Putin’s plan to undermine the dollar has been openly discussed for months but has been in the works since at least 1998. Only now, however, has his goal become obvious and to many seemingly obtainable. Today’s Voice of Russia exposes what we shared years ago: The BRICS nations ARE conspiring to replace the dollar in international trade. Of course, Brazil, Russia, India, China, and South Africa each have unique views on the dollar as reserve currency. But, they do appear united, with varying degrees of passion, in a desire to at least see the dollar’s global role diminished. From Voice of Russia today (emphasis added with bold):
On June 10th, Sergey Glaziev, Putin’s economy advisor published an article outlining the need to establish an international alliance of countries willing to get rid of the dollar in international trade and refrain from using dollars in their currency reserves. The ultimate goal would be to break the Washington’s money printing machine that is feeding its military-industrial complex and giving the US ample possibilities to spread chaos across the globe, fueling the civil wars in Libya, Iraq, Syria and Ukraine. Glaziev’s critics believe that such an alliance would be difficult to establish and that creating a non-dollar-based global financial system would be extremely challenging from a technical point of view. However, in her discussion with Vladimir Putin, the head of the Russian central bank unveiled an elegant technical solution for this problem and left a clear hint regarding the members of the anti-dollar alliance that is being created by the efforts of Moscow and Beijing:
“We’ve done a lot of work on the ruble-yuan swap deal in order to facilitate trade financing. I have a meeting next week in Beijing,” she said casually and then dropped the bomb: “We are discussing with China and our BRICS partners the establishment of a system of multilateral swaps that will allow to transfer resources to one or another country, if needed. A part of the currency reserves can be directed to [the new system].” (source of the quote: Prime news agency)
It seems that the Kremlin chose the all-in-one approach for establishing its anti-dollar alliance. Currency swaps between the BRICS central banks will facilitate trade financing while completely bypassing the dollar. At the same time, the new system will also act as a de facto replacement of the IMF, because it will allow the members of the alliance to direct resources to finance the weaker countries. As an important bonus, derived from this “quasi-IMF” system, the BRICS will use a part (most likely the “dollar part”) of their currency reserves to support it, thus drastically reducing the amount of dollar-based instruments bought by some of the biggest foreign creditors of the US.
This is not idle talk. Whether there really is an “anti-dollar alliance” and whether or not such an effort would be effective are perhaps different questions. But there should be no doubt in regard to Putin’s intentions. The Russian government appears convinced that an anti-dollar alliance is forming and can be effective, as explained in the article:
Skeptics will surely claim that a BRICS-based anti-dollar alliance will not manage to deprive the dollar of its global reserve currency status. Instead of arguing against this line of thought, it is easier to point out that Washington is doing its best to enlarge the ranks of the enemies of the dollar. Asked by Russia 24 channel to comment on Nabiullina’s statements, Andrei Kostin, the president of the state-owned VTB bank and one of the staunchest supporters of anti-dollar policies, offered an interesting perspective on the situation in Europe:
“I think the work on ruble-yuan swap line will finalized in the nearest future and the way for ruble-yuan settlement will be open. Moreover, we are not the only ones with such initiatives. We know about the statements made by Mr. Noyer, chairman of the Bank of France. As a retaliation for what Americans have done to BNP Paribas, he opined that the trade with China must be done in yuan or euro.”
If the current trend continues, soon the dollar will be abandoned by most of the significant global economies and it will be kicked out of the global trade finance. Washington’s bullying will make even former American allies chose the anti-dollar alliance instead of the existing dollar-based monetary system. The point of no return for the dollar may be much closer than it is generally thought. In fact, the greenback may have already passed its point of no return on its way to irrelevance.
Obviously, there is skepticism in Washington. It should be noted, however, that American arrogance in regard to dollar permanence is resented at the very least. The French are angry over BNP Paribas fines imposed due to dollar-based transactions. The British were upset over the treatment of Standard Chartered over fines imposed regarding Iranian money laundering. Our use of sanctions has created an anti-dollar mood. Even American manufacturers are upset (as noted in MoneyNews):
Two top U.S. business lobbies are preparing to publicly break with President Barack Obama over the prospects of more sanctions against Russia after months of quietly raising their objections with the White House.
The U.S. Chamber of Commerce and National Association of Manufacturers plan to run newspaper advertisements Thursday in the New York Times, Wall Street Journal and Washington Post, warning that more Russia sanctions risk harming U.S. workers and businesses, said a person familiar with the plans, who asked not to be identified to discuss private deliberations.
Noted investor Jim Rogers also made this point recently:
Putin is clearly using this European frustration to create the anti-dollar wedge (also excerpted from Voice of Russia, emphasis added with bold):
18 June 2014
Sergey Glazyev, the economic aide of Vladimir Putin, published an article outlining a plan for “undermining the economic strength of the US” in order to force Washington to stop the civil war in Ukraine. Glazyev believes that the only way of making the US give up its plans on starting a new cold war is to crash the dollar system.
…According to Glazyev, the so-called “third phase” of sanctions against Russia will be a tremendous cost for the European Union. The total estimated losses will be higher than 1 trillion euros. Such losses will severely hurt the European economy, making the US the sole “safe haven” in the world. Harsh sanctions against Russia will also displace Gazprom from the European energy market, leaving it wide open for the much more expensive LNG from the US.
Co-opting European countries in a new arms race and military operations against Russia will increase American political influence in Europe and will help the US force the European Union to accept the American version of the Transatlantic Trade and Investment Partnership, a trade agreement that will basically transform the EU into a big economic colony of the US. Glazyev believes that igniting a new war in Europe will only bring benefits for America and only problems for the European Union. Washington has repeatedly used global and regional wars for the benefit of the American economy and now the White House is trying to use the civil war in Ukraine as a pretext to repeat the old trick.
Glazyev’s set of countermeasures specifically targets the core strength of the US war machine, i.e. the Fed’s printing press. Putin’s advisor proposes the creation of a “broad anti-dollar alliance” of countries willing and able to drop the dollar from their international trade. Members of the alliance would also refrain from keeping the currency reserves in dollar-denominated instruments. Glazyev advocates treating positions in dollar-denominated instruments like holdings of junk securities and believes that regulators should require full collateralization of such holdings. An anti-dollar coalition would be the first step for the creation of an anti-war coalition that can help stop the US’ aggression.
Unsurprisingly, Sergey Glazyev believes that the main role in the creation of such a political coalition is to be played by the European business community because America’s attempts to ignite a war in Europe and a cold war against Russia are threatening the interests of big European business. Judging by the recent efforts to stop the sanctions against Russia, made by the German, French, Italian and Austrian business leaders, Putin’s aide is right in his assessment. Somewhat surprisingly for Washington, the war for Ukraine may soon become the war for Europe’s independence from the US and a war against the dollar.
Other allies question why the dollar should retain superior status when they could conduct trade with other nations directly in their own currencies. The British are pushing to lead in Yuan trading. Remember that the Chinese laughed at Treasury Secretary Geithner’s suggestion that the dollar would remain strong. Even American citizens living abroad are questioning the U.S. Government draconian overreach with FATCA, prompting a record renouncing of U.S. citizenship.
Russia is certainly the most vocal in their planning for the end of the dollar but they are not alone. The Chinese have quietly amassed a great deal of gold. They are rapidly expanding the use of the yuan, even in the U.S. market (as noted by the Financial Times on June 4):
It is the monetary equivalent of what Chairman Mao called “bombarding the headquarters”. China’s renminbi is rapidly displacing the US dollar as a trading currency not only in Asia and Europe but now also in the US home market.
The value of renminbi payments between the US and the rest of the world rose by 327 per cent in April this year from the same month a year ago as more US corporations switched to using the Chinese currency to pay for imports from China, according to data from SWIFT, the international currency settlement firm.
The Chinese have plotted alternatives to dollar-based institutions such as The World Bank and may even be lobbying for the IMF to move to Beijing. They are also teaming with Russia to create non-dollar ratings agencies. And, in their internal documents the Chinese government has made it clear that the dollar must go. In frustration with Washington, they even publicly let slip last September that the world must be de-Americanized and the dollar replaced. Their actions speak even louder than their words, as China rapidly displaces the dollar for their own trading as noted recently in The Wall Street Journal:
“In its continued push to make the yuan a global currency, China’s central bank said Sunday it plans to designate clearing banks for its currency in Paris and Luxembourg, as the two financial centers battle with London to become the leading European offshore yuan-trading city…
China’s currency has become increasingly popular in settling total trade. In the first three months, 18% of China’s total trade, or 1.09 trillion yuan, was paid for in yuan, up from 14% in the fourth quarter of last year, according to Bank of China. That compares with just 1% of China’s total cross-border trade five years ago.”
The point is this. While Washington arrogantly assumes the world will always need and want American dollars, many in the world (including Americans living abroad and our own banking industry as well as other astute investors) see the handwriting on the wall. Others are diligently working to get off a dollar standard. We have been warning about this as a “Phase Three” economic attack for more than five years in reports to the Pentagon and briefings to various intelligence agencies and Congress. The evidence has been piling up for years. Sadly, each day brings further proof that we have been right all along. The implications are extremely serious.