Posted on 04/13/2013 5:44:53 AM PDT by lowbridge
Australia’s announcement that it is abandoning the U.S. dollar for trade with China is the latest broadside in the global currency war. Starting April 10, Australia and China will no longer use the U.S. dollar for trade between the two nations. For the first time, Australian businesses will be able to conduct trade in Chinese yuan. No more need for U.S. dollar intermediation.
This is a significant announcement and key development for China as it continues its campaign to internationalize the yuan and chip away at the dollar’s role as the world’s reserve currency.
Australian Prime Minister Julia Gillard made the announcement during an official visit to Shanghai on Monday. She noted that China is now Australia’s biggest trading partner and that the direct currency trading would be a “huge advantage for Australia.”
She called the currency accord a “strategic step forward for Australia as we add to our economic engagement with China.”
According to hsbc bank, more than 40 percent of small and medium-size Australian businesses that trade with China plan to offer quotes for goods and services in yuan. No longer will Chinese customers need U.S. dollars before purchasing Australian goods.
For China, this is a big accomplishment as it works toward its goal of having about a third of its foreign trade settled in yuan by 2015.
But for the U.S. dollar, it is more like the treatment the U.S. Eighth Army got at Chosin Reservoir in Korea.
This Australia-China currency pact isn’t the only whipping the dollar has taken lately either.
On March 26, China and Brazil agreed to cut out the U.S. dollar for approximately half of their trade. Some $30 billion worth of commerce per year will now be conducted in yuan and reals.
(Excerpt) Read more at thetrumpet.com ...
It will be increasingly difficult to print worthless money if this trend continues.
In the overall scheme of things, that would be world history, the US$ has been on top for a mere 60 years or so. That is because, solely because, America was unscathed by WW II.
There is no real right direction. There is only change.
Change results in evolution to something new and different. In an age where money, the foundation of trade, is actually entries on an electronic ledgers, it is difficult to sort out the direction of the change.
The trade banks maintain the ledgers and sort out the entries. As the ledger keepers, they have determined that the temporary use of the US$ for trade transactions in the China/Australia lane in no longer necessary.
One of the reasons the US has maintained the ascendency in world affairs for so long, is because the dollar has been declared the “reserve currency”, good for settling debts everywhere in the world.
This function was once ascribed to various stores of silver, to some degree, but more specificly, the use of gold. Trouble is, there simply is not enough gold in the world to adequate settle debts, and what gold there is held by national treasuries, is “hypothecated”, essentially it is already mortgaged to another party or country. And apparently, this hypothecation can have many layers, in which obligations, counter-obligations and cross-obligations can all exist simultaneously. Therefore, it is a legal and increasingly, a physical impossibility to deliver the gold bullion from one point to another.
But now, the US has chosen to expand its physical and virtual supply of dollars, cheapening and diluting its value, so it is no longer a trustworthy measure of exchange. What was once a reliable yardstick for exchange, has now become a rubber rod, flexing and stretching in unpredictable manner.
The Chinese have chosen the old method of basing their currency, the yuan, on some measure of how many ounces of gold a given amount of face value will buy, and pegged it accordingly. The Australians have chosen to respect this monetary relationship, and now settles all their debts with China directly without resorting to the intermediary of dollars.
Once China gets a real blue-water navy, expect our international influence to diminish even further.
The quasi-governance of the territory once known as “the United States of America” is not being defeated, as on a field of battle. The Current Regime is pre-emptively surrendering.
In a pig's eye. Half the world's wealth is in the US and so is almost a third of the world's economic activity. Not bad for a twentieth of the population.
Like it or not the dollar is the world's economic unit just as American English is the world's common language. Of course that also means most dollars are created outside the US and most speakers of English learn it poorly as a second language, but it's not up to us. Personally I think we'd all be better off with the rest of the world getting rich like us but I'm not holding my breath.
Sure it'd be nice to live in a world with ten times the wealth and a sevenfold GDP increase, but it would require billions of people to learn to not only work harder but more importantly how to work smarter.
By eliminating the U.S. dollar from transactions with third-party nations like Australia and Brazil, China is doing exactly what the U.S. has been asking them to do for several years now. One of the long-term criticisms of China among posters right here on this website has been China's policy of deliberately undervaluing its currency by pegging it to the U.S. dollar at a fixed (artificially low) rate.
Guess what, folks ... by eliminating the U.S. dollar from their third-party transactions, China effectively isn't pegging its currency to ours anymore.
Yes but also because the dollar was agreed upon to be backed by arab oil. Just google "petrodollars" for further reading.
“Half the world’s wealth is in the US and so is almost a third of the world’s economic activity.”
Old news. New news is about 1/3 of the wealth and about 20% of economic activity (PPP measure) or 25% (nominal dollar measure).
Hell! If I could I’d get rid of the U.S. dollar as well.Its not worth a damn.
I hope you are right.
The Chinese yuan or Renminbi was literally pegged to the US Dollar up until very recently, moving in absolute lockstep. They've now publicly "floated" their currency, although the actuality isn't very far removed from the formal peg of just a year or two ago. There has been no major divergence of the two currencies as far as exchange rates.
I've been watching certain currencies fairly closely in order to educate myself, under the assumption that such knowledge may be necessary for capital preservation or possibly even survival if worse comes to worst. I've had foreign currency CD's, but no FOREX account, not yet at least.
What you write sounds plausible and you wrote it well, but it just isn't so. Maybe that's the trajectory China appears to be pursuing but it's not the case currently. I will grant you that a Renminbi-denominated CD has a pretty high bar for admission as far as minimum balance, so it's deemed desirable, although I have my personal suspicions regarding the long term viability of what still is a communist currency, no matter what the free traders and transnationalists say.
If what you say were actual current reality, there would be a mad scramble on for sourcing outside China as exchange rates would be heading into unfavorable territory. Some of that sourcing would be returning to the US. I'm in a position to see that, too, it happened in 2008 due to fuel prices. Such changes to the cost equation does alter planning as far as offshore sourcing.
Haven't seen that. It would be very noticeable, as it was in 2008.
The only reason U.S. has gotten away with money printing and rising debt is because the dollar is the world’s reserve currency. When China doesn’t have to hold so many dollars, they won’t have to buy so many U.S. treasuries which we have to sell to cover out of control spending, money printing and debt. Then who will buy? Force U.S. citizens to buy with their retirement accounts if not outright confiscation.
Too late. Socialism is the antithesis of this.
China buys huge amounts of coal and other raw materials from Australia and are always agitating for discounted prices on these.
about sidelining the US Dollar. Long term they are about making the US financially irrelevant.
This is one thing the pos climate-change commie Julia Gillard and the ChiComs can agree on. This puts moves Australia towards being dominated by China instead of being allied with the United States. One price of being under the US defense umbrella is to use our US Dollars. This is part of the reason Japan holds a trillion in US Treasuries. Why Taiwan and South Korea also hold large amounts
This would not have taken place under John Howard ang George Bush. Also thank pos Obama for Australia moving towards China and away from the US
Just wait....when the Communist Chinese start playing around with their Yuan again..... Oz will want the US Dollar as bad as a Latin American country.
You Free Trade with Communist China...you go Communist
This is a very significant abandonment of the US Dollar and China is encouraging other nations to do the same. To engage in direct trade without the US Dollar as intermediary. I think Brazil and China are going to direct trade and Russia/China are moving there too.
This helps China and hurts the US
I did say long term - Chinese think long term we do not anymore.
The Chinese are attempting to sideline American currency “long term” They are also buying resource companies worldwide as they are ever increasingly eating resources. They want to be and will be on either end of their own resource transactions as long as countries like mine let our resource companies fall into their hands.
It’s pathetic but it is happening quicker than most people want to believe.
Two peas in the same pod. Commie Julia Gillard and the ChiComs.
Exactly. You get how the “Great Game” is played out on the global scale between Russia, China, USA and (lesser extent) Europe.
While money grubbing “globalist” libertarians like Mr.X-Pat-Panama remain oblivious ...intentionally oblivious
Yes Dennis - I couldn’t agree more.
While John Howard and George W were not perfect they were far better than these communist traitors we have in power now.
When I look back to the age of Maggie Thatcher and Ronald Reagan - how far have we fallen. We have spent our wealth and energy on social engineering that has failed us dismally, on schools that don’t teach and health systems that don’t heal and on politicians who are so damn vain that they tailor their policies around what Europe and other countries think of them.
The moral high ground is taken by all sorts of weirdos from LGBT buggerers to Muslims and New Age wackos. It can’t go on too much longer before something snaps.
Mel
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.