War is coming…
This weekend’s chaos in the middle east just got considerably more serious.
China continues to pursue its ambitious plan to make its currency—the yuan—more international.
The world’s top crude oil importer and key oil demand growth driver is now determined to get as many oil exporters as possible on board with accepting yuan payments for their oil.
China is now trying to persuade OPEC’s kingpin and biggest exporter, Saudi Arabia, to start accepting yuan for its crude oil. If the Chinese succeed, other oil exporters could follow suit and abandon the U.S. dollar as the world’s reserve currency. Pulling oil trade out of U.S. dollars would lead to decreased demand for U.S. securities across the board, Carl Weinberg, chief economist and managing director at High Frequency Economics, tells CNBC. Weinberg believes that the Chinese will “compel” the Saudis to accept to trade oil in yuan.
In 1994, I was working for HBO at a low-level programming job.
My central task was to get HBO streaming interactively on cable lines.
I said to my boss, “The technology to do this is already done. It’s called the web. Why do I have to invent an entirely new way to stream content?”
He said, “James. Calm down. The cable guys know what they are doing. This internet thing is popular with academics but is just a fad.”
And that was that… Continue reading
It is one of the most impressive economic and political miracles in modern times. And it isn’t over yet.
China is a sovereign state with a population of over 1.3 billion people. The nation possesses the world’s largest economy by some measurements, the world’s largest population and the fourth-largest territory.
These are the building blocks of a superpower. While the world anticipates China gaining superpower status, analysts debate over when and whether its rise will be peaceful.
The Trumpet forecasts that China will continue to grow as a formidable power, combining its strength with Russia. Further, we forecast that it will play a major role in waging economic war that will devastate America.
Where do these forecasts come from? Continue reading
But, the latest news is one that should have every one stand up and take notice.
QUESTION: I read a credible theory recently about China taking over US as the top superpower via economic pressures. Namely by replacing the US dollar with the Yuan as the standard currency for international trade. This shift is (supposedly) being enacted through 1) increased control over Developing countries through international lending from the New Development Bank, 2) increasing control over global oil via financial ties to Saudi Aramco and Russia’s Rosneft, 3) trying to denominate global oil transactions in Yuan through the Shanghai oil futures market & backing up the Yuan value with the massive gold reserves China has been accumulating.
My question is whether you see this strategy unfolding as a credible threat to usurping United States’ global domination by China and if so – what might the investment world look like during such a massive upheaval? Continue reading
Many Daily Reckoning readers are familiar with the original petrodollar deal the U.S made with Saudi Arabia.
It was set up by Henry Kissinger and Saudi princes in 1974 to prop up the U.S. dollar. At the time, confidence in the dollar was on shaky ground because President Nixon had ended gold convertibility of dollars in 1971.
Saudi Arabia was receiving dollars for their oil shipments, but they could no longer convert the dollars to gold at a guaranteed price directly with the U.S. Treasury. The Saudis were secretly dumping dollars and buying gold on the London market. This was putting pressure on the bullion banks receiving the dollar. Continue reading
Could this trend lead to the erosion of the dollar’s reserve-currency status?
On September 15, Venezuela began to publish prices for its oil in the Chinese yuan rather than in United States dollars, following President Nicolás Maduro’s promise earlier in the month to rid the South American country’s economy of the “tyranny of the dollar.” News emerged on September 13 that Venezuela was telling oil traders that it will stop receiving or sending payments in dollars.
The Venezuelan Oil Ministry published a statement about the decision to publish prices in yuan, saying, “This format is the result of the announcement made on September 7 by the president [Maduro] … that Venezuela will implement new strategies to free the country from the tyranny of the dollar.”
Whether in response to rising scorching tensions with the US, or simply to provide support for the ruble, on Tuesday Russian President Vladimir Putin instructed the government to approve legislation making the ruble the main currency of exchange at all Russian seaports by next year, RT reported citing the Kremlin website. Continue reading
The issue of when a global reserve currency begins or ends is not an exact science. There are no press releases announcing it, and neither are there big international conferences that end with the signing of treaties and a photo shoot. Nevertheless we can say with confidence that the reign of every world reserve currency has to come to and end at some point in time. During a changeover from one global currency to another, gold (and to a lesser extent silver) has always played a decisive role. Central banks and governments have long been aware that the dollar has a sell-by date as a reserve currency. But it has taken until now for the subject to be discussed openly. The fact that the issue has been on the radar of a powerful bank like JP Morgan for at least five years, should give one pause. Questions regarding the global reserve currency are not exactly discussed on CNBC every day. Most mainstream economists avoid the topic like the plague. The issue is too politically charged. However, that doesn’t make it any less important for investors to look for answers. On the contrary. The following questions need to be asked: What indications are there that the world is turning its back on the US dollar? And what are the clues that gold’s role could be strengthened in a new system? Continue reading
This is exactly what Global Geopolitics mentioned just a five days ago. The tables have turned on the global playing field and the traditional options once thought to be useful to use against China will now backfire. America will now have to get more creative to once again get ahead in controlling the narrative when it comes to using leverage against its adversaries.
Adding to this, China is likely waiting for such a move to happen, which will benefit the nation in numerous ways:
- China is a master in state propaganda, will successfully claim it’s the victim of a U.S. economic attack and rally support throughout the nation.
- China, through provocation, will have produced a reason to retaliate. The trade war begins.
- Retaliation will be successful due to the weakening of the U.S. positions and strengthening of Chinese leverage. World-wide, this will cause people and nations to question America’s ability to act and standing as the lone global superpower. If the Dollar goes down, the U.S. goes down with it.
Following Treasury Secretary Mnuchin’s threat that the US could impose economic sanctions on China if it does not implement the new sanctions regime against North Korea:“If China doesn’t follow these sanctions, we will put additional sanctions on them and prevent them from accessing the US and international dollar system, and that’s quite meaningful.”
- President Maduro ‘ Venezuela will create a basket of currencies to free us from the dollar,”
- Oil traders ordered to stop accepting U.S. dollar in exchange for crude oil
- Order comes following calls from Russia and China to find alternatives to current reserve system
- U.S. Dollar accounts for two-thirds of global trade
- Venezuela has over ten-times more oil than United States
- Super powers are gradually turning to gold to avoid using world’s main reserve currency
- Are we seeing the beginning of the end for the U.S. dollar?
The oil-rich country of Venezuela has stopped accepting the U.S. Dollar as payment for oil.
Last week President Maduro warned that the country would this week ‘free’ itself from the US dollar. Continue reading
New financial instrument gives oil-exporting nations their long-sought alternative to the petrodollar.
China will soon introduce a crude oil futures contract denominated in yuan and convertible into gold, the Nikkei Asian Review reported on September 1. Analysts say that since China is the world’s largest oil importer, the move could deal a major blow to the global influence of the United States dollar.
The contract would allow oil exporting nations such as Russia, Iran and Venezuela to conduct sales in yuan, instead of in U.S. dollars, and to then change the yuan into gold on both the Hong Kong and Shanghai exchanges. This would also allow these countries that often fall afoul of American foreign policy to circumvent dollar-based U.S. sanctions.
The Chinese government has been developing the gold-backed futures contract for years, and Oilprice.com reports that it is expected to launch this year. It will be China’s first commodities futures contract available to foreign entities, and analysts expect many oil-exporting nations and firms to find it appealing. Continue reading
It was said that “the guinea and the gallows” were the true instruments of British imperial power.
The guinea represented the coined wealth of Great Britain.
The gallows represented its… constabulary zeal in policing restless natives.
This is the 21st century of course… a time of enlightenment.
Today’s instruments of imperial power are no longer the guinea and the gallows.
No. Today’s instruments of imperial power are “the dollar and the drone.” Continue reading
While this sounds like a step that needed to be taken, and it is, it’s too little too late. China (and Russia) have created an alternative to SWIFT. Thus, cutting China off only means it will switch to its own and abandon the U.S. Dollar system — with Russia likely to join. In effect, it will end up hurting the United States more than the intended target(s).
Over the last decade China and Russia have feverishly worked around America’s global influence. Russia and China no longer need GPS, as they have their own indigenous satellite navigation systems — Europe, too. You’ll only do their militaries a favor if you cut that off. Control over the internet has been ceded by America, so there’s also no method or means of punishment there. The IMF has been undermined by the AIIB, so it’s also hard to do anything there as well.
America’s choices are limited and not as effective as they used to be. The joke may be on the U.S. should push come to shove. The alternatives set up only mean America will likely isolate itself should it choose punitive measures.
In an unexpectedly strong diplomatic escalation, one day after China agreed to vote alongside the US (and Russia) during Monday’s United National Security Council vote in passing the watered down North Korea sanctions, the US warned that if China were to violate or fail to comply with the newly imposed sanctions against Kim’s regime, it could cut off Beijing’s access to both the US financial system as well as the “international dollar system.”
Speaking at CNBC’s Delivering Alpha conference on Tuesday, Steven Mnuchin said that China had agreed to “historic” North Korean sanctions during Monday’s United Nations vote. “We worked very closely with the U.N. I’m very pleased with the resolution that was just passed. This is some of the strongest items. We now have more tools in our toolbox, and we will continue to use them and put additional sanctions on North Korea until they stop this behavior.”