[ritter]

That complicates things. In my simple little brain, at least.

[dolanbaker]

It's quite simple really, the Dollar is being bypassed!

[Shaved Monkey]

Thats more dangerous to the US than any nuclear program could ever be.

[SeaGypsy]

Na, the dollar can go to sh#t without creating a glassbowl where American cities were. The best thing about this is that there is nothing the US can do to enforce their immoral embargo. The great plan at total world domination has only 1 brake/ it cannot print oil. Nor can it justify forcing other nations to trade in it's currency. Really it's amazing the dollar reserve status (really only based on an OPEC treaty) has been held up and lasted so long.

[bochen280]

Na, the dollar can go to sh#t without creating a glassbowl where American cities were. The best thing about this is that there is nothing the US can do to enforce their immoral embargo. The great plan at total world domination has only 1 brake/ it cannot print oil. Nor can it justify forcing other nations to trade in it's currency. Really it's amazing the dollar reserve status (really only based on an OPEC treaty) has been held up and lasted so long.

You are forgetting the the West can (correction: have used and will continue to use) use military coercion and force. Might becomes "right". When it comes down to it, they can't "print" oil but thievery is the next best option. Plus they can just use Wikileaks, Bin Laden's reincarnation, Al-CIA-duh, etc to Arab Spring the oil rich nations that don't follow US orders and topple those nations in the name of "war on terra", "war on tyranny", "crimes against humanity", "democrazy", "freedom", etc and just put whatever puppet TPTB wants to have in place.... and if that fails they can always fall back on the more expensive traditional wars of "we are liberating your peoples", "we need to preemptive strike to disarm you from your Weapons of Mass Destruction in the name of Peace", etc .... one way or another, Empire's don't go out willingly or without a fight... Be on the lookout for another major false flag operation, psycho ops, probably this time information warfare (internet control) and propaganda and blaming it on China... or maybe another one of them Asian "flu" with a real nasty payload this time to wipe out half of Asian population... etc... or global thermonuclear warfare with US surprise decapitation first strike on China (with the help of Russia, ironically... ) etc... All things considered and all else being equal, Russia would rather have a bi-polar world than a tri-polar world.. Russia don't trust US but all China does is consume resources, they probably figure US is more difficult to get rid of (if not impossible) so push comes to shove... maybe backstab China first...

[SeaGypsy]

Like the patient on life support wakes up and rips the cord from the machine? Sure makes a lot of sense, not.

[ralfy]

The problem is that most recent U.S. incursions have led only to increasing war costs for the country, and ironically passed on to sheeple. Meanwhile, China and others continue to set deals with new authorities in Afghanistan, Iraq, and other countries.

What makes matters worse is that probably 40 pct or more of U.S. war costs are being funded through foreign loans, with the interest alone impossible to pay. Given it, it should not be surprising if the U.S. military starts turning on U.S. sheeple, especially given the imposition of more draconian measures and the irrelevance of things like voting rights.

Finally, the same thing will take place for other military powers. That is, armed forces will follow the local populace only as long as the vote matters and the former will obey the government, if not the financial elite. Otherwise....

[bochen280]

The problem is that most recent U.S. incursions have led only to increasing war costs for the country, and ironically passed on to sheeple. Meanwhile, China and others continue to set deals with new authorities in Afghanistan, Iraq, and other countries.

What makes matters worse is that probably 40 pct or more of U.S. war costs are being funded through foreign loans, with the interest alone impossible to pay. Given it, it should not be surprising if the U.S. military starts turning on U.S. sheeple, especially given the imposition of more draconian measures and the irrelevance of things like voting rights.

Finally, the same thing will take place for other military powers. That is, armed forces will follow the local populace only as long as the vote matters and the former will obey the government, if not the financial elite. Otherwise....

.... Otherwise it is mad max and all bets are off....

But everyone is still thinking in terms of conventional incursions, invasions, occupations... standard wars, etc... I'm talking about "black swan" events like US taking out BRIC population and pushing peak oil to 2020+ etc... money is a funny concept, but at the end of the day it is resources, infrastructure, technological advancements, etc that count... the whole "paying interest on interest" means nothing if US can (or is in position to do so) simply choose not to pay by taking out the population of its creditors altogether, whereby the demand destruction reverts energy and resource prices back ten years or so. Peak oil is a population problem.... Mostly everything these day is a population problem.

[seahorse3]

If I remember correctly, the term "blow back" originated after the US screwed around in Iran, toppled its president and installed the Shah leading to the Iranian Revolution and this long simmering feud between the US and Iran (we even started the Iranian nuclear program we so much now opposed under the Shah).

After 30 years of blowback, the US still hasn't learned. Now, it seems the US risk the fate accompli of the long feared dollar demise by in fact, forcing our biggest holder of US dollars to use something other than dollars to buy Iranian oil. What a retarded move. Now, the dollar may not have kept its reserve status forever, but how was this smart? The blowback from this is to obvious. These US politicians aren't retards to not see they risk the dollar on this move. To me, it means all cards are on the table, last option is using tactical nukes on their nuclear program. The US puts risks the fate of the dollar leaving only one option, the military option. I could be wrong, but it sure seems that's the way things are lining up.

[Plantagenet]

I Now, it seems the US risk the fate accompli of the long feared dollar demise by in fact, forcing our biggest holder of US dollars to use something other than dollars to buy Iranian oil. What a retarded move. Now, the dollar may not have kept its reserve status forever, but how was this smart? The blowback from this is to obvious. These US politicians aren't retards to not see they risk the dollar on this move. .

Its the Obama administration. What do you expect?

[NickyBoy]

I Now, it seems the US risk the fate accompli of the long feared dollar demise by in fact, forcing our biggest holder of US dollars to use something other than dollars to buy Iranian oil. What a retarded move. Now, the dollar may not have kept its reserve status forever, but how was this smart? The blowback from this is to obvious. These US politicians aren't retards to not see they risk the dollar on this move. .

Its the Obama administration. What do you expect?

And when faced with an external threat, your first instinct is to try to score points off each other in petty partisan politics.

You are an excellent example of why your country is in trouble.

[radon]

And when faced with an external threat, your first instinct is to try to score points off each other in petty partisan politics.

You are an excellent example of why your country is in trouble.

Their trouble is a kind of trouble that other countries are dreaming of to be in (at least yet). So your remark might be a bit off.

[Keith_McClary]

China takes big step towards fully convertible yuan

In a move towards internationalising the yuan, the State Council said yesterday it will unveil an operational plan this year to make the currency fully convertible under capital accounts.

The plan is likely to include a clear-cut time frame.

The cabinet also said it would establish a comprehensive system for individuals' outbound investments, indicating that Beijing would make a renewed effort to relaunch the "through train" scheme allowing mainlanders to directly buy Hong Kong stocks - a plan that was scrapped in 2007. While the yuan is already convertible under the current account, covering trade, the capital account, which covers portfolio investment and borrowing, is closely controlled.

The announcement, which followed a meeting chaired by Premier Li Keqiang , indicated the leadership may already have drafted a time frame for a freer capital flow. It had been speculated earlier that full convertibility would come by 2015.
The State Council said the decisions at the meeting were in compliance with directives from the Communist Party's Central Economic Working Conference in December chaired by President Xi Jinping .

"The statement shows the leadership has attached great importance to the convertibility issue and the operational plan will give the all-clear for liberalisation," said Li Huiyong, chief economist with Shenyin Wanguo Securities.

Global and domestic economic conditions have pushed the leaders to accelerate the pace for reforms.
In 2007, Beijing first announced its ambition to internationalise the yuan and promote its use worldwide in step with China's rising economic heft.

Liberalisation of the capital account would allow businesses or individuals from home and abroad to freely convert their currencies to buy assets and equities across the border. However, it is likely that, at least initially, the exchange of foreign currencies would still be subject to restrictions by regulators to prevent an entirely free flow of capital.

Beijing opened the current account in 1996, allowing companies to exchange foreign currencies for trade deals. The central bank put full convertibility on the agenda in 1996, with 2000 as a target date, but the Asian financial turmoil derailed the plan.

As China integrates further into the global economy, with domestic capital seeking fresh markets and foreign funds gravitate to the mainland, an open capital account would facilitate capital flow and investments.

"The meeting discussed a lot of issues, but it's not easy to get all of them done," said Industrial Bank chief economist Lu Zhengwei . "The thing that Premier Li is set to do in the near term is to reduce administrative approvals."

[Tanada]

The writing is clear on the wall, the Yuan is the international reserve currency of the 21st century.

[ROCKMAN]

What’s that old line: Death by a thousand cuts. We’ve talked about the big Chinese move into refining. This strikes me as one more move to make the yuan a more acceptable international currency. Consider one of these seemingly small cuts: the 400,000 bopd refinery being built by China (1/3) and Saudi Arabia (2/3) on the Red Sea. As usual not enough details released so I can only speculate. Where is that refinery going to get its oil: I think it’s a safe bet that the KSA will prefer to use their oil and increase its value by turning it into product. So how will the Chinese pay for their 1/3 of that 400,000 bopd? Maybe pay nothing at all up front: they may simply pay using their sales income from the refinery output. And who are they going to sell to? Again, just my guess but they are right there at the EU’s back door. So maybe China and the KSA are paid in euros. And both China and the KSA buy what they want with those euros.

And there’s not a single US dollar bill in sight. But what if China would rather ship some or all of that refinery output back home? Again, I can’t prove it but I would be shocked if China doesn’t have a Right of First Refusal on it all. And how will the Chinese pay the KSA for their share? Perhaps using some of those US $’s we pay them in interest on our debt. And maybe not. Maybe China will simply swap those refinery products for exports from the homeland. IOW pay the KSA in yuans which the KSA then uses to pay for their imports. I believe China is already one of the KSA’a biggest trade partners and given that the KSA has to import almost everything they consume it appears to be a match made in heaven. So not only is the US $ cut out of the deal but there’s even more incentive to increase Chinese imports perhaps at the expense of US exports to the KSA.

An aside about US $100 bills: heard on NPR this morning: about 75% of US paper currency is $100 bills. And the majority of these bills are being held overseas. And for the most part they aren’t in circulation…folks holding them for security. Perhaps a part of the reason we haven’t been hit with big inflation while the fed has been pumping out many $billions every month. But what happens if the world starts to slowly turn away rom the $? I doubt they’ll be rushing into yuans anytime soon. But it’s good to remember that China is always playing the long game.

[ROCKMAN]

This may seem like a stretch and may well be. But part of the current conversation reflected on China’s big move into crude oil refining not only to secure supplies but also part of its strategy to make their currency more tradable in the global market place. And then I saw what looked like an unrelated story:

“Indian exports to China are down 24 per cent as of April, reaching $ 6.02 billion. The decline contrasted with rising figures for exports from other developing countries among China's biggest trading partners”.

China is changing their trading profile so how does that relate to refining. Maybe not at all but then I read the rest of the story: while China decreased imports from India by a ¼ they increased imports from South Africa by 55 per cent, and those from Asian countries by up 7 per cent. And then I remembered the story about China planning to build the largest refinery on the continent in SA. A country with little oil production. And that huge SA refinery will be supplied with oil from where? They didn't say. And will the Chinese pay for it in dollars or yuans? They didn’t say. And they didn’t say what markets they planned to sell those products to. But I suspect it a good bet they won’t be paid in yuans. BTW: take a look at the map: A quick run from Iran to South Africa, eh? Ajust as fast a sail back hauling products that the Iranian apparently is desperate for. Probably just a coincidence.

So a lot more I’m not sure of then I know for certain. But there is one thing I do know for sure: the Chinese govt is calling all the shots in these matters so I can only assume all these diverse pieces fit together in their long term plan. Which has always been their advantage over the rest of the free market system where each component focuses on its own interest and not the collective good of the entire system.

[Pops]

In order to be a "reserve currency" the supplying country must provide enough for the whole world (the us$ is about 2/3 of all central bank reserves) and to do that it must run a current account deficit - buy more than it sells.

Not sure how China is going to do that.

But China has said they want to have a global currency, not sure if that has changed since '09 or whenever. That currency would be issued by the IMF, it has a name I can't remember.

But think a minute, how much cash do Americans have under the mattress? $200? $500? Hard to believe every American has that much but at $500 folding money for every adult is "only" a hundred billion.

There is $1.14 Trillion in FRNs floating around according to the FRB.

I'm not too worried about the US$ being the reserve currency but even if I were I'd think the fact that so many are holding it means it will be a long time before it isn't and it isn't going to happen overnight.

[Plantagenet]

...there is one thing I do know for sure: the Chinese govt is calling all the shots in these matters so I can only assume all these diverse pieces fit together in their long term plan. Which has always been their advantage over the rest of the free market system where each component focuses on its own interest and not the collective good of the entire system.

The Chinese communists only have an advantage as long as their "great helmsman" doesn't make any mistakes in the orders he gives to China. But people always make mistakes. In an open and distributed economy and decentralized government like we have here in the US it doesn't matter that much if any individual CEO or even the president makes a mistake, because there are always other opposing forces and a different business or political party will oppose the mistake, and take advantage of it down the road.

In closed centralized states like China, mistakes made by the leader are much more serious. All it takes is one mistake by the Communist leader and his whole country can be diverted for many years off into something nutty like Mao's great leap forward. Just look at North Korea---its nothing more than a giant gulag with nukes. And Cuba----the Castro's have run the place for 60 years now, and its gone from the richest country in Latin American to the poorest, all because of the stupidity of Fidel Castro and his unwillingness to change the failed socialism he imposed 60 years ago.


Chinese communist leaders are hardly infallible---Mao killed tens of millions and wasted decades on failed policies

[ROCKMAN]

Pops – Since I’m not a global macro-economics guy so I know I'm treading on thin ice. OTOH I didn’t say anything about the yuan becoming a reserve currency. A reminder of how this thread started:” China is buying crude oil from Iran using its currency the yuan…Oil transactions are usually settled in dollars but US sanctions make it difficult for Iran to accept payments in the US currency. Iran is using the revenue to buy goods and services from China. China is the biggest buyer of Iranian crude oil exports. The country buys some $20bn-30bn of oil from Iran each year.”

That’s $20 billion to $30 billion in oil traded in the market place but not in US reserve currency. And probably something on that order of Chinese exports being sold to Iran for yuan. So the question is what good is it doing the US to be the reserve currency of the world if Iran and China are conducting more than $50 billion in commerce every year without using a single US dollar? It doesn’t buy us one bbl of Iranian oil but takes a bit of oil out of the global market place producing some upward pressure on prices. And that Chinese/Saudi refinery may be taking another $15 billion of oil out of the market yearly and again, perhaps without a single US $ involved. And if the KSA uses yuan to buy some of the huge international shopping list then that’s another potential of non-US $ trade on the order of $15 billion. So combine the two and we’re looking at maybe $80 billion. Not a very big number by any means compared to the global economy. But now add the South African, Egyptian, Brazil, Nigerian, etc. refinery deals. Still probably won’t add up to a big percentage of global trade.

But I don’t think the prime Chinese motive is to challenge the US for reserve currency master. What they are doing is trying to control more of the oil export market. Getting other countries to accept the yuan as part of the transactions just helps the process. It also guarantees the Chinese a big chunk of those countries import demand. And perhaps taking some customer away from US companies in the process as well as making China less dependent to some degree on exports to the US.

As far as TPTB in China making mistakes that’s certainly possible. As I understand the situation the Chinese are preparing to build EXCESS refining capacity to the tune of at least $120 billion. That means someone’s refineries are not going to get the oil they are getting today if it goes to those new and more efficient refineries cranking out higher value products. And China is building most of those refineries with some sort of JV with a number of oil exporters. And let’s not forget the Bank of China planning to finance a huge refinery in British Columbia that will crack production from the oil sands and send the products to the coast to be loaded onto tankers that can transport it to anywhere in the world. That’s more oil US refiners assumed would always be theirs to crack. In the meantime US refineries have been upgraded as much as possible since no refinery has been built in this country for over 30 years.

Yep…someone may be making a huge strategic mistake when it comes to the global refinery situation. Being the reserve currency of the world is nice. But IMHO gaining control over more of the supply of oil in the world market place is very nice also.