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| Moscow and Beijing join forces to bypass US dollar in world money market Move seen as small step towards monetary alliance to bypass US dollar in the global monetary system PUBLISHED : Friday, 17 March, 2017, 8:02am UPDATED : Saturday, 18 March, 2017, 12:00pm Russia’s central bank opened its first overseas office in Beijing on Thursday, marking a small step forward in forging a Beijing-Moscow alliance to bypass the US dollar in the global monetary system.It was part of agreements made between the two neighbours to seek stronger economic ties since the West brought in sanctions against Russia over the Ukraine crisis and the oil-price slump hit the Russian economy. The opening of a Beijing representative office by the Central Bank of Russia was a “very timely” move to aid specific cooperation, including bond issuance, anti-money laundering and anti-terrorism measures between China and Russia, said Dmitry Skobelkin, deputy governor of the Central Bank of Russia … for more, go to http://www.scmp.com/news/china/diplomacy-defence/article/2079648/russian-central-bank-opens-first-overseas-office |
US vs China-Russia global trade war begins
https://youtu.be/Nkfb2EW0YwQ (VIDEO: Moscow And Beijing Join Forces To Bypass US Dollar In Global Markets)
KUALA LUMPUR (March 2018): Believe it or not, President Donald Trump’s current “tariff amok” is aimed at demonising and destroying China’s fast growing global economic and military influence.
And, the scheme that has become the US’ nightmare is slowly but sure unfolding clearly - China’s trillion-dollar Belt Road Initiative (BRI) that is scheduled to be completed - with the participation of 69 countries and cities to date - in 2025.
And with it, economists are predicting that China’s economy is set to be twice as large as the US by 2030!
BRI is not the only thing that is scaring the hell out of the US.
China and Russia inked a deal last year to trade in their own currencies or in gold - meaning, dumping the Greenback or Petrodollars! The deal has started the ball rolling for other countries to also use their own currencies to conduct trans border financial trade transactions.
Read on to find out why the rest of the world must be prepared for a US-initiated all-out global trade war at best; or worse, a conventional US-China military clash:
"China Is Days Away From Killing the Petrodollar
by Nick Giambruno, Senior Editor
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The answer was, “The husband of Peng Liyuan,” the famous singer Xi is married to.
Today, Xi is China’s president. He leads 1.4 billion people. And he’ll likely be the most powerful person in the world soon.
As I mentioned last Wednesday, Trump’s new steel and aluminum tariffs are part of a larger, escalating battle between the US and China.
China is rapidly displacing the US as the dominant global power. This shift is inevitable. China’s economy will be twice as large as the US economy by 2030.
This leaves the US with limited options…
1. It could kick back and let China displace it as the most powerful country in the world.
2. It could start a military war with China.
3. And it could push the current trade battle into an all-out economic war against China.
I think a full-blown economic war is the most likely. Under President Trump, it’s all but certain.
That said, the Trump administration seems to underestimate China’s position—in both the short and long term.
For decades, the US has been able to exclude virtually any country it wants from international trade. Right now, if one country wants to trade with another, it basically needs US permission first.
That’s because (for a short while longer) the US dollar is the world’s most important currency. The US Navy also dominates the world’s oceans, controlling most major shipping lanes.
But China is building a new international system. Eventually, it will let China and its trading partners totally bypass the US.
And, as I’ll explain shortly, a key piece is set to fall into place on March 26…
History’s Biggest Infrastructure Project
The New Silk Road is the centerpiece of China’s new plan.
In the coming months and years, it will include high-speed rail lines, modern highways, fiber optic cables, energy pipelines, seaports, and airports. It will link the Atlantic shores of Europe to the Pacific shores of Asia.
China expects to have its New Silk Road fully up and running by 2025.
This is history’s biggest infrastructure project. The whole point is to completely re-draw the world economic map. If it’s successful—and it most likely will be—China will dominate Eurasia.
President Xi announced the $1.4 trillion plan in late 2013. When it’s done, a train leaving Beijing will be able to reach London in only two days.
Keep in mind, the Chinese are careful long-term planners. When they make a strategic decision of this magnitude, they totally commit.
Take their road system, for example. Between 1996 and 2016 China built 2.6 million miles of road, including 70,000 miles of highway. In just 20 years, it built far more highway than the US has in its entire existence.
In other words, the Chinese get things done. They have the political might—along with the financial, technological, and physical resources—to make the New Silk Road happen. With iron-willed President Xi at the helm, I have no doubt they’ll pull it off.
Not long from now, the New Silk Road will help China unseat the US as the world’s dominant global power and totally upend the geopolitical paradigm.
But before that happens—within the next couple of weeks, actually—China is introducing a way for anyone who buys or sells oil to opt out of the US-dominated global monetary system.
Why the Dollar Is Different Than the Peso
Most investors know that oil is the largest and most strategic commodity market in the world. As you can see in the chart below, it dwarfs all other major commodity markets combined.
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This is the essence of the petrodollar system, which has underpinned the US dollar’s role as the world’s reserve currency since the early 1970s.
Right now, if Italy wants to buy oil from Kuwait, it has to purchase US dollars on the foreign exchange market to pay for the oil first.
This creates a huge artificial market for US dollars.
In part, this is what separates the US dollar from a purely local currency, like the Mexican peso.
The dollar is just a middleman. But it’s used in countless transactions amounting to trillions of dollars that have nothing to do with US products or services.
Since the oil market is so enormous, it acts as a benchmark for international trade. If foreign countries are already using dollars for oil, it’s just easier to use dollars for other international trade, too.
In addition to nearly all oil sales, the US dollar is used for about 80% of all international transactions.
This gives the US unmatched geopolitical leverage. The US can sanction or exclude virtually any country from the US dollar-based financial system at the flip of a switch. By extension, it can also cut off any country from the vast majority of international trade.
The petrodollar system is why people and businesses everywhere in the world take US dollars. Other countries have had little choice about it, until now…
China’s “Golden Alternative”
China does not want to depend on its main adversary like this. It’s the world’s largest oil importer. And it doesn’t want to buy all that oil with US dollars.
That’s why China is introducing a new way to buy oil. For the first time, it will allow for the large-scale exchange of oil for gold.
I’m calling this new mechanism China’s “Golden Alternative” to the petrodollar. It goes live on March 26.
Ultimately, I think people will look back and see the Golden Alternative as the catalyst that killed the petrodollar.
Here’s how it will work…
The Shanghai International Energy Exchange is introducing a crude oil futures contract denominated in Chinese yuan. It will allow oil producers to sell their oil for yuan.
China knows most oil producers don’t want a large reserve of yuan. So producers will be able to efficiently convert it into physical gold through gold exchanges in Shanghai and Hong Kong.
As of March 26, countries around the world will have a genuine, viable way to opt out of the petrodollar system. Now is the time to position yourself to profit.
Gold Will Soar
With China’s Golden Alternative, a lot of oil money will flow into yuan and gold instead of dollars and Treasuries.
I think the price of gold is going to soar.
China imports an average of around 8.5 million barrels of oil per day. This figure is expected to grow at least 10% per year.
Right now, oil is hovering around $60 per barrel. That means China is spending around $510 million per day to import oil.
Gold is currently priced around $1,300 an ounce. That means every day China is importing oil worth over 390,000 ounces of gold.
If we assume that just half of Chinese oil imports will be purchased in gold soon, it translates into increased demand of well over 60 million ounces per year—or more than 55% of gold’s annual production.
Of course, China won’t be the only country using the Golden Alternative. Anyone will be able to.
The increased demand for gold is going to shock the market. That’s why I think the price of gold will soar.
As the petrodollar dies, gold will be remonetized… and China will be another step closer to displacing the US.
Editor’s Note: Owning physical gold’s not the only way to turn the coming chaos into huge profits. There are other practical steps you can take before the US-China conflict reaches its boiling point. Get the details in our guide to Surviving and Thriving During an Economic Collapse.
Nick GiambrunoNick is Doug Casey’s globetrotting companion and is the Senior Editor of Casey Research’s International Man. He writes about economics, offshore banking, second passports, value investing in crisis markets, geopolitics, and surviving a financial collapse, among other topics. In short, Nick’s work helps people make the most of their personal freedom and financial opportunity around the world. To get his free video crash course, click here. - International Man
Timing the Collapse: Ron Paul Says Watch the Petrodollar
by Nick Giambruno, Senior Editor"The chaos that one day will ensue from our 35-year experiment with worldwide fiat money will require a return to money of real value. We will know that day is approaching when oil-producing countries demand gold, or its equivalent, for their oil rather than dollars or euros. The sooner the better." (emphasis mine)
~ Ron Paul
What Ron Paul is referring to here is the petrodollar system. It's one of the main pillars that's been holding up the US dollar's status as the world's premier reserve currency since the breakdown of Bretton Woods.
Paul is essentially saying that, if we want to better understand the answer to the elusive question of "When will the fiat US dollar collapse?", we have to watch the petrodollar system and the factors affecting it.
At the recent Casey Research Summit, I had the chance to speak extensively with Dr. Paul on this subject, and he told me that he stands by his assessment.
I believe this is critically important, because once the dollar loses this coveted status, the window of opportunity to take preventative action will definitively shut for Americans.
At that moment, I believe the US government will become sufficiently desperate and implement the destructive measures that governments throughout the world and throughout history have all taken (overt capital controls, wealth confiscations, people controls, price and wage controls, pension nationalizations, etc.)
But it's not just the financial implications that need to be considered. The destruction of the dollar is going to wipe out the wealth of a lot people, and that will cause political and social consequences that will likely be worse than the financial consequences.
The three points to understand here are:
1. You absolutely must be internationalized before the US dollar loses its status as the premier reserve currency. Internationalization is your ultimate insurance policy.
1. The US dollar's status as the premier reserve currency is tied to the petrodollar system.
1. The sustainability of the petrodollar system is linked to Middle East geopolitics. Having lived and worked in the Middle East for a number of years, this is a topic I know a thing or two about.
From Bretton Woods to the Petrodollar
The dollar's role as the world's premier reserve currency was established in 1944 by the Allied powers in what was known as the Bretton Woods international monetary system.
Being victorious in WWII and possessing the overwhelmingly largest gold reserves in the world (around 20,000 tonnes) allowed the US to reconstruct the global monetary system with the dollar at its center.
Simply put, the Bretton Woods system was an arrangement whereby a country's currency was tied to the US dollar through a fixed exchange rate, and the US dollar itself was tied to gold at a fixed exchange rate.
Countries accumulated dollars in their reserves to engage in international trade or to exchange them with the US government at the official rate for gold ($35 an ounce).
By the late 1960s, exuberant spending from welfare and warfare, combined with the Federal Reserve monetizing the deficits, drastically increased the number of dollars in circulation in relation to the gold backing it.
Naturally, this caused countries to accelerate their exchange of dollars for gold at the official price.
The result was a serious drain in the US gold supply (20,000 tonnes at the end of WWII to around 8,100 tonnes in 1971, a figure supposedly held constant to this day).
Nixon officially ended convertibility of the dollar for gold to halt the gold outflow, thus ending the Bretton Woods system, on August 15, 1971.
The US had defaulted on its promise to back the dollar with gold.
The central justification that the gold–backed dollar had provided as to why countries held the dollar in their reserves and used it as a medium of international trade was now gone.
With the dollar no longer convertible into gold, demand for dollars by foreign nations was sure to fall and with it, its purchasing power.
OPEC passed numerous resolutions after the end of Bretton Woods, stating the need to retain the real value of its earnings (including discussions about accepting gold for oil), which resulted in the cartel significantly increasing the nominal dollar price of oil in the wake of August 15, 1971.
If the dollar was to sustain its status as the world's reserve currency, a new arrangement would have to be constructed to give foreign countries a compelling reason to hold and use dollars.
Nixon and Kissinger would end up succeeding in retaining the dollar's premier status by bridging the gap between the failed Bretton Woods system and the emerging petrodollar system.
The Petrodollar System
Between the years of 1972 to 1974 the US government completed a series of agreements with Saudi Arabia to create the petrodollar system.
Saudi Arabia was chosen because of its vast petroleum reserves, its dominant influence in OPEC, and the (correct) perception that the Saudi royal family was corruptible.
In essence, the petrodollar system was an agreement that, in exchange for the US guaranteeing the survival of the House of Saud regime by providing a total commitment to its political and security support, Saudi Arabia would:
1. Use its dominant influence in OPEC to ensure that all oil transactions would be conducted only in US dollars.
1. Invest a large amount of its dollars from oil revenue in US Treasury securities and use the interest payments from those securities to pay US companies to modernize the infrastructure of Saudi Arabia.
1. Guarantee the price of oil within limits acceptable to the US and act to prevent another oil embargo by other OPEC members.
The need to use dollars to transact in oil, the world's most traded and most strategic commodity, provides a very compelling reason for foreign countries to keep dollars in their reserves.
For example, if Italy wants to buy oil from Kuwait, it would have to first purchase US dollars on the foreign exchange market to pay for the oil, thus creating an artificial market for US dollars that would not have otherwise naturally existed.
This demand is artificial, since the US dollar is just a middleman in a transaction that has nothing to do with a US product or service. It ultimately translates into increased purchasing power and a deeper, more liquid market for the US dollar and Treasuries.
Additionally, the US has the unique privilege of not having to use foreign currency but rather using its own currency, which it can print, to purchase its imports, including oil.
The benefits of the petrodollar system to the US dollar are indeed difficult to overstate.
What to Watch For
The geopolitical sands of the Middle East have been rapidly shifting.
The faltering strategic regional position of Saudi Arabia, the rise of Iran (which is notably not part of the petrodollar system), failed US interventions, and the emergence of the BRICS countries providing potential future alternative economic/security arrangements all affect the sustainability of the petrodollar system.
In particular, you should watch the relationship between the US and Saudi Arabia, which has been deteriorating.
The Saudis are furious at what they perceive to be the US not holding up its part of the petrodollar deal. They believe that as part of the US commitment to keep the region safe for the monarchy, the US should have attacked their regional rivals, Syria and Iran, by now.
This would suggest that they may feel that they are no longer obliged to uphold their part of the deal, namely selling their oil only in US dollars.
The Saudis have even gone so far as to suggest a "major shift" is underway in their relations with the US. To date, though, they have yet to match actions to their words, which suggests it may just be a temper tantrum or a bluff. In any case, it is truly unprecedented language and merits further watching.
A turning point may really be reached when you start hearing US officials expounding on the need to transform the monarchy in Saudi Arabia into a "democracy." But don't count on that happening as long as their oil is flowing only for US dollars.
Conclusion
It was evident long before Nixon closed the gold window and ended the Bretton Woods system on August 15, 1971, that a paradigm shift in the global monetary system was inevitable.
Likewise today, a paradigm shift in the global monetary system also seems inevitable. By considering Ron Paul's words, we will know when the dollar collapse is imminent.
"We will know that day is approaching when oil-producing countries demand gold, or its equivalent, for their oil rather than dollars or euros."
There is no question that you want to be internationalized before that day arrives, which seems to be getting closer and closer. It is very possible that one day soon, Americans will wake up to a new reality, just as they did on August 15, 1971.
Your goal should be to remove as much political risk from as many aspects of your life as possible so that you are not caught flat-footed when the next August 15, 1971 moment arrives.
International diversification is your ultimate insurance policy to protect you from not just the financial, but also the sociopolitical effects of an economic collapse. Be sure to get the free IM Communiqué to keep up with the latest on how to protect yourself. - International Man
Nick Giambruno
Nick is Doug Casey’s globetrotting companion and is the Senior Editor of Casey Research’s International Man. He writes about economics, offshore banking, second passports, value investing in crisis markets, geopolitics, and surviving a financial collapse, among other topics. In short, Nick’s work helps people make the most of their personal freedom and financial opportunity around the world. To get his free video crash course, click here. - International Man
How to Profit from the Biggest Infrastructure Project in History… (Hint: It’s Not Trump’s)
by Nick Giambruno, Senior Editor
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I discussed with Justin what I think will be 2017’s two biggest stories, and of course how you can make money getting ahead of these big trends.
I think you’ll find our conversation below informative and entertaining.
Nick Giambruno
Senior Editor
International Man
Justin Spittler: Thanks for joining me today, Nick. With 2016 in the books, what big themes do you see playing out this year?
Nick Giambruno: I think the European Union (EU) could collapse this year. Now, this might sound crazy to some people, but hear me out.
A populist tsunami is washing through Europe. It will drastically change the Continent’s political landscape in a way not seen since before World War II.
This wave will flush away traditional “mainstream” parties and usher in anti-establishment populists who want to leave the European Union and its currency, the euro.
In June of last year, it took shape in the United Kingdom in the form of Brexit, which killed David Cameron’s pro-EU government.
Six months later, it struck Italy. As our readers know, Italy held an important constitutional referendum on December 4. This vote forced Matteo Renzi, Italy’s former pro-EU prime minster, to step down.
I think you’re going to see a lot more European countries do the same. The momentum is clearly building for this anti-elite surge. It’s like a hurricane gathering strength. I think the failure of the Italian referendum is the tipping point. It will make this trend unstoppable.
Voters in Europe’s biggest countries could soon throw out their “mainstream” parties in favor of populist and Eurosceptic alternatives.
2017 will be a decisive year.
Voters go to the polls in major elections in the Netherlands (March 15), France (April 23), and Germany (between August 27 and October 22).
Anti-euro populists have a real chance to win in any of those countries. If they win in even one, the EU would likely unravel.
J.S.: I know many of our readers are following this story closely. It will be interesting to see how things shake out.
Any other big themes investors should keep their eyes on?
Nick Giambruno: China’s New Silk Road is one of the biggest stories in the world right now. The US media has barely made a peep about it. That’s probably because the idea is too big to fit into sound bites. But that doesn’t make it any less important.
For thousands of years, the Silk Road was one of the world’s most important land routes. It stretched 4,000 miles and was the main trade route for lucrative Chinese silk, passing through a chain of empires all the way from China to Europe. Famed merchant Marco Polo traveled to the Orient on this path.
Now China is building a New Silk Road. It is history’s biggest infrastructure project.
If all goes according to plan, the New Silk Road will be up and running by 2025. A train will be able to zip from Beijing to London in only two days.
Chinese President Xi Jinping announced the gigantic plan in late 2013. The New Silk Road will include high-speed rail lines, modern highways, fiber-optic cable networks, energy pipelines, seaports, and airports. It will link Europe’s Atlantic shores to the Pacific shores of Asia.
Unlike Western governments, the Chinese rule by consensus. They’re careful long-term planners. When they make a strategic decision of this magnitude, they’re totally committed.
Not only does China have the political clout to pull this off, it also has the financial, technological, and physical resources to make it happen.
J.S.: Interesting. How will the New Silk Road impact the global economy?
Nick Giambruno: It will likely trigger the biggest shift in global power since World War II.
To understand why, it helps to look at a map…
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| Source: Free World Maps |
You’ll notice that Asia and Europe are shown as one giant land mass called “Eurasia.”
Decades ago, Sir Halford Mackinder, the godfather of geopolitical theory, argued that the key to becoming a dominant global power was controlling Eurasia.
Zbigniew Brzezinski, a renowned Polish-American geopolitical strategist, also thinks controlling Eurasia is key to becoming a global economic power. He wrote in his 1997 book The Grand Chessboard: American Primacy and Its Geostrategic Imperatives:
Ever since the continents started interacting politically, some five hundred years ago, Eurasia has been the center of world power. . . . A power that dominates Eurasia would control two of the world’s three most advanced and economically productive regions . . . rendering the Western Hemisphere and Oceania geopolitically peripheral to the world’s central continent. About 75 percent of the world’s people live in Eurasia, and most of the world’s physical wealth is there as well, both in its enterprises and underneath its soil. Eurasia accounts for about . . . three-fourths of the world’s known energy resources.
In other words, if a single country controlled Eurasia, it would be an unstoppable global superpower. And that’s exactly what China plans to do.
J.S.: Can investors make money off the New Silk Road today?
Nick Giambruno: Yes, they can. Massive amounts of money are already flowing into China’s New Silk Road. Accounting firm PricewaterhouseCoopers estimates that more than $250 billion has already been invested in New Silk Road projects like railways and power plants. Many analysts think this number could eventually reach $1 trillion.
Investors who get in right now—ahead of this trillion-dollar tsunami—are likely to make enormous profits…
Last year, I told my readers in Crisis Investing how to profit from this gigantic global economic power shift. My New Silk Road investment is already up 8% since then. But I think much bigger gains are on the way—possibly triple-digit gains—as this trend is still in its infancy.
Best of all, you don’t have to be a sophisticated investor to get in on this investment. All you need is a regular US brokerage account.
If all goes according to plan, the New Silk Road will give China a huge economic advantage over the United States.
If China succeeds, it could soon overtake the US to become the dominant global superpower.
The rise of China also brings up another important point.
It’s not going to be good news for the US.
Specifically, it’s a huge threat to the dollar and US financial system.
Most people don’t realize it, but if China dislodges the dollar as the world’s reserve currency, the dollar would collapse.
We think a financial crisis for the record books is coming in the months ahead. It’s going to be much worse, much longer, and very different than what we saw in 2008 and 2009.
That’s exactly why New York Times best-selling author Doug Casey and I covered this in a recent issue of Crisis Investing. Click here to get access now.
Nick GiambrunoNick is Doug Casey’s globetrotting companion and is the Senior Editor of Casey Research’s International Man. He writes about economics, offshore banking, second passports, value investing in crisis markets, geopolitics, and surviving a financial collapse, among other topics. In short, Nick’s work helps people make the most of their personal freedom and financial opportunity around the world. To get his free video crash course, click here. - International Man"
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| Russia’s central bank opened its first overseas office in Beijing last month, coming one step closer to replacing the U.S. dollar as the world’s reserve currency. The South China Morning Post reported the new office was part of agreements made between the two countries “to seek stronger economic ties.” “The opening of a Beijing representative office by the Central Bank of Russia was a “very timely” move to aid specific cooperation, including bond issuance, anti-money laundering and anti-terrorism measures between China and Russia,” Dmitry Skobelkin, deputy governor of the Central Bank of Russia said. Financial regulators from both countries agreed last May to issue home-currency-denominated bonds in each other’s respective markets, a move that is seen as the beginning of the dethroning of the U.S. dollar, as both countries have stated they would implement a replacement for years. China opened up its gold market in 2016, an entirely separate system than the COMEX gold futures market in New York and the Over-the-Counter (OTC) trades cleared through the London Bullion Market. China and Russia have both been working to undermine the West and the U.S. dollar since China called for a new world reserve currency in 2009. A Wikileaks cable titled “China increases its gold reserves in order to kill two birds with one stone” shows that China was already shifting some of its massive foreign holdings into gold and away from the U.S. dollar in 2009. China again began stockpiling gold in 2013, when they bought JPMorgan’s building that previously housed its gold … for more, go to https://wearechange.org/moscow-beijing-join-forces-bypass-us-dollar-world-reserve-currency/ |
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