The U.S. Dollar: A Victim of Its Own Success

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America’s most powerful weapon of war does not shoot, fly or explode. It’s not a submarine, plane, tank or laser. America’s most powerful strategic weapon today is the dollar.

The U.S. uses the dollar strategically to reward friends and punish enemies. The use of the dollar as a weapon is not limited to trade wars and currency wars, although the dollar is used tactically in those disputes. The dollar is much more powerful than that.

The dollar can be used for regime change by creating hyperinflation, bank runs and domestic dissent in countries targeted by the U.S. The U.S. can depose the governments of its adversaries, or at least blunt their policies without firing a shot. Continue reading

China Takes Aim At The Petrodollar

 

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.

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Japan’s Shifting Power Alliances

 

I’ve just wrapped up a long trip to Japan. And I’ve taken away one lesson from all of my conversations, speeches and research: The rise of nationalism in the U.S. will cause massive shifts in global trade alliances.

One of the main beneficiaries will be Japan. Now, Japan might not be on your radar, day-to-day, but it’s about to play a very important role in the world of Donald Trump.

Here’s what I mean… 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’s Ambitious Plan to Make the Yuan the World’s Go-To Currency

China’s long-held desire to provide an alternative to the U.S. dollar will get a boost on October 1, when the yuan enters the International Monetary Fund’s basket of reserve currencies, placing it alongside the pound, euro, yen and dollar. The yuan’s ascent is a validation of the importance of the world’s second-biggest economy and the work policy makers have done to allow freer access to the nation’s markets.

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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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China ‘Stealth’ Devaluation Continues – Yuan Plunges For 6th Day, Default Risk Soars, Fosun Bonds Crash

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USDCNY broke above 6.4500 for the first time since the August devaluation, extending its post-IMF plunge to 6 days. This is the largest and longest streak of weakness since March 2014 as China seems to have taken the SDR-inclusion as blessing to devalue its currency drip by drip. Default risk is once again stomping higher as CDS surge from 94bps to 112bps (2-month highs). The biggest news in China tonight is the disappearance of Fosun International’s Chairman, China’s 17th richest man (and the collapse in the company’s bonds, since stocks are suspended). Continue reading

China boosts gold reserves for 5th straight month

Taking advantage of the low price of gold, in November China boosted its gold holdings for the fifth consecutive month, the fastest growth rate since June, the central bank reported Tuesday.

However, November’s $87 billion decline in total foreign exchange reserves was the country’s biggest drop since August’s record-high decline of $93.9 billion. Continue reading

Russia issuing yuan-denominated bonds

On the heels of the International Monetary Fund’s approval for the yuan, Russia said it’s preparing to raise $1 billion in yuan-denominated sovereign bonds in Moscow, the Financial Times reported Monday.

Last week, the IMF made the yuan, also known as the renminbi, a world reserve currency by including it in its Special Drawing Rights basket. By integrating the yuan to the SDR, the IMF boosted the credibility of the currency and acknowledged it would be an accepted part of the global economic system. Continue reading

Chinese Yuan Could Give the IMF “a Shock It Isn’t Prepared For”

 

 

On Monday, the Chinese yuan joined one of the most elite clubs on the planet: the International Monetary Fund’s Special Drawing Rights basket of reserve currencies.

CURRENCY OLD WEIGHT NEW WEIGHT
U.S. Dollar 41.90% 41.73%
Euro 37.40% 30.93%
Chinese Yuan 10.92%
Japanese Yen 9.40% 8.33%
Pound Sterling 11.30% 8.09%

*Source: IMF Continue reading

Chinese yuan likely to be added to IMF special basket of currencies

China hopes stamp of approval will improve yuan’s desirability among investors and undermine hegemony of US dollar as global reserve currency

China’s efforts to make the yuan an international currency on a par with the US dollar is to receive a fillip with the International Monetary Fund widely expected to add it to a special basket of global currencies.

Analysts say the shareholders in the Washington-based IMF will vote on Monday to include the yuan, also known as the renminbi, as the fifth member of its special drawing rights currency basket alongside the dollar, the Japanese yen, sterling and the euro.

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Russia adds yuan as currency reserve

The Central Bank of Russia has included the Chinese yuan in its reserve currency basket, TASS reports. The move is expected to boost the yuan’s presence in the Russian financial market.

As of December 31, 2014, the latest data available, the US dollar was still dominating Russia’s forex basket at 44 percent. The second most-used foreign currency was the euro with 42 percent. The British pound made up 9.5 percent. Continue reading

USA Losing Sovereignty to World Fiscal Mismanagement

The IMF and many economists (domestic and foreign) are now warning that a rate hike by the U.S. Federal Reserve, no matter when, will spark a major economic crisis in the emerging markets. They see this crisis being ripe for countries with high budget deficits, such as Turkey, as well as commodity-based economies. This includes the oil exporters such as Russia and even Saudi Arabia who has now begun to issue debt. Continue reading

A Yuan Reserve Currency Is Coming – Brace for a $2 Trillion Global Disruption

It’s almost certain a yuan reserve currency will become reality 11 months from now, triggering a foreign currency shift of as much as $2 trillion – an existential threat to the U.S. dollar’s status as the world’s primary reserve currency.

Last week, Bloomberg reported that International Monetary Fund (IMF) officials have told Chinese officials that the yuan will join the organization’s basket of reserve currencies “soon.” Continue reading

IMF set to approve yuan joining currency basket: sources

Dethroning the U.S. Dollar, one step at a time.

 

International Monetary Fund (IMF) staff are set to give the all-clear for China’s yuan to be included in the lender’s benchmark currency basket, laying the groundwork for a favorable decision by policymakers, people familiar with the discussions said late Sunday.

The IMF’s executive board is scheduled to decide in November on putting the yuan on a par with the dollar, yen, euro and pound sterling and a key factor will be its performance against a checklist of technical criteria, as assessed by IMF staff. Continue reading