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Path From USDollar to New Gold Note Global Trade System

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Much has been written of the coming demise of the US dollar and a possible return to the gold standard. Jim Willie explores how he believes this will come about and what to expect along the way. 2013 being the key year.

The crux of the non-US$ trade vehicle devised as a USDollar alternative will be the Gold Trade Note. It will enable peer-to-peer payments to be completed from direct account transfers independent of currency, and most importantly, not done through the narrow pipes and channels controlled by the bankers with their omnipresent SWIFT code system among the world of banks. The Gold Trade Note will act much like a Letter of Credit, serve as a short-term bill, and maybe even push aside the near 0% short-term USTreasury Bills that litter the banking landscape. Any bond or bill earning almost no interest is veritable clutter. The zero bound USTreasurys open the door in a big way for replacement by a better vehicle. The new trade notes will involve posted gold as collateral, whose entire system for trade usage will bear a massive gold core that also will include silver and platinum, maybe other precious metals. The idea is to avoid the FOREX systems, to avoid the USDollar, and to avoid the banks as much as possible in a peer-to-peer system that can be executed between parties holding Blackberry devices or simple PC to complete the payments on transactions. If Gold is ignored by the corrupt bankers, then Gold will be the center of the new trade system and the solution in providing a globally accepted USDollar alternative.

 Do not be surprised to see the Chinese Yuan later as interchangeable with the Gold Trade Note. But first the Yuan must be convertible into the many major currencies actively traded in the world. Numerous reports have come in recent weeks that the Yuan currency will soon have a gold backing, yet unconfirmed. My expectation is for the Chinese Yuan eventually to be interchangeable with the Trade Note. That will signal its implicit gold backing. While many events and steps are not known, and many surprises will be thrust on stage, the guiding pathways are slowly coming to light.

Currency wars ongoing with no sign of abatement.

The list of nations undergoing active currency intervention is growing markedly. Currency manipulation actions are routine, each action inviting a reaction by other nations. It is not just Japan and the United States, the usual suspects. It is Luxembourg, Switzerland, South Korea, Sweden, Norway, and Brazil. Heck, even the venerable England has taken steps to create a Chinese Yuan swap facility. They do not wish to be left out when the Yuan becomes a more global currency, with full convertibility. London is aiding the path to a convertible Yuan. Who’d a thunk it? London wishes to remain a major trading center. Look for someday soon a Chinese Govt Bond auction denominated in Yuan, the offering managed by London banks. Such a development is not welcome news for New York, which must be seething with anger and flush with disgust. This is the more than a currency war, but rather a global currency tumult and transformation, with grand tectonic shifts, on the disruptive path to a return of the Gold Standard.

The Swiss and Japan will make an eventual switch from the current system to an Eastern orientated solution.

Watch for the Swiss and Japan to knock on the door for entrance in the Eastern Alliance, which will produce the USDollar alternative. It requires a critical mass for success. The stress felt in these two nations will motivate their pursuit of the USDollar alternative solution. They are being seriously wounded by the fiat paper currency system with floating rates.

The G20 meeting held in Russia later in the year(Sept) is one to watch out for as Willie suspects the plans will be put in place in the rumoured absence of US/UK.

Rumor is circulating in London that neither the United States nor the United Kingdom will attend the G-20 Meeting in Moscow. Refusal to attend by the Anglos would open a giant gate to coordinate plans by the leading Eastern nations (trade participants) on the new trade settlement system with attendant platforms. Rather than creating a new and better currency, they are more likely to establish a gold-backed trade settlement process that will render the USDollar obsolete. Failure to attend by the US-UK tagteam of financial fascists would ignite the Eastern-led consortium on motivation toward the launch of the new system in a more open public vocal manner with press conferences. The Third World awaits the nations that refuse to become part of a growing critical mass in global trade, which desires a more fair and equitable system of trade settlement. It is coming, but awaits a climax of collapse.

Source: silverdoctors

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China To Be Major Gold Trade Center

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It should come as no surprise that China, the world’s largest gold producer and buyer should want to become a major gold trading center. The Wall Street Journal has reported such plans after being briefed by an insider.

China has proposed to broaden trading of precious metals in its local market in order to help China become a “major gold trading centre” (see News).

The Wall Street Journal was briefed about China’s plans by “a person involved with the matter.” The paper reports that “the move could increase liquidity and help Beijing gain stronger pricing power for key commodities like gold”.

China is the largest consumer and now the largest producer of gold in the world and has aspirations to become a major gold trading center on a par with London and New York. China is also the fifth largest holder of gold reserves in the world after the U.S., Germany, France, Italy (see table).

Clearly they have ambitions far beyond a major Gold trading center but as a worlds reserve currency, possibly even THE worlds reserve currency.

Chinese officials have spoken of China’s aspirations to have gold reserves as large as the U.S. in order to help position the yuan or renminbi as a global reserve currency. Indeed, it would be only natural for China to aspire to have their currency become the global reserve currency in the long term.

In the longer term, being a major gold trading center would make China a more powerful financial and economic player and indeed could allow them to influence commodity and other important market prices. Indeed, Reuters reported that becoming a major gold trading center “would boost the country’s clout in setting global prices”.

The journal reports that “Beijing’s tight grip on commodities trading and rigid capital controls are among the obstacles in the way.”

The move is also part of the broader financial reforms that Beijing has launched in recent weeks, loosening some of the restrictions on securities investment and allowing banks to price loans at cheaper rates than in the past, that seek to grant market forces a bigger role in both the economy and the capital market.

The moved proposed by market officials would expand trading of precious metals from designated exchanges to the country’s vast interbank market, according to the person involved. The Shanghai Gold Exchange has released draft rules for such interbank precious metals trading, which will include spot, forward and swap contracts for the commodities, said the person.

Current limitations.

At the moment, producers, consumers and investors can trade only spot and futures contracts in gold and silver on the Shanghai Gold Exchange and the Shanghai Futures Exchange, respectively.

Due to limited membership on the two exchanges, many investors, including banks, aren’t able to directly trade the precious metals on the exchanges.

The draft rules were jointly developed by the Shanghai Gold Exchange, which is the world’s biggest marketplace for spot gold trading, and the China Foreign Exchange Trading System, a central bank subsidiary that oversees onshore currency trading.

Plans are afoot to get around this and expand gold trading.

According to the draft rules, the authorities are aiming to launch the interbank trading on Aug. 31, starting with gold contracts, said the person.

That would make gold the first commodity to trade on the interbank market.

The authorities will introduce a “market maker” system for the planned precious metals trading—the first time the system will be used to trade a commodity on the interbank market—with transactions done on an over-the-counter basis as compared to the exchange-based pricing mechanism.

Market makers are firms that stand ready to buy and sell a product at a publicly quoted price to facilitate trade.

An over-the-counter market would allow investors, in this case banks, to trade in large quantities that far exceed the Shanghai Gold Exchange’s current trading volumes, analysts said.

According to the draft rules, banks are allowed to use the new precious metals contracts in the interbank market for proprietary trading only.

The Shanghai Gold Exchange is inviting banks, mostly members of the exchange, to submit applications to take part in the trading, said the person, who expects most major and midsize banks to participate.

The move to let banks become market makers also shows the authorities’ desire to give such better-established and more sophisticated institutions more power in setting prices for major commodities, a common practice in developed markets, said Jiang Shu, senior precious metals analyst at Industrial Bank Co.

Current restrictions and capital controls remain an obstacle to China becoming major gold trading center and to the renminbi becoming an accepted global reserve currency.

The move by China to expand precious metals trading to their glowingly important and vast interbank market is important and another step towards China becoming an economic power on the world stage and one that will rival European nations and the U.S.

Source: Goldcore

Global Trade Figures Slowing Down

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This week is certainly a week for a raft of economic data to be released indicating the health of the Global economy and whether we can expect an improvement or not. ZeroHedge  recently reported on a lot of negative headlines regarding global trade and with Spain’s dismal bond auction after LTRO’s have stopped doesn’t bode well. Does this point to a global collapse or more aggressive money printing to come? Recent history has always shown us that ultimately CTRL+P is the CB’s only weapon and that can’t end well.

The weakness in the markets started late last night when Australia posted a surprising second consecutive deficit of $480MM on expectations of a $1.1 billion surplus (with the previous deficit revised even higher). This is obviously quite troubling because as we pointed out 3 weeks ago when recounting the biggest Chinese trade deficit since 1989 we asked readers to “observe the following sequence of very recent headlines: “Japan trade deficit hits record“, “Australia Records First Trade Deficit in 11 Months on 8% Plunge in Exports“, “Brazil Posts First Monthly Trade Deficit in 12 Months ” then of course this: “[US] Trade deficit hits 3-year record imbalance“, and finally, as of late last night, we get the following stunning headline: “China Has Biggest Trade Shortfall Since 1989 on Europe Turmoil.” So who is exporting? Nobody knows, but everyone knows why the Aussie dollar plunged on the headline. The shock sent reverberations across Asian markets, which then spilled over into Europe. Things in Europe went from bad to worse, after Germany reported its February factory orders rose a modest 0.3% on expectations of a solid 1.5% rebound from the -1.8% drop in January. But the straw on the camel’s back was Spain trying to raise €3.5 billion in bonds outside of the LTRO’s maturity, where the results confirmed that it will be a long, hard summer for the Iberian country, which not only raised far less, or €2.6 billion, but the internals were quite atrocious, blowing up the entire Spanish bond curve, and sending Spanish CDS to the widest in over half a year.

Uruguay to Barter Rice For Iranian Oil

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The sanctions against Iran have in recent months resulted in countries trading with Iran for oil using commodities and non US dollar currencies. The latest, has been Uruguay announcing that it is going to trade rice for Iran’s oil. These sanctions have clearly backfired and only hasten the end of the US Dollar as the world’s reserve currency. Already this week at the BRICS summit there has been calls for a “BRICS Bank” which would reduce dependence on the western-led financial institutions, the IMF and World Bank as well as  signing two landmark agreements aimed at eventually replacing the dollar with their own currencies for trade amongst themselves.

Uruguayan Agriculture Minister Tabare Aguerre says his country is ready to export rice to Iran in exchange for Iranian oil in the face of the US-led unilateral sanctions on Tehran.
“If Iran is willing to barter oil for rice we will do it and we will take out currency from (the operation),” Reuters quoted Aguerre as saying on Friday.

Uruguay, which is Latin America’s top rice exporter, sold 90,000 tons of rice to Iran in 2011.

Aguerre’s remarks came as the US and EU have imposed tough financial and oil sanctions against Iran since the beginning of 2012, claiming that the country’s nuclear energy program includes a military component.

India And Iran To Drop The Dollar

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Reuters has reported that India and Iran have decided to drop the dollar in some of their oil trade between the two countries.

 India and Iranhave agreed to settle some of their $12 billion annual oil trade in rupees, a government source said on Friday, resorting to the restricted currency after more than a year of payment problems in the face of fresh, tougher U.S. sanctions.

India, the world’s fourth-largest oil consumer, relies on Iran for about 12 percent of its imports or 350,000-400,000 barrels per day (bpd) and is Tehran’s second-biggest oil client after China.

…..

An Indian delegation has been in Tehran this week discussing options for payment and the source said the decision to pay in rupees was made after a meeting there.

“The Central Bank of Iran will open an account with an Indian bank for receiving payment and settling its import,” the source, who has direct knowledge of the matter, said, adding the new system will start “soon”.

The source did not specify the name of the Indian bank. But other sources have said that Iran could open an account with India’s UCO Bank as it does not have any interests in the United States.

In addition to rupee payments, Indian refiners will continue to make payments through the current mechanism using Halkbank, this source said, “as long as it continues”.

How about this for a kick in the stones for Obama’s administration 😉

India Trade Secretary Rahul Khullar said this week that the Indian delegation to Iran would work around the U.S. sanctions to protect oil supplies and promote Indian exports.

………..

Asian support for U.S. sanctions is vital since the region buys more than half of Iran’s daily crude exports

This follows a list of large Asian and Middle East countries that have abandoned the dollar in trade between themselves. In a previous post we wrote about Iran and Russia dropping the dollar.

Russia And Iran Plan To Dump The Dollar

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Fars News Agency in Iran has announced an agreement by a senior Iranian diplomat for Russian and Iran to replace dollars in trade between the two countries. Trade will now be conducted in either rubles or rials. This is another major move by large countries to drop the dollar when trading amongst themselves.

TEHRAN (FNA)- Iran and Russia have replaced US Dollar with their own currencies in their trade ties, a senior Iranian diplomat announced on Saturday.

Speaking to FNA, Tehran’s Ambassador to Moscow Seyed Reza Sajjadi said that the proposal for replacing US Dollar with Ruble and Rial was raised by Russian President Dmitry Medvedev in a meeting with his Iranian counterpart Mahmoud Ahmadinejad in Astana on the sidelines of the Shanghai Cooperation Organization (SCO) meeting.

This is in response to moves by the US against Iran, which looks like backfiring.

“The move (imposing sanction on the CBI) is unacceptable. Russians have clearly announced that they will not accept these sanctions and Iran’s nuclear issue is resolvable just through negotiations.”

Iranian President Mahmoud Ahmadinejad hit back at the US after Washington introduced new sanctions against Iran’s central bank.

It was reported last November by Marketwatch that China and Russia had agreed to trade in yuan or ruble.

HONG KONG (MarketWatch) — China and Russia will stop using the U.S. dollar to settle bilateral trade and instead use the ruble or the yuan, though the move is not meant to signal a challenge to the dollar, according to reports Wednesday.

At the end of 2011, the new ASEAN trading block has put further pressure on the dollar. In this article from alt-market discusses moves by China to place itself in a position to trade in a new world without dollars as the worlds reserve currency.

In 2009 and 2010, it became absolutely clear that China (with the help of global corporate entities) was developing the skeleton of a new system; a trade network that had the capacity to supplant the U.S. and end the dollar’s world reserve status. 

Since then, Yuan bonds have spread across the planet, China has dropped the dollar in bilateral trade with Russia, the ASEAN trading bloc has formed into a tight shell of export partners, and that is just the beginning.  Two major announcements in 2011 have solidified my belief that a complete dump of the dollar by eastern interests is near…

According to alt-market even Japan looks to also drop the dollar within this region.

Japan has indeed entered into an agreement to drop the dollar in currency exchange with China and has expressed interest in melting into ASEAN.  Japan has also struck somewhat similar though slightly more limited deals with India, South Korea, Indonesia, and the Philippines almost simultaneously:

Reuters ran a headline in October of China creating a regional bank for ASEAN which sounds more like a Central Bank for the new trading area.

(Reuters) – China is considering a proposal to set up a regional bank to help its small and medium enterprises (SMEs) invest in Southeast Asian neighbors, fund infrastructure projects and promote development in southwestern China, two independent sources said.

After approval by the State Council, or cabinet, China would formally invite members of the Association of Southeast Asian Nations (ASEAN), Japan and South Korea to each take a stake in the ASEAN Bank, said the sources, who have direct knowledge of the proposal.

China, the world’s second biggest economy, is likely to be the bank’s biggest single shareholder with an initial investment of up to 30 billion yuan ($4.7 billion), the sources said, requesting anonymity because they are not authorized to speak to reporters. The other countries’ stakes still must be negotiated.

These moves over the last 3 months do not bode well for the future of the dollar. In fact it now looks as if the East is manoeuvering itself away from the worlds reserve currency and placing itself in a position to trade in a new world.

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