UPDATE – April 13, 2013
Chinese Premier Li Keqiang (left) accompanies Australian Prime Minister Julia Gillard to view an honor guard during a welcoming ceremony outside the Great Hall of the People on April 9 in Beijing, China. Prime Minister Gillard announced during the visit that Australia would start using the Chinese yuan for trade with China. (Feng Li/Getty Images)
Australia to Abandon the U.S. Dollar
April 11, 2013 • From theTrumpet.com Australia chooses a side in the global currency war. More by this author
Australia’s announcement that it is abandoning the U.S. dollar for trade with China is the latest broadside in the global currency war. Starting April 10, Australia and China will no longer use the U.S. dollar for trade between the two nations. For the first time, Australian businesses will be able to conduct trade in Chinese yuan. No more need for U.S. dollar intermediation. This is a significant announcement and key development for China as it continues its campaign to internationalize the yuan and chip away at the dollar’s role as the world’s reserve currency. Australian Prime Minister Julia Gillard made the announcement during an official visit to Shanghai on Monday. She noted that China is now Australia’s biggest trading partner and that the direct currency trading would be a “huge advantage for Australia.” She called the currency accord a “strategic step forward for Australia as we add to our economic engagement with China.” According to HSBC bank, more than 40 percent of small and medium-size Australian businesses that trade with China plan to offer quotes for goods and services in yuan. No longer will Chinese customers need U.S. dollars before purchasing Australian goods. For China, this is a big accomplishment as it works toward its goal of having about a third of its foreign trade settled in yuan by 2015. But for the U.S. dollar, it is more like the treatment the U.S. Eighth Army got at Chosin Reservoir in Korea. This Australia-China currency pact isn’t the only whipping the dollar has taken lately either. On March 26, China and Brazil agreed to cut out the U.S. dollar for approximately half of their trade. Some $30 billion worth of commerce per year will now be conducted in yuan and reals. Brazilian Economy Minister Guido Mantega said the trade and currency agreement would act as a buffer against any unexpected dollar turbulence in the international financial markets. Less than a week later, China announced its participation in the joint BRICS bank initiative. Brazil, Russia, India, China and South Africa announced the creation of a new development bank that some analysts say has the potential to rival the U.S.-dominated World Bank and European-influenced International Monetary Fund. “Most people assume that the current economic crisis has led to a great strengthening of the power of the World Bank and the IMF, and that this power is largely uncontested,” notes Prof. Geoffrey Wood, who teaches at Warwick Business School. “The proposed BRICS development bank represents an important new development that potentially further circumscribes the influence of these bodies.” America’s other major ally in the Pacific announced last year that it would be curtailing its use of the dollar too. In June, Japan and China began cutting out the dollar in bilateral trade. The initiative was announced as part of a broad agreement to reinforce financial ties between the world’s third- and fourth-largest economies. Similar dollar exclusion deals have been announced by Russia and China, Russia and Iran, India and Iran, and India and Japan. “[T]he free lunch the U.S. has enjoyed ever since the advent of the U.S. dollar as world reserve currency may be coming to an end,” writes popular financial blog ZeroHedge. “And since there is no such thing as a free lunch, all the deferred pain the U.S. Treasury Department has been able to offset thanks to its global currency monopoly status will come crashing down the second the world starts getting doubts about the true nature of just who the real reserve currency will be in the future.” As more nations challenge the dollar’s position as reserve currency it will greatly impact living standards in America. Interest rates will skyrocket. The government will be forced to resort to full-scale money printing to finance its debt. Credit and loans will become unaffordable, collapsing much of America’s consumer economy. Monetary inflation will shoot through the roof destroying the value of people’s savings. And higher levels of unemployment will become a way of life. By jumping ship and swimming to China, Australia may think it will mitigate the worst of the looming dollar war. But eking out strategic partnerships with China comes with a whole set of other risks that are just as deadly. ▪
To put it in polite language – “WE ARE IN DEEP DOO DOO!“
The fiscal tsunami is rolling and no one is paying any attention! Attention has been diverted away by the shenanigans of our elected officials! They can not be called our representatives, because they only represent themselves and their own pocketbooks! Therefore it is up to us to protect ourselves!
NOT LONG AGO THE AMERICAN DOLLAR
WAS THE CURRENCY OF CHOISE
FOR THE WHOLE WORLD!
THINGS CONTINUE TO EVOLVE
AWAY FROM THE USA DOLLAR AS THE WORLD STANDARD!
This will have a huge impact on your checkbook! The American dollar looses value each month the feds continue to print $40 Billion dollars – based on nothing other than desire to continue to SPEND! SPEND SPEND! No country or empire, has been able to avoid the consequences of irresponsible spending for long. The time comes and it is fast approaching, where one has to pay the piper (pay the bills in the vernacular)! The other financial tsunami heading our way is the derivatives market – which all the big banks are invested in – it is another ponzi scheme – based on nothing! When that crashes, there isn’t enough money in all the world’s savings account to cover the staggering amount of paper wealth that will vanish!
And so, we too shall fall …
Thanks, World Reserve Currency, But No Thanks: Australia And China To Enable Direct Currency Convertibility
Submitted by Tyler Durden on 03/31/2013 12:46 -0400
- Australia Australian Dollar Brazil China Hong Kong India Iran Japan Renminbi Reserve Currency Treasury Department Yuan
A month ago we pointed out that as a result of Australia’s unprecedented reliance on China as a target export market, accounting for nearly 30% of all Australian exports (with the flipside being just as true, as Australia now is the fifth-biggest source of Chinese imports), the two countries may as well be joined at the hip. Over the weekend, Australia appears to have come to the same conclusion, with the Australian reporting that the land down under is set to say goodbye to the world’s “reserve currency” in its trade dealings with the world’s biggest marginal economic power, China, and will enable the direct convertibility of the Australian dollar into Chinese yuan, without US Dollar intermediation, in the process “slashing costs for thousands of business” and also confirming speculation that China is fully intent on, little by little, chipping away at the dollar’s reserve currency status until one day it no longer is. That said, this latest development in global currency relations should come as no surprise to those who have followed our series on China’s slow but certain internationalization of its currency over the past two years. To wit: “World’s Second (China) And Third Largest (Japan) Economies To Bypass Dollar, Engage In Direct Currency Trade“, “China, Russia Drop Dollar In Bilateral Trade“, “China And Iran To Bypass Dollar, Plan Oil Barter System“, “India and Japan sign new $15bn currency swap agreement“, “Iran, Russia Replace Dollar With Rial, Ruble in Trade, Fars Says“, “India Joins Asian Dollar Exclusion Zone, Will Transact With Iran In Rupees“, and “The USD Trap Is Closing: Dollar Exclusion Zone Crosses The Pacific As Brazil Signs China Currency Swap.” And while previously the focus was on Chinese currency swap arrangements, the uniqueness of this weekend’s news is that it promotes outright convertibility of the Yuan: something China has long said would happen but many were skeptical it ever would. That is no longer the case, and with Australia setting the precedent, expect many more Asian countries (at first) to follow in Australia’s footsteps, because while the developed world is far more engaged in diluting its currency as a means to spur “growth”, Asian and developing world nations are still engage in real, actual trade, where China is rapidly and aggressively becoming the world’s hub. More from The Australian: Former ambassador to China Geoff Raby, now a Beijing-based business figure, told The Weekend Australian: “The value of such a deal would be substantial for exporters to China, especially those that import a lot from China like mining companies, as it would remove business constraints including exchange-rate risks and transaction costs.” Businesses, like individuals when travelling, have to pay extra to convert currency since there are different rates for buying and selling. So removing one step also cuts out the cost of paying for such a “spread”. Australia has undertaken significant lobbying for the deal and the direct conversion of the yuan, also referred to as the renminbi (RMB), is identified as a priority in the government’s Asian century white paper. “We have held preliminary discussions with the Chinese government to explore how soon direct convertibility can be practicably achieved,” the white paper says. “We are continuing these discussions, and also exploring other opportunities to work with China to support the internationalisation of the RMB.” Australia’s banks increasingly arrange trade finance through Hong Kong, which has developed a special role as China’s chief international finance centre. Needless to say, China is eagerly looking forward to taking yet another bite out of the USD’s reserve status. New President Xi Jinping, a former Communist Party secretary of Shanghai, is a champion of that city’s development as China’s finance hub, and it is believed that the Prime Minister may fly there to sign the currency conversion deal. Ms Gillard is expected to go on from Shanghai to Beijing, where she will open the third Australia China Economic and Trade Forum organised primarily by the Australia China Business Council, which will be bringing about 100 people from Australia for the event. Participants are likely to include Andrew Harding, Rio Tinto’s new chief executive for iron ore; Warwick Smith, ANZ Bank’s chairman for NSW and the ACT; Australian Trade Minister Craig Emerson and Financial Services Minister Bill Shorten; Gao Hucheng, China’s Commerce Minister; and Gao Xiqing, the acting head of China Investment Corporation, the country’s vast sovereign wealth fund. The ANZ Bank has been a strong advocate of direct convertibility between the dollar and the yuan. Gilles Plante, the bank’s chief executive in Asia, said in a recent report that in the last financial year, China accounted for 29 per cent of all exports and 18 per cent of imports, but the value of that trade denominated in yuan was less than 0.3 per cent. He forecast that cross-border flows of funds would be liberalised “to support Shanghai’s plan to build itself as a global financial centre. At the time the whole world is digging out opportunities from the rise of the yuan, Australia should not lag behind.” It was significant the liberalising governor of the People’s Bank, Zhou Xiaochuan, kept his job during the reshuffle of China’s leadership. He said last year at a conference: “The next movement related to the yuan is going to be reform of convertibility. We are moving in this direction; we need to go further, we will have some deregulation.” Most importantly, to China, Australia will serve as the Guniea Pig – should this experiment in FX liberalization work out to China’s satisfaction, expect Beijing to engage many more trade partners in direct currency conversion. Beijing appears to have chosen Canberra as its partner in this next movement for straightforward economic reasons, as Australia has become China’s fifth-biggest source of imports and thus, the appropriate partner for the march of its currency. Ms Gillard and President Xi Jinping may also during the visit establish a “strategic partnership” between the countries. This will enable Australia to catch up in status with a large range of nations. Why is this so very critical? For the simple reason that the free lunch the US has enjoyed ever since the advent of the US dollar as world reserve currency, may be coming to an end as other, more aggressive alternatives – both fiat, and hard-asset based – to the USD appear. And since there is no such thing as a free lunch, all the deferred pain the US Treasury Department has been able to offset thanks to its global currency monopoly status will come crashing down the second the world starts getting doubts about the true nature of just who the real reserve currency will be in the future. It has been written about in a few financial magazines and the finance sections of a one or two newspapers – but unfortunately, this is another event that people are not paying attention to and for that we will all pay dearly!
I have said it before and I will keep saying it until people start to listen – we have to:
– Get rid of the Fed
(a private international bankers consortium)
– Get rid of the UN
(the enforcement arm of the elite, who want to rule the whole world)
If we ever want to be FREE!