No use trying to be humble any more. It just isn’t working out. As far as I know, we were the only site that foresaw, way back on July 4, 2017, the ascendancy of the euro – not the yuan (rmb) – as the currency most likely to challenge the US dollar as a reserve currency and as the tender of choice for the settlement of international transactions. We were way ahead of the curve in that prediction.
I knew something was up when I happened upon an inconspicuous innocuous-sounding passage by Putin in his speech at the Valdai Club in 2017 stating that Russia is for a “strong Europe.” (I try to read every one of Putin’s speeches. They point to the future). So I did a search to see what non-dollar currencies were used most in international trade settlements. I discovered the euro led the pack by a wide margin.
I wrote (as the unnamed staff writer) in the above-linked article (Look who’s really edging out the dollar) at New Silk Strategies:
“This [de-dollarization of world trade] is precisely what Putin and Xi want, which is certainly why Putin said at the last Valdai Club meeting that the Kremlin wants a strong EU. Meanwhile the dummies in France were complaining that Putin supported Marine LePen in the last presidential election. We had to hold our sides at this “news” of "Russian meddling"! Putin’s invitation to meet with her in Moscow was most likely intended as a kiss of death for her campaign. We think he likes her personally and applauds her fight for French sovereignty but his main goal is a weak dollar to put an end to US bullying, and for now, the possibility of her pulling out of the euro zone would set back the movement to end dollar hegemony.”
Something tells me Putin’s support for the euro as a challenger to the dollar is one reason Europe has recently warmed up to him – expressed, for example, in Germany’s wholehearted endorsement of the Nord Stream 2 gas pipeline project, over Trump’s dead body, and their willingness to pursue the Special Purpose Vehicle (SPV) (SWIFT by-pass) as a means to circumvent US sanctions on Iran and third parties.
QUOTE from our translation below:
“As Luft points out, Washington’s striving to fight all dissenters has formed a critical mass of discontented people who need to create a parallel financial system that is inaccessible to the long arms of the United States.”
This is a perfect example of how the heavy handed US approach to international relations is hastening the demise of the dollar. It is hard to imagine how anyone could be so downright stupid as to so unfairly abuse their trading partners so as to drive them away from the US and its currency, but it is happening and no one in Washington is catching on to the potentially disastrous boomerang effects.
According to the Financial Times:
“The US has pulled out of the [Iran] deal and Brussels will say that Mr Trump’s attempts to weaponise the dollar by imposing sanctions on European companies still doing business with Tehran should be a ‘wake-up call regarding Europe’s economic and monetary sovereignty.’”
The above linked Financial Times article mentions one of Putin’s favourite terms, ie, multilateral world, and there is no better example of it than this de-dollarization effort. If Europe holds to the course, it is right around the corner. I do not often encounter this term in the US press. Either the Western elites are afraid of the concept or they are clueless about its existence.
This all ties in with our article showing that the US has lost all vestiges of common sense.
Of course, no one in Washington is blaming the US for these impending consequences. Once de-dollarization reaches a critical point, the consequences will be laid, of course, at the feet of the usual whipping boy, Russia. But it won’t matter by that time.
Below is our translation of an article from RIA Novosti on the latest development with the SPV. BTW, I did a Google search for SPV in English and found no new developments since October 2018, so I tried a Russian language search. Even in Russian it was hard to find anything, particularly since Google could not find the term “special purpose vehicle,” The reason? It turns out they use the Russian literal equivalent of “special purpose mechanism.” The above commentary is by Vince Dhimos. (Also the initially anonymous author of the above-linked article).
Goodbye green. Europe rejects the dollar
December 5, 2018
MOSCOW, December 5 - RIA Novosti, Maxim Rubchenko. The European Commission has developed a package of measures to expand the use of the euro in such strategic areas of the economy as the procurement of energy and raw materials. The main goal of Brussels is to weaken the role of the US currency in the energy sector, in particular, in operations with Iran, which is under sanctions from Washington. About how the world gets rid of the dollar – Article in RIA Novosti.
This is war
Today, any transactions in dollars or carried out through a US bank automatically makes the parties to the trade relations subject to the action of the US legal system. When Washington imposes sanctions, market participants have to choose either to terminate business relations with the state under sanctions or to be excluded from the global financial system.
As long as the Americans were concerned about maintaining good relations with traditional allies, this system worked extremely efficiently. However, the total trade wars unleashed by Donald Trump radically changed the situation.
"The United States is now waging an economic war against a tenth of the countries of the world with a total population of about two billion people and a total GDP of over 15 trillion dollars," said Gal Luft, executive director of the Global Security Analysis Institute, in a commentary to CNBC. Further, thousands of citizens of different states are included in the list prepared by the US Treasury of those not entitled to use the US-controlled global financial system controlled from the USA. "
As Luft points out, Washington’s striving to fight all those who disagree has formed a critical mass of discontented people who need to create a parallel financial system that is inaccessible to the long arms of the United States.
An example of dedollarization is Russia. A month ago, Deputy Prime Minister Yury Borisov said that Moscow would sell S-400 Triumph anti-missile systems to New Delhi with settlement in the Russian currency: the amount of the contract is about 331 billion rubles. With Turkey, Moscow also agreed on dollar-free trade after Washington imposed sanctions against Ankara.
The major Russian companies Surgutneft, Gazpromneft and Severstal have already asked foreign contractors to switch to settlements in euros.
The American currency is being forced out of the credit market. In November, Russian companies held three large Eurobond placements for a total amount equivalent to $1.6 billion: Gazprom placed one issue in euros, and RusHydro, two issues, in yuan and roubles, respectively.
And on November 27, the Russian Ministry of Finance announced the successful placement of government bonds denominated in European currencies in an amount equivalent to one billion euros.
"We have no goal to move away from the dollar; the dollar is leaving us. And those who are making the decisions in question are no longer shooting themselves in the foot, but a little higher, because such instability in the calculations in dollars leads to the desire of so many economies of the world to find alternative reserve currencies and to create payment systems that are independent of the dollar,” said Russian President Vladimir Putin at the VTB Capital forum "Russia is calling!" at the end of November.
The head of state clarified that active work is now being conducted with key trading partners to create systems independent of the international interbank SWIFT system.
Not only Russia
China is successfully using its “One Belt, One Road” initiative as a tool for attracting countries to settlements in yuan, not in dollars.
Pakistan and Iran have refused dollars in favour of the yuan. In addition, Iran and Iraq have agreed on mutual trade in national currencies.
Now the European Union has joined the camp of "refuseniks," firmly determined to switch to the euro in payments for energy and raw materials. This was reported by the Financial Times with reference to the draft EC document, which will be presented to the EU leaders for the upcoming summit in December.
Currently, more than 80 percent of energy resources imported by the European Union are paid for in dollars, and the EU member countries, in accordance with the draft document, must ensure that contracts concluded "within the framework of interstate energy agreements" will henceforth be denominated only in euros.
Promoting an increase in the global use of the euro reflects the “political, economic, and financial weight of the bloc” in a more multipolar world, the draft document indicates. European experts stress that this "will increase the economic sovereignty of the union, taking into account the policies pursued by US President Donald Trump."
Gold is better than the dollar
Economists point out that the decline of the dollar as the main global currency is accelerated by macroeconomic trends.
Barry Eichengreen, a professor at the University of California at Berkeley, explains that the power of modern financial technology makes the global monetary monopoly pointless.
Today, it is becoming easier for companies and banks in different countries to switch between currencies, choosing the one that is most effective for a particular transaction.
And for the event of financial cataclysms, central banks and large investors are stocking up on gold. One of the leading American financiers, billionaire Ray Dalio, the founder of the world's largest hedge fund Bridgewater Associates, points to gold as one of the most reliable instruments for hedging currency and political risks.
And there is a rational explanation for this: if the dollar system collapses under the weight of the colossal US sovereign debt, gold will definitely not depreciate. While maintaining the function of the payment instrument in world trade, this asset reduces dependence on any currency.
“I’m sure that a global reset will happen when the governments of the world need to get rid of debts and they tie everything to the price of gold. That's why countries like Russia and China are accumulating gold - they know what can happen in a few years,” agrees Keith Newmeyer, Chairman of the Board of Directors of First Mining Gold.