China’s Recent Actions Indicate They May Soon Drop The U.S. Dollar
Giordano Bruno
Neithercorp Press - 10/25/2009
As we have reported in previous articles, China and its economic decisions will be a major tipping point for the U.S. Dollar and its eventual collapse as the world reserve currency:
http://neithercorp.us/npress/?p=105
http://neithercorp.us/npress/?p=167
China has taken several steps already in separating itself from its dependence on the U.S., including a recent dumping of U.S. Treasury Bonds:
http://english.people.com.cn/90001/90780/91421/6734461.html
And the purchase of $50 billion dollars in the IMF’s world currency, the SDR (Special Drawing Rights):
http://www.chinadaily.com.cn/china/2009-09/03/content_8648691.htm
China has also stated repeatedly that the U.S. Dollar should be replaced as the world reserve currency:
http://www.youtube.com/watch?v=u_5_KCKeM4k&feature=player_embedded
However, these actions were only just the beginning as China has now taken concrete steps to replace the U.S. as its main export market.
In the past, main stream economists have argued that China would never break from the Greenback, mainly because the vast portion of their export markets were dependent on U.S. consumption. However, Chinese exports have faltered significantly due to the economic downturn in the U.S., not to mention, the Greenback’s rapid drop in the past two months is threatening the value of nearly $1 Trillion in U.S. T-Bonds the Chinese still hold. The Chinese no longer have any reason to maintain static ties to the U.S. or the Dollar.
This became more apparent in the past week when China announced at the ASEAN conference in Thailand that the CAFTA free-trade agreement will be finalized January 1st, 2010. This agreement includes RMB-regionalization, meaning, the institution of the Chinese Yuan as a standard currency between all the member nations of ASEAN, much like the Euro in the European Union:
http://english.people.com.cn/90001/90778/90861/6792566.html
“Alongkorn Ponlaboot, deputy minister of commerce of Thailand, believed RMB would play a more important role in bilateral trade between China and ASEAN in the future.
He said yuan was a very stable currency and expanding its use could help reduce risks faced by the ASEAN countries in using the U.S. dollar, which has become highly volatile as a result of the global financial crisis.
Pung Kheav Se, general manager of Canadia Bank Plc. of Cambodia, echoed Thailand’s deputy minister, saying trade between China and ASEAN kept growing and less risk by the use of RMB would benefit both sides…”
The article continues…..
“Xu Ningning said new economic situation had created stage in Asia for RMB. The three FTAs between ASEAN and China, Japan and the Republic of Korea, respectively, will build a wider platform for RMB exchanging.
“Although it needs time to breed a new trade market or a new currency market, the CAFTA is believed to create new space for the regionalization of RMB,” Xu said.”
The ASEAN and the advent of CAFTA is essentially the formation of an “Asian Union,” with the Yuan and most likely the SDR as the universal currencies, all of this being formed quietly without the open admission that it is an “Asian Union.” It also opens up a trading block that could support China while they drop the U.S. Dollar entirely and break ties with our failing economy. This began with an announcement by the Chinese Central Bank last year indicating that they would begin a “baby step program” to use the Yuan in international trade:
http://news.bbc.co.uk/2/hi/asia-pacific/7799541.stm
It appears that this “baby step” program has now moved into high gear, as the Yuan hurtles towards reserve currency status. But this is not all…
China has also been making economic headway with Russia, as Russian vice-premier Minister Alexei Kudrin recently stated that Russia will soon include the Chinese Yuan in its Foreign Exchange Reserves:
http://english.people.com.cn/90001/90778/90859/6792509.html
Russia has recently reduced its holdings in U.S. dollars and replaced them with Euros. Now, they plan to move into the Yuan and the SDR. This means that the Greenback’s role in international trade is being slowly suffocated.
China has also recently been strengthening its ties to France:
http://english.cpc.people.com.cn/66102/6791515.html
And some African Nations, including Guinea, which is controlled by a repressive military regime:
http://finance.yahoo.com/news/ChinaGuinea-deal-highlights-apf-1060239020.html?x=0
China has become incredibly bold in its political and financial moves in the past year. The Chinese have taken advantage of the recent economic weakness of the U.S. and are now pushing for oil drilling contracts in the Gulf of Mexico, even though Congress refused their requests to purchase UNOCAL and their drilling rights 4 years ago:
http://www.latimes.com/business/la-fi-china-oil22-2009oct22,0,2776603.story
“Four years after denying a Chinese bid to buy Unocal, the U.S. may be in too weak an economic position to object. Rebuffing China could also push it into the arms of countries hostile to the U.S.”
Chinese investors and the Communist Government have also been snapping up U.S. Real Estate on the cheap due to the housing bubble collapse:
http://www.msnbc.msn.com/id/29162036/
http://www.businessinsider.com/when-the-chinese-come-for-our-real-estate-2009-6
I believe all of these actions indicate that China is repositioning itself as a power center in the world economy, and is hedging its wealth in preparation for an announcement that they will drop the U.S. dollar. I also believe that this announcement could come as soon as next year.
If China dumps its remaining U.S. treasuries and stops using the dollar as a reserve currency, our economy as we know it will end. It is as simple as this. Numerous nations will follow China’s lead into SDRs and the Greenback will plummet even further into the abyss, most likely resulting in hyperinflation and the insolvency of our massive national debt. Without question, all eyes should remain on China in the next year.
October 25th, 2009 at 10:19 pm
All these things, predictions, deductions, are quite logical. On the one hand you have the tin foil hat crowd saying “The End Is Here!” and then you have the ostriches that momentarily look up and say “It Will All Be Fine…” and stick their heads back in the sand. If someone were to read this article and the one that Bruno just posted on the forum ( http://www.neithercorp.us/nforum/economics/one_of_the_largest_us_commercial_real_estate_lenders_files_for_bankruptcy-t1035.0.html;msg2359#msg2359 ) they would get a pretty bleak picture of our economy. But, *I* believe our president! Recovery is here! I’m going to go slap down the plastic and eat a few fancy steak dinners this week! I just hope the sand in my mouth doesn’t ruin the taste of the steak. Hey! Maybe those blue pills will help!
;)
-NR
October 26th, 2009 at 11:17 am
If the chinese and others stop buying our treasuries the currency could lose 30% to 50% of its value, but not drop to zero. At 50% devaluation, our debt could become serviceable. Some believe the Treasury Dept and Fed know this and are allowing a “controlled demolition” of the dollar.
Regardless of the actual road taken, the destination remains the same: people losing almost half their savings, prices for foreign goods doubling (just about all goods americans buy are foreign made)and lower living standards. Gasoline and heating oil would be alot more expensive as well.
What I want to know is how americans will react. Can the gov spin it in a way that they can appear “shocked” and pin the blame on China and co. for “stabbing us in the back?” The reality is they were only being smart with their money after being scammed by Wall Street. I don’t think it will happen right away. China needs a domestic market to replace their american exports and they simply haven’t got one.
October 26th, 2009 at 11:59 am
Mick:
That is a common misconception which we have covered in previous articles. Its actually not only ‘possible’ that the dollar will drop to near zero, it is most likely inevitable. The Fed has printed (that we know for certain) over $8 Trillion, and probably closer to $24 Trillion as projected by Bloomberg. This does not include the trillions held by the Foreign Exchange Reserves of numerous other countries. When the dollar begins its final drop, ALL of this currency being held in other countries will come flooding back into the U.S. Our currency will drop far more than 50% in value with that mount of inflation. Maybe not all at once, but it will happen. Also, with our dollar no longer being accepted by foreign countries, our national debt will be unserviceable. Our Treasuries will no longer be purchased and this will also bring a massive weight down on the dollar.
I’m not sure why people think that China has no domestic market. The people there have saved a very large portion of their income and now they are investing in gold en masse. The government there has been shifting towards a consumer based economy for the last 10 years at least, and they have the savings to do it, not to mention China’s new agreements with ASEAN. The idea that they cannot survive without U.S. markets is a myth, and that will be proven in the next couple years.
Of course, they will still be affected by any collapse in the U.S. All countries will be, but China has positioned itself so that it can easily stay afloat without our help.
October 27th, 2009 at 1:29 pm
Giordano:
You wouldn’t be doing a little currency trading would you? Don’t like the way the dollar is heading maybe?
USD near zero… now that is funny!
Maybe you are 19 and don’t remember when the US and other countries had to step in and tell China to stop printing money whenever it felt like it. You sir are a fear monger and any one that listens to your drivel is an idiot.
November 4th, 2009 at 6:24 pm
Getagrip:
No, I am not trading in currencies right now, although if I were, I would be making a killing on the recent dollar drop. My only investments are in precious metals.
I am 28, and I am well aware of China’s printing issues. You seem to think I am “promoting” China’s policies in some strange way. Sorry, but you are sorely mistaken. I am against all Central Banking Systems, regardless of what country they are operating in.
Also, it seems you need reminding that China IS NOT looking at a projected $9 Trillion deficit like we are in the U.S. Its ignorant wannabe day traders like yourself that always seem to forget this important fact.
WE OWE TRILLIONS TO THE WORLD. INFLATING AND DEVALUING OUR CURRENCY WILL FORCE THE WORLD TO DROP OUR CURRENCY CAUSING IT TO DEVALUE EVEN MORE. PLEASE READ THIS ALL CAPS MESSAGE AND MENTALLY DIGEST IT BEFORE YOU EMBARRASS YOURSELF FURTHER. THANK YOU.
November 10th, 2009 at 2:55 pm
I think you’re right about the dollar going almost totally devalued. Unfortunately, hording gold (precious metals) isn’t going to work either. See all those new gold bars China is offering to the public? Will be confiscating those soon! Same for the US, for the third time. Also, ya can’t eat gold!
So, what to change dollars into? Heirloom seeds? Bullets? SDRs?
November 10th, 2009 at 10:55 pm
scaredshirtless:
I agree that if we revert to a barter economy, gold will take a back seat to more essential items. However, gold and silver have been money for 6000 years, and there is a reason for that. They are finite resources that cannot be duplicated and have industrial uses, unlike paper money which is both easily duplicated and has no inherent value but what we place upon it. If you want to protect the value of your money during a collapse, buy essentials for sure, but also invest in Precious Metals. They will skyrocket in value as the dollar implodes, allowing you to buy EVEN MORE essentials with which to survive.
November 10th, 2009 at 10:58 pm
Also, SDR’s may initially be backed by some gold and silver as they are introduced to the public, but they will just become another fiat currency in the end. I would stay away, and stick with gold if you want to invest in a REAL currency.
November 11th, 2009 at 10:44 am
Don’t you think that confiscation of gold will happen. The teeth of confiscation, I suspect, would be to not allow gold transactions (if one were to hid it).
Look at how much China has increased their gold reserves in the past year. Since this has always been the base “currency”, the USA will have to have a massive reserve to stay in the game. The public (or ground) is the only place to get it- unless we plunder another country.
November 11th, 2009 at 6:33 pm
Sure, anything is possible with the NWO. They would ban breathing if they could get away with it. The question is, can they get away with it? Roosevelt confiscated gold bars as part of his “New Deal”, but smaller gold transactions with coins would be very difficult to trace or ban. I would welcome them to try to confiscate our PM’s actually. That would put all the cards on the table. If the elites want a fight they can’t possibly win, then confiscating the only stable savings people have would be the way to do it.
December 10th, 2009 at 10:53 am
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January 26th, 2010 at 8:36 am
I am curious. I havn’t been able to find it here if it is here. But what are your qualifications? Are you an economist? I see you have lots of news sources to back what you are saying and I DO agree that China could, out of monetary nessecity, drop the US Currency for its own as a reserve. Personally I believe in Jesus as my personal saviour and for the things in Revelations to come about the US has to cease as a power, whether it be militarily destryed or more likely economically destroyed. I am just starting to prep for somethig like this in trying to hoard some resorces. Even if me and my family are taken in a Rapture early, that will allow others to benifit from my savings of things. God bless.
January 26th, 2010 at 8:42 am
Oh sorry for putting up two posts but I also believe at some point PM will become useless, atleast according to the bible. What are your thoughts on a one world currency? That is another of my strong held beliefs’. And yes I do believe in the taking of the mark of the Beast, tiny chip implanted under the skin so you cannot buy or sell without it and you can be tracked wherever you are.
January 26th, 2010 at 2:43 pm
Voodoo daddy:
I’m just a guy. There’s nothing particularly special about me except that I put in the effort to do the research. With enough effort anyone can do what I do or know what I know. Economics is in many respects a kind of science, and like any science, the information is available to everyone. You don’t have to have a Doctorate to understand the truth, you just have to make the effort.
As far as PM’s go, as long as there is a need for organized trade, there will always be a need for a stable currency such as gold. At the height of a chaotic collapse, metals may not be so useful, but just before the collapse, they will be very valuable, not to mention after the collapse during reconstruction. An economy cannot sustain itself on barter alone, that’s why gold has been used as a currency for 6000 years.
While I feel its good to be spiritually driven, and I respect Christian groups that have been fighting the NWO all these years, I don’t think we are looking at “Armageddon”. I think we are looking at a very terrible point in human history in which we must stand strong and take back our country, but its not the end of the world.