While our own American leadership arrogantly assumes that our paper money will always be the primary reserve currency of the world, foreign nations seem to be increasing their plans to remove the dollar from the world's stage. To prove this point, let's just run through a few of the various press reports of the past few weeks.
November 13, 2013
The Washington Times
By Marc Bennetts
MOSCOW — Predicting the imminent collapse of the U.S. dollar, a Russian lawmaker submitted a bill to the country's parliament on Wednesday that would ban the use or possession of the American currency.
Mikhail Degtyarev, the lawmaker who proposed the bill, compared the dollar to a Ponzi scheme. He warned that the government would have to bail out Russians holding the U.S. currency if it collapsed.
"If the U.S. national debt continues to grow, the collapse of the dollar system will take place in 2017," said Mr. Degtyarev, a member of the nationalist Liberal Democrat Party who was a losing candidate in Moscow's recent mayoral election.
"The countries that will suffer the most will be those that have failed to wean themselves off their dependence on the dollar in time. In light of this, the fact that confidence in the dollar is growing among Russian citizens is extremely dangerous."
The bill would partially revive a Soviet-era ban on the dollar. It would prohibit Russians from holding dollars in the country's banks, and banks also would be unable to carry out transactions in the dollar.
November 7, 2013
The Economic Collapse
By Michael Snyder
The death of the dollar is coming, and it will probably be China that pulls the trigger. What you are about to read is understood by only a very small fraction of all Americans. Right now, the U.S. dollar is the de facto reserve currency of the planet. Most global trade is conducted in U.S. dollars, and almost all oil is sold for U.S. dollars. More than 60 percent of all global foreign exchange reserves are held in U.S. dollars, and far more U.S. dollars are actually used outside of the United States than inside of it. As will be described below, this has given the United States some tremendous economic advantages, and most Americans have no idea how much their current standard of living depends on the dollar remaining the reserve currency of the world. Unfortunately, thanks to reckless money printing by the Federal Reserve and the reckless accumulation of debt by the federal government, the status of the dollar as the reserve currency of the world is now in great jeopardy.
November 6, 2013
By Ashish Advani
It is hard to pinpoint the extent of hostility against the U.S. dollar, but the resentment toward the United States and the U.S. dollar is definitely ratcheting up as time passes.One always hears that kicking the can down the road can only make things worse as time passes, and one has to pay the piper eventually. I am beginning to sense the eventually may not be that far off now. The walls seem to be caving in around the U.S. dollar faster than before.
The most attention-grabbing reform planned for Shanghai's new free trade zone is free convertibility of the yuan — also known as the renminbi, or "people's money" — an unprecedented change which would allow greater use of the currency.
But no timetable has been specified, and a true contest between Mao Zedong, Communist China's founding father whose face is emblazoned on most yuan notes, and Benjamin Franklin on the $100 bill will be years in the making.
For decades the US has benefited to the tune of trillions of dollars-worth of free credit from the greenback's role as the default global reserve unit.
But as the global economy trembled before the prospect of a US default last month, only averted when Washington reached a deal to raise its debt ceiling, China's official Xinhua news agency called for a "de-Americanised" world.
It also urged the creation of a "new international reserve currency… to replace the dominant US dollar".
November 5, 2013
By Ye Xie, Maria Levitov and Fion Li, Bloomberg News
HONG KONG — Evidence the yuan is becoming truly global can be found in Rongrong Huo's passport, which shows the HSBC Holdings Plc banker bouncing from Switzerland to South Africa fielding inquiries from a growing number of clients on how they can trade China's currency.
International use of the yuan is increasing as the world's second-largest economy opens up its capital markets. In the first nine months of this year, about 17 percent of China's global trade was settled in the currency, compared with less than 1 percent in 2009, according to Deutsche Bank AG.
"The development of the yuan market is the biggest story for the foreign-exchange market in many years," Stuart Oakley, Nomura's head of currency cash trading for Asia outside Japan, said in an Oct. 24 phone interview from London. "I would compare it to the inception of the euro in terms of its significance."
October 25, 2013
by Katie Holliday
Investors are failing to factor in the very real risk of China scaling back on its U.S. government debt holdings, economist Stephen Roach told CNBC.
"Everyone thinks interest rates are going to stay low in the U.S. because the Fed is in the control room… but the Chinese own about 11 percent of the Treasury market right now, and as they start to reduce their purchases of dollar-based assets… [this] will mean higher interest rates," he told CNBC Asia's Squawk Box . . .
Most analysts have dismissed fears of China cutting its Treasury holdings, arguing that there is not a large or liquid enough viable alternative. But Roach questioned this argument, noting U.S. investors have become too smug in thinking that China would stick to its holdings for this reason.
"The U.S. is really not focused on the possibility of [China scaling back on Treasurys] because they think very smugly ‘where else are they going to go?' And where else are the Chinese is going to go… [they will start] directing their savings at supporting their economy not just America's economy," he said.
Roach added that the recent political crisis in Washington has meant Chinese investors will be even less inclined to maintain their exposure to U.S. government debt.
October 23, 2013
By Michael SnyderThe number one American export is U.S. dollars. It is paper currency that is backed up by absolutely nothing, but the rest of the world has been using it to trade with one another and so there is tremendous global demand for our dollars. The linchpin of this system is the petrodollar. For decades, if you have wanted to buy oil virtually anywhere in the world you have had to do so with U.S. dollars. But if one of the biggest oil exporters on the planet, such as Saudi Arabia, decided to start accepting other currencies as payment for oil, the petrodollar monopoly would disintegrate very rapidly. For years, everyone assumed that nothing like that would happen any time soon, but now Saudi officials are warning of a "major shift" in relations with the United States. In fact, the Saudis are so upset at the Obama administration that "all options" are reportedly "on the table". If it gets to the point where the Saudis decide to make a major move away from the petrodollar monopoly, it will be absolutely catastrophic for the U.S. economy.
October 22, 2013
Saudi Arabia, the world's biggest oil exporter, ploughs much of its earnings back into US assets. Most of the Saudi central bank's net foreign assets of $690 billion are thought to be denominated in dollars, much of them in US Treasury bonds.
"All options are on the table now, and for sure there will be some impact," the Saudi source said.
October 8, 2013
If that isn't convincing enough, on October 17th, Michael Snyder also wrote a strong piece titled 9 Signs That China Is Making A Move Against The U.S. Dollar. Here are his nine points:
by Yuri Skidanov
At the G-20 summit in St. Petersburg the discussion of U.S. aggression against Syria overshadowed the economic issues. Meanwhile, there have been certain developments in this area that are crucial for the future of the global economy. The first steps were made to rid the banking and financial system of the dictatorship of the U.S. dollar as the world reserve currency.
U.S. power is determined by two components: the dollar as the world reserve currency and the army. When the U.S. dollar becomes weaker, the army starts acting, arranging demonstrations and beneficial in the long run aggressions "oil in exchange for democracy."There are many examples of this, especially after the collapse of the great Soviet Union, when the United States began organizing local wars and conflicts nearly every year. Syria is a good example: Obama spoke of an armed strike after he became aware of the official debt of 17 trillion dollars, and according to unofficial estimates of Californian scientists this number is much larger . . .
Another unprecedented step towards getting rid of the monopoly of the dollar is the creation of a stabilization fund of the BRICS countries and the Development Bank. Its goal, as stated by the President of the Russian Federation, is to contribute to the improvement of the financial markets after the U.S. ends the policy of quantitative stimulation. This was a diplomatic statement, but its meaning translated into vernacular formula would sound something like "get lost with your dollar."The initiative would create a full-fledged monetary union. The BRICS sovereign fund along with the Bank may lend money to the countries participating in the fund without the consent of the Federal Reserve. The residents of these countries represent 44 percent of the world's population. The Bank will have the opportunity to buy securities of the Fund as well as debt securities of the participating countries. This means a sovereign issue according to the rules of today's financial market, bypassing the Federal Reserve System. In times of an acute economic crisis launched by the U.S., the fund may take over the function of the new financial center of the world, reducing the role of the compromised dollar to zero.
President Putin has consolidated BRICS countries around Russia in order to create sovereign issue tools in addition to the Federal Reserve that did not exist since the time of the Soviet Union. These are the outlines of a future world order where there will be no place for the greedy hegemony of the U.S. and its Anglo-Saxon satellites. The U.S. authorities are unable to prevent such a development. In terms of military potential BRICS countries are as strong as the U.S. and NATO, even if we assume that they will choose a suicidal nuclear mission.
#1 Chinese credit rating agency Dagong has downgraded U.S. debt from A to A- and has indicated that further downgrades are possible.
#2 China has just entered into a very large currency swap agreement with the eurozone that is considered a huge step toward establishing the yuan as a major world currency. This agreement will result in a lot less U.S. dollars being used in trade between China and Europe…
The swap deal will allow more trade and investment between the regions to be conducted in euros and yuan, without having to convert into another currency such as the U.S. dollar first, said Kathleen Brooks, a research director at FOREX.com.
"It's a way of promoting European and Chinese trade, but not doing it with the U.S. dollar," said Brooks. "It's a bit like cutting out the middleman, all of a sudden there's potentially no U.S. dollar risk."
#3 Back in June, China signed a major currency swap agreement with the United Kingdom. This was another very important step toward internationalizing the yuan.
#4 China currently owns about 1.3 trillion dollars of U.S. debt, and this enormous exposure to U.S. debt is starting to become a major political issue within China.
#5 Mei Xinyu, Commerce Minister adviser to the Chinese government, warned this weekthat if the U.S. government ever does default that China may decide to completely stop buying U.S. Treasury bonds.
#6 According to Yahoo News, China has already been looking for ways to diversify away from the U.S. dollar…
There have been media reports this week that China's State Administration of Foreign Exchange, the body that handles the country's $3.66 trillion of foreign exchange reserve, is looking to diversify into real estate investments in Europe.
#7 Xinhua, the official news agency of China, called for a "de-Americanized world" this week, and also made the following statement about the political turmoil in Washington: "The cyclical stagnation in Washington for a viable bipartisan solution over a federal budget and an approval for raising debt ceiling has again left many nations' tremendous dollar assets in jeopardy and the international community highly agonized."
#8 Xinhua also said the following about the U.S. debt deal on Thursday: "[P]oliticians in Washington have done nothing substantial but postponing once again the final bankruptcy of global confidence in the U.S. financial system". The commentary in the government-run publication also declared that the debt deal "was no more than prolonging the fuse of the U.S. debt bomb one inch longer."
#9 China is the largest producer of gold in the world, and it has also been importing an absolutely massive amount of gold from other nations. But instead of slowing down, the Chinese appear to be accelerating their gold buying. In fact, money manager Stephen Leeb says that his sources are telling him that China plans to buy another 5,000 tons of gold. There are many that are convinced that China eventually plans to back the yuan with gold and try to make it the number one alternative to the U.S. dollar.
So exactly what would happen if the Chinese announced someday that they were going to back their currency with gold and would no longer be using the U.S. dollar in international trade?
It would change the face of the global economy almost overnight.
None of this can tell us exactly when or even if the dollar will lose its reserve currency status. But, all of it confirms that we are in a global economic war and the dollar is a primary target. To imagine otherwise is foolish. Unfortunately, our leadership has been ignoring this reality to our peril.
Here are a few links to other posts we have made on this subject in the past few months for your review:
by KEVIN D. FREEMAN on OCTOBER 13, 2013
by KEVIN D. FREEMAN on OCTOBER 1, 2013
by KEVIN D. FREEMAN on SEPTEMBER 17, 2013
by KEVIN D. FREEMAN on SEPTEMBER 16, 2013
by KEVIN D. FREEMAN on SEPTEMBER 15, 2013
by KEVIN D. FREEMAN on SEPTEMBER 5, 2013
by KEVIN D. FREEMAN on JULY 28, 2013
by KEVIN D. FREEMAN on JULY 21, 2013
by KEVIN D. FREEMAN on JULY 7, 2013
BOTTOM LINE: The threat is increasing and the pace is accelerating.