America's European "Allies" Desert Obama, Join China-led Infrastructure Bank

Tyler Durden's picture

It appears the sea of de-dollarization has reached the shores of Europe. With Australia and UK having already moved in the direction of joining the China-led AIIB, The FT reports that France, Germany, and Italy have now all agreed to join the development bank as 'pivot to Asia' appears to be Plan B for Europe. As Greg Sheridan previously noted, "the saga of the China Bank is almost a textbook case of the failure of Obama’s foreign policy," but as The FT concludes, the European decisions represent a significant setback for the Obama administration, which has argued that western countries could have more influence over the workings of the new bank if they stayed together on the outside. As Forbes notes, this leaves Obama with 3 uncomfortable options...

As The FT reports,

France, Germany and Italy have all agreed to follow Britain’s lead and join a China-led international development bank, according to European officials, delivering a blow to US efforts to keep leading western countries out of the new institution.


The decision by the three European governments comes after Britain announced last week that it would join the $50bn Asian Infrastructure Investment Bank, a potential rival to the Washington-based World Bank.




The European decisions represent a significant setback for the Obama administration, which has argued that western countries could have more influence over the workings of the new bank if they stayed together on the outside and pushed for higher lending standards.


The AIIB, which was formally launched by Chinese President Xi Jinping last year, is one element of a broader Chinese push to create new financial and economic institutions that will increase its international influence. It has become a central issue in the growing contest between China and the US over who will define the economic and trade rules in Asia over the coming decades.

This follows Australia and UK...

Australia, a key US ally in the Asia-Pacific region which had come under pressure from Washington to stay out of the new bank, has also said that it will now rethink that position.


When Britain announced its decision to join the AIIB last week, the Obama administration told the Financial Times that it was part of a broader trend of “constant accommodation” by London of China. British officials were relatively restrained in their criticism of China over its handling of pro-democracy protests in Hong Kong last year.


Britain tried to gain “first mover advantage” last week by signing up to the fledgling Chinese-led bank before other G7 members.


Britain hopes to establish itself as the number one destination for Chinese investment and UK officials were unrepentant.

*  *  *
Which, as Forbes explains, leaves Obama with three options...

1)      Continue to press its allies not to join the AIIB until governance procedures for the bank are assured;


2)      Join the AIIB itself; or


3)      Drop the issue.


Option one is clearly a losing proposition. There is no sense expending further political capital trying to persuade regional and other actors not to join the bank. It is a small-potato issue that is making the United States look weak at a time when U.S. influence in the region is otherwise quite strong.


Option two, which I—along with virtually every other China analyst outside the U.S. government—supported back in October is that the United States join the AIIB. There are several reasons why this is a good idea. It would allow the United States a seat inside the tent where it could be both a positive force for best governance practices and an internal critic if things go awry. It also would likely help ensure that U.S. companies have fair access to the bidding opportunities that will arise from the AIIB’s investment financing. Joining now will be hard to accomplish in a face-saving manner, but the United States could begin by publicly recognizing the need for the financing capabilities in Asia that the AIIB can provide and by moving quickly to work with Australia, South Korea, and Japan to work out common principles of accession.


Option three is for the United States to back away from the AIIB, release other countries from any pressure they might feel from the United States not to join, and let the AIIB rise or fall on its own merits. Chinese-led resource and infrastructure investment has encountered significant difficulty in a number of countries, including Zambia, Myanmar, Vietnam, Brazil, and Sri Lanka, among others. If the AIIB does not do a better job than China’s own development banks, it will be a stain not only on Beijing but also on all the other countries that are participating. If it does operate at the same standard as the World Bank and Asian Development Bank, then it will be a welcome addition to the world of development financing. The United States does not have to be in every regional organization in the Asia Pacific; it is not in the Shanghai Cooperation Organization, for example, and it is only an observer in the Conference on Interactions and Confidence-Building Measures in Asia. It can sit out the AIIB or assume observer status as well.


Washington’s priority should be on advancing U.S. ideals and institutions through the pivot or rebalance rather than blocking Chinese initiatives unless absolutely necessary. (Let’s not confuse China’s effort to develop the AIIB with its push to implement an Air Defense Identification Zone, for example.) Opposition to the Asian Infrastructure Investment Bank has become a millstone around Washington’s neck. It is time to remove it one way or another.

*  * *

De-dollarization continues... As Simon Black recently concluded, now we can see words are turning into action...

[The Allies] might be too polite to tell the US straight up– “Look, you have $18.1 trillion in official debt, you have $42 trillion in unfunded liabilities, and you’re kind of a dick. I’m dumping you.”


So instead they’re going with the “it’s not you, it’s me” approach.


But to anyone paying attention, it’s pretty obvious where this trend is going.


It won’t be long before other western nations jump on the anti-dollar bandwagon with action and not just words.

*  *  *

Bottom line: this isn’t theory or conjecture anymore. Every shred of objective evidence suggests that the dollar’s dominance is coming to an end.

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GetZeeGold's picture



Hell of a job Barry....see you on the golf course.

Haus-Targaryen's picture

This doesn't make me think this is bad for the US, but that both the Americans and the Chinese are on the same team. 

Self-enslavement's picture

WWII never ended.

We're still here.

We aren't going away.


Latina Lover's picture

After 15+ years of Neocon foreign policy, this is the result. Your enemies hate you more and your allies start to desert.

Dr. Richard Head's picture

The off and on-budget war costs are indeed frightening from a perspective of logic and math, but the corporate welfare police is right up there with MIC spending.  At the end of the day, both should discontinue immediately to have any chance of solvency.  Then again, solvency in the eyes of government is a moot point.

Pool Shark's picture



"Every shred of objective evidence suggests that the dollar’s dominance is coming to an end"

Sorry, 'Simple Simon.'

I'm no fan of fiat currencies (the US$ included), but have you looked at this chart lately?:

The dollar is currently 'stronger' than just about every fiat currency in existence; sitting at multi-year highs.

I'm not saying the US$ isn't going to eventually fail (it will), but until it does, saying that 'objective evidence' is calling for its imminent demise is just plain stoooopid.



Manthong's picture

“pushed for higher lending standards”  

Like they do with Greece, Spain, Ukraine etc. and like higher standards of modesty in a porn flick.

WillyGroper's picture

License for more QE and the final nail for slave wage parity.

balanced's picture

Remember when Merkel and Hollande met with Putin last month? I'm wondering if we are now glimpsing some of the topics discussed. Putin [effectively] pulls offer of assistance to Greece if Germany and France join AIIB and (a general moving away from the U.S. - more to come).

mtl4's picture

The Euro is a bad example (Pounds much better) but it still shows a strengthening dollar and that is why I'd bet we'll get a bit of a correction this summer/fall and then it will be off to the moon in USD markets.

Oh regional Indian's picture

Says in the article that the US could be in the tent and an example for "best governance practices".....

Ahhhhaaaaaaaaahhhahaaaahaaaaa........*wipes a tear from his eye*

Funny writers on ZH lately, making these lame assed statements about the US....

Listen to some good music instead :

X_Weatherman's picture

I stopped reading at " It would allow the United States a seat inside the tent where it could be both a positive force for best governance practices and an internal critic if things go awry. It also would likely help ensure that U.S."

The author must be kidding, right?

The U.S. would probably turn the institution into another tool for extraction and looting.

Oh regional Indian's picture

Zigackly brother weatherman. A big joke (on us)....

Which way does the wind blow by the way?

gallistic's picture

It is blowing away from the Dollar right now.

FrankDrakman's picture

Since it's intercontinental, it has to be more than the winds of shit, or the shit blizzard, or a tornado of shit.

It must be shit tectonics!

semperfi's picture

War period never ends - cycles between preparation & execution, and usually a mix thereof.  War is human nature.  At the most basic level, an argument or fight between 2 people is the fundamental unit of war.  Move up a level to family war (feud), gang wars, etc.  People want to deny it, but humans are born fighters - and that will never change.

Ass Burger's picture

War was human nature. Most people have evolved beyond the tribal mindset.

11b40's picture

No, that's wrong.  Most people just think they have moved beyond a tribal mindset.  We have not.  The true nature of man is not evident until security is threatened.  It's easy to be cililized (for most) so long as there is abundance.  In times of scarcity or threat, not so much.  You have no idea of what anyone is capable of when pushed and stressed.

Learn more - check out Konrad Lorenz

Or, just read some good first person accounts of war.

DanDaley's picture

Right, as if Obama, Holder, Jarrett and a few others aren't a gang as criminal as any in history? That's funny, really funny.

NoDebt's picture

Now your patrons have all left you in the red
Your low rent friends are dead
This life can be very strange
All those dayglow freaks who used to paint the face
They've joined the human race
Some things will never change
Son you were mistaken
You are obsolete
Look at all the Chinamen on the street

- Steely Dan (slightly modified by NoDebt to fit circumstances)

TeamDepends's picture

Have quoted Black Friday many times here. There is something extra depressing about this thread. It feels like this is the last brick. There is hope until they slide that last brick into place. Back in 2008, progressives were calling Ron Paul "isolationist". Haha, joke's on you, suckers! But it's not funny. It never was.

NoDebt's picture

TD- I gotta tell you, I've been here before.  The last 2 years of a 2-term president are always depressing.  Especially so with this fucking moron in the WH (to be more accurate, he's the Manchurian Candidate).  We're never going to be what we once were- too much damage done at this point.  But there will be a time you feel better about things than you do now.  I don't know when but it won't be in the next 2 years.  Sometime after that.


SWRichmond's picture

US to the rest of the world: "The beatings will continue until morale improves...hey, where did everybody go?"

LatinaLover's above comment about the neocons is spot on.  And now they want to "restore" "defense" spending to its former levels...


DanDaley's picture

Manchurian Candidate  +1,000!  That's what I call him.

SamAdams's picture

This makes me think this is cold war 2.0 and this time we are Russia.  Remember who and what happened to Russia after the wall fell?  Piece and parcel, public sold to private Jews with even some Rothschild involvement. 

What was it the prime minister said?  Oh yes, "when we are through with the US, they can dry up and blow away".

Icelandicsaga...............................................'s picture

One has to consider this is part of the global reset .. NWQ .. part of the plan .. in the mind of the central bankers it gives them a vote in the 'new order' .. or not.

cossack55's picture

"kind of a dick".  Love the understatement

overmedicatedundersexed's picture

does this mean $/euro goes even higher?? yes it does

new game's picture

unintended consequences of a strong dollar and abuse of world reserve currency!

fucking idiots at the federal reserve. they blew the opportunity to keep on fucking everybody over. they went too far. they get what they deserve unless we all get fucked by wwIII...saddening world we live in.

sessinpo's picture

A strong dollar was inevitable, which is why I called for it for years now. The problem is the massive debt everyone has incurred and the fact that the US dollar is the world's currency reserve. That means everyone that accepted the US dollar as the world's currency reserve and also have massive debts must struggle to get more and more dollars.

Thus it is really an unintended consequence of creating unpayable debt and using one single currency as the world's currency reserve. The strong dollar is not the cause, but the effect. Anyway, I think we both agree it is a bad situation.

Son of Loki's picture

So ... what happens when oil, etc start to be traded and quoted in RMB?

Thirst Mutilator's picture

So now all China has to do is 'dePEG' from the dollar and start selling stolen & reverse engineered military hardware at Wal Mart prices & with a discounted currency to all the countries that the US has fucked with for the last 60 years...


#WINNING [hearts & minds ~ one regime change at a time].

Thirst Mutilator's picture

Don't forget about the part where they sell UST's, convert to dollars, & use the dollars to buy physical gold...


But no need to rush that just yet [until the dollar tops out]. You know SELL HIGH ~ BUY LOW... The MIT geeks prolly haven't even thought about that one just yet because they're too busy writing HFT algos to try & frontrun Lululemon. [well ~ THAT & try to come up with the perfect NCAA bracket].

roddy6667's picture

They are doing that now, swapping UST's for physical gold, copper, and other metal commodities.

HowdyDoody's picture

Stolen and reverse-engineered? The best stuff was sold by our best friend in the ME, our special indispensable ally.

Thirst Mutilator's picture

Well, that & Slick Willie... But for all practical purposes, we'd be talking about the same thing.

Ghordius's picture

+1 sessinpo. meanwhile, many megacorps based in the US are funding themselves more and more with fresh bonds denominated in EUR, particularly for their european operations

"We are too much accustomed to attribute to a single cause that which is the product of several, and the majority of our controversies come from that." (Marcus Aurelius)

Winston Churchill's picture

We've had this discussion before Ghordo.

Its what you are supposed to do.Matching liabilites in term and currency to the medium you

sell in.Lots of international companies are now selling in yuan direct, so should be

borrowing in yuan as well.

BurningFuld's picture

Not to worry people of North America. Canada's got you covered too.  And you thought Obama's Keystone XL decision was based on the environment.

Canada is the first place in the Americas to win the designation, giving Canadian companies a competitive edge over their U.S. rivals.

MartyFlesh's picture

And there in Lies the one Safety Valve with Psychopaths, they always push things too far with Greed and Over Confidence and end up blowing up the whole show in the end :) Marty

f16hoser's picture

Obama Loves Dick! Tom, Dick and Harry too. What a Fag. You can add Michael (Michelle) to the list! Wink/Wink

Chuck Knoblauch's picture

Why do you think the communists want war?

They want world domination.

By any means necessary.

sessinpo's picture

Why do you think governments (politicians) want war? They want world domination by any means necessary.


Fixed it for you.

Abitdodgie's picture

Communists , no you mean Nazi's they are the one's having another go.

Oh regional Indian's picture

Right you are is that...some say Hillary and Merkel are the daughters of Hitler. A stretch indeed, but then again, is it?