[R-G] [BillTottenWeblog] The New New Money

[Bill Totten]

by Dmitri Orlov

Club Orlov (May 10 2009)


It's official: The government in Beijing has announced that the Yuan can
now be used in international trade. Their mouthpiece for this occasion
was the Industrial and Commercial Bank of China, a private entity, which
made the announcement on their behalf. By the end of this year, it is
expected that fully fifty percent of all transactions with Hong Kong
will be denominated in the Yuan. In turn, Hong Kong re-exports ninety
percent of its Chinese imports. Importer #1 is the European Union;
importer #2 is the United States. Some of these countries may soon find
themselves hard-pressed to earn enough Yuan to continue importing
Chinese-made products.

This is only the next small step in Beijing's "policy of small steps".
Already the Chinese government has ramped down its purchases of US
Treasury paper, forcing the Federal Reserve to step in as the buyer of
last resort. The IOU, with which the US has inundated the world, is now
becoming the I-owe-me - which is not quite as impressive to those who
are considering selling products to the US on credit. Instead of the
funny paper, the Chinese government has started to buy up gold on the
international market. The Yuan has long been in de facto use in Hong
Kong, Singapore, Kuala Lumpur, and other countries in the region, in
preference to the US Dollar. In several countries it is already possible
to have Yuan-denominated savings and checking accounts; in Hong Kong
alone such accounts are set to exceed US$100 billion by the end of this
year.

The United States and Europe have recently demonstrated their
unwillingness to grant other countries a greater say in the IMF and the
other organizations that govern international finance. Now Beijing can
turn this combination of weakness and recalcitrance to its advantage, by
quickly creating a wide coalition of countries that wish to isolate
themselves from the financially untrustworthy regions of Europe and
America. This is but one of many developments that those who are
predicting economic recovery in the US sometime next year have chosen to
ignore, but it may turn out to be one of the more important ones.

What do these major shifts in international finance portend for us mere
private citizens? The implication is simple: if you think that you still
have some money, let's hope that you don't mean that you have something
or other denominated in the US Dollar. Or that you just wrote yourself
an I-owe-me.

Source: PRIME-TASS.

http://cluborlov.blogspot.com/2009/05/new-new-money.html


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