Forget Russia Dumping U.S. Treasuries … Here’s the REAL Economic Threat

George Washington's picture

Russia threatened to dump its U.S. treasuries if America imposed sanctions regarding Russia’s action in the Crimea.

Zero Hedge argues that Russia has already done so.

But veteran investor Jim Sinclair argues that Russia has a much scarier financial attack which Russia can use against the U.S.

Specifically, Sinclair says that if Russia accepts payment for oil and gas in any currency other than the dollar – whether it’s gold, the Euro, the Ruble, the Rupee, or anything else – then the U.S. petrodollar system will collapse:

Indeed, one of the main pillars for U.S. power is the petrodollar, and the U.S. is desperate for the dollar to maintain reserve status.  Some wise commentators have argued that recent U.S. wars have really been about keeping the rest of the world on the petrodollar standard.

The theory is that – after Nixon took the U.S. off the gold standard, which had made the dollar the world’s reserve currency – America salvaged that role by adopting the petrodollar.   Specifically, the U.S. and Saudi Arabia agreed that all oil and gas would be priced in dollars, so the rest of the world had to use dollars for most transactions.

But Reuters notes that Russia may be mere months away from signing a bilateral trade deal with China, where China would buy huge quantities of Russian oil and gas.

Zero Hedge argues:

Add bilateral trade denominated in either Rubles or Renminbi (or gold), add Iran, Iraq, India, and soon the Saudis (China’s largest foreign source of crude, whose crown prince also happened to meet president Xi Jinping last week to expand trade further) and wave goodbye to the petrodollar.

As we noted last year:

The average life expectancy for a fiat currency is less than 40 years.


But what about “reserve currencies”, like the U.S. dollar?


JP Morgan noted last year that “reserve currencies” have a limited shelf-life:


As the table shows, U.S. reserve status has already lasted as long as Portugal and the Netherland’s reigns.  It won’t happen tomorrow, or next week … but the end of the dollar’s rein is coming nonetheless, and China and many other countries are calling for a new reserve currency.


Remember, China is entering into more and more major deals with other countries to settle trades in Yuans, instead of dollars.  This includes the European Union (the world’s largest economy) [and also Russia].


And China is quietly becoming a gold superpower

Given that China has surpassed the U.S. as the world’s largest importer of oil, Saudi Arabia is moving away from the U.S. … and towards China. (Some even argue that the world will switch from the petrodollar to the petroYUAN. We’re not convinced that will happen.)

In any event, a switch to pricing petroleum in anything other than dollars exclusively – whether a single alternative currency, gold, or even a mix of currencies or commodities – would spell the end of the dollar as the world’s reserve currency.

For that reason, Sinclair – no fan of either Russia or Putin – urges American leaders to back away from an economic confrontation with Russia, arguing that the U.S. would be the loser.

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infiniti's picture

It matters not one fuck if russia sells oil to china in exchange for CNY. Russian petro exports to China are about $10 billion USD per year which is the proverbial pimple on a fly's ass.


Let them collect shitty illiquid non-reserve CNY, who gives a fuck.



AdvancingTime's picture

Whether by design or merely as a byproduct of globalization we have weaved a web of financial transactions that circle the globe. Over the last several years as money was printed by the central Banks it was not contained in the countries where in was printed. This money flowed across borders influencing and distorting markets and prices across the world.

Some people have been calling for a "world currency" for years. the saying "one should never let a good crisis go to waste" means a meltdown with high levels of fear would present a perfect opportunity to advance this agenda down the field. Remember many people with agendas have a lot to gain when a major shift in the currency markets takes place. More on this subject in the article below.

whidbey-2's picture

The roll of a currency in exchange is based on its issuer's production of desired goods and services. The role of the USD as a reserve currency will survive not be cause the US "deserves" it, but because it is mutually desired as the best of all possible arrangements - without being equally for all traders - "good".  The US produces more of what the rest of the world wants and this is NOT energy alone. Today it is food, water, meds, and weapons.  Awful? no, it is just who we humans are. Just a bag of perferences, germs if you please.

whidbey-2's picture

Easy to believe man.  We know Putin thinks the Euro zone is a whorehouse. First, you join the EU, then you make things 1% better and you own the place.  Are you sure we haven't seen one before? Oh yes, China, PreWW II Europe?

Ifigenia's picture

you forgot to mention since 45, Western Europe was occupied by military bases, except France. If there is a truth alliance, why didnt close the occupation bases?

luckylongshot's picture

This actually makes sense. Consider what the so called friendly US has done to Europe over the last period in time. It has a) spied on Germany and hacked into Angela Merkels cell phone b) stolen Germany's gold c) kept a 50,000 strong army in Germany it should have removed d) Said "Fuck the EU" regarding the Ukraine d) Pushed the EU into anti Russian sanctions that were brought about by the US financing Nazis to commit a coup and have set the EU up to be ruined by higher Russian gas prices (assuming Russia still wants to sell its gas to the EU. The case for abandoning the US and getting closer to Russia is fairly strong. 


Ifigenia's picture

and forcing us to buy gas in dollar not euro.

supermaxedout's picture

Yes, its 3.5 years ago, nevertheless this does not mean that this idea is off the table.  The Euro is the best managed, free floating, mayor fiat money. No printing orgies, and the ECB is independent.  Not following orders from a European government, since such a thing does not exist till today.

The only danger for the Euro is the US and UK, both eager to kill the Euro.


windcatcher's picture


American Empire was an unknown concept 40 years ago. We had the Free Enterprise System, Competitive Markets and Fair Trade with protection from evil corporate monopoly with our Democratic Representative Republic (government of, for and by the People). This is how we grew as the richest nation in the World. This industrial and small business American Nation was built on the concepts of Self Determination and the Great American Dream!


Those concepts have been overthrown, and yes, the Free Enterprise System and Gold Standard economy that built this once great nation is also gone: overthrown by American Empire Fascist!


You know GW, that these bastards get away with their shit with the use of lies, stonewalling and delaying information and TIME. Yes, TIME to slime around the issues!


Guess what, as Obama is playing golf, his shit and time has ran out. Now real TIME is catching up to the Empire Fascist with no time to sleaze out! Ha. Ha.

Ifigenia's picture

Sorry to copy and paste the whole article, but i think it is an important to add another view by JC Collins,


" On Friday, the House of Representatives introduced a new aid bill for Ukraine which did not include the reforms.  An earlier version of the bill did in fact include the reforms.


We are entering into a situation where the G20 countries have told the United States that they have until the Finance Ministers and Central Bank Governors meeting on April 10th and 11th to enact the required supporting legislation for the IMF Reforms.

This meeting is being held in Washington and it will certainly be a few days to remember.

Let’s recall that the G20 countries have stated that they will take aggressive measures to by-pass the United States and its veto power over the IMF Executive Board by the April meeting.

Let’s recall that Russia has threatened to dump its US Treasury Bonds and begin settling trade in other currencies other than the US dollar.  As many have predicted, this will be the death of the petrodollar and reserve currency status of the American dollar.

America has but a few weeks to enter into multilateral agreements with the rest of the world and show its willingness to become part of a more balanced and centralized financial system.  The financial power of the rest of the world has created a situation for the US where it is collapse or consolidation.

While not paying attention to the obvious sovereign debt crisis the US will have the moment the dollars status is removed, television pundits and government officials will talk America into a corner by saying that they will not be financially held hostage to the whims and desires of corrupt financial institutions which are now controlled by a consortium of special interests.

Like Nixon taking the dollar of its 30% gold peg in 1971, the American people will never be told the truth of why and how international economics has given them a post WW2 life style with the reserve status of the dollar, and how that same lifestyle and image will now be reduced as the reserve currency status is shifted to the centralized SDR system.

America is playing a dangerous game where it thinks that the level of Treasury debt being held in the foreign account reserves of other countries will protect it from a debt default.  The consensus is that if the US dollar collapses so will the foreign assets of other countries.  As such, its in the best interest of all countries to keep the dollar alive.

One can’t help but wonder if the simplicity of this argument is injected into the social collective to enforce the forthcoming deniability of American administration officials.  There is way to much focus put on this component of the US debt and bond issue.  How easy would it be for the rest of the world, represented by a disgruntled G20 and International Monetary Fund to aggressively restructure the US debt into the SDR bond allocation and composition system, while using the Bank for International Settlements as the clearing house for all transactions?

One can only think of such historical paradigm shifts as the Versailles Treaty and the end of the Ottoman Empire.

The US dollar will be removed from its current status as primary reserve currency and the world will move towards a centralized SDR system.  Of this there is little doubt.  When even China and Russia are calling for the implementation of this very same system, and resource rich countries like Canada and Australia also supporting the IMF restructuring, not to mention currency swap agreements with China and the establishment of renminbi trading hubs, the transition becomes imminent.

America will cry victim.  It has become the hostage to a world which it held hostage since 1944.  It’s karma has come full circle.  – JC Collins"

If it is truth, the World order is upside down.

El Vaquero's picture


(Some even argue that the world will switch from the petrodollar to the petroYUAN. We’re not convinced that will happen.)

I'm not convinced that it will either.  We're just beginning to find out how much leverage having the reserve currency gives other players over us now that we have shown weakness. 


OT, but here's some more police state stuff for you GW:

lakecity55's picture

As a former LEO, I can think of several ways to have controlled the suspect w/o any serious harm at all.

One of the reasons I no longer am a LEO; the last few years, the USG has been ginning these guys up with full battle rattle attire.

Now, I was not there, but it appears to be a case of unjustified killing.

As I have stated before on these hallowed pages, nowadays DO NOT give them any reason to kill you, because they WILL kill you. STAY AWAY from any unneeded contact w/LE! You would not believe how many of these guys are on those steroids. It makes you unbalanced mentally. We have gone from Peace Officers to gun-wielding thugs in 2014.

Let them do their thing, take notes, get a lawyer later; at least you will be alive. There are MANY cops out there who are balanced, but they are NO LONGER in the majority. Nowadays when I run into other LEOS and they complain about citizens' not helping them, I just keep my mouth shut.

I would never advocate taking an officer out. However, if you feel you are 100% going to be killed, you will have to make your choice.


El Vaquero's picture

It seems that too many cops either do bad shit these days, or they let it happen and don't say a word.  I don't care for either category.  It also seems that the truly good cops are either in small units that keep to themselves, or they are in small departments these days.  It also seems that if you take a department like APD, the good ones who will speak up get run out of the department mighty quick.  That video is from my neck of the woods, and in fact, there's a decent chance that I have been right where that took place. 


As for dealing with cops, I know of one unit that is decent, so I'll be nice to them.  But when The Man is on the job, video will be rolling and I will be exercising every single right that I can.  But I'm one of those odd ducks.  I read court decisions for entertainment.  I know pretty much when and how bad I can fuck a cop in court.  In my state, a cop detaining me for open carrying and nothing else loses qualified immunity, for example.  Arresting me because I conceal my identity if the cop has no reason to lawfully detain me is another case where the cop loses qualified immunity.  But in the end, yes, I will avoid LEO contact unless I have something that I feel is really important, or if it is just something in passing, like the time I told a state trooper who was in a crowd that his holster was unbuttoned.  The embarrassment was palpable. 

Dead Canary's picture

Flaw in Jims logic. If Russia sez "we will take any currency for oil", and the dollar drops. What happens to China. Russia may not have a l of reserves in US DOLLAR, but China does. Trillions! They will not be happy to wake up and see their foreign reserves slashed.

TrulyStupid's picture

China could use its USD reserves to buy hard assets from countries that want the USDs. The are already stockpiling commodities like copper, iron ore and of course gold. Perhaps they would be interested in buying Freddie or Fannie and becoming the biggest landlord in the US.

darteaus's picture

There's also that lovely development in the Crimea that is now under new management!

the grateful unemployed's picture

this hyperbole about the reserve currency concept is outmoded thinking, were it possible to affect the crash of the us economy by requiring the bls to route all transactions through a third currency then there must be bigfoot on mars. there are other ways to take energy off the market, although the means are less obvious when you have a huge NG pipeline between two countries. its easy enough to take crude off the market, you simply redact your geological statement of reserves. this is how the SPR game is played, only the other way around. obama loans oil to private storage in NY, which they count in their inventory, and use that to bargain against the sellers (tankers from saudi arabia) i call it peek-a-boo oil... (and it really plays into the fear of the general public, who is right now hitting the red arrow button) since the captains of industry are all honorable men, (ahem ahem) we know they wouldn't do this, unless they were concerned that hyperinflation was going to make their oil worth a lot more.. and now we are nearer the kernel of truth, misallocated monetary resources, result in misallocated commodity resources, and hedge funds buy oil to store against the day its worth some multiple higher than it is now. hedge funds take oil off the market every time the SPR puts more oil into a global system which doesn't need any more oil and the federal reserves inflates the monetary base by printing money, oil is a treasury bond of sorts, if you buy a long term bond while rates are low and rates go higher, you are screwed, if you sell all your oil today at $100 and next year its $500, likewise you are screwed. at the inflection point nobody wants to sell their products, which is what you see already in gold, scarcity. and the more obama pours out of SPR the more dear that oil will get, just the way corporations are hoarding money,and banks aren't lending and bernanke just keeps pouring more money into the system. he can't print oil (though maybe someday a 3D printer will do that). eventually push comes to shove, and Putin is not a guy who can be pushed, that much is given

Rafferty's picture

In any event the total value of oil sold annualy by Russia to China is miniscule in proportion to the number of petrodollars out there.  If Russia starts cutting deals with Europe for gas....well that's anothing thing entirely.

the grateful unemployed's picture

will putin play hardball with europe to settle his score with the necons? or the neo-obama-cons. the only thing that changes with that policy is the intensity of the rhetoric all the military manuevering goes on regardless. theres nothing stamped on a dollar bill that says global reserve currency, good for extra points at any foreign kiosk. if the dollar falls then manufacturing will come back to the us, and more jobs and a better trade deficit. it also means wage pressure and inflation maybe. so far the great global scam has worked pretty well, wall street outsources the jobs, and the government gives people money to buy imported products and wall street books the profits. right now i am sure they want to give EE that deal, cheap labor, and pollution for WTO, and mild improvement in living conditions (certainly more gangster capitalism, they don't call it that in China, but they have it just the same, as you notice by the number of wealthy chinese flying around the world buying expensive things) the poor in china, are still poor




midtowng's picture

The Chinese will never have a reserve currency as long as they peg their currency to another currency. As long as it is pegged to the dollar it is still a derivative of the dollar. It doesn't matter how much trade they do with the Yuan.

the grateful unemployed's picture

yeah global superpower or giant capitalist potemkin village? you can't have it both ways

rsnoble's picture

EMP's are also hell on digital zeros.

RMolineaux's picture

Not mentioned in this item are Special Drawing Rights in the International Monetary Fund.  On several occasions, Chinese spokesmen have declared their preference for a reserve currency that is not tied to the fortunes of one country.  This idea was first floated at the time of the gold crisis in the late '60s and early '70s.   To be considered at the present time, a number of obstacles would have to be overcome:

The current claim to exceptionalism by the US, combined with currents of zenophobia (including some ZHers) prevents serious discussion of the proposal in our politics.  Unfortunately, this may only end when the US dollar is fully discredited in a predictable economic crash.

The current structure of the IMF would have to be updated to reflect the changes that have occurred in the world since 1944, when the Bretton Woods agreements were signed.  At that time, all international organizations in their structures were a club of the victors of WWII.  An acceptable contemporary IMF would have to assign substantial additional voting power to China, India, Brazil, South Africa and Russia.  Will the US and Europe accept this?  Probably not until they are forced to.


Ifigenia's picture

I agree that the World has change since 2008 and Europe has already aprove the change and only US is delaying the aprove the reform agree in G-20 meeting in Seoul. Is a pity that msm didnt mention it during all these years.


elwind45's picture

The gold pros see the writing? Dollar collapse is the best you can do? Why because we didn't stand up to Putin when he invaded own country? Or this new oil deal of hoping revenue from eastern Siberia will replace what is lost in the west? Wow it must be flat the earth! There will be a scramble in Europe for development dollars? A increase to the defence budget? Who you think is world policeman PETROYAUN. Being left behind Russia will become less and less as NWO passes them by

Rafferty's picture

WTF are you trying to say??????

elwind45's picture

Gold will be the reserve currency until China pays its debts

litemine's picture

Who hold's China's Debt?

China holds American Debt (TREASURIES)

What are you thinking?

China's Population works like slaves for their Government. They have amassed stock piles of commodities, gold, steel etc.....

It the mainstreet peoples that have bought this storage of wealth, with their Sweat and Blood.

theprofromdover's picture

Folks in Western Europe, Japan and US are going to have to get used to the idea that their standard of living has to halve. I hope gold becomes the world currency, but of course it won't. It would have, if they hadn't already destroyed trust in gold with the paper markets. If 90% of all gold is merely a promissory piece of paper, they couldn't all get out alive. So they are selling all the paper and all the physical they can, maybe hop;ng to get it back some day in the future when China collapses. Energy is the true currency, and the yuan and rouble will fight it out.

Asia has probably half the world's population, and not enough food to feed them. China has one quarter. The coming problems are all China's. They might get a decade of supremacy before the country breaks up into 30 pieces.

Russia has the land and the mineral wealth, and actually a small population. When it finally trusts itself to educate its people, their corruption will be swamped by their middle class.

The US has to go back to small government, tiny public sector, break up the corporations and banks and clean out the justice system. It won't be our generation that does that. It will be our children yet unborn; the doctrinaire homeland they come into will be unrecognisable to our generation.

Secede now Texas, Az, Or, Canada and the flyover states and you might have a chance.

Peter Pan's picture

I can just see the board game Monopoly going out of business if the US dollar becomes the next piece of useless paper.

The new board game will be USOPOLY and will be played with US Dollars.

kashey's picture

After Visa and Mastercard imposed ban on money transfers of clients of US-sanctioned bank "Rossija" there's an extensive talk in Russia about nessesity to establish own money-processibg center in Russia and abandoning Visa and Mastercard. There are several local nets of Russian banks, but they are not promoted and ancouraged by the government - till now.
Now Visa and Mastercard will not be banned in Russia, but in several months Russian national analogue will be established and most probably Russian business will shift to it both willingly and also being encouraged by the authorities.
I see the end of dollar and euro monopoly coming.

Christophe2's picture

It won't be hard for the Russians to offer far more competitive rates than Visa/Mastercard for what are essentially simple electronic transactions.


VISA/Mastercard, with their 'hidden' minimum ~3% merchant charge on EACH TRANSACTION, are a total anachronism, since it would be SO EASY to offer a competitive alternative in today's already connected, high tech world.  Understand: gas stations make less money off of each gas sale than do the credit card companies.  The same is true for all low-margin direct-to-user businesses, like online merchants, and yet nothing emerges as a true work-around EVEN ONLINE...


The only reason that the financial transaction networks don't have any effective competition in the US is that brutal bankster-owned thugs like the FBI and CIA will go to any means to prevent that any 'non-member company' be able to threaten their bottom line with a clearly better offering.  It's part of what they call spending tax dollars defending "National Security".


And you can be sure that they make just as much effort (and use even more lawless violence) to prevent any potential competitors from taking 'market share' abroad, so it is indeed very ironic to see how much the West/US loses by pushing something as huge and unassailable as Russia truly against it.


The Russians easily win from any serious economic embargo, given that they have in any case already decided to rebel against the NWO after all (unlike during the Cold War and Yeltsin eras) and given that they actually have the military might to fairly clearly match if not outclass the US/West (ex: the F-35), and thus they can actually get away with it militarily AND economically: Iran, Venezuela and their like will flourish trading with Russia while the West implodes under its generations of ever-expanding lies and fraud.


On so many levels, the Western elites seem to be fumbling and to even be in denial of reality, which never works out well strategically...

Escapedgoat's picture
" I see the end of dollar and euro monopoly coming." ....just hope so.


(a disgruntled "Westerner" that feels really that is an "Easterner")

dreadnaught's picture

Hooray for Russia!

GoldIsMoney's picture

Very easy. Let Russia accept gold as payment and we'll see what'll happen.

litemine's picture

Why promote War? Given enough time, Enough Bankers will Kill themselves.

GoldIsMoney's picture

Why do you think I'm promoting War?  I do not understand that.

Escapedgoat's picture

They, are not doing it quickly enough.

Radical Marijuana's picture

This article raises one of the most important points relevant to the American people. (However, as many other comments above pointed out, the majority of the American people are unaware of their real situation.) The government of the USA has had control over it captured by the international banksters for more than a Century, at an exponentially accelerating rate. Inside that context, both the events on 9/11/2001 and the financial crises in 2008 were INSIDE JOBS, because the American government is not operated for the benefit of the American people, but for a tiny ruling class, which has globalized interests and an agenda to attempt to consolidate their global hegemony over the power to create the public "money" supply out of nothing as debts, in order to thereby symbolically control natural resources.

In my view, those globalized ruling classes have become increasingly criminally insane. They have psychological and political habits to be willing to act in relentlessly ruthless and reckless ways. They appear to have no problem with gambling in ways which could result in the demise of the American Dollar as the global reserve currency. After all, they have been making a profit from deliberately destroying the American Democratic Republic, at an exponential rate, for more than a Century. However, for average Americans, in my opinion, the best case scenario would be that the end of the status of the American Dollar as the global reserve currency would result in the cost of most things that average Americans need to buy increasing by about 50%. I emphasize, that is one of the better case scenarios, since more genocidal wars, along with the imposition of democidal martial law, could also become probable results.

It is plausible that those are the real goals of the international banksters, since they know perfectly well that their debt slavery systems have reached the point where their numbers are now debt insanities, and therefore, they may be deliberately provoking events, so that they will be able to blame somebody else for the outcomes of the situations that the banksters actually created. After all, such "false flag" attacks are extremely common in human history. Therefore, it is possible that there is some higher order level of deliberate insanities behind constantly provoking Russia worse and worse ???


GoldIsMoney's picture

I can't see why you argue this wasy. What does international trade takes away from you? It's exactly the opposite, the states do everything to prevent free trade between people. It's always regulated and supervised from "state" agencies. If you are so much against trade, you probably have an answer why having such agencies is such a great thing?

Rafferty's picture

Great post, +100 green ones.


I too would like to see the American (and European) standard of living fall 50%, not out of malevolence or schadenfreude, rather because nothing else will get the general populace to wake up and destroy that which has by now almost destroyed their societies.

pondview28's picture

Please name some of these evil geniuses. You fall into the trap that people are smarter and more organized than they actually are. You also assume that there is some super-cooperative cabal which ever so genially divides up he spoils between them. Since when do evil geniuses really share and cooperate??
What we have is venal people acting in what they perceive as their own short-term interests. Nothing more. You actually buy into the running out of resources nonsense? Please.

Radical Marijuana's picture

Pondview28, I rather liked this video for presenting who the ruling classes are within the Anglo-American (Zionist) empire:


Of course, there is way too much information for anyone to be able to completely comprehend world history, however, I do tend to think that the ruling classes, while they compete amongst themselves, tend to all argee upon keeping the lower classes under their control. They do not like any bad examples anywhere that might tend to point other people in any different directions.

YES! I do buy into the idea that Planet Earth is FINITE, and that exponential growth of human activities, which currently are turning natural resources into garbage and pollution as fast as possible, are problems, which we are NOT adapting to in sane ways, especially since people indugling in doing that like to rationalize that there is no problem there.


Peak mining & implications for natural resource management

- Simon Michaux

ETC., ETC., ETC. ... Overshoot in a nutshell: