Hidden Amongst the Furore: Synchronised Warnings From the BIS and the IMF

It has become a disconcerting trend that as geopolitical events intensify and keep a majority of people engaged in the latest outbreak of political theatre, the words of central bankers fall on increasingly deaf ears.

At a seminar of the European Stability Mechanism this month, Bank for International Settlements General Manager Agustin Carstens delivered a speech called, ‘Shelter from the Storm‘. Continue reading

British govt report suggests US is currently winning trade war with China

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China has already declared its intent to retaliate against US President Donald Trump’s new tariffs on $200 billion in Chinese imports, a move set to raise prices on consumer goods for both countries.

Several analysts have demonstrated how Trump’s tariffs will blowback on the US economy. Moody’s Investment Service previously warned that the tariffs would reduce US GDP by 0.25 percent in 2019, to about 2.3 percent. The American economy could take an even bigger hit if Trump proceeds with tariffs on $200 bn worth of Chinese products, Moody’s warned. Continue reading

Russia Finance Minister: We Are Ready To Ditch The Dollar In Favor Of The Euro

In a testament to the success of the latest Trump sanctions against Russia, overnight Russian aluminum giant Rusal announced that its chief executive, Aleksandra Buriko, and half of its managerial board resigned to make sure the firm avoids U.S. sanctions against its founder, billionaire oligarch, Oleg Deripaska. The mass resignations were part of “the efforts that have been made by the management of the group to protect the interests of the company and its shareholders” since the sanctions were imposed last month, Rusal said in a May 24 statement.

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Report: China has Stopped Buying U.S. Treasuries

 

While It’s Not Selling Them, Yet, It Reportedly Stopped Buying Them ‘Several Weeks Ago.’

Despite positive signs that Chinese President Xi Jinping may make a wink-and-nod concession to the U.S. overnight at the Boao Forum, a new report suggests China has already engaged its so-called “nuclear option.” Continue reading

The World Is Creeping Toward De-Dollarization

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

Jim Rogers Warns “If Trump Starts A Trade War With China, It Will End US Hegemony”

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.”

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Russia and China Finding Ways to Avoid the U.S. Dollar

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It is becoming easier to imagine the coming post-American financial order.

At Bretton Woods in 1944, the world’s major powers settled on a new financial system. That system of world finance was dominated by America. When the system fell apart in 1971, countries switched to floating exchange rates, but the U.S. dollar remained the reserve currency. But today, in the post-global-financial-crisis world, Russia and China are finding new ways to avoid using the dollar. Continue reading

China’s Entrance Into SDR Basket Shifts Global Finance

Remember the renminbi billboard sighting in China back in March of 2015? Well, it has officially landed.

On Monday, October 3rd, 2016, a turning point for America begins: The beginning of the end for the global U.S. Dollar hegemony.

 

China’s yuan, or Renminbi (RMB), will officially join the International Monetary Fund (IMF)’s Special Drawing Rights (SDR) basket on Saturday, which indicates a step up in the international status of the currency.

  • The inclusion is first and foremost recognition of the substantial reform efforts conducted by Chinese monetary authorities.
  • “The RMB is already, for a number of years, very much an international currency.
  • China has also taken additional measures to allow the inclusion of RMBinto the SDR,” said Jurgen Conrad, head of the Economics Unit at the Asian Development Bank in China.
  • Alfred Schipke, the chief China representative of the IMF, thinks that the move’s significance isn’t limited only to the country.
  • “[I think] the RMB joining the SDR will indeed be a milestone for China, but also for the international financial system. It, in effect, recognizes the progress that has been made on the reform side in China over the past couple of years,” said Schipke. Continue reading

China designates US’ first renminbi clearing bank: Premier Li Keqiang

Bank of China’s New York branch authorised for the role

China has designated the United States’ first renminbi clearing bank, Premier Li Keqiang said on Tuesday as he welcomed American banks to apply to become clearing banks.

China’s central bank said it had authorised the Bank of China’s New York branch to be a renminbi clearing bank in the United States.

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Poland first in Europe to issue RMB debt in China

Poland has become the first European country to issue government debt into China’s mainland bond market, with a bond of 3 billion yuan ($452 million), marking a significant milestone for renminbi’s growing use internationally, which builds towards its reserve currency status. Continue reading

Currency War Resumes – China Devalues Yuan To 5-Year Lows

After a brief hiatus from the ongoing currency wars, China fired another salvo at The Fed tonight by devaluing the Yuan fix to 6.5693 – its weakest against the USD since March 2011. After eight days higher in a row for The USD Index, it seems PBOC has turned its currency liberalization plan off, stabilizing the broad Renminbi basket (which has been steadily devalued) and turning its attention to devaluing against the USD. Having unleashed turmoil in August (pre-Sept FOMC) and January (post Dec rate-hike), it appears the rising rate-hike probabilities jawboned by The Fed are decidedly disagreeable to “authoritative persons” in China. Continue reading

SWIFT Attacks in the Global Economic War

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Recent headlines confirm that the SWIFT (Society for Worldwide Interbank Financial Communication) has suffered multiple cyber attacks. SWIFT is a privately run Belgium-based provider of financial messaging, considered essential to move money around the world. The system is so important that to be denied access to it is essentially to be cut off financially from the rest of the world. That is what happened to Iran in 2012 in conjunction with sanctions and the pain was severe. Many believe that regaining access to SWIFT was the Iranians top priority in negotiations.

It is important to understand that SWIFT is not, at least not directly, controlled by the United States. Rather, it is governed by a multi-nation board. Still, it is viewed to be part of the United States-led global financial community. American sanctions carry tremendous weight. Continue reading

Report: China’s Currency Will Diminish Dollar’s Role in International Trade

The Chinese government has taken steps to promote the international use of its currency, the renminbi, which will diminish the dollar’s role in international trade, according to a report from the Brookings Institution.

The steps China has taken to internationalize the renminbi have been gaining traction and the currency now represents the fifth-most important payment currency in the world. Continue reading

“Fasten Your Seatbelts”: Kyle Bass Previews The Collapse Of China’s $34 Trillion Banking Sector

Earlier this month, Kyle Bass asked a funny question in a discussion with CNBC’s David Faber. To wit: “If some fund manager in Texas is saying that your currency is dramatically overvalued, you shouldn’t care on a $10 trillion economy with $34 trillion in your banks. I have, call it a billion –  it’s so small it should be irrelevant and yet somehow it’s really relevant.”

Bass was referring to China’s penchant for firing off hilariously absurd “Op-Eds” in response to anyone who suggests that the country may indeed be experiencing the dreaded “hard landing” or that a much larger yuan devaluation is a virtual certainty. The People’s Daily literally laughed at George Soros when the aging billionaire said he was short Asian currencies in Davos. “Declaring war on China’s currency? Ha ha,” PD wrote. Chinese media also called Soros a “crocodile,” a “predator,” and said his yuan gambit “cannot possibly succeed.” Continue reading

A Chinese Banker Explains Why There Is No Way Out

Over the past year, we have frequently warned that the biggest financial risk (if not social, which in the form of soaring worker unrest is a far greater threat to Chinese civilization) threatening China, is its runaway non-performing loans, which at anywhere between 10 and 20% of total bank assets, mean that China is one chaotic default away from collapsing into the post “Minsky Moment” singlarity where it can no longer rollover its bad debt, leading to a debt supernova and full financial collapse. And as China’s total leverage keeps rising, and according to at least one estimate is now a gargantuan 350% of GDP (incidentally the same as the US), the threat of a rollover “glitch” gets exponentially greater. Continue reading