Tag Archives: de-dollarisation

The Global De-dollarization and the US Policies

The Russian government held a meeting on de-dollarization in spring of 2014, where the Ministry of Finance announced the plan to increase the share of ruble-denominated contracts and the consequent abandonment of dollar exchange. Last May at the Shanghai summit, the Russian delegation manged to sign the so-called “deal of the century” which implies that over the next 30 years China will buy $ 400 billion worth of Russia’s natural gas, while paying in rubles and yuans. In addition, in August 2014 a subsidiary company of Gazprom announced its readiness to accept payment for 80,000 tons of oil from Arctic deposits in rubles that were to be shipped to Europe, while the payment for the supply of oil through the “Eastern Siberia – Pacific Ocean” pipeline can be transferred in yuans. Last August while visiting the Crimea, Russia’s President Vladimir Putin announced that “the petrodollar system should become history” while “Russia is discussing the use of national currencies in mutual settlements with a number of countries.” These steps recently taken by Russia are the real reasons behind the West’s sanction policy.

In recent months, China has also become an active member of this “anti-dollar” campaign, since it has signed agreements with Canada and Qatar on national currencies exchange, which resulted in Canada becoming the first offshore hub for the yuan in North America. This fact alone can potentially double or even triple the volume of trade between the two countries since the volume of the swap agreement signed between China and Canada is estimated to be a total of 200 billion yuans.

China’s agreement with Qatar on direct currency swaps between the two countries are the equivalent of $ 5.7 billion and has cast a heavy blow to the petrodollar becoming the basis for the usage of the yuan in Middle East markets. It is no secret that the oil-producing countries of the Middle Eastern region have little trust in the US dollar due to the export of inflation, so one should expect other OPEC countries to sign agreements with China.

As for the Southeast Asia region, the establishment of a clearing center in Kuala Lumpur, which will promote greater use of the yuan locally, has become yet another major step that was made by China in the region. This event occurred in less than a month after the leading financial center of Asia – Singapore – became a center of the yuan exchange in Southeast Asia after establishing direct dialogue regarding the Singapore dollar and the yuan.

The Islamic Republic of Iran has recently announced its reluctance to use US dollars in its foreign trade. Additionally, the President of Kazakhstan Nursultan Nazarbayev has recently tasked the National Bank with the de-dollarization of the national economy.

All across the world, the calls for the creation of a new international monetary system are getting louder with each passing day. In this context it should be noted that the UK government plans to release debts denominated in yuans while the European Central Bank is discussing the possibility of including the yuan in its official reserves. Continue reading

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Oil: The US is in for a Bumpy Ride.

If the current price regime continues for years into the future than the value of the big agreements made last year might be impacted but the thing is that China and Russia are dealing in yuan and roubles, not in dollars. This means that the dollar’s fluctuations are not relevant and the price of the rouble and yuan as a pair will be much more stable than rouble – dollar -yuan will be.

China has devalued slightly, but the currency, due to its link to the dollar, is still very over valued. They could move another 20% to get to the ‘correct’ value. Of course by doing so they’d kick the US in the nuts such that they’d not be getting off the floor for a while.

For them cheaper energy is worthwhile but is not essential. It was the decline in China’s energy consumption early last year that told us what was happening globally – that consumption of Chinese goods was falling. The Chinese knew this too, before the energy figures gave he game away. That led them to move ahead with moving toward the internal market which has a huge amount of room to grow – just as the US market did from early in the last century when they were already the world’s largest economy (since about 1870).

It is obvious that the Chinese devaluation was a signal to the IMF and US. As many do not understand, a currency pegged to another, as the yuan and dollar are, are not freely traded. For inclusion in the IMF basket the yuan needs to be unpegged, either fully or almost so.

This is a signal to the IMF that China is willing to do what is needed.

The US is being told that China will no longer support the dollar as it has been doing.

Whilst events may seem to be coincidental they are probably less coincidental than we might imagine. China is making foreign policy moves, in concert with Russia. Saudi Arabia is making its own moves. The target, on the whole, is the US.

The goal is to force the dollar into appreciation against as many significant currency pairs as possible thus weakening the US freedom of action across the globe and in the internal market.

Remember, having a ‘strong’ currency is often not the best option, especially when the holders of that currency have been spending the past 6 years trying to devalue it, without success.

The big issue facing all of us is this: it is quite possible that the global economy can no longer afford to pay as much as it is for oil. If we can not afford to pay then we will not and the price will fall further. This WILL result in a fall in oil output from all but the cheapest sources – this means the US will cease to produce almost any oil. Only the cheapest producers will be viable and only the cheapest producers with manufacturing infrastructure will be able to maintain anything like current standards of living. Continue reading

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Two for the Price of One: De-dollarise and Reduce American Hegemony.

Russia is the largest exporter of gas in the world and the second largest exporter of oil. It isn’t much of a stretch to see how Russia, with China’s help, would be able to give Uncle Sam a major financial headache very quickly if they wanted to.

The dollar, at one time America’s strength, has become the tool to create a managed decline of its influence. We are seeing over time, the US as a declining power, the end of a unipolar world and a slow de-dollarisation taking place. If anything, this makes the US more dangerous as it won’t go down without a fight. Make no mistake, the US will go down kicking, screaming and lashing out.

It’s a process. A process the world now needs. The only way to wind down constant US wars, regime changes, terrorism and aggression across the world, without WW3, is to devalue and undermine the currency. And relegate America and its dollar to a regional power. Continue reading

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Why the US Economy is Finished. The Managed Decline of the USA by Russia & China.

We should hope they will succeed. Not because of any ill feeling towards America, but WW3 started on the back of economics to save a country hopelessly in debt will embroil much of the world. I think what we are seeing with Russia, China and others is a long, slow, managed decline of America to a regional power. The dollar, at one time America’s strength, will become the tool to create that managed decline of influence. Like I said before, America will go down kicking and screaming. And that is what may cause a war. Continue reading

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