By Allen Currie
China offers other Brics renminbi loans
By Henny Sender in Hong Kong and Joe Leahy in São Paulo
March 7, 2012 8:06 pm
China intends to extend renminbi loans to other Brics nations, in another step towards the internationalisation of its currency.
The China Development Bank will sign a memorandum of understanding in New Delhi with its Brazilian, Russian, Indian and South African counterparts on March 29, say people familiar with their talks. Under the agreement CDB, which lends mainly in dollars overseas, will make renminbi loans available, while the other Brics nations’ development banks will also extend loans denominated in their respective currencies.
Why do I find this important? For many years the Chinese have been buying commodities (such as copper) mines and other commodity based assets as fast as they could. Makes good business sense. Invest your profits to secure against price and supply disruption. And they did have a lot of profits resting on an increasingly shaky US dollar base. Commodities in hand were far better.
Last week I noticed a couple of separate news items. One specifically dealt with a new announcement that China was prepared to ”do business” with their trade partners in Yuan. (read we are pressuring them) The second was a chart showing that their percentage reserves in USD have dropped from 65% to 54% in two years!!! That is IN ADDITION to the trade surpluses that the China is running with the US. Money that the US sends more or less directly to China. Last year alone the US ran a $272 billion trade deficit with China. Given the absolute size of their reserves, their announcement of a year or two ago that they would “diversify out of the US dollar,” they are doing so at a mind boggling pace. Almost impossible to move those quantities in the foreign exchange markets without major disruption. My antennae went straight up.
This announcement is especially significant to me. In my mind there cannot be any good for the USD in these moves and their subsequent reactions. This has to be a sneak nuclear attack where the Chinese assume that they will get hurt but not nearly as much as the current entities in the world financial system. In fact that is probably true, especially since the US has depleted its financial nuclear stockpile. As well, The US has its hands tied via the amount of bonds the Chinese hold. Those inscrutable Orientals are really good at surprise attacks, an objective that most warriors lust after. Waking up on Dec 8 with half your fleet gone by surprise attack is not fun. Right now I am suggesting I can see financial Kamakasi planes on the horizon. Better the US should take its eyes off Europe again to glance west for just a moment or two.
Mind you, I don’t think it is going to be much of a surprise to the powers that be. Recently the US has been passing all sorts of legislation designed to control its own home turf. For example the recent legislation allowing American citizens to be detained by the armed forces indefinitely. I don’t think they really have any choice being bankrupt and all. Then there is this; March 16, Friday night, Obama signed the National Defense Resources Preparedness Executive Order. The Federal Government’s plans for 100% control of private resources, labor, and assets in the event of an emergency.
For example section 502; to employ persons of outstanding experience and ability without compensation and to employ experts, consultants, or organizations. – Get high or numb, using your method of choice before reading the document.
Is the hair on the back of your neck rising yet? Just like under Hitler, this control will last as long as the president decides that a state of emergency exists.
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