China, Russia quit dollar on bilateral trade

[TalkingDog]

Source: China Daily: English Online Version

China and Russia have decided to renounce the US dollar and resort to using their own currencies for bilateral trade, Premier Wen Jiabao and his Russian counterpart Vladimir Putin announced late on Tuesday in St. Petersburg.

Chinese experts said the move reflected closer relations between Beijing and Moscow and is not aimed at challenging the dollar, but to protect their domestic economies.

"About trade settlement, we have decided to use our own currencies," Putin said at a joint news conference with Wen in St. Petersburg.

Read more: http://english.peopledaily.com.cn/90001/90778/90859/7208907.html

---

This seems... less than good.

[krispos42]

1. The US dollar... run away! Run away!

[neverforget]

4. It's just a flesh wound!

[Ozymanithrax]

2. So much for the empire... n/t

[tsuki]

5. I think we are an ex-pire. nt.

[Creative]

93. Meanwhile, back at the print shop...

Helicopter Ben continues to consume massive quantities of paper and ink.

[ShamelessHussy]

3. Doubt the military industrial complex will be able to deal with them, like Iraq

now if they manage to secure most of their energy needs outside of dollars we are all done.

[Monk06]

6. Normally this would require an invasion of China and Russia but I guess that ain't gonna happen. n/t

[La Lioness Priyanka]

22. lol. good one

[Mojorabbit]

7. This is not good. nt

[txlibdem]

8. This is the best thing that could ever happen

The US Dollar should not be used in any transaction not originating in the USA. I encourage all nations to follow Russia and China's example -- dump the dollar. There should be a pseudo-currency as the official currency of international trade. The dollar is unstable and any nation that relies on it has already faced the terrible consequences. Get out of the Dollar and work to devise an independent currency that will not give any nation undue influence over international trade.

[inna]

9. +1

[txlibdem]

17. Spaciba

Spaciba, Xièxiè, Dank je, Arigato, Salamat, Vielen Dank.

(I only wish I spoke all of those languages...)

[nadinbrzezinski]

10. Ah it was good while it was a reserve currency

we have had many rumors of things like this...

[JCMach1]

11. We'll just see how that works out for them! Especially the next time for Russia when oil takes a

dive!

[Warren Stupidity]

16. I'm holding my breath waiting for the 'oil dive'. nt

[pampango]

12. Voice of Russia: Russia, China to bolster trade ties

http://english.ruvr.ru/2010/11/23/35469187.html

Russia and China may reach the pre-crisis trade turnover level before the end of this year, Chinese Ambassador to Moscow Li Hui told reporters on Tuesday. He explained that the past ten months have seen a significant surge in bilateral trade turnover, which currently stands at 45 billion dollars. This means that the global economic crisis fallout failed to damage trade ties between Moscow and Beijing, whose trade turnover may hit the 56-billion-dollar threshold by year-end, a figure that Li said saw the light of day in 2008.

The Chinese diplomat voiced hope that the next few years will witness further full-fledged trade cooperation between Russia and China.

"Last year saw an increase in Russia’s electronics and machinery exports to China, Li says, citing a range of products with significant value added components from both sides. Diversifying bilateral trade remains high on Beijing’s radar, he goes on to say, touting IT and investment cooperation between Russia and China. In this regard, the completion of a cross-border oil pipeline gave an additional boost to the development of regional infrastructure," Li concluded.

"Last year’s Russian exports to China, Sanakoyev says, included the Mi-26 heavy-lift helicopters plus the nuclear energy-related equipment that Russia began to supply to China amid the construction of the Tianwan nuclear power station there. It should be admitted, however, that Russia is yet to intensify trade ties with its immediate neighbor," Sanakoyev concedes.

For this to happen, Russia should supply more competitive machinery products to China instead of centering on raw material exports there , Sanakoyev says, pitching Russia’s high-tech sector, which he adds has yet to be developed in China.

[fasttense]

13. Well the US insists that if you want to trade in the US you have to

use US dollars. Now, if they don't want to use our dollar, they don't have trade in the US. Which would actually help our fading manufacturing base.

[madrchsod]

14. the russian currency is worthless and...

the chinese is under valued. good luck !

[txlibdem]

18. Yeah, that stupid Ruble

Whose value in underpinned by the world's largest oil, gas, minerals...

Russia accounts for around 20 percent of the world's production of oil and natural gas and possesses large reserves of both fuels. This abundance has made Russia virtually self-sufficient in energy and a large-scale exporter of fuels. Oil and gas were primary hard-currency earners for the Soviet Union, and they remain so for the Russian Federation. Russia also is self-sufficient in nearly all major industrial raw materials and has at least some reserves of every industrially valuable nonfuel mineral--even after the productive mines of Ukraine, Kazakstan, and Uzbekistan no longer were directly accessible. Tin, tungsten, bauxite, and mercury were among the few natural materials imported in the Soviet period. Russia possesses rich reserves of iron ore, manganese, chromium, nickel, platinum, titanium, copper, tin, lead, tungsten, diamonds, phosphates, and gold, and the forests of Siberia contain an estimated one-fifth of the world's timber, mainly conifers (see fig. 8; Environmental Conditions, ch. 3).

The iron ore deposits of the Kursk Magnetic Anomaly, close to the Ukrainian border in the southwest, are believed to contain one-sixth of the world's total reserves. Intensive exploitation began there in the 1950s. Other large iron ore deposits are located in the Kola Peninsula, Karelia, south-central Siberia, and the Far East. The largest copper deposits are located in the Kola Peninsula and the Urals, and lead and zinc are found in North Ossetia.

http://countrystudies.us/russia/59.htm

Yeah, the stupid Ruble is in so much trouble. But wait:

Russian Ruble Success Highlights Demise of U.S. Dollar

Baltimore, MD: The Russian Financial Ministry announced yesterday that they had successfully repaid $3.6 billion of debt in the first half of 2006. Compared to the U.S., which accrues, on average, well over a billion dollars of debt per day, Russia’s dedication to repay debt is as impressive as it is telling. The Russian ruble, which utterly collapsed less than a decade ago, is beginning to challenge the once reliable dollar as the next foreign reserve currency.

“The ruble’s rise is a serious gut-check confirmation,” said Justice Litle, an expert on international currency trade. Litle, who is the editor of the critically acclaimed newsletter Outstanding Investments, believes that the ruble’s recent growth signals the weakening of global democracies and the inevitable rise of national oil companies controlled by authoritarian states. “Russia's finances have become so strong, thanks to its position as a top energy exporter,” said Litle, “that there is talk of the (now fully convertible) ruble cutting into the dollar's turf as a regional reserve currency.”

http://dailyreckoning.com/russian-ruble-success-highlights-demise-of-us-dollar/

Contrast that to the "Oh, so stable" US Dollar which is backed by junk bonds, mortgage backed securities certified as Triple A but are in fact worthless, and possibly the world's highest tower of debt. Yeah, if I was some other country I'd sure trust the US banks to STOP lying and cheating and thieving. Sure I would...

[Hydra]

20. One of my teachers hammered this point home once

"Superpowers do not import most of their needs. They produce everything they need and export extensively."

That means there are 2 near superpowers and us(not exactly superpower anymore).

[FreakinDJ]

15. Gee - this Free Trade thing is working out so well

[RUMMYisFROSTED]

19. It's working perfectly, as planned.

Just not for you or me.

[txlibdem]

21. +1

:scared:

[Poboy]

23. China, Russia quit dollar

Source: Li Xiaokun (China Daily)


Premier Wen Jiabao shakes hands with his Russian counterpart Vladimir Putin on a visit to St. Petersburg on Tuesday.ALEXEY DRUZHININ / AFP

St. Petersburg, Russia - China and Russia have decided to renounce the US dollar and resort to using their own currencies for bilateral trade, Premier Wen Jiabao and his Russian counterpart Vladimir Putin announced late on Tuesday.

Chinese experts said the move reflected closer relations between Beijing and Moscow and is not aimed at challenging the dollar, but to protect their domestic economies.

"About trade settlement, we have decided to use our own currencies," Putin said at a joint news conference with Wen in St. Petersburg.

The two countries were accustomed to using other currencies, especially the dollar, for bilateral trade. Since the financial crisis, however, high-ranking officials on both sides began to explore other possibilities.

The yuan has now started trading against the Russian rouble in the Chinese interbank market, while the renminbi will soon be allowed to trade against the rouble in Russia, Putin said.

"That has forged an important step in bilateral trade and it is a result of the consolidated financial systems of world countries," he said. Putin made his remarks after a meeting with Wen. They also officiated at a signing ceremony for 12 documents, including energy cooperation.



Read more: http://www.chinadaily.com.cn/china/2010-11/24/content_11599087.htm

[SpiralHawk]

24. "Pluto opposite USA Venus and Jupiter." - Ronald Reagan's Dead Republicon Astrologer *

"Just perfect. Right on schedule. We republicon darkside occultists have been expecting this to happen. We set the wheels in motion over our 8 idiotic years of FeebleMindedness, FAIL & Plunder under the 'leadership' of our beloved Republicon Chickenhawks: Commander AWOL Bush and Dickie 'Five-Military-Deferments' Cheney. The Planets have spoken. Now we can pile the blame ALL on Obama and the Libs. Bwaaa ha ha ha ha. Snark. Smirk."

- - Ronald Reagan's Dead Republicon Astrologer *


* Courageously channeled by the intrepid SH from the vast netherworld of Republicon occultism.

[YOY]

25. Bigger news that most here realize.

n/t

[JackRiddler]

41. Are you kidding? Very big!

[Safetykitten]

42. But the TSA....

[YOY]

52. The TSA is important on a different level. It is no fluff piece.

This however, is the ending of a Empire. A bell tolling.

[loudsue]

43. This is HUGE.

Bigger than 99% of Americans can even fathom.

We are so screwn.

[defendandprotect]

79. This has been a long time coming -- remember reports that some ME nations ....

were going to switch to Euro in oil trades???

Was that it? I'm a little foggy on that --

Was it Saddam Hussein?

Is Cuba using everything or have they shown partiality to the Euro?

Obviously, the "united Europe" and Euro were created to combat illegitimate

US power -- or am I wrong?

[northzax]

26. in other words

Russia doesn't sell much to China, and will return 100% of the Remminbi to China in purchases, it's not good for anything else. no one else will take it, since there are no exchange rates on the open market. and China will end up with a pile of Roubles, not good for much except buying stuff in Russia (and parts of Eastern Europe where the currency will simply be returned to Russia in energy purchases.) until China floats the Remminbi, it's not good for anything but bilateral exchanges with countries that run a trade deficit with Beijing.

[Art_from_Ark]

92. I would have to agree with you

Renminbi is not easily convertible, and the Ruble is not given much respect outside of its traditional spheres.

[TheLastMohican]

95. Both countries have enormous real assets.

Russia has all the natural resources in the book. China has the workforce. They will do fine with this move. Perhaps they know that the storm is coming and don't want to be buried under the ruble of US economic meltdown.

What US has is a ton of green paper, currently known as "US dollars" and a lot of AAA+ valued stock options which are actually junk bonds. But the people are too afraid to tell that the king has no clothes on.

[Art_from_Ark]

98. Considering that the ruble has already had its own meltdown,

going from $1.29 to a couple of cents since the breakup, I don't see the attraction of holding rubles.

[robcon]

27. I'd love to know the renminbi value on a free market.

China must have an agreement that the renminbi is fixed in value.

I don't know what Russia gets from this, except to thumb its nose at the dollar.

Economically, this will only work if Russia accepts the undervalued renminbi. I don't know why they would - they can't buy much with that currency.

edit:spell

[Psephos]

58. Exactly. n/t

[onehandle]

28. And down we go. nt

[bossy22]

29. thinking much lately?

this is meaningless politics- as posters put it above the remnibi is not fully convertable and uses a fixed exchange rate. Russia doesnt get much out of this and the chinese just get to play politics with world finance. Show me a replacement for the U.S. dollar that is around today?

[onehandle]

31. The Euro.

Before the economic meltdown, the Euro was kicking our ass. When the economy returns, it will once again outpace us for decades.

Until China becomes the dominant economy in three or four decades.

And we become fully third world.

[northzax]

33. the Euro?

yes, until the reckoning, the Euro was outpacing the dollar on a one to one basis. but you think there are parts of the US that are lagging? the Euro has basically one engine, Germany. how long are the Germans going to keep paying for everyone else? (and by everyone else, I mean EVERYONE else. there is not a single country in the Euro zone with ten year positive growth besides Germany, Finland and Sweden. one by one the dominoes are falling (Hi there, Ireland, how's it hanging?) where's the growth engine? Portugal? Spain? Italy? Croatia? Malta? Monaco? the Netherlands? Belgium? none of these look all that dynamic.

[Imperialism Inc.]

39. The interesting thing is the mix of types that are falling.

Ireland was the poster child for being "responsible". They had low corporate taxes and ran a budget surplus for 5 years prior to the crisis. When it hit they immediately moved to make cuts and balance the budget. Now, they are a complete basket case. The rates they can get to borrow are sky high and they don't control their own currency. Since they are on the Euro they can't use monetary policy.

[northzax]

47. exactly. that's the problem.

the Eurozone makes the individual countries a hodgepodge of countries and states. Ireland did everything right, and when the bottom fell out, couldn't leverage that good behaviour to help themselves out because the policies that could have helped them were blocked by other countries. Greece had similar problems, from a different angle. outside of the Eurozone, Greece would have simply defaulted, bankrupted themselves and started over. (see: Argentina) a few years of pain, and then you start to take advantage of your opportunities. Ireland could have borrowed more on the open market at cheaper rates with the Punt and inflated themselves out of this mess in four or five years. instead, both are hit with serious penalties from the rest of the Eurozone and are facing decades of economic pain. sometimes it's better to rip off the bandaid than slowly pull it.

[onehandle]

40. Where's the growth engine in the United States?

Would you like fries with that and tax cuts for the rich is not going to do shit.

Europe will find a way. We will find another Republican President in 2016 or maybe even 2012 if as projected, the unemployment rate barely budges.

[northzax]

49. same place it has always been

innovation. yes, it's certainly not a guaranteed situation, but I like our chances over the next 50 years more than Europe's (which is why I am not using my Eurozone passport) maybe I'm wrong, maybe I'm betting on the wrong horse, but the US has significantly fewer structural impediments to long term growth than Europe as a whole does.

[bossy22]

60. not to mention a growing population

much of europe population is stagnant or declining- which means that the main engine for growth will have to be from productivity increases only- and productivity can only increase so much

[defendandprotect]

82. Wages and bonuses are rising in Germany because of falling population ....

SAME should be happening here in America but the scams to bring in foreign workers

began decades ago -- and the busting of various professions, such as Engineering, began --

first with training more engineers that were needed, then with salary reductions, then

with foreign workers taking the jobs.

If Americans are smart they will stick with the revolution in childbearing and go for

one kid or none.

Productivity has already returned to many now working weekends and or two jobs --

some three jobs! And the regular job now is often the job of two workers ... they just

keep failing to replace the one who is gone!! Under the gun, under the gun.


The unemployed and the employed have to unite for unions -- and stand firm against any

further deterioration in wages or the work week -- in fact, we should be reducing the

work week -- and get down to a 4 day week!

[defendandprotect]

81. Look at Global Warming and Peak Oil ... we don't have 50 years ...!!!

US has seen 50,000 manufacturing plants closed in the last 10 years --

The stimulus is fading out and we will suffer the loss of another million jobs.

There is still no lending to Main Street -- no expansion there -- and Main Street is

the true engine.

Wall St. is the Casino -- the pretend place for "investment" while in relatity it is

a hotbed of capitalistic crime!

[Phil The Cat]

100. Why do we get crazy about manufacturing?

"US has seen 50,000 nasty greenhouse gas spewing plants closed in the last 10 years"

Hate to see the jobs go, not at all sorry to see the pollution, traffic, and consumption of natural resources to make frivolous products disappear!

We need more brain-filling jobs and fewer back-breaking jobs! More services, less "stuff"!

[defendandprotect]

101. Only for the jobs which provide taxpayer revenue, money in pension plans,

support for families -- FICA contributions --

However, all of the negatives have simply been moved to another location on the planet.

Also agree that we need less "stuff" ---

And many of the jobs that were taken were union jobs with higher wages.

United Nations has also called for the public to move to vegetarianism to save the planet.

Where are you on that?

[Name removed]

104. Deleted message

Message removed by moderator. Click here to review the message board rules.

[JackRiddler]

68. Being sucked to death via forced extraction of interest for the banksters.

[defendandprotect]

80. Come on ... what's happening in Ireland is the same old credit crap ...entrapment and enslavement ..

by banks -- it's the IMF which should be considered illegitimate and under attack!

This is banking power by threat and destruction!!

Something most of us have long recognized.

It is the right wing which creates the downward spirial by corrupt and criminal means --

and I include the FED and IMF in that, certainly -- and which is bringing everyone down.

Everyone's economy has been negatively impacted by the crimes of our system of capitalism.

Crimes which have not been atoned -- not been accounted for -- and NOT amended -- i.e.,

we are still open to repeats of this corruption and crime by Wall St./Banks --

Unregulated capitalism is merely organized crime --

[BrklynLiberal]

36. As soon as it regains its standing...the Euro will be the international currency.

[northzax]

48. and if my Aunt had balls

she'd be my Uncle. the euro isn't even close to 'regaining' it's footing. and structurally, I don't think it ever really can. it simply isn't stable enough, there are too many cooks in the kitchen, and too many weak spots.

[defendandprotect]

84. Has Cheney moved his assets back from the Euro into the US$ .. or is he

going with Russia and China?

[northzax]

94. what do I care where Dick Cheney invests?

that bitter old man? what does he know about the future?

[defendandprotect]

97. You may not care, but it was certainly an indication of where Cheney's confidence was .....

[defendandprotect]

83. Presume it's been under pretty heavy attack from US for a few years now ....

Rising Euro made mockery of the Superpower's dollar bill!!

Don't know how they did it, but imagine we've been up to something.

While we're at it, let's uninvent the dollar bill -- it's an artificial entity --

And we also need to stop measuring everything by the yardstick of a dollar bill!!!

We're going no where without a planet -- and no where without new alternative and

sustainable -- non fossil fuel -- sources of energy.

And we're 60 years late in moving on that --

We have to NATIONALIZE the oil industry -- and our natural resources -- or face even

more environmental damage.

Capitalism is suicidal in its war on nature and humanity!!

[Imperialism Inc.]

38. The Euro is a wreck.

The member countries of the EU are like our states. They have no control over their currency. Greece, Ireland, Portugal, Spain, all a complete wreck. The EU Central Bank and the IMF are crushing them with harsh loan conditions. What is going to happen there is far from clear.

At any rate we, the US, actually want money to go elsewhere. Right now China buys our treasuries but won't allow capital to flow in to China. This makes our dollar "kick their ass". Think of it as them drying up supply of dollars and the lower supply leads to a higher price. But a stronger dollar means a trade deficit. If the dollar goes up from a given level it becomes more expensive for someone to buy the dollars they need to buy our stuff. And, less expensive for us to buy theirs. We would like if people would just go somewhere else, let our dollar drop to where it should be, and improve our imports/exports balance and encourage more domestic based consumption.

[Turbineguy]

72. Third world?

Well, at least there will be a Democrat somewhere to blame it on.

[JackRiddler]

45. An anti-dollar can be set up, and probably will be.

BRIC and EU can establish a basket of their own currencies fixed relative to each other (or floating within ranges a la Bretton Woods) while floating freely against the US dollar and commodities. A transaction system would allow for trade accounts among participating nations to be settled via this "Dollar for International Trade." Those accumulating DITs could redeem them in any of the participating currencies. Once the oil producers agreed to also price in DITs (as they already do in euros or other currencies under bilateral agreements), it would be more solid than the dollar.

[Imperialism Inc.]

55. I hope so. We'll see.

[bossy22]

61. the problem is its going to cost alot of money to do that

and people don't want to spend it. So for now the dollar stays at it is

[JackRiddler]

62. That's a pretty short answer. Fine if it works for you, but what would it cost?

Note that we're not talking about introducing new currencies, but an arrangement of existing ones in an index, a virtual currency that would require no more than the cost of the coding to "introduce." It would be used in settling international trade transactions.

[defendandprotect]

85. Ah ... memories of Bretton Woods .... and Nixon overturning it -- !!!

Isn't one of the most important trades that of OIL and US battle to keep

trades from going with the Euro?

That's been a threat we've been hearing about before 9/11 --

[earcandle]

30. China is doing well, Russia is coming out of the hole we are now entering. I suppose this is good

for them, but I don't really  understand the consequences for
America.

Can someone explain? 

[The Doctor.]

37. It's odd. Can't figure it out myself... yet.

Best I can figure is that China is going to un-pin its currency from the dollar and hope that Russia is their next market. Maybe they want to start a run?

[northzax]

44. only the fearmongers can, really

it will have a small impact on the value of the dollar globally. small, but not much, it's really not that big of a trading partnership (and I was wrong above, after further review, it seems Russia has a trade surplus with China, what the heck does Moscow plan to spend those spare Remminbi on? more investment in China, I guess) which makes this a better deal for China than I suspected.

to give you a comparison. China exported roughly $17b worth of goods to Russia last year. that's believed to have increased to about $25 billion this year. at the same time, China exported $270b to the US. heck, even the US exported $70b to China, larger than the entire Sino-Russo relationship.

one of the things that has allowed the US to maintain a deficit position in regards to the rest of the world over the past 40 years is the demand for dollars. People sold to the US to get dollars, because they knew those dollars were accepted everywhere else they may want to go.

an example: you go to say, Target. and spend $30. you give them a $100 bill, and they give you $70 in change, right? Target can spend your $30 on merchandise, rent, electricity, labor, whatever, right? and you can spend your $70 wherever you want to. that's the value of a universal currency. now imagine that Target takes your money and only gives you change in the form of a Target gift card for say, $71. your transaction costs you a little less, but this only works if you want to spend another $70 at Target. that gift card isn't worth jack at Safeway. so in order to get your groceries, you have to sell me your target card for $69 in credit at Safeway. I want to go to Target, but you want to go to Safeway more. it's good for the seller, not so good for the buyer (unless, of course, you are selling more stuff to Target than you are buying. This is the problem that Russia is going to face on this. if current trends hold, next year they will be the proud possessors of a gift card worth about $10b to the People's Republic. not much good unless you want even more stuff from China, right?

[earcandle]

57. thank you! well said.

[JackRiddler]

63. China and Russia are not Sarah Palin and a Target store.

May I remind that Russia is the number one oil producer, and China the future number one oil consumer? And oh look, they share the world's second-longest border. Obviously there is much room for growth between them. The news splash of two giants coming to a small agreement is significant in a context where more and more of these bilateral currency arrangements are being announced. It signals where the future trade will be. In this case, your folksy metaphor does not apply, because both sides have much to sell to each other and are signalling a growth in that relationship that cuts out the middle currency.

[dipsydoodle]

71. Correct.

.

[northzax]

96. and it removes Russia from the global equation

which is handy. the only thing Russia has that China wants are natural resources (plus some increasingly obsolete aerospace and military tech, I'd guess) Russia will now, in terms of this relationship, become in essence a colony, selling natural resources and buying back finished goods at increased prices. after all, there's nothing else they can do with the remminbi they'll be getting.

[Fool Count]

77. There is another name for "stuff from China" - one can simply call it "stuff"

because China produces virtually anything one may desire. The same cannot be said about the US. Its so-called "universal" currency is only
universal until everyone believes it to be such and not one minute longer. US was granted by history a great privilege of being a central banker to the World.
They could have used that privilege prudently to their advantage in perpetuity, but greed got better of them. This currency is now debased and remains
"universal" only by forces of habit, inertia and fear. A Target gift card may now be a better investment than US dollar, because Target is an international company
with real assets and it doesn't seem likely to go out of business in foreseeable future. The same cannot be said about the US. China now holds about 3 trillion (that is with
twelve zeroes) USD without any guarantee that it can cash any of it at will. Russia holds almost a trillion. How much Chinese and Russian citizen and businesses
hold in banks, safes and mattresses nobody knows, but that could easily double it to 8 trillion total. That is two thirds of US economy. What if they lose faith
in USD and decide to cash out? Who can blame them for wanting to switch a small percentage of those holdings into rubles or renminbi? US is going to print
another 600 billion USD, then another 600 billion, then another. Who knows when it is going to end? Who wants to get stuck holding the bag?

[defendandprotect]

86. No way the FED has printed huge amounts of dollars and not even disclosing total amounts ...

and we're not going to have hyper inflation???

And devaluation???

[jeff47]

53. It's not really a big deal.

Before this agreement: China wants to sell something to Russia. Russia converts Rubles into Dollars, uses dollars to buy Chinese goods. Chinese convert Dollars to Renminbi, pays workers/suppliers/etc.

After this agreement: China wants to sell something to Russia. Russia uses Rubles to buy Chinese goods. Chinese convert Rubles to Renminbi, pays workser/suppliers/etc.

(These examples also work in reverse, with Russia selling to China)

It's an agreement between China and Russia to not have the inconvenient intermediate step of converting their own currency to Dollars. What's it mean to the dollar? Not much.

What could it mean for the dollar? Well, if a whole lot of places decide to follow suit, then it's possible for the dollar to stop being the de-facto trading currency. The dollar's status as the de-facto trading currency is convenient for us, in that we don't have to worry about currency fluctuations when signing international trade contracts.

Departing from a dollar-based system would not cause a massive crash of the dollar, in that the modern international market doesn't use physical currency. China isn't hoarding pallets of greenbacks. There was a time when that was the case, and so switching from the Dollar meant that a huge quantity of dollars would be dumped on the market, and those dollars could only remain dollars. Today, a couple mouse clicks magically turn Dollars into Euros, or any other currency.

[Ruby the Liberal]

65. Really? Google 'reserve currency' and 'currency pegs', read up and get back to us.

No friend, this is huge from an econ standpoint. Very huge.

[jeff47]

66. Nope.

When the money enters the electronic realm, nobody really cares if the wealth is labeled "Dollars" or "Euros". Sure, the conversion rate matters at the moment you convert. But that doesn't change the wealth.

So what happens if Dollars are no longer the default reserve currency? <click> ok, it's now a different number of Euros.

Perhaps you could explain what, exactly, you would expect to happen?

The 'danger' here is that our debt is denominated in dollars, and continuing to have our debt be in dollars means we can use inflation to reduce our real debt. If our debt was denominated in something else, we'd be in Ireland or Greece's shoes. But I really don't see a mechanism by which our debt would be in something other than dollars in less than 100 years.

The oft-cited danger is that if goods such as oil were denominated in Euros, we'd be "at the mercy" of the Dollar-Euro exchange rate. This ignores the fact that we're already at the mercy of the Dollar-oil exchange rate.

[Ruby the Liberal]

69. 100 years? Really?

Do you not see the danger of the market being flooded with unpegged currency dumped from sovereign reserves?

Think Weimar or Zimbabwe.

Don't think for a minute that it can't happen - and quickly. The unpegging of the US$ oil bourses (as per 1973 OPEC negotiations with Nixon) will destabilize the dollar in days if not hours.

WHY do you think we jumped into the bullshit war with Iraq when we did - to 'win hearts and minds'? Bwa! It was because Hussein was threatening to back off of the NYC/London dollar-based oil bourses and create their OWN Euro-based bourse (as Iran did in 2008). The threat to our currency based on the reserve/peg issue pulled us out of Tora Bora and into Baghdad thanks to the astute leadership of Uncle Dick and Idiot Son.

Seriously. Wake up.

[jeff47]

70. You're not quite up to the current state of technology.

Do you not see the danger of the market being flooded with unpegged currency dumped from sovereign reserves?

Do you not understand that there's no "flooding" involved?

Back in the old days, using dollars as reserve currency indeed required storing actual dollars, and switching would result in dumping of the currency onto the market, driving the value of the dollar way down and thus causing inflation problems.

Today, reserve currencies are held in computers. There are no physical dollars to be dumped. Changing currency means the same wealth is denominated in a different unit of measure. To keep the math simple, let's say today's exchange rate is $1 = 2 Euros. You have $2 billion in reserves. You decide to switch to Euros. A few commands into a computer and you now have 1 billion Euros in reserves. No actual dollars were transferred. No dumping occurred.

The unpegging of the US$ oil bourses (as per 1973 OPEC negotiations with Nixon) will destabilize the dollar in days if not hours.

How, exactly? While oil is currently denominated in dollars, the price of oil is not fixed. So if $100 buys you a barrel, or $100 converts to 50 Euros which buys you a barrel, how does that destroy the dollar?

Again, what you are saying made sense back when these deals required transfer of actual currency. The people in the oil market had to have a pile of dollars to use to buy and sell oil and switching would result in dumping of actual dollars on the market. But there's no actual currency transfer anymore.

WHY do you think we jumped into the bullshit war with Iraq when we did

Because W's administration was full of PNAC folks, who saw 9/11 as an opening to start rolling out "the plan". The ball was rolling on Iraq loooong before Saddam made his threats to switch to Euros, and loooong before Tora Bora.

Finally, you're ignoring one other very important point: What, exactly would they switch to?

Euros? Well, that entire experiment is looking rather shaky at the moment. It's quite possible that Ireland and Greece will reach the point where they abandon the Euro. Doing that would create quite a bit of chaos.

Renminbi? China's still pegged their currency to Dollars. So it's not gonna replace Dollars until it's free-floating.

[JackRiddler]

73. Really now?

So you're saying China in the absence of a partner for a currency trade could unilaterally declare half their dollars to be euros, and have these accepted as euros?

Maybe you're the one who needs to study something other than the technology.

[Ruby the Liberal]

74. Thank you, God, that I didn't sit under someone this delusional when I went to Econ Grad school.

I give up. You simply aren't worth the time and/or energy.

Have a nice life.

[Joanne98]

32. WOW!

[Mosaic]

34. Wow

I knew this day was coming, but not so soon. The dollar was the main tool American capitalists had against the rest of the world. Their arrogance has finally brought them down. Many won't celebrate, I will.

[BrklynLiberal]

35. Bush invaded Iraq and killed Saddam for this exact thing...

He wanted to start trading oil in Euros..

[JackRiddler]

46. Yes but the Bush regime invaded Iraq because Saddam DIDN'T have WMDs.

[BrklynLiberal]

50. oh..thanks for 'splain' that to me....lolol

[defendandprotect]

87. EXACTLY ... was a little foggy on just who, but it was Saddam moving to trade in Euros...OIL ...

Many mentioned that as very likely motive -- among many others --

US corruption and crime don't limit themselves to just one motive!!

Thanks --

:)

[Paper Roses]

51. Another confirmation that we are headed in a downward spiral.

Protect their domestic economies? Think about this a minute and you realize we're really in duck soup.

[JackRiddler]

56. Actually it's the rest of the world discovering their own interests.

Whether "we" are headed in a downward spiral is up to us. It's up to us to reject the politics of fear, permanent war, austerity and concentration of all wealth in the fewest, most corrupt hands. A better future is among our choices - and among other things the end of the US dollar as world currency and the end of US empire would be vital elements of a better future.

[defendandprotect]

88. Agree ... but is the world saving us from this corporatist dictatorship we're living

under -- or only themselves?

How can we insure that we get to junk capitalism in this go-around?

Would imagine there are a couple of hundred countries that would like to see the

US MIC moved backwards and OUT --

And let the world enjoy some peace for a change!!

Stability -- the enemy of elitism and huge profits!!

[tpsbmam]

54. This article provides some explanation. This is out of the area of my knowledge

so I can't speak to the bias here or address different perspectives. But here's one take on this move:

China-Russia currency agreement further threatens U.S. dollar

This latest move -- a continuation in a series of efforts by both countries to move away from U.S. dollar usage in international trade -- further threatens the dollar's reserve currency status.

The dollar is, for now, the international trade currency.

For example, when Malaysia and Germany exchange goods, the transaction is often denominated in dollars. In particular, oil -- something that all modern economies need -- is denominated in U.S. dollars, so the currency is almost as indispensable as oil itself.


The dollar reserve currency status allows the U.S. to run up high deficits and have its debt be denominated in the U.S. dollar, which in turn enables it to print unlimited dollars and inflate its way out of debt. America, understandably, wants to protect these privileges.

In fact, some allege that the U.S. wants to protect this status so badly that it invaded Iraq because the country began selling oil in euros instead of dollars. Now, the U.S. is allegedly threatening Iran because of the country's desire to use euros or Russian rubles in oil transactions.

There's more at the link. I still need a more comprehensive explanation, but this starts to get at the import of this announcement.

[Xenotime]

59. Smart move on their part. The dollar is worthless.

[defendandprotect]

89. Well, when capitalism and the FED got thru with it ... very true -- !!!

Bush and Obama did their part in the bail outs --

And, will say we can still save a few bucks and reinstate some prestige by

moving to MEDICARE FOR ALL --

Otherwise, I think 50 million uninsured -- i.e., no medical care -- and the connections

so many of us have to that 50 million is going to topple both Obama, the Dems and

insurance companies!!

Think Obama overplayed his hand in back room deals on this issue --

but I could be wrong!!???

[David__77]

64. China-Russia partnership is critical for international development.

There is a multipolar geopolitical framework emerging, and the US needn't be and shouldn't be central to all aspects of that framework.

[Catherina]

67. This is going to be painful for the US n/t

[defendandprotect]

90. If it takes us out from the tyranny of capitalism and the dollar .....

and moves us to economic democracy, it might not be that painful --

Trick is to rid ourselves of corrupt and criminal politicians!!

And end the pouring out of our Treasury directly into the pockets of corporates/elites!!

[lovuian]

75. Osama Bin Laudin said he was going to BANKRUPT USA

and he did

WAR did it ....and DEREGULATION did it

Corruption DID it

and now Corporations...WAKE up call dudes

Putin and China OWN YOU

They Nationalize corporations

watch out all those companies who are in China and Russia

your screwed

[defendandprotect]

91. Our own corrupt politicians did this ....from deregulation to crime ....

and it's been going on for decades --

Recall the S&L theft and embezzlements at all --

and we're in for more if we don't get control of capitalism and reregulate it!!

[burrowowl]

76. BIG NEWS

What does it portend? Not good for US.
We need to start a real economy and not one based on casino finances!

[defendandprotect]

78. Looks like a BIG message for US in that .... and what about the Euro....???

Is that worrying them as well?

BRETTONWOOD .... WHERE ARE YOU???

[U4ikLefty]

99. We're screwn...that is all. nt

[goforit]

102. China is screwing themselves by dumping our dollar they already have.

[Fool Count]

103. They would be screwing themselves even more if they hold on to it.

It's like holding on to Enron stock. It's never coming back. Get what you can for it and get out -
that's the best strategy.

[jamiefoxer]

105. another blow against the dollar

every new day brings news of the demise of our world preeminence.

Not that I'm crying....about time we ate some humble pie.

But still, in things not imperial, the U.S. should invest its resources wisely and develop its society to its best. We just don't....catering to the rich has gotten us nowhere.