global trade settlement system to be introduced very soon. The usually patient Beijing leaders are showing signs of no longer possessing patience. The gold imports from Hong Kong are not simply rising; they are exploding in unprecedented fashion. Something big is going on.” – Jim Willie (1)

The process of ‘overthrowing’ the dollar in trade transactions launched by China accelerates. Increasingly, countries often use their own currencies in transactions dodging the greenback. Such agreements have been signed by China with Japan, Russia, Ukraine, Chile and Brazil.(…) At present, China’s foreign exchange reserves are more than $ 3 trillion. Therefore, it will not be difficult for the Chinese authorities to allocate a few hundred million dollars to acquire a stable currency-gold-which probably will end up doing, say experts.” – actualidad.rt.com (2)

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.” – Mish (3)

The US is bankrupt. However, the US dollar remains the world reserve currency. This means that the US can print money to pay its bills. As long as the world accepts the dollar as world reserve currency, the US will be able to continue its wars.”  – Paul Craig Roberts (4)

***

Excerpt from:
Firestorms & Currency Twisters, by Jim Willie
financialsense.com
August 29, 2012

USDollar Global Shun

The many moving parts of the isolation of the USDollar are in progress still. However, it has taken some dangerous turns, hardly noticed by the intrepid American Idol populace. The USDollar collapse will come from a foundation of trade settlement no longer conducted in US$ terms. The stench of hyper monetary inflation by collusion between governments and their central bank masters, combined with obscene gargantuan banker aid packages serve as the motive to continue the abandonment by global players. Before too many more months, a critical line will be crossed. More global trade will be conducted outside the US$ settlement sphere. The line will be crossed in non-oil transactions first, then in overall transactions. The American Dome dwellers are not prepared for this development. In every conversation done by the Jackass with ordinary US citizens over several years, not one has any concept of the USDollar and its exchange rate. It is an assumed entity without discussion or consideration. Such is a precarious position to conduct life and business under.

The Petro-Dollar is set to be abandoned, as the Saudi Royal family is deposed. Two and three years ago, my firm belief was that the Saudis would choose to switch chariots as the Eastern horses would be favored. The Saudis would see the Anglos are losing their grip on the global helm, suffering from insolvency and rot from corruption. Instead, it seems the Saudis are soon to endure a surprising backlash blow from the Arab Spring uprisings. Not well reported in the controlled panels of the Western press are the high level Syrian deaths. A real battle clearly features the tyrant Assad against his people, striving for freedom. Another battle is between HezBollah and the Saudi security teams. No details will be offered, since not much is known except some of the wretched unfolding of events. By many accounts, their Minister of Security Prince Bandar was just assassinated, perhaps two to three weeks ago. A photograph from mid-August was doctored to show Bandar Bush still alive, according to a source in the Persian Gulf. The apparent kill was revenge for the targeted hits done on the Assad regime. Things are all coming apart in Saudi Land, hardly called collateral damage. What incredible irony if the Petro-Dollar is collateral damage from the Syrian projects. What irony if the Arab Spring begun by the QE1 with blowback from rising food prices, encouraged by the US security agencies, delivers a blowback to knock the USDollar of its oil studded throne. (…) The ultimate cost could eventually be the Fall of the House of Saud after almost 60 years reign, and the deposed USDollar as global reserve currency.  Complete article HERE

***

How Long Will the Dollar Remain the World’s Reserve Currency?

by Ron Paul
paul.house.gov

We frequently hear the financial press refer to the U.S. dollar as the “world’s reserve currency,” implying that our dollar will always retain its value in an ever shifting world economy.  But this is a dangerous and mistaken assumption.

Since August 15, 1971, when President Nixon closed the gold window and refused to pay out any of our remaining 280 million ounces of gold, the U.S. dollar has operated as a pure fiat currency.  This means the dollar became an article of faith in the continued stability and might of the U.S. government.

In essence, we declared our insolvency in 1971.   Everyone recognized some other monetary system had to be devised in order to bring stability to the markets.

Amazingly, a new system was devised which allowed the U.S. to operate the printing presses for the world reserve currency with no restraints placed on it– not even a pretense of gold convertibility! Realizing the world was embarking on something new and mind-boggling, elite money managers, with especially strong support from U.S. authorities, struck an agreement with OPEC in the 1970s to price oil in U.S. dollars exclusively for all worldwide transactions. This gave the dollar a special place among world currencies and in essence backed the dollar with oil.

In return, the U.S. promised to protect the various oil-rich kingdoms in the Persian Gulf against threat of invasion or domestic coup. This arrangement helped ignite radical Islamic movements among those who resented our influence in the region. The arrangement also gave the dollar artificial strength, with tremendous financial benefits for the United States. It allowed us to export our monetary inflation by buying oil and other goods at a great discount as the dollar flourished.

In 2003, however, Iran began pricing its oil exports in Euro for Asian and European buyers.  The Iranian government also opened an oil bourse in 2008 on the island of Kish in the Persian Gulf for the express purpose of trading oil in Euro and other currencies. In 2009 Iran completely ceased any oil transactions in U.S. dollars.  These actions by the second largest OPEC oil producer pose a direct threat to the continued status of our dollar as the world’s reserve currency, a threat which partially explains our ongoing hostility toward Tehran.

While the erosion of our petrodollar agreement with OPEC certainly threatens the dollar’s status in the Middle East, an even larger threat resides in the Far East.  Our greatest benefactors for the last twenty years– Asian central banks– have lost their appetite for holding U.S. dollars.  China, Japan, and Asia in general have been happy to hold U.S. debt instruments in recent decades, but they will not prop up our spending habits forever.  Foreign central banks understand that American leaders do not have the discipline to maintain a stable currency.

If we act now to replace the fiat system with a stable dollar backed by precious metals or commodities, the dollar can regain its status as the safest store of value among all government currencies.  If not, the rest of the world will abandon the dollar as the global reserve currency.

Both Congress and American consumers will then find borrowing a dramatically more expensive proposition. Remember, our entire consumption economy is based on the willingness of foreigners to hold U.S. debt.  We face a reordering of the entire world economy if the federal government cannot print, borrow, and spend money at a rate that satisfies its endless appetite for deficit spending. (5)

Notes:

(1) Firestorms & Currency Twisters, by Jim Willie
(2) China no paga con la misma moneda: el yuan desplaza con rapidez al dólar, http://actualidad.rt.com/economia/view/52753-se-echa-yuan-sorpresa-dolar-china-eeuu, Publicado: 1 sep 2012 (Translation: Google Translate)
(3) China, Germany to Settle More Trade in Yuan, Euros; What does That Mean for Gold, the Dollar ?, by MishGlobal Economic Analysis, September 3, 2012
(4) USA to continue its wars as long as dollar remains reserve currency, Pravda.ru, Sept 4, 2012
(5) How Long Will the Dollar Remain the World’s Reserve Currency?, by Ron Paul

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