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R/E/P => R/E/P Archives => R/E/P Saloon => Topic started by: MDM, on December 01, 2010, 08:20:12 AM

Title: China and Russia agree to not use Dollar for commerce
Post by: MDM, on December 01, 2010, 08:20:12 AM

http://www.chinadaily.com.cn/china/2010-11/24/content_115990 87.htm

Title: Re: China and Russia agree to not use Dollar for commerce
Post by: cgc on December 01, 2010, 09:09:02 AM

One step closer to renouncing the dollar as reserve currency which would destroy the value of the currency.  China and Russia are the two largest holders of US debt.

Title: Re: China and Russia agree to not use Dollar for commerce
Post by: bblackwood on December 01, 2010, 10:39:03 AM

Slight correction - China is the largest foreign holder of US debt, Russia is 9th.

http://www.ustreas.gov/tic/mfh.txt

No matter, this is not good news.

Title: Re: China and Russia agree to not use Dollar for commerce
Post by: compasspnt on December 01, 2010, 10:41:42 AM

That's it.

I am dumping all of my Renminbi.

Title: Re: China and Russia agree to not use Dollar for commerce
Post by: Jay Kadis on December 01, 2010, 10:42:12 AM

Why should foreign countries be expected use our currency?

Title: Re: China and Russia agree to not use Dollar for commerce
Post by: bblackwood on December 01, 2010, 11:23:09 AM

Jay Kadis wrote on Wed, 01 December 2010 09:42

Why should foreign countries be expected use our currency?

I don't expect them to, but it has been beneficial to the strength of our dollar for a long time.

It's really just a sign of the times.

Title: Re: China and Russia agree to not use Dollar for commerce
Post by: Edvaard on December 01, 2010, 02:13:58 PM

Historically there has usually been one currency as a de facto international currency, normally that of the largest economy of the era. The British pound was the most recent example prior to the dollar. It's not usually a matter of which currency is the "strongest," just the most prevalent. But more developed economies have usually used their own currencies for most transactions, especially if having regular trade with each other.  

I wouldn't make too much out of this agreement. Russia and China should have been using their own exchanged currencies for awhile now, but one or both have always been too unstable for the purpose, hence use of a third party currency, which is why many other countries still do the same. All this represents is that in this case China is extending a hand of conciliation to Russia by agreeing to allow use of the recently wobbly ruble in transactions of greater importance. And there's also the matter of savings to both parties on FX charges. The article also noted that the two countries are ~ $100/mcm (1,000 cubic meters) apart on a price for Russian gas, the Chinese wanting that much of a discount vs. the price Europeans pay. (I think I've read ~ $300 vs. ~$200 elsewhere). That's pretty huge, a 33% reduction.

The Russians aren't doing themselves much of a favor being paid in rubles, on the surface, but any other currency has to be eventually converted to rubles anyway, and the big bonus here is that anyone would take rubles in payment for Russian purchases abroad. So in that regard Russia get's a better deal than otherwise on what it buys from China.




The only time to pay attention to any of these international currency discussions is if there were to be any credible talk of pricing oil in a currency other than the dollar.


   

Title: Re: China and Russia agree to not use Dollar for commerce
Post by: danickstr on December 02, 2010, 02:10:53 AM

Why didn't we take over these countries after WW2?  gosh that was dumb.

Title: Re: China and Russia agree to not use Dollar for commerce
Post by: MDM, on December 02, 2010, 06:24:00 AM

apparently there are physical silver shortages, and banks are supposedly trying to short-sell silver to keep the price down.

this may be a good time to buy silver, because the combined effect of the USD blowing-up and people actually demanding physical silver might create a sudden raise in price.

I've read that historically Silver has had a higher price than now when compared to gold..

might be worth looking into.

Title: Re: China and Russia agree to not use Dollar for commerce
Post by: PRobb on December 03, 2010, 12:13:46 PM

bblackwood wrote on Wed, 01 December 2010 10:39

Slight correction - China is the largest foreign holder of US debt, Russia is 9th. http://www.ustreas.gov/tic/mfh.txt No matter, this is not good news.

Keep in mind that the flip side of that is that makes it in China's interest NOT to trash the dollar since that would devalue its huge dollar holdings.

Title: Re: China and Russia agree to not use Dollar for commerce
Post by: bblackwood on December 03, 2010, 12:22:33 PM

PRobb wrote on Fri, 03 December 2010 11:13

bblackwood wrote on Wed, 01 December 2010 10:39 Slight correction - China is the largest foreign holder of US debt, Russia is 9th. http://www.ustreas.gov/tic/mfh.txt No matter, this is not good news. Keep in mind that the flip side of that is that makes it in China's interest NOT to trash the dollar since that would devalue its huge dollar holdings.

Agreed.

That said, we've done a magnificent job of devaluing our own currency. It's fun to point at others as the blame, but our own policies have crippled the US dollar.

Title: Re: China and Russia agree to not use Dollar for commerce
Post by: MDM, on December 03, 2010, 07:01:34 PM

although it's not in the interest of China to devalue the dollar I would consider a few things as well

-China is buying gold and other commodities, effectively getting rid of dollars and protecting themselves with real physical wealth which will not lose value during hyperinflation if it happens.

-International monetary regulation  is not as scientific as we have been led to believe and there may be some agreement to shift the value of the huge debt that china holds into a new world currency, which china would be holding instead of the dollar.  In other words the international banking community may create a 'fix' for the problem by inventing something out of the blue.

- a sinking ship is not seaworthy and sooner or later you will have to jump-off.. how and when is the question.. the time may be coming near


most of the 'high' financial system is working on principles which at the basic business-level would not work and be considered fraud IMO (even though it may take years of university to understand the lexicon).. so there is less true economic logic to all of the actions taken than we may think.. most of the action could easily be interpreted as political and predatory instead..

Title: Re: China and Russia agree to not use Dollar for commerce
Post by: PookyNMR on December 08, 2010, 10:55:03 AM

bblackwood wrote on Fri, 03 December 2010 10:22

That said, we've done a magnificent job of devaluing our own currency. It's fun to point at others as the blame, but our own policies have crippled the US dollar.

And Bernanke is looking at deflating it even more thinking his more recent $600B injection idea isn't going far enough.