The Shifte From Petrodollar to Petroeuro Is Here

[Polly]

A major stab at the USD.

China is to launch RMB as the denomination for international trade settlement.  Sorry it's in Chinese.

http://chinese.wsj.com/gb/20090307/MKT015493.asp

[Polly]

This would have been unthinkable a year ago:

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Russia, China Should Dump Dollar in Trade - Medvedev

By Reuters

June 05, 2009 -- MOSCOW (Reuters) - Russia and China should consider switching to domestic currencies in bilateral trade without going to the dollar, Russia's president Dmitry Medvedev said in an interview with Kommersant daily published on Friday.

China has already entered similar agreements with Brazil and Belarus. The deal involves a currency swap agreement between the two countries. Trade turnover between Russia and China reached about $50 billion in 2008 and is set to increase.

"I think that we can think about such positions, for example the rouble against yuan," Medvedev was quoted by Kommersant as saying. Russia's own attempt to switch to the rouble in bilateral trade with Belarus has so far not been successful.

Leaders of Brazil, Russia, India and China, known by their BRIC acronym, are meeting in the Russian city of Yekaterinburg on June 16 to discuss the role of the dollar in the global financial system among other issues.

Medvedev said bilateral currency deals between trade partners ease impact of the economic crisis in an environment when many countries have difficulties tapping international capital markets.

http://informationclearinghouse.info/article22781.htm

[The Smoking Man]

They need to great care in making statements like this though.

China is the second largest investor in the US$ after Japan.

Statements like this go further to devaluing the US$ thus making the Chinese investment less valuable.

[Polly]

How many trillions has the US spent in vain in Iraq the quagmire?

If 2 trillion is what it takes to destroy the credibility of the USD, bankrupt the country, win the reserve currency status for RMB and consolidate China's supremacy, I'd say it's chicken feed to pay.

Think Big.  Think Politics. 

The USD is nothing but a bunch of green paper bolstered by very transient confidence.

[The Smoking Man]

Good question ... Should the currency of any one country be used as an indicator?

At least with the gold standard, the substance was common to all countries and was not tied political decisions of 1 country. One idiot decision by another 'Bush' and the world economy slams.

There has to be a better way.

Also ...

Remember, the RMB is a protected currency and can not be taken or used outside of the mainland.

How can it become a reserve currency?

[Polly]

The Chinese government has already had a time table and they have made it known.  It is 10 years.  

In 10 years RMB will be a free floating and circulating currency, if not one of the reserve currencies.

Arrangements have been made with first, neighbouring countires and regions (HK, SE Asia, S Korea etc) about "currency swap" so that there is considerable amount of RMB at these countries and regions, effectively freely convertible as far as they are concerned.  

Then some of the trade shall be done in RMB:

July 6 (Bloomberg) -- Three Shanghai companies agreed to settle import and export contracts in yuan for the first time, as China seeks to reduce the role of the dollar in global trade.

Shanghai Silk Group, Shanghai Electric Group Co. and Shanghai Huanyu Import & Export Co. signed contracts worth 14 million yuan ($2 million) with customers in Hong Kong and Indonesia, Fang Xinghai, director general of the municipal government’s financial services office, said at a press conference today. Bank of Communications Co. and Bank of China Ltd. offered transaction services.

China, Russia and India have said the world economy is too reliant on the dollar and called for changes in how $6.5 trillion in foreign-exchange reserves are managed, before Group of Eight leaders meet this week. The settlement program and sales of yuan-denominated debt overseas are designed to make the currency more attractive for central banks to hold.

“This is a first step on the long road towards that target of making the yuan a global reserve currency,” said Nizam Idris, a strategist in Singapore at UBS AG, the world’s second biggest foreign-exchange trader. “That’s probably going to take five years or more.”

The central bank on July 2 allowed companies in Shanghai and four cities in the southern Guangdong province to settle trade in yuan with businesses in Hong Kong, Macau and Association of Southeast Asian Nations. Outside of special border trade zones, companies previously had to convert yuan into dollars or other currencies to settle international trade.

Exchange Rate Risks

“The yuan settlement program will help boost bilateral trade with Hong Kong and Asean nations,” People’s Bank of China Deputy Governor Su Ning said at the signing ceremony. “The yuan is stable compared with other major currencies. A stable yuan will help companies control exchange-rate risks.”

http://www.bloomberg.com/apps/news?pid=20601087&sid=a.VjgFi0enXQ

[Polly]

A good read.

http://www.nytimes.com/2009/07/07/business/global/07yuan.html?_r=3&partner=rss&emc=rss

[Polly]

The Demise of the Dollar

In a graphic illustration of the new world order, Arab states have launched secret moves with China, Russia and France to stop using the US currency for oil trading

By Robert Fisk

October 06, 2009 "The Independent" -- -- In the most profound financial change in recent Middle East history, Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.

Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars.

The plans, confirmed to The Independent by both Gulf Arab and Chinese banking sources in Hong Kong, may help to explain the sudden rise in gold prices, but it also augurs an extraordinary transition from dollar markets within nine years.

The Americans, who are aware the meetings have taken place – although they have not discovered the details – are sure to fight this international cabal which will include hitherto loyal allies Japan and the Gulf Arabs. Against the background to these currency meetings, Sun Bigan, China's former special envoy to the Middle East, has warned there is a risk of deepening divisions between China and the US over influence and oil in the Middle East. "Bilateral quarrels and clashes are unavoidable," he told the Asia and Africa Review. "We cannot lower vigilance against hostility in the Middle East over energy interests and security."

This sounds like a dangerous prediction of a future economic war between the US and China over Middle East oil – yet again turning the region's conflicts into a battle for great power supremacy. China uses more oil incrementally than the US because its growth is less energy efficient. The transitional currency in the move away from dollars, according to Chinese banking sources, may well be gold. An indication of the huge amounts involved can be gained from the wealth of Abu Dhabi, Saudi Arabia, Kuwait and Qatar who together hold an estimated $2.1 trillion in dollar reserves.

The decline of American economic power linked to the current global recession was implicitly acknowledged by the World Bank president Robert Zoellick. "One of the legacies of this crisis may be a recognition of changed economic power relations," he said in Istanbul ahead of meetings this week of the IMF and World Bank. But it is China's extraordinary new financial power – along with past anger among oil-producing and oil-consuming nations at America's power to interfere in the international financial system – which has prompted the latest discussions involving the Gulf states.

Brazil has shown interest in collaborating in non-dollar oil payments, along with India. Indeed, China appears to be the most enthusiastic of all the financial powers involved, not least because of its enormous trade with the Middle East.

..............

http://www.informationclearinghouse.info/article23648.htm

[Polly]

LatAm Leftists Tackle Dollar with New Currency

By Agence France-Presse

October 17, 2009 "AFP" -- COCHABAMBA, Bolivia - Leftist Latin American leaders agreed here on the creation of a regional currency, the Sucre, aimed at scaling back the use of the US dollar.

Nine countries of ALBA, a leftist bloc conceived by Venezuelan President Hugo Chavez, met in Bolivia where they vowed to press ahead with a new currency for intra-regional trade to replace the US dollar.

"The document is approved," said Bolivia's President Evo Morales, who is hosting the summit.

The new currency, dubbed the Sucre, would be rolled out beginning in 2010 in a non-paper form.

That move echoes the European Union's introduction of the euro precursor, the ECU, an account unit designed to tie down stable exchange rates between member states before the national currencies were scraped.

ALBA's member states are Venezuela, Bolivia, Cuba, Ecuador, Nicaragua, Honduras, Dominica, Saint Vincent and Antigua and Barbuda.

The currency, which was backed in April this year, is named after Jose Antonio de Sucre, who fought for independence from Spain alongside Venezuelan hero Simon Bolivar in the early 19th century.

The bloc also called for the replacement of the World Bank's International Centre for Settlement of Investment Disputes, which arbitrates international contract disputes and has probed a slew of disputes involving ALBA members and western energy firms.

Most ALBA members have already withdrawn from the organization, with Ecuador announcing last July that it would pull out of the group.

On Friday Bolivian media reported the country intents to nationalize a electricity distribution firm owned by Spain's Red de Electrica de Espana.

It is just the latest in a series of nationalizations in Venezuela, Ecuador and Bolivia.

In May, Venezuela nationalized 74 energy services firms operating in the oil-rich Maracaibo Lake region.

Bolivia's Evo Morales has indicated that parts for his country's energy and rail sectors will be nationalized.

© 2009 Agence France-Presse