De-Dollarization Accelerates As More Of Washington's "Allies" Defect To China-Led Bank

Tyler Durden's picture

The global de-dollarization trend continues as it appears the UK’s move to join the China-led Asian Infrastructure Development Bank has indeed shown other US “allies” that spurning Washington’s advice is actually acceptable and concerns about the institution’s “standards” may simply be a diversion aimed at undermining China’s attempt to exercise more influence in its own backyard. Here’s more from the NY Times

Ignoring direct pleas from the Obama administration, Europe’s biggest economies have declared their desire to become founding members of a new Chinese-led Asian investment bank that the United States views as a rival to the World Bank and other institutions set up at the height of American power after World War II.


The announcement on Tuesday by Germany, France and Italy that they would follow Britain and join the Chinese-led venture delivered a stinging rebuke to Washington from some of its closest allies. It also called into question whether the World Bank and the International Monetary Fund, which grew out of a multination conference in Bretton Woods, N.H., in 1944 and established an economic pecking order that lasted 70 years, will find their influence diminished.


The announcement by Germany, Europe’s largest economy, came only six days after Secretary of State John Kerry asked his German counterpart, Frank Walter-Steinmeier, to resist the Chinese overtures until the Chinese agreed to a number of conditions about transparency and governing of the new entity. But Germany came to the same conclusion that Britain did: China is such a large export and investment market for it that it cannot afford to stay on the sidelines.

South Korea, another US ally that the Obama administration has not-so-subtly lobbied to stay out of the AIIB for the time being, is reportedly reconsidering a bid to join and although reports that Seoul had already committed to the venture appear to have been a bit premature, the country will make a decision this month and is expected to discuss specifics this weekend at a meeting with Chinese and Japanese officials. Here’s FT

The foreign ministers of China, Japan and South Korea will meet in Seoul this weekend for the first time in three years, in an effort to calm tensions in the region.


The trio have strong economic ties but frosty relations. International angst about this state of affairs among the regional superpowers has been further piqued by the Asian Infrastructure Investment Bank, a Chinese-led initiative sparking alarm in Washington and proving divisive elsewhere.

Meanwhile, even Europe’s own “magical fairyland” is taking the plunge. Via Bloomberg: 

China welcomes Luxembourg’s application to be a founding member of the Asian Infrastructure Investment Bank, China’s finance ministry says in a statement on website.

And so, with the most European of European countries on the bandwagon, and with South Korea leaning unmistakably towards joining up, we say again

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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Pladizow's picture

Birth, growth, maturity, decline, death.

froze25's picture

We should be in this on the ground floor.  But ego's will prevent it.

hobopants's picture

It won't be nearly as peaceful as the natural end to a life cycle there bud.

"Sadly, looking back through economic history, all too often war is the manifestation of simple economic entropy played to its logical conclusionWe believe that war is an inevitable consequence of the current global economic situation."

-Kyle Bass

DaddyO's picture

When the alternative to the dollar was offered in the past, it never gained much traction. Now that the debt bubble worldwide has reached biblical proportions, the time for collapsing the bubble has arrived. hence the big players in the global economy are now moving to protect themselves and the flag may be ready to go up.

With all the attention being given in certain quarters to the seven year economic and monetary cycles, it may be time to act accordingly. Much ink has been given to the history lessons on woar, again a seven year cycle and a coincident timing with the seven year cycle.

Makes you wanna go, 9/2015 another significant marker in the great space/time continuum?


TruthInSunshine's picture

Pure, unadulterated propaganda by ZH here.

Look at reality, current reality, to see the complete B.S. in this hogwash article.

Either the EUR has to continue plunging vs the USD - OR the EU will break up (which means most of the PIIGS leaving, and even France & the UK being forced to devalue living standard in order to maintain an even remotely sustainable balance of trade & sustainable budgets).

Mr. Yellen & Mr. Lew (and their bosses, more importantly) can't defy gravity & have it both ways (and their bosses are very international/global in their citizenry, btw).

As it is, and this is a stark sign of things to come - even Germany's famed middle class & union membership is going through the same process that the U.S.'s middle class did beginning in the early 90s (Germans are seeing manufacturing jobs go to the Czech Republic, Slovakia, Croatia, Turkey, Poland & even Romania & Algeria).

Also, the BRIC block of nations' economic & financial travails have only yet begun.

Look at what's happening in Brazil just this past week for a small appetizer as to what lay ahead. Brazil could be very well be headed for some sort of civil war.

China, as the big BRIC rep, will join hands with Japan & PIIGS in ensuring that there is currency debasement relative to the USD for a long time to come, no matter what ZH articles are posted daily about an alleged shift away from the USD, as a matter of basic survival.

It's all about export-intensive nations vs import-intensive ones (balance of trade of manufactured goods; and aircraft count only marginally as they're more of a token tool to smooth imbalances out), and commodity prices.

Rodders75's picture

Agreed with a lot of this although Brazil civil war is a bit of an esaggeration.

But actually the TPTB are getting ready for a developed ctry meltdown and the US is shitting itself that this new bank will be the first port of call, not the IMF. Check out this link.

Washington Consensus completely falling apart. Another nail in the coffin of the US. BRICS are clearly screwed as well, but it doesn't mean the "developed" world isn't either. 

TruthInSunshine's picture

That ignores the fact that we're in a fiat credit system, and that the
marginal utility of each newly created unit of credit is far weaker than the last in a situation where the past credits are so incredibly mis-allocated/mal-invested, and that they've "pooled" into incredibly inefficient & highly concentrated bathtubs, so to speak.

In other words, the world still runs on credit/debt, Central Bank coordinated policies of the last 6 years have ensured that marginal utility of each new credit unit created will inevitably shrink, while at the same time, the credit/debt create hasn't even been remotely efficiently allocated over anything approximating a wide area.

We have a highly distorted, patchy, schizophrenic, incredibly inefficient monetary/credit base, where there's no possibility of avoiding another deep cyclical downturn because those who can spend in a discretionary manner don't need to (and are relatively few in number as a % of overall consumers), and those who can't spend in a discretionary manner are constrained dramatically in being able to do so, are a MASSIVE % of overall consumers on a relative and historical basis.

LawsofPhysics's picture

So, the question remains, when do all those paper claims on real goods and services and real resources, start seeking them out?  If history is any guide, the "value" of all that paper can be reset in a fucking hurry.  Either officially (by government degree-has happened three times for the dollar over the last 100 years), or "unofficially" through currency collapse.  One option might be better than the other...   ...or not (it is a global economy now).

tick tock motherfuckers...

TruthInSunshine's picture


The best analogy I've heard, and now use, is that central banks continue to pour water (the credit) into relatively few bathtubs of an already extreme situation wealth divisional system (let's assume 90% of credit/tokens are being received by the top 10%, and further, of this 90%, 75% of it is actually flowing to the top - not 1% - but the top .3%).

So, the credit/token levels bathtubs of the top 10% are stable, the credit/token levels bathtubs of the top 1% are growing moderately, the credit/token levels bathtubs of the top .3% are full, and the credit/token levels bathtubs of the top .1% (that is the top 1/10th of 1%) are overflowing and spilling into drains on the floor, while the credit/token levels bathtubs of the bottom 89% are receding.

Herd Redirection Committee's picture

I sometimes wonder if they didn't stave off collapse in 07/08 BECAUSE others were better prepared for it, than TPTB were!  So they decided it was better to give 7 years of pain to stackers, and make them look like nutjobs in their local community, before allowing the collapse...

LawsofPhysics's picture

"It's all about export-intensive nations vs import-intensive ones (balance of trade of manufactured goods; and aircraft count only marginally as they're more of a token tool to smooth imbalances out), and commodity prices."  --  This, once again, trade is the only thing that prevents humans from really killing each other.  Everything else is fucking noise.

same as it ever was,

tick tock motherfuckers...

TruthInSunshine's picture

At this point, only the truly imbecilic can't see that further accommodative monetary policy is not only not stimulating aggregate demand, but actually putting extreme pressure on most to further cut consumption, and ultimately, merely being used as a conduit by excessively few economic/financial actors to squirrel away arbitrage gains.

p.s. - I should've added tanks, missiles, APCs and other defense oriented wares into the mix with "aircraft" above, and for the same reason.

Many of our trade partners, whether providing oil or machine goods, can defuse trade imbalances that run the risk of creating political problems by buying some Boeing 787s, F-16s, Bradley APCs, Abrams Tanks, etc.

malek's picture

Don't you fail to make a point in your theory how/why the USD can continuously keep strengthening?

TruthInSunshine's picture

It's based on 1) relativity, 2) trade flows, 3) the composite of those goods/services traded, and 4) export-to-import dependency of national GDP (and GNP).

Here's an example: Where did BMW, based in Munich, Germany, sell the majority of its exported vehicles last year, and what does a cheaper EUR mean in terms of comparative advantage for their exports?

walktheline's picture

I strongly agree with all of your foregoing comments and analysis. In the UK the export/import situation is referred to as the balance of payments. The UK has had a balance of payments imbalance since the mid 60's (at least), since businesses find it easier to make money by becoming importers rather than manufacturing exporters. Churchill put it succintly when he said:  'If trade doesn't cross frontiers, armies will.' The totally unrealistic valuations of both the dollar and the pound are a reflection of overall trade flows in both countries, but without acknowledging that both are increasingly bubble driven on the one hand and ignoring the long-term consequences of ever growing balance of payments asymmetry. Add to this the occasional outbreak of competitive devaluation, certainly by the UK and involuntarily by the EU and you have the making of an economic model far removed from reality, when govts come to believe that the day of reckoning will never come because 'everybody is doing it', leading to the we're all in it together delusion. The classic response to cyclical crises has been to engage in foreign adventures on the battlefield as a means of distracting attention from what is actually going on.

ajax's picture



The USD has still got a lot of that elusive quality known as "charisma".

Laugh all you like but I have personally seen people go all weak in the knees when they behold a US dollar for the first time in their lives.

So much of int'l. trade is still inextricably tied to the USD in varying degrees... I sure wouldn't want to be trying to protect my manufacturing exporters from behind a forex desk lately. Bloody hell what a fucking mess.

As for the constant comments about some impending war: believe me, no one anywhere in Europe has the slightest inclination to oblige you American armchair generals and/or heavily armed cyber-cowboys. Go fight your own fucking war.

On a lighter note, let's see what effect tomorrow's solar eclipse will have on EUR/USD and CHF/USD.

Stronger than Yellen and The Klezmer Palace?

Fun Facts's picture

The USD has support from the ZWO banksters because they are still borrowing their worlds largest army.

Once the US has been used up, the banksters will pull the plug on the USD and sink their parasitic tentacles into China. Not until then.

TruthInSunshine's picture

The dilemma is that the Chinese are far more homogeneous in ancestry/genetics, and far more nationalistic/parochial.

It will be impossible for ZWO to hijack China in the same manner as the U.S.

COSMOS's picture

Plus the Chinese are prepared, I hear that the Protocols of the Elders of Zion as well as the Yearly Notes of the World Jewish Congress are mandatory readings for those groomed to enter the Chinese government beauracracy.

weburke's picture

ah yes, the 20th.             9 trillion plus in dollar denominated debt will force countries to get the money from the imf, at imf terms, which wont be pretty. 

bwh1214's picture

This post is the best summary of how we got into this mess.  Starts slow but worth the read:

Some of the other posts on the site are good as well.

JimBowie1958's picture

Every time a bubble bursts it destroys trillions of USD in investments and the M4 money supply.

In the tech bubble and the real estate bubble destroyed over $4.5 trillion that has not been replaced.

As bubles destroy more USD it drives the value of the USD up and the ptroleum markets maintain their USD only policies and thhus there is an eternal demand for USD...unless the Saudis change their minds.

maskone909's picture

i think kyle might have also gotten suckered into the "shale boom" meme.  kyle is a cool guy dont get me wrong.  he reminds me alot of what i would do if i was a billionaire- fast cars, gun ranch, gold...  but unfortunately i dont buy his USA has recaped their banks everything is a-o-k meme

Creepy A. Cracker's picture

"...what i would do if i was a billionaire- fast cars, gun ranch, gold..."

What, no hot women?!?!  Are you in your 80's?

maskone909's picture

im an old soul ;-)  i like to think of it as, paying them to leave, not to stay.   never let a them in your man cave. 

TruthInSunshine's picture

I thought he was going to answer "two chicks at the same time."

ajax's picture


"What, no hot women?!?!"

Who the fuck cares what 'Kyle' does with his dreadful, circumcised (i.e. wrecked) dick.

sun tzu's picture

What makes you think he doesn't have fast cars, guns, gold, and a ranch?

August's picture

You'll know that the "re-set" has arrived when you can get two hot babes for the entire night, in exchange for one can of condensed milk.

pods's picture

Yay, another supranational bank dealing with more conjured debt money.

Nothing to root for here, just another band of shysters trying to gain a seat at the big table.


DavidC's picture

Maybe, but it will give an alternative where, to date, there hasn't been one.


JRobby's picture

Currency wars still raging. Apparently "they" still think it matters. Animal instinct I guess to fight for every scrap until there is nothing.

Squirrels seem to be practical savers........

Greenskeeper_Carl's picture

pods is right, davidc. this isnt a real alternative. thats like saying a horseshit sandwich ia an alternative to a dogshit sandwich. its still just a shit sandwich

DavidC's picture

I can't disagree with that! :-)


corsair's picture

After years of eating horseshit, a dogshit sandwich might be viewed as an enjoyable variety.

Overfed's picture

Horseshit does stink a bit less than dogshit.


corsair's picture

Fragrance is in the nose of the beholder.

moonshadow's picture

what's with so many signing their comments now. as if their name isnt there already along w' their pic. guess that makes it a Special Comment as opposed to the rest of us?


pods's picture

Goddamn right.  Where ya been the last 5 years?


KingGenius's picture


We don't need to see your names all the time. If what you say is good consistently, you will be known. 

"You are not specialYou are not a beautiful or unique snowflake. You're the same decaying organic matter as everything else."

El Vaquero's picture

Yup, another shit sandwich, but if it has the side effect of making Washington DC a lot less relevant in my life, I'll gleefully watch others take a bite. 

pods's picture

I've made a conscious effect to step away lately. Maybe pop in every couple days and check headlines. It REALLY helps with life.

Glee indeed.


Abitdodgie's picture

So they are going from one Rothchild led bank toanother Rothchild led bank and the winner every time is _____________?

Took Red Pill's picture

My thinking exactly! They want us to believe there's some sort of currency war going on between countries. But they're all on the same team! The dollar will be dethroned and replaced by another and the Rothchilds will win again at our expense.