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China Maneuvers To Take Away US' Dominant Reserve Currency Status
Submitted by ilene on 07/22/2013 15:57 -0400

CHINA MANEUVERS TO TAKE AWAY US’ DOMINANT RESERVE CURRENCY STATUS
by RUSS WINTER


“All warfare is based on deception.” – Sun Tzu, “The Art of War”
(500 B.C.)

“The message of this initiative is for China to consider whether
or not China would open up its banking system and allow the
strongest currency in the world, which is the Chinese yuan, to
be the rightful and anointed convertible currency of the world.”
– Thailand Deputy Prime Minister Olarn Chaipravat in an
interview with Bloomberg

“An international monetary system dominated by a single sovereign
sovereign currency has intensified the concentration of risk and
the spread of the crisis.” — People’s Bank of China (2009)

It should go without saying that China and Russia have designs to
end the U.S. Dollar hegemony free ride.

This is fundamental to understand and will be a game changer.

The impacts on the standard of living of these players will be
profound and especially negative for the U.S.

How and in what manner this plays out is the question.
I strongly believe that the answer lies in two parts:
letting the U.S. put a noose around its own neck and then at the
appropriate time, kicking the chair out from under it.

The first part of the operation is now advanced and is described
below.
The second part involves China and Russia preparing its relative
currencies to be accepted in lieu of dollars.
It means making the yuan and ruble at least equal to, if not
superior to, American dollars in world trade.
As you can imagine, the U.S. — a country with a debt-to-GDP
ratio approaching 110% — can ill afford this sort of challenge
to its status as a reserve currency.

China has already advanced the Yuan as a principal exchange
currency by incorporating a series of deal with other countries.
Such arrangements are hardly mentioned by U.S. financial media,
but they are going on constantly. So far, the People’s Bank of
China (PBOC) has signed nearly 2 trillion yuan worth of
currency-swap deals with 20 countries and regions, including
Hong Kong. Here’s a breakdown of happenings:

• Earlier this month, the European Central Bank announced
a large currency swap arrangement with China.

•An Asian ”renminbi bloc” has been formed involving seven
countries.

•Russia, Iran, Angola, Sudan and Venezuela have converted oil
sales to China into the Chinese Yuan.
Worldwide, we see more than 5 million barrels per day traded in
Yuan rather than U.S. dollars.

•Thechinamoneyreport.com on June 16 reported RMB-yen trade is
growing strongly a year after launch.

•BBC News, April 9: “China and Australia in Currency Pact“

•BBC News, Feb. 22: “UK and China Poised for Currency Swap Deal“

•BBC News, March 26: “China and Brazil Sign $30bn Currency Swap Arrangement“

•Thechinamoneyreport.com on June 4 reports that Singapore has
launched a Yuan clearing service.

•Although ignored in the U.S., there has been increased chatter
among foreign media about the RMB (aka Yuan) reaching safe-
haven, reserve currency status, as Asia Today reported on July
22.
I suggest that the kicking the chair out from USD hegemony
involves at least partially backing the Yuan, and Ruble for that
matter, with gold.
China’s reserve assets were 30.2% of the world total at the end
of last year.
How much of this is already in gold?

China is secretive about the number, I think it’s because it had
some catching up to do and it’s incorporating Sun Tzu-style
principles, namely deception.
The last time China revealed its gold reserve levels was in 2009
at 1,054 tonnes, which caught the market by surprise.

Another reference point is that China’s foreign exchange reserve
increased from $2.2 trillion in 2009 to $3.4 trillion today.

During that period, U.S. dollar reserves held by China fell from
69% to 54%.

If only 10% of that $1.2 trillion increase went to gold, then
let’s see … At an average price of $1,200, that would be nearly
3,000 tonnes, bringing China’s total gold holdings
up to 4000 tonnes.
Conventional wisdom would point to between 3,000 and 4,000
tonnes.

The U.S. supposedly has 8,133 tonnes in its reserves? ? ? ? ? ?

Russia has doubled its gold reserve in four years.

http://www.zerohedge.com/contributed/2013-07-22/china-maneuvers-take-away-us%E2%80%99-dominant-reserve-currency-status

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