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On the other side of the world today, a couple of gentlemen that few people have ever heard of signed an agreement that has massive consequences for the global financial system.
It was a Memorandum of Understanding signed by representatives of the Singapore Exchange and Hong Kong Exchange. Their aim– to combine their forces in rolling out more financial products denominated in Chinese renminbi.
This is huge.
Hong Kong and Singapore are THE two dominant financial centers in Asia. For years they’ve been locked in competition with one another, much like New York and London. So their public partnership is a very big deal… indicative of the clear objective they have in front of them.
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Dubai: Four Gulf Cooperation Council (GCC) countries will announce the introduction of a common currency by the end of December, a Bahraini daily reported on Sunday.
The common currency to be announced by Bahrain, Kuwait, Qatar and Saudi Arabia will be pegged to the dollar, a source told Akhbar Al Khaleej.
“The decision to peg the Gulf currency to the dollar is political and is not related to the economy,” the source said.
“From an economic point of view, it would have been better to peg the new currency to a basket of currencies because the volume of trade of the Gulf states with the countries of the European Union is much larger than that of their commerce with the United States. Gulf exports of oil to the European Union are estimated to constitute about 70 per cent of European imports,” the source said.
The daily did not identify the sources, but said it was close to Gulf decision-making circles.
Oman and the UAE, the other two members of the six-country Gulf council set up in 1981, are not likely to join the common currency in the near future, the source added, without divulging the reasons for the same.
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The Gulf Monetary Council has denied media reports concerning the finalisation of the launch of a single currency for the Gulf countries.
Earlier this week, media reports claimed that four GCC countries will announce a common currency by the end of this year. The currency would reportedly be pegged to the dollar, the report said without revealing its sources.
However the Gulf Monetary Council has dismissed the rumours.
“The Monetary Council affirms that the reports by some newspapers and websites over the date of the issuing of the single Gulf currency are completely false, not based on accurate information nor reliable sources,” the council said in a statement published by Kuwait News Agency.
The Monetary Council is mandated with placing regulations for the establishment of the Gulf Central Bank and completing the establishment of the Monetary Union.
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China became the world's largest trading nation in 2013, overtaking the US in what Beijing described as "a landmark milestone" for the country.
China's annual trade in goods passed the $4tn (£2.4tn) mark for the first time last year according to official data, after exports from the world's second largest economy rose 7.9% to $2.21tn and imports rose 7.3% to $1.95tn.
As a result total trade rose 7.6% over the year to $4.16tn. The US is yet to publish its 2013 trade figures, but with trade totalling $3.5tn in the first 11 months of the year, it is unlikely to beat China.
The shift in the trading pecking order reflected China's rising global dominance, despite a slowdown in economic growth last year.
Zheng Yuesheng, a spokesman for China's customs administration, said: "It is very likely that China overtook the US to become the world's largest trading country in goods in 2013 for the first time. This is a landmark milestone for our nation's foreign trade development."
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News that Switzerland’s central bank recently opened talks with its Chinese counterpart to swap currencies has raised Swiss hopes of attaining a renminbi hub status. But Switzerland is playing catch-up with rivals that share the same ambition.
As global renminbi (RMB) transactions gather pace, a tantalising vision has emerged of a new international reserve currency competing with the dollar, euro and British pound. Financial centres are jostling to enjoy the prestige and profits of becoming RMB conduits.
In December 2012, the Swiss government officially announced its intention of becoming a renminbi hub, joining the likes of Britain, Canada, Germany and France in trying to woo Beijing.
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Behold the nascent rise of the PetroYuan:The Shanghai Futures Exchange (SHFE) may price its crude oil futures contract in yuan ...
More: http://www.reuters.com/article/2013/11/21/china-crudeoil-idUSL4N0J62M120131121
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China continues to not only liberalize and internationalize the gold market there it is tying a new gold ‘spot’ contract to the Yuan. The new Yuan priced gold contract on the Shanghai gold exchange is a step towards a greater use of the Yuan internationally as foreigners who wish to buy this product must sell dollars to buy Yuan so they can buy this gold contract.
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Koos Jansen said:...
The crucial SGE rule that makes the withdrawal numbers significant is this: once SGE bars are withdrawn from the vaults they are not allowed to be re-deposited. This rule can be found in the SGE rule book (#23), and, for example, is disclosed on several ICBC webpages regarding gold products....(2) According to the Shanghai Gold Exchange rules, physical gold taken out of the warehouse cannot be taken into the gold warehouse designated by the Shanghai Gold Exchange again.
The SGE rule, combined with the Chinese laws that require all imported and mined gold to be sold through the SGE, implies that the withdrawals are equal to total Chinese gold demand. The following quote is from the Chinese media, translated by Soh Tiong Hum:...China's explosion in demand for physical gold in 2013 left a deep impression on international investors. The Shanghai Gold Exchange withdrawals for the year up till 27 December 2013 exceeded 2180 tons. Considering the exchange's position as a hub for domestic gold circulation, in conjunction with a system that forbids withdrawn gold from re-entering inventory, to a large extent the withdrawals number can be treated as the best benchmark for physical gold demand in the Chinese market. Not to mention that the entire 2013 global mined gold production does not exceed 2700 tons. China's massive demand has to a large extent remade the world's gold circulation system. Newly mined and stocked gold is moving through trade links in London – Switzerland – Hong Kong – into China in a large scale orientation towards the East. The impact of China's demand on international gold price will inevitably increase.
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According to the USGS Gold Mineral Industry Surveys, the United States exported a record 886 mt (gross weight) in 2008. Gold scrap exports declined to 728 mt in 2009 and then stayed basically flat for the next two years at 630 mt and 633 mt respectively.
However, in the past two years, gold scrap exports have declined substantially. Here we can see that in 2012, gold scrap supply declined more than 50% to 266 mt compared to the previous year. And in the first 10 months of 2013, U.S. gold scrap exports have fallen another 50% to only 121 mt.
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Epoch Times: Can China supply the world with a reserve currency?
Mr. Rickards: Not with the yuan. A: They don’t want to open their capital account. B: The yuan can’t possibly be a global reserve currency. It is expanding in use as a trade currency, but most people don’t understand the difference between a trade currency and a reserve currency. The trade currency is just a way of keeping score in the balance of payments mechanism.
If you are Brazil and China, and Brazil agrees to take yuan for Brazilian goods, and China agrees to take reals in exchange for Chinese goods, that’s fine. Then you just keep score and settle up every now and then. That’s a trade currency.
But to be a reserve currency means that countries that have reserves have to invest it in something, so you need a deep liquid pool of investable assets. China does not have that. There is no Chinese bond market. There are a few Dim-Sum bonds and a few other things, but there is no Chinese government bond market to speak of, and it would take 10 to 15 years to develop one.
But it’s not just about issuing debt. China doesn’t have to borrow because they have too many reserves. If they don’t borrow then there are no bonds, and if there are no bonds there can’t be a reserve currency because there is nothing to invest in.
Even if they did, there is no rule of law in China, so why would you trust the Chinese not to steal your money? So putting all that together, they are not even close to being a reserve currency.
Epoch Times: So what are the Chinese up to?
Mr. Rickards: What China wants is the SDR [Special Drawing Right, a type of money for governments], because it’s not the dollar. It’s issued by the IMF [International Monetary Fund], and China is simultaneously lobbying for more votes in the IMF.
China is trying to use its willingness to lend money to the IMF to purchase SDR notes from the IMF to give the IMF money to bail out Europe. It’s trying to use that as a lever to get more votes. If it has more votes, it would be comfortable using the SDR as a reserve currency, because its use would be regulated by the membership and that would make China the second largest member after the United States.
The United States is opposing it, but Christine Lagarde [Head of the IMF], is pushing very hard to increase the Chinese role. It’s a complicated global game.
If you said to me, does China want to get rid of the dollar as the global reserve currency, the answer is yes. But most people think it’s that they want the yuan. They don’t. It’s the SDR.
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Russia vows to switch to other currencies over US sanctions threat - Glazyev
Russia can dodge any proposed US sanctions by switching to other currencies and creating its own payment system, Putin’s economic advisor Sergei Glazyev said Tuesday. A senior Kremlin official has denounced Glazyev’s remark on US-Russia economic ties, calling them "a personal opinion" inconsistent with the Kremlin stance.
This comes amid US threats to pile sanctions on Russia over its stand on the Ukrainian coup. US Senate is currently debating possible measures against Moscow.
Senator Christ Murphy, the chairman of the Senate's Europe subcommittee, said lawmakers were considering such options as imposing sanctions on Russia's banks and freezing assets of Russian public institutions and private investors.
Sergei Glazyev told reporters today Russia would have to switch to other currencies to curb its dependence on the United States.
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I'm with you Bug, but I have to wonder why they would want to piss of seven of Russia's most powerful ministers by freezing assets.
For EVERY action there is and EQUAL and OPPOSITE reaction.
... Russia is preparing the announcement of the "Holy Grail" energy deal with none other than China, a move which would send geopolitical shockwaves around the world and bind the two nations in a commodity-backed axis. One which, as some especially on these pages, have suggested would lay the groundwork for a new joint, commodity-backed reserve currency that bypasses the dollar, something which Russia implied moments ago when its finance minister Siluanov said that Russia may regain from foreign borrowing this year. ...
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Koos Jansen: Do you consider it a possibility the SDR will be the new world reserve currency backed by gold, like mentioned in Willem’s book The Big Reset? And following up on that, could it be all national currencies will be floating around such an SDR?
Jim Rickards: Yes, there is a probability the SDR will be the new global reserve currency. Gold and oil would be then be priced in SDR’s. It will be used for some of the balance of payments between countries, the creation of reserves and probably the financial accounts of the world’s largest corporations. So Siemens, General Electric and IBM will produce their financial statements in SDR’s, because they’re global corporations.
Koos Jansen: But will this SDR be backed by gold at a fixed parity?
Jim Rickards: It might be, this is where it gets interesting. That is not what our global leaders want. What they want is a paper SDR to replace the paper dollar. The question is, will people go along with that? Our global leaders may have to go back to gold not because they want to but because they need to restore confidence. It can go either way. The SDR project that will replace the dollar is already in the works. If the elites get enough time, they need about ten years, they will roll out a paper SDR. If the collapse comes sooner than that they’ll have to gold, or, if they insist on a paper SDR, they’ll have to go with martial law and neo-fascism.
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With March quickly coming to an end it appears there will be no passage of supporting legislation in Congress for the IMF 2010 Quota and Governance Reforms.
On Friday, the House of Representatives introduced a new aid bill for Ukraine which did not include the reforms. An earlier version of the bill did in fact include the reforms.
We are entering into a situation where the G20 countries have told the United States that they have until the Finance Ministers and Central Bank Governors meeting on April 10th and 11th to enact the required supporting legislation for the IMF Reforms.
This meeting is being held in Washington and it will certainly be a few days to remember.
Let’s recall that the G20 countries have stated that they will take aggressive measures to by-pass the United States and its veto power over the IMF Executive Board by the April meeting.
Let’s recall that Russia has threatened to dump its US Treasury Bonds and begin settling trade in other currencies other than the US dollar. As many have predicted, this will be the death of the petrodollar and reserve currency status of the American dollar.
America has but a few weeks to enter into multilateral agreements with the rest of the world and show its willingness to become part of a more balanced and centralized financial system. The financial power of the rest of the world has created a situation for the US where it is collapse or consolidation.
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America has but a few weeks to enter into multilateral agreements with the rest of the world and show its willingness to become part of a more balanced and centralized financial system. The financial power of the rest of the world has created a situation for the US where it is collapse or consolidation.
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As The South China Morning Post reports, Jukka Pihlman, Standard Chartered's Singapore-based global head of central banks and sovereign wealth funds (who formerly worked at the International Monetary Fund advising central banks on asset-management issues), notes that:...
...At least 40 central banks have invested in the yuan and several others are preparing to do so, putting the mainland currency on the path to reserve status even before full convertibility.
... Washington’s “foolish” imposition of sanctions on Russia over Crimea’s secession from Ukraine “has forced Moscow to react by selling Gazprom bonds not in the dollar market but rather in the fast-emerging Chinese Yuan.”
“The US has just shot itself in the foot,” he wrote.
Citing a new report by the International Monetary Fund, Engdahl said there has been a “dramatic shift” from the “US dollar as reserve currency.”“The foolish [US President Barack] Obama sanctions threats against Moscow are simply accelerating the refocus of giant Russian companies like Gazprom and Norilsk Nickel to the huge Asian market,” wrote the analyst.
He said following the “NATO-led Ukraine coup and ensuing crisis,” other countries “are looking to lessen their dollar exposure.”
The analyst said “stupid people” in the United States and NATO have failed to “think through or foresee the global consequences of their actions.”
Jim Rickards said:Had a candid exchange of views w/ #Russian Ambassador today. Takeaway: Russia is serious about pricing oil in roubles. Not just loose talk.
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