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China To Sell Oil In Yuan In Blow To Dollar

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There is a story running doing the rounds regarding Lindsey Williams announcement below that China announced that it will sell oil using the Yuan in a major move away from the dollar. Although no official source was listed in the reblogged articles I did manage to find a few stories below which lends some credibility to Williams claims below:

Lindsey Williams: “The most significant day in the history of the American dollar, since its inception, happened on Thursday, Sept. 6. On that day, something took place that is going to affect your life, your family, your dinner table more than you can possibly imagine.”

“On Thursday, Sept. 6… just a few days ago, China made the official announcement. China said on that day, our banking system is ready, all of our communication systems are ready, all of the transfer systems are ready, and as of that day, Thursday, Sept. 6, any nation in the world that wishes from this point on, to buy, sell, or trade crude oil, can do using the Chinese currency, not the American dollar. – Interview with Natty Bumpo on the Just Measures Radio network, Sept. 11

We already know China has signed trade agreements with various nations to trade in renminbi.Due to the euro crisis in Europe and growing demand from Asia, Russia is looking to export more to China in particular and is already building a pipeline to export to China by the end of 2012 as reported by the StarTribune:

Russia wants to be more than a supplier of natural resources to Asia, however, and is eager to attract the investment it needs to diversify and modernize its economy.

The first pipeline to send oil east to China began operation in early 2011. An extension of the pipeline to a port near Vladivostok is scheduled for completion by the end of this year, and Russia wants to build plants there to produce petro-chemicals and fertilizers, adding value to its exports.

After the APEC conferance it was reported by energyglobal.com  that China will export oil from its Tianjin facility.

The Russian and Chinese governments have agreed to allow oil products to be exported from the Tianjin refinery which is located north of Beijing. The facility is a joint venture between OAO Rosneft and China National Petroleum Corp. Construction of the 13 million tpy facility begun in 2010 and is 51% owned by the Chinese partner. Exporting oil products from the site will have add a major boost to the facility’s profitability.

And from Platts it has been reported of China’s intention to export oil. Although there is no report of what currency the oil is to be sold in, you would have to assume its in renminbi in light of all the trade agreements China has signed.

China has granted the future Tianjin refinery, a joint project of Russia’s Rosneft and China National Petroleum Corporation (CNPC), the right to export its oil products, Russia’s President Vladimir Putin said at a conference Friday.

“Today, at a bilateral meeting the leader of the People’s Republic of China, Hu Jintao, has informed us that the Tianjin joint venture will receive the right to buy and sell oil products, export them and supply to the domestic market,” Putin said at the Asia-Pacific Economic Cooperation CEO Summit in Russia’s Vladivostok.

It is the first time Chinese authorities have granted such a right to a project with foreign capital, Putin said, adding that this is another step in further improving economic relations between China and Russia.

The decision is to support efficiency of the joint project, Rosneft CEO Igor Sechin told reporters on the sidelines of the summit.

According to Rosneft, the refinery will process 13mln tonnes, to put in context, Rosneft exports 40mln tonnes to Europe. Thats not a particularly large amount but who knows where it will lead.

The new refinery will process 13 mln tonnes (95 mln barrels) of oil, of which 9 mln tonnes will be from Russia. The oil will be delivered by tankers to the port of Tianjin and from there via a 42 km pipeline to the refinery. Light product yield will be in excess of 80%. Target markets are Northern China and regions of the country’s Central Plateau, including Beijing, Tianjin, Hebei province, Changzhi, Jinan and Shandong province, as well as the Eastern Chinese seaboard.

I wouldn’t quite claim this is the end of the dollar just yet, but watch this space.

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What Happens When Fiat Currency Dies?

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Nice article on ZeroHedge explaining the steps of a fiat currency dying.Funny ting is, the pattern has remained the same for the last 4000 years. Why would it be any different this time?

 

This is today’s reality. It can happen here, it probably will happen here. And frankly, it’s all unfolding almost exactly as it has so many times before throughout history:

1. A nation rises to greatness and becomes wealthy based on sound principles and the hard work of initial generations.

2. Eventually, being wealthy becomes the natural expectation… an entitlement, rather than a goal to work hard for and achieve.

3. A nation begins living beyond its means to maintain the high life without the hard work, leveraging its credibility to trade tomorrow’s production for today’s consumption.

4. Living beyond its means eventually becomes unsustainable. Government begins to slowly, then staggeringly, devalue its currency.

5. The market (i.e. people) finally wake up to the fraud being perpetrated.

6. Financial repression usually follows– high taxes which steal from the productive, negative real interest rates which steal from the savers, etc.

7. Capital flight comes next. People take their money and run.

8. Governments implement capital controls, border controls, price and wage controls, and anything else they can do to maintain the status quo. People find out who the police are really there to protect and serve.

9. Capitulation (default) is the endgame; the system resets itself and begins anew.

This is nothing new. From the 3rd Dynasty of Ur (2000 BC) to Medieval Venice to the familiar stories of Rome and the Ottoman Empire, the world is full of monuments to the past greatness of failed civilizations.

We’re seeing the same pattern unfolding now. And sure, anything’s possible. Maybe the skies open up and the unicorns come out to play and the whole world manages to fix itself without skipping a beat.

But let’s live in reality: there are consequences when nations go bankrupt. And nearly every western nation on the planet is insolvent. That is a fact.

Certainly, the lies from our political leaders are entertaining. But how many more revolutions, riots, defaults, bank runs, stimulus packages, nationalizations, tax increases, pension grabs, etc. will it take to acknowledge what’s happening?

Can anyone afford to keep ignoring reality? Can you?

10 Reasons US Dollar’s Reign To End

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Poorrichard wrote a convincing post on the end of the US dollar as world’s reserve currency based on current global moves. Below are the 10 poorrichard described but I’m sure there are other reasons not mentioned. The situation in Iran alone has caused multiple problems potentially for the dollar.

Regardless, I think most people would agree we are looking ahead at major economic, financial, political and social changes. Wether the US dollar stays as World’s reserve currency remains to be seen but it is taking a battering right now.

#1 China And Japan Are Dumping the U.S. Dollar In Bilateral Trade
A few months ago, the second largest economy on earth (China) and the third largest economy on earth (Japan) struck a deal which will promote the use of their own currencies (rather than the U.S. dollar) when trading with each other.  This was an incredibly important agreement that was virtually totally ignored by the U.S. media.  The following is from a BBC report about that agreement….

#2 The BRICS (Brazil, Russia, India, China, South Africa) Plan To Start Using Their Own Currencies When Trading With Each Other
The BRICS continue to flex their muscles.  A new agreement will promote the use of their own national currencies when trading with each other rather than the U.S. dollar.

#3 The Russia/China Currency Agreement

Russia and China have been using their own national currencies when trading with each other for more than a year now.  Leaders from both Russia and China have been strongly advocating for a new global reserve currency for several years, and both nations seem determined to break the power that the U.S. dollar has over international trade.
#4 The Growing Use Of Chinese Currency In Africa
Who do you think is Africa’s biggest trading partner?
It isn’t the United States.
In 2009, China became Africa’s biggest trading partner, and China is now aggressively seeking to expand the use of Chinese currency on that continent.
A report from Africa’s largest bank, Standard Bank, recently stated the following….

“We expect at least $100 billion (about R768 billion) in Sino-African trade – more than the total bilateral trade between China and Africa in 2010 – to be settled in the renminbi by 2015.”

China seems absolutely determined to change the way that international trade is done.  At this point, approximately 70,000 Chinese companies are using Chinese currency in cross-border transactions.
#5 The China/United Arab Emirates Deal
China and the United Arab Emirates have agreed to ditch the U.S. dollar and use their own currencies in oil transactions with each other.
The UAE is a fairly small player, but this is definitely a threat to the petrodollar system.  What will happen to the petrodollar if other oil producing countries in the Middle East follow suit?

#6 Iran
Iran has been one of the most aggressive nations when it comes to moving away from the U.S. dollar in international trade.  For example, it has been reported that India will begin to use gold to buy oil from Iran.
Tensions between the U.S. and Iran are not likely to go away any time soon, and Iran is likely to continue to do what it can to inflict pain on the United States in the financial world.

#7 The China/Saudi Arabia Relationship
Who imports the most oil from Saudi Arabia?
It is not the United States.
Rather, it is China.
As I wrote about the other day, China imported 1.39 million barrels of oil per day from Saudi Arabia in February, which was a 39 percent increase from one year earlier.
Saudi Arabia and China have teamed up to construct a massive new oil refinery in Saudi Arabia, and leaders from both nations have been working to aggressively expand trade between the two nations.
So how long is Saudi Arabia going to stick with the petrodollar if China is their most important customer?
That is a very important question.

#8 The United Nations Has Been Pushing For A New World Reserve Currency

The United Nations has been issuing reports that openly call for an alternative to the U.S. dollar as the reserve currency of the world. In particular, one UN report envisions “a new global reserve system” in which the U.S. no longer has dominance….”A new global reserve system could be created, one that no longer relies on the United States dollar as the single major reserve currency.”

#9 The IMF Has Been Pushing For A New World Reserve Currency

The International Monetary Fund has also published a series of reports calling for the U.S. dollar to be replaced as the reserve currency of the world. In particular, one IMF paper entitled “Reserve Accumulation and International Monetary Stability” that was published a while back actually proposed that a future global currency be named the “Bancor” and that a future global central bank could be put in charge of issuing it….”A global currency, bancor, issued by a global central bank (see Supplement 1, section V) would be designed as a stable store of value that is not tied exclusively to the conditions of any particular economy. As trade and finance continue to grow rapidly and global integration increases, the importance of this broader perspective is expected to continue growing.”

#10 Most Of The Rest Of The World Hates The United States

Global sentiment toward the United States has dramatically shifted, and this should not be underestimated. Decades ago, we were one of the most loved nations on earth. Now we are one of the most hated. If you doubt this, just do some international traveling. Even in Europe (where we are supposed to have friends), Americans are treated like dirt.  Many American travelers have resorted to wearing Canadian pins so that they will not be treated like garbage while traveling over there. If the rest of the world still loved us, they would probably be glad to continue using the U.S. dollar.  But because we are now so unpopular, that gives other nations even more incentive to dump the dollar in international trade. So what will happen if the reign of the U.S. dollar as the world reserve currency comes to an end? Well, some of the potential effects were described in a recent article by Michael Payne….”The demise of the dollar will also bring radical changes to the American lifestyle. When this economic tsunami hits America, it will make the 2008 recession and its aftermath look like no more than a slight bump in the road. It will bring very undesirable changes to the American lifestyle through massive inflation, high interest rates on mortgages and cars, and substantial increases in the cost of food, clothing and gasoline; it will have a detrimental effect on every aspect of our lives.”

Goodfrey Bloom – Euro To End, Its Just A Matter Of When

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Goodfrey Bloom MEP (former investment manager & financial economist) gives his opinion on the state of the Euro. Some of the points he covers are :

Sovereign Bond grading
Why aren’t UK gilts downgraded
Danger the global economy is in
ECB underwriting junk sovereign bonds
Contagion to spread across Europe (including France)
Euro is a failed project. It has no mandate.
Gold is not rising, it’s just fiat currencies falling.

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