China launches global yuan payment system

The Central Bank of China’s has launched a global payment scheme which will provide facilities for settlig cross-border trades in yuan. The China International Payment System (CIPS) signalled its intention to internationalize the yuan and challenge the domination of world trade by the US dollar several years ago.

China is backed in this project by Russia and by emerging economies such as Btazil, India and Nigeria and oil exporting states such as Venezuela whose trade had been restricted by American manipulation of currency and commodity markets.

“The establishment of CIPS is an important step in yuan internationalization, providing the infrastructure that will connect global yuan users through one single system,” Helen Wong, greater China CEO for HSBC, was cited as saying by the Financial Times. The move comes less than a year after China launched its Asian Investment Bank, AIIB to rival the World bank and IMF as a financier of infrastructure projects.

CIPS will accept payments in cross-border trade, direct investments, financing and personal remittances. The system is open for operations 11 hours a day. The first CIPS transaction was completed by Standard Chartered Bank for Sweden’s IKEA. Nineteen banks have been authorized to use CIPS; eight of them are Chinese subsidiaries of foreign banks, including Citi, Deutsche Bank, HSBC and ANZ.

Prior to launching CIPS international, transfers in Chinese currency could only be carried out through offshore clearing banks in Hong Kong, Singapore or London. While the procedure was slow and costly, the new system is expected to significantly reduce the cost and time for money transfers.

China is also trying to reduce its reliance on the global transaction services organization SWIFT.

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The Obama Administration Just Accelerated The Demise Of The USA As Dominant Econimic Power

A mistral helicopter landing ship – at the centre of the bust up between France and the USA (source)

When we reported late last year that The Obama Administration in the USA was playing with fire by imposing fines on British (and German) banks because they handled transactions with Iran and other nations against which the USA has imposed sanctions, we did not expect an arrogant egomaniac like Barack Hussein Obama to take our warning on board. It might have been wise if Obama had listened to some of the international financiers and diplomats who were trying to remind the ego – in Chief he is president of the USA, not the entire world, but hey Obama knows that the colour of a man’s skin is the only measure of intelligence so I guess his critics just weren’t black enough for him to believe they knew what they were talking about.

The backlash began slowly enough, France, Britain, Germany and other European nations, along with governments in Africa, Asia and South America began making trade deals with Russia and China to conduct business in the currency of the vendor nation and undermine the status of the US$ as the global reserve currency.

It would be totally out of character for Obama to react to what is actually happening, the man is a solipsist and seems to believe he can bring about a situation by wishing it so. Thus the US compunded its error of believing the world must do its president’s bidding by imposing a multi-billion US dollar fine on France’s biggest bank, BNP, because the french government proceeded with delivery of a warship to Russia after the USA had declared military equipment trades with The Kremlin illegal after Putin made the Americans look like idiots over Ukraine. The French government took exception to this (well the ship was already built and warships don’t come cheap). In an interview given to French magazine ‘Investir’, the governor of the French National Bank Christian Noyer and member of the ECB’s governing board, made this rather gobsmacking response to a question:

Q. Doesn’t the role of the dollar as an international currency create systemic risk?
Noyer: Beyond [the BNP] case, increased legal risks from the application of U.S. rules to all dollar transactions around the world will encourage a diversification from the dollar. The fining ofBNP Paribas was the occasion for many observers to remember that there have been a number of sanctions (against non US banks) and that there would certainly be others in the future.

A movement to diversify the currencies used in international trade is inevitable. Trade between Europe and China does not need to use the dollar and may be read and fully paid in euros or renminbi. Moves towards towards a multi – currency trading system is the natural monetary policy, since there are several major economic and monetary powerful ensembles. China has decided to develop the renminbi as a settlement currency. The Bank of France was behind the popular ECB-PBOC swap and we have just concluded a memorandum on the creation of a system of offshore renminbi clearing in Paris.

We have very strong cooperation with the PBOC in this field. But these changes take time. We must not forget that it took decades after the United States became the world’s largest economy for the dollar to replace the British pound as the first international currency. But the phenomenon of U.S. commercial law expanding to all USD-denominated transactions around the world can have an accelerating effect.

In other words, the head of the French central bank, and ECB member, Christian Noyer, just issued a direct threat to the world’s reserve currency, the US Dollar, and the Obama administration.

In a nutshell, by attempting bring France to heel after the French honoured contractual obligations taken on long before there was any threat of sanctions against Russia by completing the delivery of a Mistral amphibious warship, the US decided it had the right to punish France by imposing a large fine on BNP, its leading bank. Really the fine represented blackmail by the Americans ( Putin revealed the BNP penalty was a used as a carrot to pressurize France into scrapping the Mistral transaction at a very late stage: had Hollande scrapped the deal, the French were promised BNP would face a far lower fine, if any). The blackmail attempt backfired catastrophically for America when as a result, the head of the French central bank spells it out that not only is the Dollar’s reserve currency status not immutable, but the international community will be even more eager to avoid USD-transactions in order to escape the tentacles of America’s global trade police.

The biggest irony is that in “punishing” France for dealing with Russia, the key player in the Eurasian alliance of Russia, China and Iran, the US merely gave France (and all of Europe) an enormous push towards Eurasia, toward a multi lateral global trading environment, (sorry fanatic believers in a one world, totalitarian collectivist government, but it’s looking less likely to happen every day).

Like I keep saying, it’s impossible to do political satire these days. Nobody could ever make up anything as crazy as the truth.

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Putin Flushes The Dollar Down The Toilet – We Told You So

Vlad knows the value of western co – operation (picture source)

Not long ago members of our little team posting on Boggart Blog, Little Nicky Machiavelli and The Daily Stirrer warned you that the USA and EU had a lot more to lose than Russia if they got into an economic war with The Kremlin.

One proud, patriotic and utterly stupid American loftily informed me that the America had nothing to fear because the world trades in US dollars. That used to be right, unfortunately it is no longer so because China and the rest of the BRICS along with Iran and several other significant holders of vast natural resources have been dumping the dollar and making bilateral trade agrements for several years.

Well as usual, drawing on our vast pool of business and life experience we were right at this information that came to us via News Beacon Ireland shows.

Russia announces that it will sell (and buy) his products and commodities – including oil – in roubles; not anymore in dollars.

Putin has been preparing this move — the creation of a payment system in roubles completely independent and protected from the Dollar and the killer speculations of the big Western financial institutions — for a long time.

After sanctioning several Russian banks to punish Russia for Crimea, the Washington politicians were told by the financial power-to-be to step back because obviously, the Wall Street vampires understand that putting Russian banks outside the reach of their blood sucking teeth is never a good idea.

For Wall Street and the city’s financial services, countries like Russia should always have an open financial door through which their real economy can be periodically looted. So Washington announced that it was a mistake to enforce sanctions on all those Russian banks; only one, the Rossiya bank shall be hit by sanctions, just for propaganda reasons and to make an example out of it.

It is what Putin needed. Since at least 2007, he was trying to launch an independent Rouble System, a financial system that would be based on Russia’s real economy and resources and guaranteed by its gold reserves. No tolerance for looting and financial speculation: A peaceful move, but at the same time a declaration of independence that Wall Street will consider as a “declaration of war”.

According to the Judo strategy, the sanction attack created the ideal situation for a “defensive” move that would redirect the brute force of the adversary against him. And now it’s happening. Bank Rossiya will be the first Russian bank to use exclusively the Russian rouble.”

Here’s a view of the current situation from another perspective from Zero Hedge:

“They Never Learn” – Russia’s Take On The “West” And The Shifting Geopolitical Balance Of Power

UPDATE – 31 March:
Dollar Hegemony Under Attack By Export-Superpowers Germany and China

‘The word dollar didn’t even come up. “The volume of transactions that can be carried out in the Chinese currency in international and German financial centers is not commensurate with China’s importance in the global economy,” the Bundesbank explained in its dry manner on Friday in Berlin, after signing a memorandum of understanding with the People’s Bank of China. President Xi Jinping and Chancellor Angela Merkel were looking on. It was serious business. Everyone knew what this was about. No one had to say it.

The agreement spelled out how the two central banks would cooperate on the clearing and settlement of payments denominated in renminbi – to get away from the dollar’s hegemony as payments currency and as reserve currency.’

Continue reading:

The world is run by insane people doing insane things – John Lennon

Journalism is reporting news somebody does not want reported, everything else is public relations – George Orwell

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Meanwhile as things on the ground take a turn for the worse in Ukraine, financial markets are suggesting the big banks do not see any easy way out of this one.

from Zero Hedge:

Foreigners Sell A Record Amount Of Treasurys Held By The Fed In Past Week
Submitted by Tyler Durden on 03/14/2014 – 10:51

A month ago we reported that according to much delayed TIC data, China had just dumped the second-largest amount of US Treasurys in history. The problem, of course, with this data is that it is stale and delayed. For a much better, and up to date, indicator of what foreigners are doing with US Treasurys in near real time, the bond watchers keep track of a far less known data series, called “Treasury Securities Held in Custody for Foreign Official and International Accounts” because it shows what foreigners are doing with their Treasury securities held, as the name suggest, in custody by the Fed. So here it goes: in the just reported latest data, for the week ended March 12, Treasurys held in custody by the Fed dropped to $2.855 trillion: a drop of $104.5 billion. This was the biggest drop of Treasurys held by the Fed on record, i.e., foreigners were really busy selling.
Continue reading …

Fire-sale of US Treasuries is a warning of acute stress across the world

Someone is offloading US treasury bonds as if the future is going out of fashion according to Daily Telegraph finance writer Ambrose Evans Pritchard.

Nobody seems to know (or they’re just not saying) who is dumping US bonds. It could be Russia of course, ahead of any sanctions imposed by the USA, a case of Putin getting his retaliation in first, it could just as easily be China, Turkey, South Africa, or Indonesia, or all frantically selling bonds at the same time for different reasons. Or even Malaya because although they are not letting on officially they’re sure the American government knows what happened to that missing Malaysian Airlines Boeing 777.

We don’t know for sure at the time of writing. All we do know is that the US Federal Reserve’s custody holdings on behalf of foreign central banks dropped to $2.855 trillion: a drop of $104.5 billion. This was the biggest drop of Treasurys held by the Fed on record, i.e., foreigners were really busy selling.

Russia’s central bank is undoubtedly dumping dollar reserves primarily to prevent assets being tied up by sanctions but also perhaps to prevent a collapse of the rouble, as foreign companies race to get all their cash out of Russian accounts before sanctions kick in next week clan.

Russia is certainly trying to move its assets beyond the reach of US regulators or the governments of their allies, not an easy task considering the tangled web of Rothschild controlled banks and investment houses.

What the Ukraine crisis may come down to in the end is this question: is the world more frightened of US regulators than it is of Putin’s tanks and polonium and China’s holdings of western debt.

The financial panic goes far beyond Russia, it is an indicator of the stress in the global financial system. “Countries are intervening all over the place to defend their currencies, (which means they are tightening their economies).

Meanwhile the Russians have quietly pulled their cash out of the USA to make sure it is not tied up in frozen accounts once the sanctions axe falls.

Yesterday Zero Hedge reported that China is suspected of having withdrawn (sold to the Federal Reserve) the near USD-equivalent in government debt bonds. a far likelier candidate was Russia, which as any fule kno, has had a bit of a falling out with the USA / EU and the global financial system in general.

We will not know for certain what has happened until half yearly figures are reported in June but what Russian official institutions have done with their Treasury bonds and dollar reserves could be merely the beginning.

The Financial Times reports that in covert and not so covert preparations for financial sanctions (which would include account freezes and asset confiscations following this Sunday’s Crimean referendum) the Russian oligarchs have already pulled billions from banks in the west thereby essentially making the biggest western gambit – that of going after the wealth of Russia’s 0.0001% – moot. If that is the case, the world has more to fear from Russia and China than the American toothless tiger.
UPDATE

China Warns of ‘Retaliatory Action’ and ‘Unforeseeable Consequences’ Over U.S. Monday Deadline

From: Shit Hits The Fan

It’s quite obvious, based on Kerry’s statement, that the Obama Administration really has no idea what to do, as they are still talking through “various options,” something that probably should have been worked out well before President Obama began slinging rhetoric over the crisis.

What the Obama administration assumes will happen is that they’ll force Russia into compliance by coming after their economy. Obama will hit the Late Night TV circuit to tout his success, we’ll all laugh about it, and then go on our merry way. Putin will be left embarrassed and laying in the fetal position sucking his thumb. At least that’s the plan.

But two can play at that game and China, which has stood by Russia’s show of force in Europe since the get-go, has now upped the ante.

It’s a brilliant move designed, once again, to show the world that President Obama and the United States are no longer running the show.

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What We Are Not Being Told About Ukraine

Another day passes and there is now hardly a word in mainstream media print and broadcast news about Ukraine. Has it all blown over you might well ask. Actually while a localised and limited shooting war would have been tragic for the people of Ukraine, Russia and some surrounding territories it would have afected people in the EU, Britain and the USA very little.

What’s happening now poses a far greater threat to our prosperity both in the short and long term and to the kind of future we can look forward to. Jere’s a summary of some stories that were not reported in western media.

Russia Threatens to Drop The Dollar and Crash The U.S. Economy if Sanctions Are Imposed – West Goes Ahead With Sanctions Anyway

On Tuesday Reuters reported that a Kremlin aid Sergei Glazyev had announced that if the U.S. were to impose sanctions on Russia Moscow may drop the dollar as a reserve currency and refuse to pay off any loans to U.S. banks saying that Moscow could recommend that all holders of U.S. treasuries sell them if Washington freezes the U.S. accounts of Russian businesses and individuals.

“We would find a way not just to reduce our dependency on the United States to zero but to emerge from those sanctions with great benefits for ourselves,” said Glazyev. “An attempt to announce sanctions would end in a crash for the financial system of the United States, which would cause the end of the domination of the United States in the global financial system”

That statement is startling by itself, but the true gravity of this situation is only evident when you consider it in context. China has taken Russia’s side in the Ukraine conflict (they are after all allies) and China holds the lion’s share of U.S. treasuries. If Russia puts out the call to drop the dollar China would have a choice: either hold on to those treasuries while the dollar slides (losing their shirt in the process) or join Russia and dump their holdings as well. It should be pretty obvious which way China would go.

As The Guardian reports however, that the USA has unilaterally decided to go ahead with sanctions against Russsia in retaliation for Putin’s refusal to back down and withdraw Russian troops from Crimea.

US imposes visa restrictions on Russian officials as Obama signs sanctions order
Employing his favourite tool for by passing the democratic process, On March 6 The Emperor Obama signed an executive order extending US sactions against Russia. (Read More on sanctions story at The Guardian)

Getting into an economic war with Russia would create a pile of problems for the Obama Administration, first it would drive a wedge between the USA and it’s EU allies most of which are heavily dependent on Russian gas for their domestic and industrial supplies. Secondly, failing to consider the consequences of Russia’s allies responding to such a move by applying sanctions of their own is, typically asinine. When Obama signed the sanctions order, authorizing economic action against the Russians he may have performed his usual arrested adolescent feat of convincing himself that we he speaks, nobody could possibly disagree with him.

Experience of dealing with other world leaders has taught him nothing in this respect. So was the massianic one hoping that on realising they had incurred his displeasure Russia would capitulate, beg for mercy and start dancing to Washington’s beat. It’s hard to imagine The White House corps of diplomats, advisors and political scientists could be so thick, but Obama has had five years to fill key roles with his personal rent boys appointees. Maybe they were just too busy planning the next frat party to think things through properly.

Either way, the outcome is the same. The U.S. government’s constant meddling in the domestic affairs of sovereign states has now embroiled it in a geopolitical game of chicken and if one side or the other does not blink soon there will be an almighty fracas.

Unfortunately though they initially picked a fight with the corrupt but democratically elected government of Ukraine in the hope of humiliating Russia by drawing its neighbour and close ally into the US / EU / NATO sphere of influence, by sponsoring regime change the USA has brought itself into conflict with the world’s 8th largest economy (by GDP), having already for a while been at loggerheads with China, the second largest economy and holder of huge amounts of US debt.

In the latest development India sided with Putin by announcing Russia’s interests in Crimea are legitimate (Times of India).

The question now is how will the rest of the world react. Iran’s position is a foregone conclusion and Saudi Arabia will demand a heavy price for its support, even from a traditional ally. With Japan, like the EU, hamstrung by economic difficulties and Australia and Canada likely to offer token support while Britain’s David Cameron’s hands will be tied by Parliament that in the wake of futile wars in Iraq and Afghanistan has become somewhat isolationist.

The lines of economic warfare have been drawn up, and as sides are being picked it looks as if the USA is backed by weaklings, wusses and economic basket cases. Get ready to kiss your savings goodbye. And find a good recipe for bone broth.

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