Reserve Currency

The Reserve Currency has power. It is a huge advantage for the spendthrift hooligans running America. Why? It means they can produce more dollars by printing them at almost zero cost. Or they can just add a few zeroes in their computers Then they can spend them will nilly.

This means that America can buy oil from Saudi Arabia at something like $100 a barrel. These notes cost maybe 5 cents each. It is good business. The problem with this approach is that Arabs holding these dollar notes can spend them in America. Thus the Treasury is defrauding its own people. Or that same American government can buy from its own people using those forged notes. In either case there is a certain amount of friction as profit margins & taxes take their toll but the government still comes out far ahead.
PS The Chinese are now THE manufacturers but they buy Oil from Saudi Arabia etc. Why fiddle about with dollars? Whence Pepe Escobar's article Say Hello to Russian Gold and Chinese Petroyuan ex The Unz Review.

How Hitler Tackled Unemployment and Revived Germany’s Economy
By Mark Weber

To deal with the massive unemployment and economic paralysis of the Great Depression, both the US and German governments launched innovative and ambitious programs. Although President Franklin Roosevelt’s “New Deal” measures helped only marginally, the Third Reich’s much more focused and comprehensive policies proved remarkably effective. Within three years unemployment was banished and Germany’s economy was flourishing. And while Roosevelt’s record in dealing with the Depression is pretty well known, the remarkable story of how Hitler tackled the crisis is not widely understood or appreciated. - http://www.ihr.org/other/economyhitler2011.html

One advantage for America is called #Exorbitant Privilege by Frenchmen whining about not being the winners. See below

Reserve Currency ex Wiki
A reserve currency (or anchor currency) is a foreign currency that is held in significant quantities by central banks or other monetary authorities as part of their foreign exchange reserves. The reserve currency can be used in international transactions, international investments and all aspects of the global economy. It is often considered a hard currency or safe-haven currency.

The United Kingdom's pound sterling was the primary reserve currency of much of the world in the 19th century and first half of the 20th century.[1] However, by the middle of the 20th century, the United States dollar had become the world's dominant reserve currency.[2] The world's need for dollars has allowed the United States government to borrow at lower costs, giving the United States an advantage in excess of $100 billion per year.[3][4][5]

The US 100-dollar bill, the world's most recognizable reserve currency in physical form

History
Reserve currencies have come and gone. International currencies in the past have (excluding those discussed below) included the Greek drachma, coined in the fifth century B.C., the Roman denari, the Byzantine solidus and Arab dinar of the middle-ages and the French franc.

The Venetian ducat and the Florentine florin became the gold-based currency of choice between Europe and the Arab world from the 13th to 16th centuries, since gold was easier than silver to mint in standard sizes and transport over long distances. It was the Spanish silver dollar, however, which created the first true global reserve currency recognized in Europe, Asia and the Americas from the 16th to 19th centuries due to abundant silver supplies from Spanish America.[6]

While the Dutch guilder was a reserve currency of somewhat lesser scope, used between Europe and the territories of the Dutch colonial empire from the 17th to 18th centuries, it was also a silver standard currency fed with the output of Spanish-American mines flowing through the Spanish Netherlands. The Dutch, through the Amsterdam Wisselbank (the Bank of Amsterdam), were also the first to establish a reserve currency whose monetary unit was stabilized using practices familiar to modern central banking (as opposed to the Spanish dollar stabilized through American mine output and Spanish fiat) and which can be considered as the precursor to modern-day monetary policy. [7] [8]

It was therefore the Dutch which served as the model for bank money and reserve currencies stabilized by central banks, with the establishment of Bank of England in 1694 and the Bank of France in the 19th century. The British pound sterling, in particular, was poised to dislodge the Spanish dollar's hegemony as the rest of the world transitioned to the gold standard in the last quarter of the 19th century. At that point, the UK was the primary exporter of manufactured goods and services, and over 60% of world trade was invoiced in pounds sterling. British banks were also expanding overseas; London was the world centre for insurance and commodity markets and British capital was the leading source of foreign investment around the world; sterling soon became the standard currency used for international commercial transactions.............

Attempts were made in the interwar period to restore the gold standard. The British Gold Standard Act reintroduced the gold bullion standard in 1925,[10] followed by many other countries. This led to relative stability, followed by deflation, but because the onset of the Great Depression and other factors, global trade greatly declined and the gold standard fell. Speculative attacks on the pound forced Britain entirely off the gold standard in 1931.

John Maynard Keynes (right) and Harry Dexter White helped to draft the provisions of the post-war financial system. Here, they meet at the inaugural meeting of the International Monetary Fund, 1946.

After World War II, the international financial system was governed by a formal agreement, the Bretton Woods System. Under this system, the United States dollar (USD) was placed deliberately as the anchor of the system, with the US government guaranteeing other central banks that they could sell their US dollar reserves at a fixed rate for gold.[13]

In the late 1960s and early 1970s, the system suffered setbacks ostensibly due to problems pointed out by the Triffin dilemma—the conflict of economic interests that arises between short-term domestic objectives and long-term international objectives when a national currency also serves as a world reserve currency.

Additionally, in 1971 Nixon suspended the convertibility of the USD to gold, thus creating a fully fiat global reserve currency system. However, gold has persisted as a significant reserve asset since the collapse of the classical gold standard.[14]

Following the 2020 economic recession, the IMF opined about the emergence of "A New Bretton Woods Moment" which could imply the need for a new global reserve currency system. (see below: § Calls for an alternative reserve currency)

Theory
Economists debate whether a single reserve currency will always dominate the global economy.[21] Many have recently argued that one currency will almost always dominate due to network externalities (sometimes called "the network effect"), especially in the field of invoicing trade and denominating foreign debt securities, meaning that there are strong incentives to conform to the choice that dominates the marketplace. The argument is that, in the absence of sufficiently large shocks, a currency that dominates the marketplace will not lose much ground to challengers.

However, some economists, such as Barry Eichengreen, argue that this is not as true when it comes to the denomination of official reserves because the network externalities are not strong. As long as the currency's market is sufficiently liquid, the benefits of reserve diversification are strong, as it insures against large capital losses. The implication is that the world may well soon begin to move away from a financial system dominated uniquely by the US dollar. In the first half of the 20th century, multiple currencies did share the status as primary reserve currencies. Although the British Sterling was the largest currency, both the French franc and the German mark shared large portions of the market until the First World War, after which the mark was replaced by the dollar. Since the Second World War, the dollar has dominated official reserves, but this is likely a reflection of the unusual domination of the American economy during this period, as well as official discouragement of reserve status from the potential rivals, Germany and Japan.

The top reserve currency is generally selected by the banking community for the strength and stability of the economy in which it is used. Thus, as a currency becomes less stable, or its economy becomes less dominant, bankers may over time abandon it for a currency issued by a larger or more stable economy. This can take a relatively long time, as recognition is important in determining a reserve currency. For example, it took many years after the United States overtook the United Kingdom as the world's largest economy before the dollar overtook the pound sterling as the dominant global reserve currency.[1] In 1944, when the US dollar was chosen as the world reference currency at Bretton Woods, it was only the second currency in global reserves.[1]

The G8 also frequently issues public statements as to exchange rates. In the past due to the Plaza Accord, its predecessor bodies could directly manipulate rates to reverse large trade deficits.

Major reserve currencies
 

Distribution of global reserve currencies

United States dollar

Further information: International use of the U.S. dollar

The United States dollar is the most widely held currency in the allocated reserves, representing about 61% of international foreign currency reserves, which makes it somewhat easier for the United States to run higher trade deficits with greatly postponed economic impact or even postponing a currency crisis. Central bank US dollar reserves, however, are small compared to private holdings of such debt. If non-United States holders of dollar-denominated assets decided to shift holdings to assets denominated in other currencies, then there could be serious consequences for the US economy. Changes of this kind are rare, and typically change takes place gradually over time, and markets involved adjust accordingly.[1]

However, the US dollar remains the preferred reserve currency because of its stability along with assets such as United States Treasury security that have both scale and liquidity.[22]

The US dollar's position in global reserves is often questioned because of the growing share of unallocated reserves, and because of the doubt regarding dollar stability in the long term.[23][24][25][26][27] However, in the aftermath of the financial crisis, the dollar's share in the world's foreign-exchange trades rose slightly from 85% in 2010 to 87% in 2013.[28]

The dollar's role as the undisputed reserve currency of the world allows the United States to impose unilateral sanctions against actions performed between other countries, for example the American fine against BNP Paribas for violations of U.S. sanctions that were not laws of France or the other countries involved in the transactions.[29] In 2014 China and Russia signed a 150 billion yuan central bank liquidity swap line agreement to get around European and American sanctions on their behaviors.[30]

Euro

Further information: International status and usage of the euro

The euro is currently the second most commonly held reserve currency, representing about 21% of international foreign currency reserves. After World War II and the rebuilding of the German economy, the German Deutsche Mark gained the status of the second most important reserve currency after the US dollar. When the euro was introduced on 1 January 1999, replacing the Mark, French franc and ten other European currencies, it inherited the status of a major reserve currency from the Mark. Since then, its contribution to official reserves has risen continually as banks seek to diversify their reserves, and trade in the eurozone continues to expand.[31]

After the euro's share of global official foreign exchange reserves approached 25% as of year-end 2006 (vs. 65% for the U.S. dollar; see table above), some experts have predicted that the euro could replace the dollar as the world's primary reserve currency. See Alan Greenspan, 2007;[32] and Frankel, Chinn (2006) who explained how it could happen by 2020. [33][34] However, as of 2021 none of this has come to fruition due to the European debt crisis which engulfed the PIIGS countries from 2009 to 2014. Instead the euro's stability and future existence was put into doubt, and its share of global reserves was cut to 19% by year-end 2015 (vs. 66% for the USD). As of year-end 2020 these figures stand at 21% for EUR and 59% for USD.

Other reserve currencies

Dutch guilder

The Dutch guilder was the de facto reserve currency in Europe in 17th and 18th centuries.[8][35]

Pound sterling

The United Kingdom's pound sterling was the primary reserve currency of much of the world in the 19th century and first half of the 20th century.[1] That status ended when the UK almost bankrupted itself fighting World War I[36] and World War II[37] and its place was taken by the United States dollar.

In the 1950s, 55% of global reserves were still held in sterling; but the share was 10% lower within 20 years.[1][38]

The establishment of the U.S. Federal Reserve System in 1913 and the economic vacuum following the World Wars facilitated the emergence of the United States as an economic superpower.[39]

As of 30 September 2021, the pound sterling represented the fifth largest proportion (by USD equivalent value) of foreign currency reserves and just 4.75% of those reserves.[40]

Japanese yen

Japan's yen is part of the International Monetary Fund's (IMF) special drawing rights (SDR) valuation. The SDR currency value is determined daily by the IMF, based on the exchange rates of the currencies making up the basket, as quoted at noon at the London market. The valuation basket is reviewed and adjusted every five years.[41]

The SDR Values and yen conversion for government procurement are used by the Japan External Trade Organization for Japan's official procurement in international trade.[42]

Swiss franc

The Swiss franc, despite gaining ground among the world's foreign-currency reserves[43] and being often used in denominating foreign loans,[44] cannot be considered as a world reserve currency, since the share of all foreign exchange reserves held in Swiss francs has historically been well below 0.5%. The daily trading market turnover of the franc, however, ranked fifth, or about 3.4%, among all currencies in a 2007 survey by the Bank for International Settlements.[45]

Canadian dollar

A number of central banks (and commercial banks) keep Canadian dollars as a reserve currency. In the economy of the Americas, the Canadian dollar plays a similar role to that played by the Australian dollar (AUD) in the Asia-Pacific region. The Canadian dollar (as a regional reserve currency for banking) has been an important part of the British, French and Dutch Caribbean states' economies and finance systems since the 1950s.[46] The Canadian dollar is also held by many central banks in Central America and South America. It is held in Latin America because of remittances and international trade in the region.[46]

Because Canada's primary foreign-trade relationship is with the United States, Canadian consumers, economists, and many businesses primarily define and value the Canadian dollar in terms of the United States dollar. Thus, by observing how the Canadian dollar floats in terms of the US dollar, foreign-exchange economists can indirectly observe internal behaviours and patterns in the US economy that could not be seen by direct observation. Also, because it is considered a petrodollar, the Canadian dollar has only fully evolved into a global reserve currency since the 1970s, when it was floated against all other world currencies.

The Canadian dollar, since 2013, is ranked fifth among foreign currency reserves in the world.[47]

Calls for an alternative reserve currency

John Maynard Keynes proposed the bancor, a supranational currency to be used as unit of account in international trade, as reserve currency under the Bretton Woods Conference of 1945. The bancor was rejected in favor of the U.S. dollar.

A report released by the United Nations Conference on Trade and Development in 2010, called for abandoning the U.S. dollar as the single major reserve currency. The report states that the new reserve system should not be based on a single currency or even multiple national currencies but instead permit the emission of international liquidity to create a more stable global financial system.[48][49][50]

Countries such as Russia and the China, central banks, and economic analysts and groups, such as the Gulf Cooperation Council, have expressed a desire to see an independent new currency replace the dollar as the reserve currency. However, it is recognized that the US dollar remains the strongest reserve currency.[51]

On 10 July 2009, Russian President Medvedev proposed a new 'World currency' at the G8 meeting in London as an alternative reserve currency to replace the dollar.[52]

At the beginning of the 21st century, gold and crude oil were still priced in dollars, which helps export inflation and has brought complaints about OPEC's policies of managing oil quotas to maintain dollar price stability.[53]

Special drawing rights

Some have proposed the use of the International Monetary Fund's (IMF) special drawing rights (SDRs) as a reserve.

China has proposed using SDRs, calculated daily from a basket of U.S. dollar, euro, Japanese yen and British pounds, for international payments.[54]

On 3 September 2009, the United Nations Conference on Trade and Development (UNCTAD) issued a report calling for a new reserve currency based on the SDR, managed by a new global reserve bank.[55] The IMF released a report in February 2011, stating that using SDRs "could help stabilize the global financial system."[56]

Chinese yuan

See also: Internationalization of the renminbi

Chinese yuan officially became a supplementary forex reserve asset on 1 October 2016.[57] It represents 10.92% of the IMF's SDR currency basket.[58][59] The Chinese yuan is the third reserve currency after the US dollar and Euro within the basket of currencies in the SDR.[58] The SDR itself is only a minuscule fraction of global currency reserves.[60]

Further reading

See also

 

Exorbitant Privilege ex Wiki
The term exorbitant privilege (privilège exorbitant in French) refers to the benefits the United States has due to its own currency (the US dollar) being the international reserve currency. For example, the US would not face a balance of payments crisis, because their imports are purchased in their own currency. Exorbitant privilege as a concept cannot refer to currencies that have a regional reserve currency role, only to global reserve currencies.[clarification needed]

Academically, the exorbitant privilege literature analyzes two empiric puzzles, the position puzzle and the income puzzle. The position puzzle refers to the difference between the (negative) U.S. net international investment position (NIIP) and the accumulated U.S. current account deficits, the former being much smaller than the latter. The income puzzle is that despite a deeply negative NIIP, the U.S. income balance is positive, i.e. despite having much more liabilities than assets, earned income is higher than interest expenses.[1]

Origin
The term was coined in the 1960s by Valéry Giscard d'Estaing, then the French Minister of Finance.[2] Charles de Gaulle, who is said to have had similar views.

Opposition in France
In the Bretton Woods system put in place in 1944, U.S. dollars were convertible to gold between countries. In France, it was called "America's exorbitant privilege"[2] as it resulted in an "asymmetric financial system" where foreigners "see themselves supporting American living standards and subsidizing American multinationals". As American economist Barry Eichengreen summarized: "It costs only a few cents for the Bureau of Engraving and Printing to produce a $100 bill, but other countries had to pony up $100 of actual goods in order to obtain one."[2] In February 1965, President Charles de Gaulle announced his intention to exchange its U.S. dollar reserves for gold at the official exchange rate. He sent the French Navy across the Atlantic to pick up the French reserve of gold and was followed by several countries.[3][4] As it resulted in considerably reducing U.S. gold stock and U.S. economic influence, it led U.S. President Richard Nixon to end the convertibility of the dollar to gold on August 15, 1971 (the "Nixon Shock"). This was meant to be a temporary measure but the dollar became permanently a floating fiat money and in October 1976, the U.S. government officially changed the definition of the dollar; references to gold were removed from statutes.[5][6]

 

Money Supply ex Wiki
In macroeconomics, the money supply (or money stock) refers to the total volume of money held by the public at a particular point in time in an economy. There are several ways to define "money", but standard measures usually include currency in circulation and demand deposits (depositors' easily accessed assets on the books of financial institutions).[1][2] The central bank of each country may use a definition of what constitutes money for its purposes.

Money supply data is recorded and published, usually by the government or the central bank of the country. Public and private sector analysts monitor changes in the money supply because of the belief that such changes affect the price levels of securities, inflation, the exchange rates, and the business cycle.[3]

The relationship between money and prices has historically been associated with the quantity theory of money. There is strong empirical evidence of a direct relationship between the growth of the money supply and long-term price inflation, at least for rapid increases in the amount of money in the economy.[citation needed] For example, a country such as Zimbabwe which saw extremely rapid increases in its money supply also saw extremely rapid increases in prices (hyperinflation). This is one reason for the reliance on monetary policy as a means of controlling inflation.[4][5]

 

 
 

Biden's Russian Roulette May Kill Dollar Dominance  [ 9 March 2022 ]
QUOTE
In the 1960s, French Finance Minister Valéry Giscard d’Estaing famously said that issuing the globe’s undisputed reserve currency gave Washington “exorbitant privilege.” In the last week, Joe Biden has proved d’Estaing understated the case quite significantly.

Among the US president’s steps to sanction Vladimir Putin for his brutal invasion of Ukraine is effectively cutting Russia off from much of its currency reserves. Markets were every bit as flummoxed as Putin’s central bank, which planned to use that US$630 billion war chest to stabilize what’s now a junk-rated economy.

Dylan Grice, a UK hedge fund manager at Calderwood Capital, speaks for many when he says he’s “never seen weaponization of money on this scale before.” And then, the kicker: “You only get to play the card once,” Grice warned. “It’s a turning point in monetary history: The end of USD hegemony.”
UNQUOTE
Of course Joe Biden is a thief but he has never done it that big before. The Mainstream Media are eagerly ignoring the bribes that his son get from the Ukraine. $50,000 a month of unearned income buys influence. Stealing $630 billion in one hit is real big time. But a problem goes with it. The dollar is the world's reserve currency. Now we will move on, we can, we must. Chinese money works just fine and we all trade with China. It will mean that the Americans can't get away with just printing dollars. It will really bring the pains on. You doubt it? See Russia Will Bypass Western Economic Warfare. 

 

Five Warning Signs The End Of Dollar Hegemony Is Near... Here's What Happens Next ZeroHedge
QUOTE
It’s no secret that China and Russia have been stashing away as much gold as possible for many years.

China is the world’s largest producer and buyer of gold. Russia is number two. Most of that gold finds its way into the Russian and Chinese governments’ treasuries.

Russia has over 2,300 tonnes—or nearly 74 million troy ounces—of gold, one of the largest stashes in the world. Nobody knows the exact amount of gold China has, but most observers believe it is even larger than Russia’s stash.

Russia and China’s gold gives them access to an apolitical neutral form of money with no counterparty risk.

Remember, gold has been mankind’s most enduring form of money for over 2,500 years because of unique characteristics that make it suitable to store and exchange value.

Gold is durable, divisible, consistent, convenient, scarce, and most importantly, the “hardest” of all physical commodities.

In other words, gold is the one physical commodity that is the “hardest to produce” (relative to existing stockpiles) and, therefore, the most resistant to inflation. That’s what gives gold its superior monetary properties. Russia and China can use their gold to engage in international trade and perhaps back the currencies.

That’s why gold represents a genuine monetary alternative to the US dollar, and Russia and China have a lot of it. Today it’s clear why China and Russia have had an insatiable demand for gold.

They’ve been waiting for the right moment to pull the rug from beneath the US dollar. And now is that moment…

This is a big problem for the US government, which reaps an unfathomable amount of power because the US dollar is the world’s premier reserve currency. It allows the US to print fake money out of thin air and export it to the rest of the world for real goods and services—a privileged racket no other country has.

Russia and China’s gold could form the foundation of a new monetary system outside of the control of the US. Such moves would be the final nail in the coffin of dollar dominance.

Five recent developments are a giant flashing red sign that something big could be imminent.

Warning Sign #1: Russia Sanctions Prove Dollar Reserves “Aren’t Really Money”

In the wake of Russia’s invasion of Ukraine, the US government has launched its most aggressive sanctions campaign ever.

Exceeding even Iran and North Korea, Russia is now the most sanctioned nation in the world.

As part of this, the US government seized [ You mean stole, don't you? ] the US dollar reserves of the Russian central bank—the accumulated savings of the nation.

It was a stunning illustration of the dollar’s political risk. The US government can seize another sovereign country’s dollar reserves at the flip of a switch.

The Wall Street Journal, in an article titled “If Russian Currency Reserves Aren’t Really Money, the World Is in for a Shock,” noted:

“Sanctions have shown that currency reserves accumulated by central banks can be taken away. With China taking note, this may reshape geopolitics, economic management and even the international role of the U.S. dollar.”

Russian President Putin said the US had defaulted on its obligations and that the dollar is no longer a reliable currency.

The incident has eroded trust in the US dollar as the global reserve currency and catalyzed significant countries to use alternatives in trade and their reserves.

China, India, Iran, and Turkey, among other countries, announced, or already are, doing business with Russia in their local currencies instead of the US dollar. These countries represent a market of over three billion people that no longer need to use the US dollar to trade with one another.

The US government has incentivized almost half of mankind to find alternatives to the dollar by attempting to isolate Russia.

Warning Sign #2: Rubles, Gold, and Bitcoin for Gas, Oil, and Other Commodities

Russia is the world’s largest exporter of natural gas, lumber, wheat, fertilizer, and palladium (a crucial component in cars).

It is the second-largest exporter of oil and aluminum and the third-largest exporter of nickel and coal.

Russia is a major producer and processor of uranium for nuclear power plants. Enriched uranium from Russia and its allies provides electricity to 20% of the homes in the US.

Aside from China, Russia produces more gold than any other country, accounting for more than 10% of global production.

These are just a handful of examples. There are many strategic commodities that Russia dominates.

In short, Russia is not just an oil and gas powerhouse but a commodity superpower.

After the US government seized Russia’s US dollar reserves, Moscow has little use for the US dollar. Moscow does not want to exchange its scarce and valuable commodities for politicized money that its rivals can take away on a whim. Would the US government ever tolerate a situation where the US Treasury held its reserves in rubles in Russia?

The head of the Russian Parliament recently called the US dollar a “candy wrapper” but not the candy itself. In other words, the dollar has the outward appearance of money but is not real money.

That’s why Russia is no longer accepting US dollars (or euros) in exchange for its energy. They are of no use to Russia. So instead, Moscow is demanding payment in rubles.

That’s an urgent problem for Europe, which cannot survive without Russian commodities. The Europeans have no alternative to Russian energy and have no choice but to comply.

European buyers must now first buy rubles with their euros and use them to pay for Russian gas, oil, and other exports.

This is a big reason why the ruble has recovered all of the value it lost in the initial days of the Ukraine invasion and then made further gains.

In addition to rubles, the top Russian energy official said Moscow would also accept gold or Bitcoin in return for its commodities.

“If they want to buy, let them pay either in hard currency—and this is gold for us… you can also trade Bitcoins.”

Here’s the bottom line. US dollars are no longer needed (or wanted) to buy Russian commodities.

Warning Sign #3: The Petrodollar System Flirts With Collapse

Oil is by far the largest and most strategic commodity market.

For the last 50 years, virtually anyone who wanted to import oil needed US dollars to pay for it.

That’s because, in the early ’70s, the US made an agreement to protect Saudi Arabia in exchange for ensuring, among other things, all OPEC producers only accept US dollars for their oil.

Every country needs oil. And if foreign countries need US dollars to buy oil, they have a compelling reason to hold large dollar reserves.

This creates a huge artificial market for US dollars and forces foreigners to soak up many of the new currency units the Fed creates. Naturally, this gives a tremendous boost to the value of the dollar.

The system has helped create a deeper, more liquid market for the dollar and US Treasuries. It also allows the US government to keep interest rates artificially low, thereby financing enormous deficits it otherwise would be unable to.

In short, the petrodollar system has been the bedrock of the US financial system for the past 50 years.

But that’s all about to change… and soon.

After it invaded Ukraine, the US government kicked Russia out of the dollar system and seized hundreds of billions in dollar reserves of the Russian central bank.

Washington has threatened to do the same to China for years. These threats helped ensure that China cracked down on North Korea, didn’t invade Taiwan, and did other things the US wanted.

These threats against China may be a bluff, but if the US government carried them out—as it recently did against Russia—it would be like dropping a financial nuclear bomb on Beijing. Without access to dollars, China would struggle to import oil and engage in international trade. As a result, its economy would come to a grinding halt, an intolerable threat to the Chinese government.

China would rather not depend on an adversary like this. This is one of the main reasons it created an alternative to the petrodollar system.

After years of preparation, the Shanghai International Energy Exchange (INE) launched a crude oil futures contract denominated in Chinese yuan in 2017. Since then, any oil producer can sell its oil for something besides US dollars… in this case, the Chinese yuan.

There’s one big issue, though. Most oil producers don’t want to accumulate a large yuan reserve, and China knows this.

That’s why China has explicitly linked the crude futures contract with the ability to convert yuan into physical gold—without touching China’s official reserves—through gold exchanges in Shanghai (the world’s largest physical gold market) and Hong Kong.

PetroChina and Sinopec, two Chinese oil companies, provide liquidity to the yuan crude futures by being big buyers. So, if any oil producer wants to sell their oil in yuan (and gold indirectly), there will always be a bid.

After years of growth and working out the kinks, the INE yuan oil future contract is now ready for prime time.

And now that the US has banned Russia from the dollar system, there is an urgent need for a credible system capable of handling hundreds of billions worth of oil sales outside of the US dollar and financial system.

The Shanghai International Energy Exchange is that system.

Back to Saudi Arabia…

For nearly 50 years, the Saudis had always insisted anyone wanting their oil would need to pay with US dollars, upholding their end of the petrodollar system.

But that could all change soon…

Remember, China is already the world’s largest oil importer. Moreover, the amount of oil it imports continues to grow as it fuels an economy of over 1.4 billion people (more than 4x larger than the US).

China is Saudi Arabia’s top customer. Beijing buys over 25% of Saudi oil exports and wants to buy more.

The Chinese would rather not have to use the US dollar, the currency of their adversary, to buy an essential commodity.

In this context, The Wall Street Journal [  https://www.wsj.com/articles/saudi-arabia-considers-accepting-yuan-instead-of-dollars-for-chinese-oil-sales-11647351541 - 15 March 2022   ] recently reported that the Chinese and the Saudis had entered into serious discussions to accept yuan as payment for Saudi oil exports instead of dollars.

The WSJ article claims the Saudis are angry at the US for not supporting it enough in its war against Yemen. They were further dismayed by the US withdrawal from Afghanistan and the nuclear negotiations with Iran.

In short, the Saudis don’t think the US is holding up its end of the deal. So they don’t feel like they need to hold up their part.

Even the WSJ admits such a move would be disastrous for the US dollar.

“The Saudi move could chip away at the supremacy of the US dollar in the international financial system, which Washington has relied on for decades to print Treasury bills it uses to finance its budget deficit.”

Here’s the bottom line.

Saudi Arabia—the linchpin of the petrodollar system—is flirting in the open with China about selling its oil in yuan. One way or another—and probably soon—the Chinese will find a way to compel the Saudis to accept the yuan.

The sheer size of the Chinese market makes it impossible for Saudi Arabia—and other oil exporters—to ignore China’s demands to pay in yuan indefinitely. Moreover, using the INE to exchange oil for gold further sweetens the deal for oil exporters.

Sometime soon, there will be a lot of extra dollars floating around suddenly looking for a home now that they are not needed to purchase oil.

It signals an imminent and enormous change for anyone holding US dollars. It would be incredibly foolish to ignore this giant red warning sign.

Warning Sign #4: Out of Control Money Printing and Record Price Increases

In March of 2020, the chair of the Federal Reserve, Jerome Powell, exercised unfathomable power…

At the time, it was the height of the stock market crash amid the COVID hysteria. People were panicking as they watched the market plummet, and they turned to the Fed to do something.

In a matter of days, the Fed created more dollars out of thin air than it had for the US’s nearly 250-year existence. It was an unprecedented amount of money printing that amounted to more than $4 trillion and nearly doubled the US money supply in less than a year.

One trillion dollars is almost an unfathomable amount of money. The human mind has trouble wrapping itself around such figures. Let me try to put it into perspective.

One million seconds ago was about 11 days ago.

One billion seconds ago was 1988.

One trillion seconds ago was 30,000 BC.

For further perspective, the daily economic output of all 331 million people in the US is about $58 billion.

At the push of a button, the Fed was creating more dollars out of thin air than the economic output of the entire country.

The Fed’s actions during the Covid hysteria—which are ongoing—amounted to the biggest monetary explosion that has ever occurred in the US.

When the Fed initiated this program, it assured the American people its actions wouldn’t cause severe price increases. But unfortunately, it didn’t take long to prove that absurd assertion false.

As soon as rising prices became apparent, the mainstream media and Fed claimed that the inflation was only “transitory” and that there was nothing to be worried about.

Of course, they were dead wrong, and they knew it—they were gaslighting.

The truth is that inflation is out of control, and nothing can stop it.

Even according to the government’s own crooked CPI statistics, which understates reality, inflation is rising. That means the actual situation is much worse.

Recently the CPI hit a 40-year high and shows little sign of slowing down.

I wouldn’t be surprised to see the CPI exceed its previous highs in the early 1980s as the situation gets out of control.

After all, the money printing going on right now is orders of magnitude greater than it was then.

Warning Sign #5: Fed Chair Admits Dollar Supremacy Is Dead

“It’s possible to have more than one reserve currency.”

These are the recent words of Jerome Powell, the Chairman of the Federal Reserve.

It’s a stunning admission from the one person who has the most control over the US dollar, the current world reserve currency.

It would be as ridiculous as Mike Tyson saying that it’s possible to have more than one heavyweight champion.

In other words, the jig is up.

Not even the Chairman of the Federal Reserve can go along with the farce of maintaining the dollar’s supremacy anymore… and neither should you.

Conclusion

It’s clear the US dollar’s days of unchallenged dominance are quickly ending—something even the Fed Chairman openly admits.

To recap, here are the five imminent, flashing red warning signs the end of dollar hegemony is near.

  • Warning Sign #1: Russia Sanctions Prove Dollar Reserves “Aren’t Really Money”

  • Warning Sign #2: Rubles, Gold, and Bitcoin for Gas, Oil, and Other Commodities

  • Warning Sign #3: The Petrodollar System Flirts With Collapse

  • Warning Sign #4: Out of Control Money Printing and Record Price Increases

  • Warning Sign #5: Fed Chair Admits Dollar Supremacy Is Dead

If we take a step back and zoom out, the Big Picture is clear.

We are likely on the cusp of a historic shift… and what’s coming next could change everything.

*  *  *

The economic trajectory is troubling. Unfortunately, there’s little any individual can practically do to change the course of these trends in motion. The best you can and should do is to stay informed so that you can protect yourself in the best way possible, and even profit from the situation. That’s precisely why bestselling author Doug Casey and his colleagues just released an urgent new PDF report [ It is just an advert for his share tips - Editor ] that explains what could come next and what you can do about it. Click here to download it now.
UNQUOTE
Give up now? Perhaps not.

 

Dollar Dominance Is Done  [ 23 May 2022 ]
QUOTE
Russia and China’s gold could form the foundation of a new monetary system outside of the control of the US. Such moves would be the final nail in the coffin of dollar dominance.

Five recent developments are a giant flashing red sign that something big could be imminent...............

In the wake of Russia’s invasion of Ukraine, the US government has launched its most aggressive sanctions campaign ever.........  As part of this, the US government seized [ You mean stole, don't you? ] the US dollar reserves of the Russian central bank—the accumulated savings of the nation.

It was a stunning illustration of the dollar’s political risk. The US government can seize another sovereign country’s dollar reserves at the flip of a switch.

The Wall Street Journal, in an article titled “If Russian Currency Reserves Aren’t Really Money, the World Is in for a Shock,” noted:

“Sanctions have shown that currency reserves accumulated by central banks can be taken away. With China taking note, this may reshape geopolitics, economic management and even the international role of the U.S. dollar.”

Russian President Putin said the US had defaulted on its obligations and that the dollar is no longer a reliable currency.......

China, India, Iran, and Turkey, among other countries, announced, or already are, doing business with Russia in their local currencies instead of the US dollar. These countries represent a market of over three billion people that no longer need to use the US dollar to trade with one another.

The US government has incentivized almost half of mankind to find alternatives to the dollar by attempting to isolate Russia...........

In this context, The Wall Street Journal [  https://www.wsj.com/articles/saudi-arabia-considers-accepting-yuan-instead-of-dollars-for-chinese-oil-sales-11647351541 - 15 March 2022   ] recently reported that the Chinese and the Saudis had entered into serious discussions to accept yuan as payment for Saudi oil exports instead of dollars.

The WSJ article claims the Saudis are angry at the US for not supporting it enough in its war against Yemen. They were further dismayed by the US withdrawal from Afghanistan and the nuclear negotiations with Iran. In short, the Saudis don’t think the US is holding up its end of the deal. So they don’t feel like they need to hold up their part.

Even the WSJ admits such a move would be disastrous for the US dollar.

“The Saudi move could chip away at the supremacy of the US dollar in the international financial system, which Washington has relied on for decades to print Treasury bills it uses to finance its budget deficit.”

Here’s the bottom line.

Saudi Arabia—the linchpin of the petrodollar system—is flirting in the open with China about selling its oil in yuan. One way or another—and probably soon—the Chinese will find a way to compel the Saudis to accept the yuan.

The sheer size of the Chinese market makes it impossible for Saudi Arabia—and other oil exporters—to ignore China’s demands to pay in yuan indefinitely. Moreover, using the INE to exchange oil for gold further sweetens the deal for oil exporters.
UNQUOTE
This is a serious problem for America; it's self inflicted too. We are going to have to go back to being a trading nation; making things instead of buying them from China.


US Dollar Is Failing As The Reserve Currency   [ 1 February 2023]
QUOTE
The US is facing serious economic risks as more countries around the globe move away from the dollar in energy trade, according to former White House official Paul Craig Roberts.

Roberts, who served as US Assistant Secretary of the Treasury for Economic Policy during the Reagan administration, cautioned in an article published on Monday that the end of the petrodollar would have severe adverse effects on the value of the dollar, as well as on US inflation and interest rates.

He pointed to Saudi Arabia’s recent announcement that it was open to accepting payment for oil in currencies other than the dollar. According to Roberts, if that happens the demand for dollars and the currency’s value will fall. By billing for oil in dollars, the Saudis guaranteed worldwide demand for the greenback, he explained. “This is a major threat to Washington’s power and to the financial power of American banks,” the economist added.

Roberts noted that for half a century the petrodollar has supported the value of the US dollar and ensured financing for America’s large budget and trade deficits. “The petrodollar supported the continuing role of the dollar as world currency after President Nixon closed the gold window in 1971, in effect ending the Bretton Woods system following WWII that gave the US dollar the reserve currency role.” 

However, according to Roberts, in recent years Washington has so abused the dollar’s reserve currency role with sanctions and asset seizes that many countries desire to settle trade imbalances in their own currencies, “in order to escape Washington’s ability to threaten and punish them for serving their own interests rather than Washington’s.” 

The article stated if the Saudis do drop the petrodollar, Americans will face stiff inflation and high interest rates necessary to finance US budget deficits, unless the Federal Reserve itself finances the deficits by printing money. In that case, monetary inflation would be added to inflation caused by the drop in the dollar’s foreign exchange value resulting from declining foreign demand for the greenback. “Should this come to pass the implication for the US is massive austerity,” Roberts warned.
UNQUOTE
Paul Roberts is not just anyone. Take him seriously. Owning the Reserve Currency is a huge advantage. They can print $100 notes for maybe 10 cents each and buy a barrel of oil with one. This will come back to haunt them.

 

Iraq And Iran Dumping American Dollar   [ 26 February 2023 ]
QUOTE
Iraq’s Central bank said today (Wednesday February 22) it has planned to allow trade from China to be settled directly in RMB Yuan for the first time, in an attempt to improve access to foreign currency. The Central bank has been taking urgent steps to compensate for a dollar shortage in local markets, which prompted the cabinet to approve a currency revaluation earlier this month.

The move follows neighbouring Iran’s decision to do the same.

The government’s economic adviser, Mudhir Salih, said “It is the first time imports would be financed from China in RMB Yuan, as Iraqi imports from China have previously been financed in US dollars only.”
UNQUOTE
The American government has been getting a free ride from the dollar. Printing a $100 note costs around 17 cents; great when it was the world's Reserve Currency but if they have to pay with Roubles or Yuan they will have to earn them first. Whoops. Recall that America chose to steal Russia's foreign reserves, several billion of them. It has not been forgotten or forgiven.

 

China, Brazil Strike Deal to Ditch Dollar for Trade  [ 1 April 2023 ]
QUOTE
China and Brazil have reached a deal to trade in their own currencies, ditching the US dollar as an intermediary, the Brazilian government said Wednesday, Beijing's latest salvo against the almighty greenback. The deal will enable China, the top rival to US economic hegemony, and Brazil, the biggest economy in Latin America, to conduct their massive trade and financial transactions directly, exchanging yuan for reals and vice versa instead of going through the dollar.

"The expectation is that this will reduce costs... promote even greater bilateral trade and facilitate investment," the Brazilian Trade and Investment Promotion Agency (ApexBrasil) said in a statement. China is Brazil's biggest trading partner, with a record $150.5 billion in bilateral trade last year.

The deal, which follows a preliminary agreement in January, was announced after a high-level China-Brazil business forum in Beijing.
UNQUOTE
The American dollar is on its way out. Biden will not get away with printing $100 notes when he feels like it. Reserve Currency status is passing to China and honest trade. America is wasting billions on aircraft carriers.

 

The Dollar Is Doomed
QUOTE
Question 1– To what extent has the war in Ukraine accelerated the move to a new global realignment?

Paul Craig Roberts– It was Washington’s economic sanctions against Russia, the theft of Russia’s central bank reserves, and the theft of Venezuela’s gold, not the conflict in Ukraine, that weaponized the US dollar and resulted in global realignment.

The limited Russian intervention in Donbas was Putin’s belated eight-year-delayed response to the US coup that overthrew the government of Ukraine in 2014 and installed a government hostile to Russia and to the Russian population that had been incorporated into the Ukraine province of the Soviet Union by Soviet leaders. The intervention was forced on Putin by the United States’ buildup of a large Ukraine army poised to overthrow the self-declared Donbas republics.

By habit and convenience, the US dollar is used as world money to settle imbalances in international trade, but the sanctions woke the world up to the risks of using the dollar. Consequently, the BRICS suddenly expanded with membership extended to Argentina, Egypt, Iran, Saudi Arabia, and the United Arab Emirates. The organization now contains essentially the entirety of world oil production and 40-45% of World GDP.

Clearly, a realignment has already occurred.
UNQUOTE
Reuters tells us @ https://www.reuters.com/world/kremlin-accuses-west-having-essentially-stolen-gold-forex-reserves-via-sanctions-2022-10-24/ that Washington has essentially stolen gold, forex reserves via sanctions. See #Kremlin accuses West of having essentially stolen gold, forex reserves via sanctions. Ditto for robbing Venezuela. See London's High Court rules against Venezuela's Maduro in $1 billion gold battle. You might feel that England is a vassal state being manipulated by Washington and the Puppet Masters, the ones in Tel Aviv,

 

Kremlin accuses West of having essentially stolen gold, forex reserves via sanctions
QUOTE
Unprecedented Western sanctions have frozen around half of Russia's gold and foreign exchange reserves, which stood near $640 billion before Moscow sent troops into Ukraine on Feb. 24.

Last week, European Council head Charles Michel said that the bloc should consider transferring frozen Russian reserves to Ukraine.
UNQUOTE
Is the Kremlin wrong? No.

 

London's High Court rules against Venezuela's Maduro in $1 billion gold battle  [
QUOTE
LONDON, July 29 (Reuters) - London's High Court has rejected President Nicolas Maduro's latest efforts to gain control of more than $1 billion of Venezuela's gold reserves stored in the Bank of England's underground vaults in London.

The court ruled on Friday that previous decisions by the Maduro-backed Venezuelan Supreme Court, aimed at reducing opposition leader Juan Guaido's say over the gold, should be disregarded.

It marked the latest victory for Guaido, who has won a series of legal clashes over the bullion after the British government recognised him rather than Maduro as the South American country's president.
UNQUOTE
Was Venezula robbed? Maduro would say YES. He got to be el Presidente just like Biden, by fraud.