Moscow And Beijing Join Forces To Bypass US Dollar In Global Markets, Shift To Gold Trade

Tyler Durden's picture

The Russian central bank opened its first overseas office in Beijing on March 14, marking a step forward in forging a Beijing-Moscow alliance to bypass the US dollar in the global monetary system, and to phase-in a gold-backed standard of trade.

According to the South China Morning Post the new office was part of agreements made between the two neighbours "to seek stronger economic ties" since the West brought in sanctions against Russia over the Ukraine crisis and the oil-price slump hit the Russian economy.

According to Dmitry Skobelkin, the deputy governor of the Central Bank of Russia, the opening of a Beijing representative office by the Central Bank of Russia was a “very timely” move to aid specific cooperation, including bond issuance, anti-money laundering and anti-terrorism measures between China and Russia.

The new central bank office was opened at a time when Russia is preparing to issue its first federal loan bonds denominated in Chinese yuan. Officials from China’s central bank and financial regulatory commissions attended the ceremony at the Russian embassy in Beijing, which was set up in October 1959 in the heyday of Sino-Soviet relations. Financial regulators from the two countries agreed last May to issue home currency-denominated bonds in each other’s markets, a move that was widely viewed as intended to eventually test the global reserve status of the US dollar.

Speaking on future ties with Russia, Chinese Premier Li Keqiang said in mid-March that Sino-Russian trade ties were affected by falling oil prices, but he added that he saw great potential in cooperation. Vladimir Shapovalov, a senior official at the Russian central bank, said the two central banks were drafting a memorandum of understanding to solve technical issues around China’s gold imports from Russia, and that details would be released soon.

If Russia - the world's fourth largest gold producer after China, Japan and the US - is indeed set to become a major supplier of gold to China, the probability of a scenario hinted by many over the years, namely that Beijing is preparing to eventually unroll a gold-backed currency, increases by orders of magnitude.

* * *

Meanwhile, as the Russian central bank was getting closer to China, China was responding in kind with the establishment of a clearing bank in Moscow for handling transactions in Chinese yuan. The Industrial and Commercial Bank of China (ICBC) officially started operating as a Chinese renminbi clearing bank in Russia on Wednesday this past Wednesday. 

"The financial regulatory authorities of China and Russia have signed a series of major agreements, which marks a new level of financial cooperation," Dmitry Skobelkin, the abovementioned deputy head of the Russian Central Bank, said.

"The launching of renminbi clearing services in Russia will further expand local settlement business and promote financial cooperation between the two countries," he added according to.

Irina Rogova, a Russian financial analyst told the Russian magazine Expert that the clearing center could become a large financial hub for countries in the Eurasian Economic Union.

* * *

Bypassing the US dollar appears to be paying off: according to the Chinese State Administration of Taxation, trade turnover between China and Russia increased by 34% in January, in annual terms. Bilateral trade in January 2017 amounted to $6.55 billion. China’s exports to Russia grew 29.5% reaching $3.41 billion, while imports from Russia increased by 39.3%, to $3.14 billion. Just as many suspected, with Russian sanctions forcing Moscow to find other trading partners, chief among which China, this is precisely what has happened.

The creation of the clearing center enables the two countries to further increase bilateral trade and investment while decreasing their dependence on the US dollar. It will create a pool of yuan liquidity in Russia that enables transactions for trade and financial operations to run smoothly.

In expanding the use of national currencies for transactions, it could also potentially reduce the volatility of yuan and ruble exchange rates. The clearing center is one of a range of measures the People's Bank of China and the Russian Central Bank have been looking at to deepen their co-operation, Sputnik reported.

One of the most significant measures under consideration is the previously reported push for joint organization of trade in gold. In recent years, China and Russia have been the world's most active buyers of the precious metal. On a visit to China last year, the deputy head of the Russian Central Bank Sergey Shvetsov said that the two countries want to facilitate more transactions in gold between the two countries.

"We discussed the question of trade in gold. BRICS countries are large economies with large reserves of gold and an impressive volume of production and consumption of this precious metal. In China, the gold trade is conducted in Shanghai, in Russia it is in Moscow. Our idea is to create a link between the two cities in order to increase trade between the two markets," First Deputy Governor of the Russian Central Bank Sergey Shvetsov told Russia's TASS news agency.

In other words, China and Russia are shifting away from dollar-based trade, to commerce which will eventually be backstopped by gold, or what is gradually emerging as an Eastern gold standard, one shared between Russia and China, and which may day backstop their respective currencies.

Meanwhile, the price of gold continues to reflect none of these potentially tectonic strategic shifts, just as China - which has been the biggest accumulator of gold in recent years - likes it.

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Giant Meteor's picture

One of my personal favourites, and yey,

Here is one better however, perhaps my all time favourite 

The Black Knight 

https://www.youtube.com/watch?v=41mkI4ozCVU

Giant Meteor's picture

Something similar to this happened to me in grade school, getting escorted out of the castle for failing to control my laughter. Priceless! LMAO

Scuba Steve's picture

Why would he?

He'd be right ... again.

He wins again.

Trump Historically = Gold

(Drop the mic)

MEFOBILLS's picture

scenario hinted by many over the years, namely that Beijing is preparing to eventually unroll a gold-backed currency, increases by orders of magnitude.

Not really.  This is more wishful projection by Gold Bugs.  Russia and China have traded Debt Instruments.  This puts Rubles in Chinese hands and a debt instrument in Russian hands. 

Vice Versa mechanism puts Yuans in Russian hands.

Then Presto:  Oil from Russia is used to buy Chinese Goods.  Russia uses Yuans to buy Chinese goods, and China uses Rubles to buy oil. 

No Gold involved -yet there is trade.   China has State banks, and they create Yuans at will.  Since the Chinese economy has grown many times since the fall of communism, their money supply had to grow as well.  Did their gold supply grow to match the economy?  I don't think so... if they used gold they would have had a deflationary economy. 

If there is any use for gold in the coming world economic system, it will be used as a pricing anchor - probably for international goods exchange.New SDR basket, or the BRICS trading system may have gold in said basket, probably along with goods and select national money units.  Anybody remember all the agitation from China to have Yuans in the SDR basket?

(A bancor system is a superior trading system..... but I digress.)

Russia buys their own production of gold with Rubles.  The Russian Central Bank can then issue Rubles in greater proportion than amount of gold on reserve according to BIS Rules.  So, Russia buying their own gold is leverage, hence less need for dollars as FX.

Note that Russian embargo was to deny Russia FX, to then collapse Russian money supply; to then make Russia supplicant to the West.  This gambit failed, partly because Russia is buying their own gold production.

Giant Meteor's picture

I upvoted you. I believe when one takes things all together, in total, no matter how one wishes to say it, or speculate about it, the US, as has been mentioned many times, in in some deep , crap ..

The reasons for this, have been well elaborated , stated .. by many

the obligatory, tick tock, may be appropriate here ...

Mat Cauthon's picture

Except for the fact you missed that Russia is within a few months of being completely debt free, including the paying off of old soviet era debt.

https://www.rt.com/business/381629-soviet-debt-payment-russia/

They don't intend to function on a credit based system like the West.  And you miss the most important thing about China's debt... it's ALL internal.  They can devalue it with a stroke of a pen, or click of a mouse, then issue a new currency in gold when they want and there will only be a small hiccup.

Europe (euro) and US (dollar) on the other hand... have a nice day (bye bye).  And that goes for Latin American countries as well as Japan who chose to sell their debt to foreign buyers... which China hasn't to any real extent. 

Putrid's picture
Putrid (not verified) Mat Cauthon Apr 1, 2017 9:27 PM

Aside from the excellent input from both experts above; the dominant families in East and West are aware the Oil is running out. That's the big issue.

With respect to Gold and China, the percentage increase in production of Gold by China is irrelevant to growth in outputted value; only the FIAT price of gold needed to increase to match output.

But it couldn't because the Fiat price was being suppressed.

This is the End by the way,
Putrid
www.beforethecollapse.com/about

espirit's picture

Might be a point taken.

Fracking and tar sands are scraping the bottom of the barrel.

MEFOBILLS's picture

They traded new debt instruments with each other.  Did you miss that part?

I'm not fond of debt based money.  But, this is what China and Russia did - sorry it doesn't fit your narrative.  I prefer to live in the real world.

The problem with debt instruments is that they grow out of bounds with their "credit."

You can make debt instruments work, but you have to force them to not grow outside of nature .. and to do this you have to use the law. 

Schacht did something like this in Nazi germany.  Germany's trading partners posted money in each others trading banks, then they proceeded to trade.  This is how Germany got raw materials, and her trading partners got finished german goods.  

Germany then bypassed the international money system based in London and Washington.  

Putrid's picture
Putrid (not verified) MEFOBILLS Apr 1, 2017 11:56 PM

In all humility, the past is no predictor of the future. We almost had World War last year so strategically speaking the East required a delicate and harmonic move away from the Dollar. Anything else resulted in First Strike

Croesus's picture

@ Putrid:

"the past is no predictor of the future."

I disagree with this statement, since "human nature" always stays the same...

It may not always repeat, but you can often make it rhyme by studying cycles, with technological/social changes superimposed onto your predictive model.

I'm usually not 100% accurate in my calls, but you can live with a margin of error, if you're not betting over your head.

besnook's picture

gold may be used as insurance when the system goes worldwide. gold will be used to mind the gaps.

Justin Case's picture

Germany then bypassed the international money system based in London and Washington. RONG!

Germany took away the bankers ability to print money. The printing of money was only allowed by the Gov't. This set fire to the jooish bankers ass and  jooish merica declared woar on Germany. Economically at first and then Churchill cheered on Poland to start the woar. Even after Hitler tried many times to come to an agreement without going to woar.

MEFOBILLS's picture

Germany took away the bankers ability to print money. The printing of money was only allowed by the Gov't. 

 

During the hyperinflation, the Reichsbank was privatized under the Dawes plan.

During the Nazi period, the Reichsbank was under government control. 

(Note:  The Reichsbank came under government control to combat the hyperinflation, and remained under government control when the Nazi's came into power.)

Justin Case's picture

Exactly what I said. Thanks for the confirmation.

Justin Case's picture

"Did their gold supply grow to match the economy?  I don't think so"

When the ferris wheel of bullshit stops turning, paper proxies for gold will fail to perform. No one knows whether China has the gold they claimed to have is true. Most analysts have stated that they believe China has far moar gold than they claim. Possibly in the rgion of 30,000 tons. All gold and silver mined in China is purchased by the Gov't plus additional buying on SGE. The Chinese have used currency swaps for trade not gold. Gold and silver are their assets to offset currency risks. Russia will have exterminated all their debt this year. The USD bond market is a disaster and USGov't uses proxy banks, like Brussels to monetise the bonds and treasury paper. mathematically the US is bankrupt and unable to pay it's debts. When the USD loses it's ability to retain value, of for the settlement of accounts it will return to it's intrinsic value, like every other currency in history. Many countries recognise that the US is a cadaver with the tubes still attached, to give the imppression that it will one day awaken. Won't happen, that's why China and Russia are partners and other Asian countries are packing it in with merica, migrating towards trade with Russia and China the US cadaver is starting to smell.

"Russia buys their own production of gold with Rubles.  The Russian Central Bank can then issue Rubles in greater proportion than amount of gold on reserve according to BIS Rules." If you have a sourse regarding that "rule" post it.

There are no rules on the issuance of currency based on gold or silver hoard. One just needs to look at Ukraine. Russia and China are not occupied by the criminal bankers. That is the whole reason of demonizing them. The attack on Iran and Lybia was to establish a private banking system in those countries.

MEFOBILLS's picture

When the ferris wheel of bullshit stops turning, paper proxies for gold will fail to perform

All money should flux in relation to goods and services.  There have been many times in history where gold went off to hide, and the country went into depression.  The late 1800's, called the crime of the century in Germany, is a good example.  Silver was demonitized, and Gold was held - this then was a boon to the gold hoarders.

 

Russia buys their own production of gold with Rubles.  The Russian Central Bank can then issue Rubles in greater proportion than amount of gold on reserve according to BIS Rules." If you have a sourse regarding that "rule" post it

I don't need to post it.  Familiarize yourself with Basel 2 rules.  Credit emitting banks can issue loans as a function of their reserves.  The Russian Central Bank runs under Basel rules.

There are no rules on the issuance of currency based on gold or silver hoard. One just needs to look at Ukraine. Russia and China are not occupied by the criminal bankers. That is the whole reason of demonizing them. The attack on Iran and Lybia was to establish a private banking system in those countries.

Libya was attacked largely because of the gold dinar, which threatened to undermine the petrodollar system.  Iraq also was trading oil outside of the petrodollar system.

Iran hasn't been attacked militarily, but they are in the cross hairs because they have oil, and don't play ball with the petrodollar.  Also, our ((friends)) in Israel feel threatened by a Middle East they cannot control.

With regards to no rules on gold emission, I'm not aware of any case in history on that account.  All Gold systems have had rules.

China has a mix of State banks and Private Banks.  The Private Banks have dollars as FX and operate by BIS rules.  The State Banks were kept after Tianamen sqare incident.

 

Justin Case's picture

Exactly what I said. Canada has no gold but continues printing money, thanks for confirming that there is no such rules. Fiat does not require to be backed by gold. Canada's central bank was hi-jacked and COMER is fighting it in court. Canada has 76 oz. of gold. Not every country has gold assets.

The private bank would be able to issue gold as money, but the cabal would not accept it. After Gaddafi was murdered the first objective was to set up the private bank.

BIS primary function is to promote financial stability and monetary support for central banks and other international organizations. Lenders of last resort.

Basel 2 are recommendations on banking laws and regulations issued by the Basel Committee on Banking Supervision. Not rules. Basically an agreement with member banks. The 3 objective for central banks to adhere to are:

Minimum capital requirements
Supervisory reviews
Market Discipline

There are no rules on gold as I mention and they only issue recommendations, not laws.

Three private banks.

State banks foreign exchange reserves controlled by the country central bank. $3,005,000.00 USD

max_leering's picture

down with the fiat dollar... sink, you fucking p.o.s. currency, based on NOTHING!!!... period!!!!!

MEFOBILLS's picture

down with the fiat dollar... sink, you fucking p.o.s. currency, based on NOTHING!!!

Down with banker fiat, also known as banker credit.  Banker credit comes into being when you hypothecate yourself for a loan.  The banker creates credit upon YOUR signature authority.

Down with hypothecations for new credit!  Down with voluntary slavery, as I show up to the bank being a willing participant in the creation of money!  Down with me!

OK... Let's get a little more enlightened please.  All money in history is fiat, including gold coins that get the kings stamp.  As soon as it is stamped with some sort of exchange value, it becomes fiat.  We haven't used metal by weight since the ancient near east many thousands of years ago, and even then it related to temple ledgers, which were denominated in barley.

The actual solution is lawful money issued into the commons, as intended by the founders.  Lawful money is the fiat of the people, not of bankers.  The usurpation of the law and of the commons by bankster fraud, needs to be undone by changing the money to become legal fiat.

www.sovereignmoney.eu


Salzburg1756's picture

You got it; that's why the bankers and the politicians who support them hang right on tv primetime. Bring the kids. Everyone needs to see this.

Justin Case's picture

If gold is not money, then we had better identify a viable hard-money alternative … and fast!

MEFOBILLS's picture

Money's true nature is law.

Saying that metal is money, is like saying that math is metal.   

Metal has an advantage in that it is volume restricted.  Volume of issuance is only one variable needed in a money system.

Channeling, type, velocity, volume.  

It always gets back to the law, and bugs that loudly proclaim that metal is money are casting a pall of hypnosis - your are drinking the cool-aid.

Gold can be money when the king deems it so, and it gets its stamp. At that point, weak minded humans then conflate the material with the law.

Justin Case's picture

I don't know how long you've been in a comma, but here is some qualified people unlike yoarself, explaining to the ignorant about gold.

 

According to Samuel Williamson, a research professor in economics and founder of the website “MeasuringWorth” (whose board of advisors includes a slew of topflight academics from places like Oxford and Berkeley), gold, by a wide margin has outperformed two of the world’s currencies, the pound and the dollar, since at least 1257. (Obviously, his data on the dollar only goes back the late 18th century.) There are records of gold outperforming paper currencies for more than 230 years before Columbus discovered America.

Also important, as I have mentioned before, is that according to another gold historian, Roy W. Jastram, since the mid-16th century there has never been a period in which gold has not gained purchasing power in deflationary times. I single out deflation because those are the times when safe financial harbors can be the difference between starvation and three meals a day.

The first recorded use of gold as a medium of exchange was in 900 BC. This suggests, according to Gott’s law, that gold not only will likely outlast the dollar as a currency but that it also will outlast the American civilization, which is less than 250 years old and already a little long in the tooth, given that the average civilization lasts about 200 years.

Because gold has been a currency for about 3,000 years, we often overlook its intrinsic beauty, which likely made it such a natural choice for a currency. Another poet, John Keats, identified beauty with truth and with timelessness. From this perspective, Buffett’s question asks whether you would trade a unique object of beauty for farmland and stocks, if the marketplace said they were worth the same. There is no answer but I think for most to have beauty and a currency in the same package is extremely special.

But to be as fair as possible to Buffett and others who scorn gold as an investment, instead of comparing gold to other currencies, let’s compare it to the assets that a currency can buy. As our chart below shows, since late 2001 gold has vastly outperformed stocks, including Exxon; soybeans, which is used as a proxy for farmland; and, of course, the dollar, which would simply be a flat line at the bottom of the chart.

messystateofaffairs's picture

Its not based on nothing, its based on nice Khazarian mafia members and ignorant trusting goyim.

serotonindumptruck's picture

The only question that seems to be left unanswered...

Can this transisition be made without WWIII?

Giant Meteor's picture

As I have stated previously, WWlll is already well under way, in my opinion. It's 4 that concerns me some ..

Sticks and stones, all that ..

serotonindumptruck's picture

I suppose it comes down to the definition of WW III and WW IV.

Semantics, perhaps?

My definition of WW III is anything that might cause the 450+ nuclear power plants located around the world to fail and/or melt down.

Nuclear weapons?

....meh.

 

Giant Meteor's picture

Probably won't be a meteor, an asteroid perhaps, I just wanted to go on record here first ..

It wasn't me ..

espirit's picture

Just hope it's quick.

Paper cuts and memories make me cry...

Giant Meteor's picture

Roger that, paper cuts are a bitch ..

Memories? Well I have remedies for that ...

No no, All spirtual, I assure you ..

short screwed's picture

Good question. It may be the only way. It's hard to wage a war with a worthless currency. Just ask the Soviets.

TheEndIsNear's picture

Like the frog being slowly brought to a boil,
the pot is warming up under the Federal Reserve Note and all other fiat currencies.

Hey Assholes's picture

Gold is money. Paper is tinder.

max_leering's picture

I work in a coin/bullion shop and sales are through the roof... both gold and silver, but junk (90%) silver coins is the hot ticket... we sell about $5000/7000 a day of that

Anopheles's picture

And a tiny Cannibis Culture store in Toronto or Vancouver brings in $40,000 to $60,000 a day.

That's where the real "gold" is.

espirit's picture

But can they bank it?

Inquiring minds want to know.

Anopheles's picture

Yes they bank it and they even collect and remit sales tax on their sales. 

However the police occasionally raid the stores.  Funny that the government is happy to collect a couple million dollars a year in taxes, but they still go and raid the place.

Silver Savior's picture

From your perspective is 90% better or .999 for future trade. Each has its own attributes.

max_leering's picture

I believe 90% silver dimes/ qtrs will be the barter of the future... just an opinion

besnook's picture

interest rates have to rise in an environment that has less need for the dollar as a means to attract buyers of usa debt(since we don't finance our own debt) and keep a lid on the inflation caused by the lessened need.

the dollar is finished unless china and russia are destroyed. if you understand that you understand why the usa is at war with russia and china.

Giant Meteor's picture

Well I believe inflation has been with us, all stealthy and shit .. since like, 1971 and shit ..

Sure, you can buy a boatland of oh, i don't know, big screen tv's cheap, all sorts of other shit, nobody wants anymore or already has enough of, funny thing that market seems to be "peaked" or tapped out ..

Oil, well THAT needs some more inflation, but no worries, they'll probably get that on line  ..

High end luxury "real estate"? Tanking in many "markets"." , although average house price I guess is still 300,000, you know for the plebes .. debt serfs etc ..

Cars, auto's? Oh hell no, got enough of them ..

Edumacation? Worthless, except as a debt bubble .. no plus there I'm afraid ..

Interest rate threats? .25 here and there probably won't cut it ..

On the other hand, the markets, the markets, 401k's pensions, (never have seen them exploding like fireworks on July 4th, meh )

What to do, what to do ..

Yep, saber rattle, concoct all sorts of shit, sit back and wait to pull the next hat trick, ONCE AGAIN ..

TAGS The FedWar and Foreign PolicyMonetary Theory

06/09/2008, by Llewellyn H. Rockwell Jr.

"No one pointed out that this institution would permit Americans to fund, without taxes, the destruction of cities abroad and overthrow governments at will. No one said that the central bank would make it possible for the United States to be at large-scale war in one of every four years for a full century. It was never pointed out that this institution would make it possible for the US government to establish a global empire that would make imperial Rome and Britain look benign by comparison."

https://www.mises.org/library/war-and-inflation

Did I mention 4% unemployment? Laugh track deafening ..

espirit's picture

Keyword is 'want'.

Less proles are falling for that line.

Capitalist With A Razor's picture

"No one said that the central bank would make it possible for the United States to be at large-scale war in one of every four years for a full century. It was never pointed out that this institution would make it possible for the US government to establish a global empire that would make imperial Rome and Britain look benign by comparison."

 

Its all right there.