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How The China-Led Bank That's Reshaping The Global Economic Order Almost Never Was
One of the most amusing things about China’s Asian Infrastructure Investment Bank membership drive (which concluded at the end of March) was that it was so successful Beijing had to essentially apologize in order to ensure that all of the US allies that signed up stayed comfortable.
To recap, in early March Britain decided - much to Washington’s chagrin - to throw its support behind China’s effort to establish a new development bank. The venture, designed to help fill gaps left by The World Bank and the ADB, was viewed by the US as an attempt to challenge the supremacy of the multilateral institutions that have dominated the global economic order in the post-war world and also as an effort to create a powerful instrument of foreign policy that could be deployed on the way to establishing what amounts to a kind of Sino-Monroe Doctrine.
Of course the Obama administration couldn’t come out and say that, so the excuse for Washington’s largely behind-the-scenes effort to subvert the AIIB was that the new lender would have inadequate controls and flimsy underwriting standards. There was also some nonsense about a lack of regard for environmental concerns. As silly and transparent as that was, Washington’s allies were willing to buy it right up until Britain broke ranks and at that point, the floodgates opened as virtually everyone except the US and Japan jumped on board.
That was great for China, until talk of a new world order characterized by yuan hegemony started to make Beijing uncomfortable. As we put it earlier this month, “despite the Politburo’s best efforts to toe the line between acknowledging the bank’s early success and unnerving Western members who, although happy to participate, are still acutely aware that a dying hegemon is still a hegemon and therefore would prefer it if Beijing didn’t rub the whole thing in Washington’s face, it was abundantly clear to everyone involved that the AIIB represented no less than a changing of the guard and a revolution against the US-dominated multilateral institutions that many emerging countries believe have failed to respond to seismic shifts in the global economy.”
And so, China did its best to ensure everyone involved that it did not plan to use the bank as a foreign policy tool and had no plans to use the new lender as a kind of backdoor way to promote yuan hegemony. As we put it earlier this year, China simply couldn’t believe how successful the bank was before it was even launched.
Now, as the AIIB gets set to officially commence operations, Reuters is out with an interesting look back at the story behind the institution that’s set to bring about a dramatic change in how the world thinks about development lending. Here’s more:
Plans for China's new development bank, one of Beijing's biggest global policy successes, were almost shelved two years ago due to doubts among senior Chinese policymakers.
From worries it wouldn't raise enough funds to concerns other nations wouldn't back it, Beijing was plagued by self-doubt when it first considered setting up the Asian Infrastructure Investment Bank (AIIB) in early 2013, two sources with knowledge of internal discussions said.
But promises by some Middle East governments to stump up cash and the support of key European nations - to Beijing's surprise and despite U.S. opposition - became a turning point in China's plans to alter the global financial architecture.
The overseas affirmation, combined with the endorsement of stalwart supporters, including a former Chinese vice premier and incoming AIIB President Jin Liqun, a former head of sovereign wealth fund China Investment Corp, enabled China to bring the bank from an idea to its imminent inception.
The bank's successful establishment is likely to bolster Beijing's confidence that it can play a leading role in supranational financial institutions, despite the economic headwinds it is facing at home.
"At the start, China wasn't very confident," one of the sources said in reference to Beijing's AIIB plans. "The worry was that there was no money for this."
A Finance Ministry delegation that called on Southeast Asian nations to gauge interest in the AIIB was not encouraging, the source said. Governments backed the idea, but were too poor to contribute heavily to the bank's funding.
But subsequent visits to the Middle East helped to win the day as regional governments informed China they needed new infrastructure and, crucially, were able to pay for it, a source said.
"They are all oil-producing countries, they have foreign currencies, they were very enthusiastic, and they could shell out the cash," he said.
"That was when we thought 'Ah, this can be done.'"
While some officials, including Jin, AIIB's incoming president, have over the years pitched for Beijing to start a new international development bank, the idea did not gain traction under previous Chinese governments, sources said.
But that changed when President Xi Jinping took office in spring 2013 and threw his weight behind China's bold "One Belt, One Road" infrastructure and export strategy.
"No one imagined (the AIIB) would be so successful, that so many people would respond to it," one of the sources said.
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Give me that SWIFT alternative> NOW
Those excess reserves PBoC [ust]holds, were just insurance. You want to play? , Be prepared to pay. ;-)
Excess reserves are MOOT, if they're just "paper promises".
its there -, russia already 'swift boated' the west
China is floating on a mountain of "paper promises".
That is all.
You're about half right. That paper still works in the SDR 'world'...
That's something people don't quite yet grasp... once this landslide starts gaining momentum, the SDR will be meaningless, and Gold / Silver will replace the SDR.
An SDR is nothing more than a derivative claiming value on what, failed fiat currencies of broke ass countries / regions. Who gives a fuck about the SDR?
That's why the IMF decision recently to forestall inclusion of Yuan in the SDR was more a death knell for the IMF / WB / BIS than to China and their replacement institutional banks.
Anyway, that is my expectation... ASSET BACKED CURRENCIES any day now, death of FIAT, death of SDR.
I expect you're right - but the story could take 10 or more years to unfold. First SDR introduction; then the new global QE of magic SDR printing - and the final implosition of fiat. It is surely doomed because one cannot print money to be wealthy - but this money illusion will be with us for a while. Investments must be managed in the meantime.
I think it will be a lot sooner than that... I believe the intent is to introduce Asset Backed Currencies before year end, and I believe that the institutions setup by china will use national currencies as the exchange mechanism, not an abstracted device like the SDR... they may or may not directly trade Gold / Silver, but the asset backing most of the world's currencies will include Gold / Silver, as well as other valuable commodities.
This new Chinese sponsored bank - AIIB - is certainly not an indication that international finance will become a system based upon gold or silver. The initial subscribers seem to be weak second tier countries which will simply issue more of their own worthless paper and donate it to the Chinese bank. Everyone wants to be in on the creation of a new bank with a clean balance sheet that needs to make loans. Countries that don't get approved by IMF or World Bank now have another option for a lender to borrow from and then default. Should not take long for this bank to solve the Greek problem. Who will help Mugabe fill out the loan documents for Zimbabwe? Maybe China will be able to sell their Venezuelan loans to this new bank to immediately get some safe interest income flowing into the bank. Should be wonderful to read the reports.
Anyone who believes this bank will be hard asset backed has been smoking some of the Colorado export crop.
"They are all oil-producing countries, they have foreign currencies, they were very enthusiastic, and they could shell out the cash,"
read: UST's
Good to have an alternative to the criminal IMF
The IMF Itself Is a Criminal Organization
To understand this story, you have to reel back to the birth of the IMF. In 1944, the countries that were poised to win the Second World War gathered in a hotel in rural New Hampshire to divvy up the spoils. With a few honourable exceptions, like the great British economist John Maynard Keynes, the negotiators were determined to do one thing. They wanted to build a global financial system that ensured they received the lion's share of the planet's money and resources. They set up a series of institutions designed for that purpose – and so the IMF was delivered into the world.
The IMF’s official job sounds simple and attractive. It is supposedly there to ensure poor countries don’t fall into debt, and if they do, to lift them out with loans and economic expertise. It is presented as the poor world’s best friend and guardian. But beyond the rhetoric, the IMF was designed to be dominated by a handful of rich countries – and, more specifically, by their bankers and financial speculators. The IMF works in their interests, every step of the way.
The organisation takes over poor countries, promising it has medicine that will cure them – and then pours poison down their throats. Whenever I travel across the poor parts of the world I see the scars from IMF ‘structural adjustments’ everywhere, from Peru to Ethiopia. Whole countries have collapsed after being IMF-ed up – most famously Argentina and Thailand in the 1990s.
http://www.realclearworld.com/2011/06/03/the_imf_itself_is_a_criminal_or...
Empire of CapitalColonialism never ended, it continues by different means.
Despite its trumpeted reforms, the International Monetary Fund remains under the control of the United States and the former colonial powers. All constitutional matters still require an 85% share of the vote(4). By an inexplicable oversight, the United States retains 16.7%, ensuring that it possesses a veto over subsequent reforms(5). Belgium still has eight times the votes of Bangladesh(6), Italy a bigger share than India and the United Kingdom and France between them more voting power than the 49 African members(7). The managing director remains, as imperial tradition insists, a European, her deputy an American.
The IMF, as a result, is still the means by which western financial markets project their power into the rest of the world.
http://www.monbiot.com/2012/04/30/empire-of-capital/
Yay, another corrupt banking institution.
Moar gambling tables! Moar opportunities to win!
Whats not to like, right? ;-)
Paying off two protection rackets is much better than dealing with just one.
Exactly. This is just more of the same, wrapped in pretty glitter. The BRICS are still controlled by the same cartel that runs the BIS and the IMF; all that changes is the name. This is the smiley face of the NWO.
http://redefininggod.com/understanding-the-nwo-strategy/
http://redefininggod.com/the-rockefeller-plan-for-the-brics-new-world-or...
http://www.alt-market.com/articles/2168-the-new-world-order-and-the-rise...
http://www.alt-market.com/articles/2126-false-eastwest-paradigm-hides-th...
just as an aside....a documentary on Martin Armstrong airs @ 9 on tvo channel.
Not according to the schedule I'm looking at.
9:00 pm
Wonders of Life Expanding Universe
Amidst the rich natural history of the United States, Professor Brian Cox encounters the astonishing creatures that reveal how the senses evolved.
DavidC
Really (this) Tyler, you're promoting a fucking bank?
How the mighty have fallen.
And, in another thread, promoting Joe Biden. Where did ZH go?
http://www.zerohedge.com/news/2015-09-19/joe-ridin-biden-close-announcin...
Stuffing them down the rabbit hole as fast as it can be produced, apparently...lol...rabbits gonna breed ya know. Hey!, who's up for a "unviable tissue mass being harvested for the vital organs they have" video?
It's paid for by you, might as well see it ;-)
You need to slow down, dude. Upvoting you is making me drunk!!
Yes, but it's redemptively anti-western narrative, so all good.
(its da weak-end donchaknow)
Still, it's competition.
I'm with you. I have heard it so often that competition is the answer, so I believe it, especially in the absence of any other answer that looks adequate to address bad situations. So let the best man win!
I want to print but my computer is to slow to mine Bitcoin.
lol...just wait till they "nationalize" the internet.
Ya know, like China ;-)
Just another bullshit bank backed by nothing but paper. I'm sure they'll be as magnanimous as every other parasitic oligarchy mafia "bank". Please take our paper but if you don't pay us back we'll take you land and resources. Maria's will be mafia's.
So far as I know, these were promises of support from the various charter members that may not yet have been forwarded. And, given the collapse in world finances since March, may never materialize at all.
Don't know if the money is actually in the bank or if it will ever get there.
My own personal guess is that a couple of show projects designed to provide money to various distressed Chinese firms will go forward and then the whole scheme will be quietly forgotten.
The West and Japan have both dabbled in this game, which is to create a money-losing piggy bank that pours cash out on favored firms to build white elephants in the Third World. Whether China does this or does not do this, it will not alter the basic equation of life in any significant way.
It's all about having a +1 for a nation suffering from a severe inferiority complex. With the leaves on the money tree turning yellow, China would be advised to let this turkey die a natural death and save the cash for a rainy year.
"Give me back the Berlin Wall
Give me Stalin and St Paul
I’ve seen the future, brother
It’s murder."
Leonard Cohen - Future (1992)
those promises of support, are as good as the U S gold pledges to the imf
That's because EVERYONE is sick of Amerikan foreign policy.
The only way the people in power will be dislodged is a world wide Mao style revolution, and even if that were even possible the new boss would be the same as the old boss. Better learn to enjoy what we have. It's all there is.
Eddie - Oh I am having fun as the IMF and 40 major central banks renominate in Yuan. ZH reported this last year but most round eye forget. Yuk yuk yuk!
Whe all just having de - preshion nhow.
But the rape victim always deserves to be strangled right?!?
The IMF and World Bank load countries up with debt and then destroy them.
The typical World Bank and IMF demands for loans are what has destroyed Greece.
This is what they do.
Any alternative will be most welcome.
From China-Led Bank That's Reshaping The Global Economic Order
to
China wasn't very confident," one of the sources said in reference to Beijing's AIIB plans. "The worry was that there was no money for this."
then
"That was when we thought 'Ah, this can be done.'"
"ah so".....calling total BS this entire POS screed
"he new lender would have inadequate controls and flimsy underwriting standards"
& they said this w/a straight face?
How does one say "Goldman Sachs" in Chinese ?
Junk SWIFT asap
dollar == blood
euro == blood
dont worry about crash
dont worry about explosions
move move
ahead
The resolve will remain strong
Let west go to dust
Let them beg to us for food, clothing, materials, labor and we will set the price