Tag Archives: yuan

China Begins To Reset The World’s Reserve Currency System

It’s a strategic move swapping oil for gold, rather than for U.S. Treasuries, which can be printed out of thin air.  – Grant Williams

A report released by the Nikkei Asian Review indicates that China is prepared to release a yuan-denominated oil futures contract that is convertible (backed by) physical gold.  The contract will enable China’s largest oil suppliers to settle  oil sales in yuan, rather than in dollars, and then convert the yuan into gold on exchanges in Hong Kong and Shanghai.

This is a significant step in removing the global reserve currency status of the dollar and resetting the the global economic and geopolitical “landscape.”  Over the past several years, China has quietly established yuan-based currency exchange facilities, which has set up the ability to implement this new non-dollar trade settlement financial instrument. According to the Brookings Institute, 34 Central Banks around the world have signed bilateral local currency swap agreements with the PBoC as of of the end of September 2016, including the major oil-producing countries.  With this new contract, China’s largest oil suppliers will now be able to transact directly with China, and other oil importing countries, using yuan which are directly convertible into gold to settle the trade.

As Alasdair Macleod asserts, “It is a mechanism which is likely to appeal to oil producers that prefer to avoid using dollars, and are not ready to accept that being paid in yuan for oil sales to China is a good idea either.”

Since 1973, OPEC oil has been quoted and traded using to U.S. dollars, otherwise known as “petrodollars.”  The “recycling” of petrodollars into U.S. Treasuries has been the life-blood of the U.S. economic and political system.  In addition to reducing a major source of funding for the the U.S. Government’s enormous deficit spending, the introduction of a gold-backed yuan oil futures contract is an important step toward removing the dollar as the world’s reserve currency. More significantly it reintroduces gold into the global monetary system.

While the new gold-backed “petroyuan” will allow oil producers to sell oil for gold rather than Treasuries. Furthermore, it reduces the ability of the U.S. Government to impose its will on the rest of the world.  It’s a strategic step toward not only ridding the world of its dependence on dollars, but also of reducing the ability of the U.S. to exert global economic and financially tyranny.   I would also argue that it’s one of the primary reasons behind the inability of the western Central Banks to drive the price of gold lower recently.

Are Yuan Speculators Moving Out of Yuan And Into Gold?

Jay Taylor – LINK – sent me this analysis of China’s devaluation by John Lee, Executive Chairman of Prophecy Development Corp.  Prophecy raised over $100 million to acquire a large silver mining project in Bolivia and coal projects in Mongolio.  He spends a substantial amount of time in China.

One of the “no-brainer” carry trades over the past couple years has been to short, or “borrow,” dollars and yen a very little cost and invest the proceeds in yuan.  The yuan had been going up in value vs. the dollar since 2006.  But China’s move to begin devaluing the yuan is prompting speculators to unwind the is fiat currency “arbitrage” carry trade en mass.

John goes through the various possibilities of why the Yuan was devalued and concludes it stemmed from massive capital outflows and foreign exchange reserves which are down by $400 billion during the first half of this year.  A large amount of that has moved to Hong Kong, Taiwan and Singapore. He is suggesting that this flow is moving toward gold as owners of large chunks of capital are tiring of dollars and euros.

China and India are two of the world’s largest gold consumers. Naturally, gold prices should have gone down when the RMB was devalued, given the reduced Chinese purchasing power for gold. Quite to the contrary however, gold prices went up during five straight trading days following the RMB devaluation.

The reason? Are RMB speculators possibly moving out of RMB into gold? This could be entirely plausible as RMB investors were likely seeking an alternative to the US dollar and the euro in the first place. Commodity currencies remained unattractive given the slowdown in the world’s economy.

The gold market is small, with annual gold production amounting to approximately US$160 billion, and total above ground gold stocks amounting to approximately $8 trillion, in all shapes and forms. Even the slightest increase in physical demand for gold can have a profound impact on the price of gold.

You can read the rest of this analysis here:  RMB Devaluation, China’s Foreign Reserve And The Price Of Gold

Shadow of Truth Market Update: Another Nail Is Pounded Into The Dollar’s Coffin

While most people and the media associate the “BRICS” most commonly with Russia and China – perhaps because the neo-cons who control the U.S. Government and media have forced this illusion on the unsuspecting American public – let’s not forget that the “S” in “BRICS” stands for “South Africa.”

Huh? South Africa?  Isn’t that some British outpost in Africa?  Let’s not forget that South Africa is the fifth largest gold producing country in the world.  It also is the world’s largest exporter of platinum and chromium and produces and sells a hulluva a lot of iron ore.

My colleague Rory Hall of The Daily Coin happened to find an article in The BRICS Post online which reported that South Africa was now conducting over 30% of its trade with China directly in yuan.  China is by far South Africa’s largest trading partner.  The trend in China’s bilateral trade settlement in rand/yuan with S. Africa underscores the movement in world trade away from using the U.S. dollar.

In the Shadow of Truth’s latest Market Update segment, Rory and I discuss this development, as well as what appears to be one massive bottom forming in the ability of the paper gold criminals to push gold much lower.  Make no mistake, as this earlier post today illustrates,there is an enormous bid for physical gold in the market.  And that bid is coming from both China and India now.

As Jim Willie stated, the dollar will not collapse per se, it will vanish. One of the best ways a smaller investor can take advantage of this insight besides accumulating physical gold and silver is to implement bearish bets on teh stock market. One of the biggest individual stock bubbles of all time has formed in Amazon.com’s stock. I have written a uniquely in-depth research report which I’m in the process of updating and revising. I have new insights which come from a reader who is a tech company accounting specialist. In fact, one of the manipulation tricks being used was alerted to him from an insider.

AMZN implements misleading and arguably fraudulent accounting in order to present the illusion that produces “free cash flow.” In fact, AMZN burns cash like a Weimar-era furnace fueled by printed marks. My existing report is available here:  AMAZON dot CON.  Anyone who has already purchased it prior to the release of updated report will receive the updated version. Once the updated report is released, I will be raising the price.

This report also includes capital management strategies which are necessary when shorting any stock and options strategies for anyone not comfortable shorting stocks. There has never been a comprehensive analysis of AMZN’s accounting like I present in my work. When this market rolls over, small fortunes will made by anyone with the patience to set up an AMZN short position ahead of the crash.

China-Russia Yuan-Ruble Trade Will Reshape Global Financial System

Trade settlement in local currencies between China and Russia, according to “official” statistics, account for 7% of their bilateral trade.  But the dollar amount has grown 700% in the last year.

Growing cooperation between Russia and China has become one of the hottest topics in the global economy. It is signaling the emergence of a strong alliance of one the world’s richest and strongest economies, which is expected to reshape the existing western-dominated economic model (RT.com link)

This part of an ongoing, systematic plan to remove the dollar as the global reserve currency.   China, as we all know, has been methodically establishing currency swap facilities with most of its major trading partners which enable a limited amount of bilateral trade settlement in local currencies.  These deals have been signed with many western countries, including the UK, France and Switzerland.

“There is a reason to believe that this trend will continue in the coming years and the role of the yuan will increase rapidly not only in international trade, but as the currency of international reserves of the central banks,” he said [Aleksandr Prosviryakov, PricewaterhouseCoopers LLC, Russia].

The writing is on the wall for the dollar.  It’s only a matter of time before the plug is pulled.  It has been my view that China has been working toward de-dollarizing the global financial system in an attempt to avoid a massive global economic shock and the ensuing chaos, which would likely precede a global military conflict.

Certainly the massive transfer of physical gold from the west to east has been part of the process in ending the petro-dollar.

I hope China’s plan to precipitate a peaceful transition from a dollar reserve currency system to a new currency system is successful.  I find it hard to believe that the U.S. will relinquish its power without a big fight…

Is This The Real Reason The SNB Cut The Swiss Franc’s Euro Peg?

But first, two observations:   1)  Obama supporters must be completely horrified by the number of blatant lies that spewed forth from Obama’s lips as he read his teleprompter to us.  It was better than the usual bedtime fairytales we get from him….2)  I am dead-right about the housing market:  LINK.  Of course, Zerohedge is finally catching up to me on high-end housing.  But I’ve said all along that the collapse of the housing bubble encore would start at the high end…

From the moment I saw the news about the Swiss cutting its currency loose from its tie to the euro, I was interested in the fact that the SNB apparently acted without telling other Central Banks or the usual cast of Too Big To Fail “insider” banks.  If they had, we likely would not have seen a 30% move, as the information would have found some leaks and the swissy would have partially priced in the event by moving somewhat higher ahead of the fact.

I thus had suspected a motive that would later become apparent.  A lot of analysts opined that the move was made ahead of a large QE announcement from the ECB.  While that aspect was no doubt a component of the decision, this news hit the tape this morning:

China, Switzerland to announce offshore yuan trading center in Zurich 

As China takes it currency global, Zurich is set to become a center for yuan trading in Europe with Chinese and Swiss officials poised to sign a financial deal on Wednesday.

“A memorandum of understanding will be signed between the central banks of the two countries during Chinese Premier Li Keqiang’s visit to Switzerland. It is an important step in the internationalization of the RMB, especially in Europe,” a government official was quoted by Chinese news agency Xinhua.

Switzerland is basing its push for the offshore yuan business on the country’s close ties with China, one of the nation’s biggest trading partner. Switzerland is the first country among the world’s top 20 to have a free trade agreement with China…LINK

It’s not just a mere coincidence that the SNB de-pegs the swissy last Thursday and this yuan currency trading deal is announced 6 days later.  The timing is not an accident.

I believe China agreed to set up a European yuan trading center in Zurich on the condition that the SNB sever the swissy’s connection to the euro.   I also think it’s another way for China to indirectly lob a bomb at the U.S. dollar in the ongoing currency war.

The “Strong Dollar” Myth

It should be pretty obvious by now that the U.S. Government, Fed and Wall Street are flooding the airwaves with nothing but fraudulent claims and lies.  One of the biggest ones currently is this idea that the U.S. dollar all of a sudden is strong and will continue to stay strong.  Part of this is seeded in the Fed’s constant threat to raise interest rates.  They’ve been threatening us with that for well over a year now.  But anyone with half a brain cell left in their skull knows that if the Fed raises interest rates, it will be like pulling the foundation out from under the Empire State Building.

The popular narrative coming from the idiots proliferating the airwaves of financial media tv holds that “the dollar is the least dirty shirt in the closet and that’s why investors are selling euros and yen and buying dollars.”   That’s utter bullshit.  When all the shirts in my closet are dirty, I don’t put the least dirty one on – I take them all to the cleaners.  Dollar-based investors are about to get taken to the cleaners.

Let’s take a look at long term chart of the dollar (click on it to enlarge):

USDX

This is a 6-year daily graph.  Now, I heard some idiot on Bloomberg News the other day say that this was the biggest move the dollar has made since, like, Christ was a child.  But how does this move look compared to the two moves the dollar made from late 2008 to mid-2010?   The USDX ran from 70 to 90 in 2008 in just 4 months.

You can see that since late 2009, the dollar has been trending in a sideways pattern between 74 and 86.   Can we really call this  a “strong” move?  The dollar index is made up of a basket of 6 western hemisphere U.S. puppet currencies.   Here’s the composition:  euro 57.6%, yen 13.6%, pound sterling 11.9%, Canadian dollar 9.1%, krona 4.2% and Swiss franc 3.6%.   Yes, the dollar has moved up to the top end of its 5-yr trading range vs. primarily the euro and the yen.  Big deal.

One thing on the graph above I’d like to point out is the red line in the bottom panel.  This is the “accumulation/distribution” metric.  It measures the cumulative flow of money in and out of a security.  As you can see, the degree of money flowing into the U.S. is not even close to the level that was flowing into it during the 2008-2010 moves.  This indicates that the demand for dollars is actually not very strong.  It means that the money that is leaving the euro and yen is going somewhere besides in to dollars.

And how come no one on Wall Street is talking about the dollar vs. the currency of the largest import/export nation in the world?  The country that is currently accumulating gold at a rate that is soaking up most of the amount of gold that is mined annually?

Here’s the dollar vs. the Chinese renminbi/yuan (click to enlarge):

dollar_Yuan

 

The dollar is down 2% against the yuan since May.  So much for the strong dollar theory.   What this whole situation means is that U.S. exports to Europe are going to get pole-axed and the cost of everything the hoi polloi buys in this country that originates in China is becoming more expensive.   Better stock up on halloween stuff now because those costumes will likely become a lot more expensive by the end of October…

Next time someone asserts that the dollar is really strong right now because our economy is getting better, try not to laugh out loud to hard…