PBOC Pressures USD Hegemony; Starts Yuan-Denominated Gold & Oil Trading

Tyler Durden's picture




 

With 23 foreign central banks diversifying from US Dollars to Renminbi and the PBOC actively aiding numerous major financial hubs around the world with bilateral currency swap agreements, it seems yet another nail in the coffin of US dollar hegemony just got hit...

  • *PBOC AIMS TO SET UP GLOBAL PAYMENT SYSTEM FOR YUAN: SEC. NEWS
  • *PBOC TO MAKE GOLD, OIL FUTURES YUAN DENOMINATED: SEC. NEWS

Nothing lasts forever, no matter how much you believe...

PBOC plans to start yuan-denominated gold and oil futures to help establish a global payment system for the Chinese currency, Guo Jianwei, deputy director of the second monetary policy department of the People’s Bank of China, is cited by Shanghai Securities News as saying.

PBOC will continue to push reform of interest rates, exchange rates and the capital account

The pace of Renminbi use is accelerating...

"In the first quarter, the RMB settlement of trade in goods amounted to 1.0871 trillion, accounting for the proportion of total import and export customs of 18.4% over the same period," said Guo Jianwei, 18.4% and 11.7%, two figures, hidden vitality, accounting for just three months time improved 6 percentage points, indicating that the use of the renminbi is growing internal demand.

It seems the level of interest in diversifying away from the US Dollar is growing...

At the end of last year, China's total with 23 foreign central banks or monetary authorities signed bilateral currency swap agreements, the total size of more than 2.5 trillion yuan.

 

Recently, the central bank after another with Britain and Germany signed a memorandum of agreement RMB clearing and settlement central bank, the European offshore RMB business to accelerate.

 

It is noteworthy that, in addition to London, Paris, Frankfurt, Luxembourg, Singapore, striving for offshore yuan trading center with only the United States "sitting on the sidelines."

The goal seems clear...

"Renminbi is a new bright spot in the next cross-border RMB business development." Guo Jianwei, said the central bank will continue to advance the future of interest rates, exchange rate reform, capital projects, and expand the range of RMB payment using to promote the yuan-denominated policies, thereby establishing renminbi The global payment system and so on.

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Fri, 04/25/2014 - 15:06 | 4696553 knukles
knukles's picture

Hah ha ha ha ha ha
Happenin' on guess whose watch?
The "It's Bush's fault" Guy 

This is what you get for a trip to Asia and not even dropping in to say Herrro.

Fri, 04/25/2014 - 15:08 | 4696569 max2205
max2205's picture

' Forever' is as long as you are alive.  

Must have been tough for the rich alive during those transtion periods

Fri, 04/25/2014 - 15:13 | 4696574 Pladizow
Pladizow's picture

“Suspicion toward a currency, once awakened, develops insomnia.” -  James Dines

“The fate of a nation is inseparable from the fate of it's currency.” - Milton Freidman

“Gold and economic freedom are inseparable.” - Alan Greenspan 1966.

“In effect, there is nothing inherently wrong with fiat money, provided we get perfect authority and God like intelligence for kings.” - Aristotle

“All paper currencies are toilet paper, the dollar is simply two ply.” - Thomas Caplin


Fri, 04/25/2014 - 15:14 | 4696611 Grande Tetons
Grande Tetons's picture

Greenspan reminds me of Brittany Spears. He was once an innocent mousketeer type that grew up to become a whore. 

Fri, 04/25/2014 - 15:47 | 4696811 CrimsonAvenger
CrimsonAvenger's picture

Now THAT is a visual concept just begging for the talents of WB7. Though I suspect it would give me nightmares.

Fri, 04/25/2014 - 16:04 | 4696921 zaphod
zaphod's picture

Although reserve currency status offers benefits, long-term it is a trap for the Chinese.

The dollar being the world's reserve currency has enabled the country to live beyond its means and not have to work hard for generations. I've come to see the dollar as part of the reason the US has lost it's work ethic and with that what made it great (after working in Asia for serveral years, there is no comparing the US IMHO). Of course now that the US is dependant on the petrodollar, losing it will cause significant damage since I think most of the country does not know how to live without it.

If the Chinese are smart they will not position the yuan as a reserve currency, but move to make gold or something international the reserve currency. Otherwise their future decendants will grow lazy and leverage the yuan to live beyond their means (as every other world power has done) and in the process lose what this generation worked for.

Fri, 04/25/2014 - 16:29 | 4697043 Pinto Currency
Pinto Currency's picture

 

Oil paid in Yuan can be converted to gold bullion on the new Shanghai free trade zone gold exchange:

http://www.scmp.com/business/commodities/article/1450182/gold-trading-open-foreigners-shanghai

Petrogold.

Fri, 04/25/2014 - 17:42 | 4697309 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

This is the problem of using the Yuan as a reserve currency separate from the USD. It is currently pegged to the USD with a little wiggle room. This still indirectly results in the USD as reserve currency. Does it not?

China got away with horrendous economic policy by piggybacking onto US debt serfs. Remove the peg and the Yuan will crash with the dollar not far behind.

Fri, 04/25/2014 - 18:08 | 4697364 Pinto Currency
Pinto Currency's picture

 

With defacto Yuan convertibility to gold, it will send the Yuan much higher.

And gold much, much higher if it is to play a meaningful settlement role in the oil trade.

Daily global value of oil produced is 30x the daily value of gold produced.

Finally it will result in selling of Treasuries and USD as USD will play a lesser role in oil and other trades.

Expecting a heavy sell-off in tech stocks and other levered equities.

Fri, 04/25/2014 - 16:49 | 4697138 Monty Burns
Monty Burns's picture

Very true.  I see the same in oil rich Gulf countries.  I know they don't have a reserve currency but it's the same pathology, easy money for something you haven't worked for. The native population is lazy, want the best jobs without getting any qualifications, study of hard subjects like SET almost unknown.

Fri, 04/25/2014 - 20:16 | 4697747 Joenobody12
Joenobody12's picture

Hyoperinflation killed off several Chinese dynasties. I think they are very aware of their history.

Fri, 04/25/2014 - 15:14 | 4696616 Handful of Dust
Handful of Dust's picture

 

 

Ludwig van Beethoven - Funeral March

 

http://www.youtube.com/watch?v=vmm2k4fRUO4

Fri, 04/25/2014 - 15:54 | 4696729 Save_America1st
Save_America1st's picture

the end of the U.S. petro-dollar and world reserve currency status will come one day soon.

You can deny reality...but you can't deny the consequences of denying reality ~ Ayn Rand

Keep stacking the phyzz, folks!  It's still on sale, believe it or not, and it's the ultimate insurance against the destruction of the U.S. dollar.

Grab a roll or 2 of Buffaloes today and have a kick ass weekend!

Fri, 04/25/2014 - 15:57 | 4696897 cro_maat
cro_maat's picture

I bought 2 rolls this week when they sent it down in the low 19's.

Fri, 04/25/2014 - 16:30 | 4697056 Carpenter1
Carpenter1's picture

No target date, not even a hint at a timeline. BRICS bank has been in the works for 6 years, still no bank. Hope PBOC can do better. Doesnt take a decade to create a futures market, especially when you have 1bn+ customers ready with cash in hand.

Fri, 04/25/2014 - 19:07 | 4697557 Winston Churchill
Winston Churchill's picture

July was already released/This is rehashed news mostly to
generally fart in Obozo's direction, and diminish him further in the worlds eyes, if that possible.
This summer is game on, bet they start on the 4th of July,
just to rub it in.

Fri, 04/25/2014 - 16:57 | 4697167 Monty Burns
Monty Burns's picture

Not being pedantic, but it won't happen in a day or anything like it.  It will be a gradually accellerating process.

 

W/r/t your handle, take cheer. The dollar's demise will force the average honest productive American to take matters in hand once again.  Nothing less will do it.

Fri, 04/25/2014 - 15:38 | 4696757 PhilB
PhilB's picture

All the major currencies of the world are grabage: Two Types Convertable Garbage:  JPY/GBP/USD/EUR and  Incovertible Garbage: YUAN/RUB/BRL/INR. Add how much those currencies represent of Global GDP and you will see that for the vast majority, the exit doors are locked. 

That said,  I have no doubt between the two world will side with Convertible Garbage in a heartbeat. Do you really want to buy Yuan? or Ruble at this stage of the game? Maybe you should have your head checked alongside your loss tolerances.

i much prefer Gold over any incovertible currency. 
Fri, 04/25/2014 - 20:39 | 4697795 Joenobody12
Joenobody12's picture

Bouhgt Yuan several years back and making good money. Thank you. 

Fri, 04/25/2014 - 15:41 | 4696779 GooseShtepping Moron
GooseShtepping Moron's picture

I am something of an Aristotelian scholar, and I dispute the authenticity of that quote. I have never seen any source where he said something like that. It is not his style in any case, and besides that it contains an anachronism. "Fiat money" was not a phrase in use c. 300 BC. Lest anyone should object that the appearance of the phrase here may only be due to some liberality taken by the translater, I reply in advance that Aristotle would certainly have been familiar with the concept of debased coinage, which answers to the modern notion of fiat currency; and had he meant that he certainly would have said so, and there would be no reason to translate his words otherwise. But even that being stipulated, Aristotle never would have said there is nothing inherently wrong with debased coinage. He would have called that an instance of trying to buy something with nothing, a most pernicious crime.

The principle can be argued on other grounds, but it should not be attributed to Aristotle.

Fri, 04/25/2014 - 18:15 | 4697418 StychoKiller
StychoKiller's picture

Umm, it was Joe Aristotle, a contemporary of Onassis.

Fri, 04/25/2014 - 15:08 | 4696570 DoChenRollingBearing
DoChenRollingBearing's picture

Gold comes pretty close to lasting forever...

Fri, 04/25/2014 - 15:59 | 4696907 Atomizer
Atomizer's picture

Don’t forget to diversify your portfolio. Holding dual assets can give you better odds. Winks

Silver is the Achilles Heel

Fri, 04/25/2014 - 15:09 | 4696572 Thought Processor
Thought Processor's picture

 

Yah, and a "Don't let the door hit you on the way out".

 

As always, listen to the actions not the words.

Fri, 04/25/2014 - 15:11 | 4696590 Thought Processor
Thought Processor's picture

 

 

This is a pretty big FU.

 

And it also aligns with Russia at a critical juncture.

 

Your move western Oligarchs................

Fri, 04/25/2014 - 15:45 | 4696793 SheepDog-One
SheepDog-One's picture

Your move, 'tribe'.

Fri, 04/25/2014 - 15:10 | 4696586 McMolotov
McMolotov's picture

So now what does Uncle Sam do? Pick a fight with Russia AND China? Yeah, that'll work out.

What exactly did these megalomaniacal motherfuckers think would happen? Or is this EXACTLY what they thought would happen? Are we witnessing the self-inflicted destruction of the dollar?

Fri, 04/25/2014 - 15:14 | 4696607 NotApplicable
NotApplicable's picture

As the "global currency" chart shows, it had to happen someday.

As long as TPTB have a proper scapegoat in place, they'll be happy to survive the collapse.

Fri, 04/25/2014 - 15:24 | 4696674 Ignatius
Ignatius's picture

We can only hope that it's only a collapse we have to survive.

General Curtis Lemay and the Joint Chiefs were ready to go full retard in '62.

Fri, 04/25/2014 - 15:50 | 4696834 Keyser
Keyser's picture

With the balance of what this administration has accomplished over the last 5 years, I would say this is all part of the master plan... 

 

Fri, 04/25/2014 - 16:23 | 4697018 MillionDollarBoner_
Fri, 04/25/2014 - 16:56 | 4697024 Dubaibanker
Dubaibanker's picture

Seems like the Indian media predicted this about 2 years ago

http://articles.economictimes.indiatimes.com/2012-04-12/news/31331043_1_...

Meanwhile, Beijing started oil trading in petro-yuan in Nov 2012http://news.xinhuanet.com/english/china/2012-11/29/c_132007999.htm

In April 2013, another oil trading exchange in yuan was created. http://english.people.com.cn/90778/8226692.html

Way back in 2011, Russia and China started trading in yuan and Rubles respectively which is not mentioned anywhere and is hard to find. http://en.ria.ru/business/20110623/164798920.html

Today Apr 25, 2014, Shanghai FTZ will allow many commodities to be traded in yuan. http://www.bloomberg.com/news/2014-04-25/shanghai-to-allow-raw-material-...

According to this research, fears of property blow up are exaggerated. http://www.asiasentinel.com/econ-business/overblown-fears-china-resident...

In the next 5 years, China's outbound travellers will exceed a gargantuan 500 million trips:  http://www.travelweekly.co.uk/Articles/2014/04/24/47776/wttc+summit+chin...?

Watch out for the Chinese buying your entire neighbourhoods....they were stopped in Australia, Singapore and Canada, so now they have entered Dubai and NZ. http://online.wsj.com/news/articles/SB1000142405270230415720457947538337...

http://www.opp-connect.com/07/04/2014/new-zealand-now-among-top-chinese-...

As well as buying all of London and NY. http://www.shanghaidaily.com/business/real-estate/Chinese-No-1-buyer-of-...

http://www.ibtimes.co.uk/london-property-boom-how-chinas-investment-inva...

The Chinese will become the biggest owners of everything around the world in the next few years. All our rents, purchases and spending will end up as savings and profits of Chinese companies and our Chinese masters. In 2001, 215 companies from North America were in Top 500 global companies as per Forbes Global ranking, today only less than 140 remain. Perhaps, in 10 years, less than 100 will remain. Meanwhile, in the Top 13 companies worldwide, 4 are now Chinese while 5 years ago were none!

From USD 18bn pa in 2005, the Chinese have invested USD 132bn in 2013 alone, outside of China and are earning an average of assumed 5% to 7% pa on such investments which is draining the rest of the world and making China even more stronger. http://www.heritage.org/research/projects/china-global-investment-tracke...

Regardless of what anyone says, the Chinese own close to USD 6 trillion in overseas assets. http://news.xinhuanet.com/english/china/2014-04/04/c_133239278.htm This has never happened in the history of the world where one country owned so much outside its borders. At an assumed 5% pa return, a ridiculous amount of USD 300bn moves just as savings and profits from all the employees working globally for Chinese companies, back to China.

Foreigners have invested a cumulative USD 2.35 trillion in China as FDI. If Chinese yuan goes down, it hurts all the global companies whose asset values decline accordingly so by wishing for yuan to going down, we are in fact hurting ourselves.

We are now inside a Chinese trap instead of a US dollar trap and increasingly entering the stomach of the dragon instead of thus far remaining in the mouth of the dragon!

Fri, 04/25/2014 - 15:05 | 4696556 Kaiser Sousa
Kaiser Sousa's picture

"bye, bye Miss American Pie..."

still stackin...ya'll better be

T O O.........................

Fri, 04/25/2014 - 15:10 | 4696578 Ban KKiller
Ban KKiller's picture

Theme song for Federal Reserve Notes? Notes, get it? Ha-ha...

Fri, 04/25/2014 - 15:05 | 4696559 stant
stant's picture

The dollar should have made it until mid century. But it looks like the Mack daddy has sped things up a bit

Fri, 04/25/2014 - 15:13 | 4696596 McMolotov
McMolotov's picture

Well, he is a long-legged mack daddy, which means he was able to get to the end quicker.

Fri, 04/25/2014 - 15:06 | 4696560 davinci7_gis
davinci7_gis's picture

Is it time to start buying (and going long) the Yuan?

Fri, 04/25/2014 - 15:09 | 4696579 Grande Tetons
Grande Tetons's picture

Not lately. 

Fri, 04/25/2014 - 15:12 | 4696595 pods
pods's picture

Seeing the magic the Chinese can do with leverage I don't think the Yuan is going to make the cut as the next reserve currency.

The way things are going I am thinking seashells or dung, depending on whether I am optimistic or not.

pods

Fri, 04/25/2014 - 15:20 | 4696649 Grande Tetons
Grande Tetons's picture

Seashells have been tried before. I am putting my bet on dung.  I like dung...because I can make it myself. 

Fri, 04/25/2014 - 15:34 | 4696736 astoriajoe
astoriajoe's picture

Seashells can be ground up and used as calcium for chicken nutrition and dung is often burned.

Fri, 04/25/2014 - 16:31 | 4697058 Doubleguns
Doubleguns's picture

So both have value in a collapse situation. They will not go to zero like Fiat.

Fri, 04/25/2014 - 18:24 | 4697449 Mesquite
Mesquite's picture

If they could only get about 5 cents a pound for bs, the US national debt could be cleared away pronto...

Fri, 04/25/2014 - 15:35 | 4696743 youngman
youngman's picture

Same thing we do...they have dollars but we just keep printing more and more....they want to to the same thing..except this time we hold the Yuan and they print more and more...the first trickle of the trickle down is the winner..the last guy holding it is the one who gets hit with the inflation..or the devalue

Fri, 04/25/2014 - 15:23 | 4696672 Darkdoc
Darkdoc's picture

Can I co-locate my HFT computer in their exchange?

Fri, 04/25/2014 - 15:37 | 4696748 Took Red Pill
Took Red Pill's picture

who knows? I doubt the Yuan will be the next reserve currency. More likely an SDR basket of currencies. Gold is a better bet.

Fri, 04/25/2014 - 15:56 | 4696883 Sorry_about_Dresden
Sorry_about_Dresden's picture

I do it through my Bank of China rmb savings account. I've gained 20% through arbitrage since 2007. I don't know wtf is going on now? I think the PRC is trying to drive people back out over the last few months. It went as low as 6.04rmb/$ and now it's 6.25rmb/$??????? My first trip to the PRC I got 7.8rmb/$. China is not so cheap any more.

I converted about half my holdings back to dollars in the last few months.

Fri, 04/25/2014 - 15:06 | 4696563 Ban KKiller
Ban KKiller's picture

I am amused to death. This helps...to see how it will all come about, no? FRNs are dead. 

https://www.youtube.com/watch?v=BUbxZHQcOTs

Roger Waters Live,  Amused to Death. 

 

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