Dollar no longer primary oil currency as China begin selling oil using YUAN

[JayAtl]

It won't happen any time soon. China may want the yuan to be the world currency, but she doesn't want other to speculate and profit off the country in the progress.

The last country to be in this position was Japan, and what happened was that the Yen was allowed to appreciate so fast (partly due to US pressure), that it resulted in a massive speculation bubble...everyone bought the Yen and Japanese investments but the country does not have the fundamentals to support it. It resulted in 2 lost decades of Economic growth for the country.

If China learned anything from that she would probably just keep letting Yuan into the world financial system a bit at a time while appreciating the currency by like 3% a year so that it won't be worth it to speculate in the currency for profit.

Its far better to accept slower growth and devalued US dollars (and more expensive oil/commodities) for now, rather than risking the same thing as Japan.

although parts of what you stated are right. you've assumed that China can take that slot if so desired- it's fundamentally impossible- pigs would fly first because the fundamentals are not in place period. it cannot stand up to that test period.

Most commentators on this thread have zero clue- hell 99% of them have no clue that the fundamentals in place -will not, shall not and cannot see the yuan as anything but a regional currency trade in some cases. India also uses local currency in international and in fact did so 6 months earlier in the very oil market this thread spoke to.

 

[terranMarine]

America wants and takes actions to whoever challenges her supremacy to fail. Be it the Soviet union, the Japanese in the 80s or the Euro in recent years and now China. China must stay low key and be careful, for she'll go a long way to achieve her goal.

You got that right, Greece is run by idiots that let Goldman Sachs ruined their country. Now the whole Eurozone is in a mess, if it wasn't for the stronger EU countries especially Germany the Euro currency would have collapsed by now. Question is how long can Germany keep this up and China is also helping the EU by buying EU bonds. China certainly isn't gonna allow some American company to bring her down, is not being controlled like Japan. Slowly working to become an international currency as long the American currency is not being threatened.

 

[Fanling Monk]

although parts of what you stated are right. you've assumed that China can take that slot if so desired- it's fundamentally impossible- pigs would fly first because the fundamentals are not in place period. it cannot stand up to that test period.

Most commentators on this thread have zero clue- hell 99% of them have no clue that the fundamentals in place -will not, shall not and cannot see the yuan as anything but a regional currency trade in some cases. India also uses local currency in international and in fact did so 6 months earlier in the very oil market this thread spoke to.

I feel safe for my country now if all Americans are as smart and think like you.

 

[JayAtl]

You got that right, Greece is run by idiots that let Goldman Sachs ruined their country. Now the whole Eurozone is in a mess, if it wasn't for the stronger EU countries especially Germany the Euro currency would have collapsed by now. Question is how long can Germany keep this up and China is also helping the EU by buying EU bonds. China certainly isn't gonna allow some American company to bring her down, is not being controlled like Japan. Slowly working to become an international currency as long the American currency is not being threatened.

you have so many factually incorrect statements there that I'm beginning to think you see your self as an all in cheerleader, more than the player on the field of knowledge. You pick up on some shiny object vis-a-vis an article about a " private" US firm and tie that to the reason for Greece's downfall.

 

[JayAtl]

I feel safe for my country now if all Americans are as smart and think like you.

well I aim to please. Post #29 in here- tells you why the fundamentals of the Yuan / China won't see it ever topple the US dollar. It is spelled out in layman terms and open to anyone challenging it's claim

 

[Fanling Monk]

well I aim to please. Post #29 in here- tells you why the fundamentals of the Yuan / China won't see it ever topple the US dollar. It is spelled out in layman terms and open to anyone challenging it's claim

No problem there, the Yuan is not about to challenge the mighty dollar. China just does what she has to so that her trades won't be constrained and restricted by a third country, that all.

 

[terranMarine]

you have so many factually incorrect statements there that I'm beginning to think you see your self as an all in cheerleader, more than the player on the field of knowledge. You pick up on some shiny object vis-a-vis an article about a " private" US firm and tie that to the reason for Greece's downfall.

People can judge that for themselves after reading these 2 articles. Now why would i connect an article about Goldman Sachs with the downfall of Greece? I don't have to because the authors of these articles made the link.

Greek Debt Crisis: How Goldman Sachs Helped Greece to Mask its True Debt - SPIEGEL ONLINE

What price the new democracy? Goldman Sachs conquers Europe - Business Analysis & Features - Business - The Independent

 

[Mahmoud_EGY]

this is very good news and i hope china and iran and russia the best in their fight against the west but i have a question

as the rogue nation can simply choose to sell its oil to China, and receive Yuan in return,

i think china policy is keeping the yuan low so the chinnese goods can be cost effective and compete in the world wont that make the value of the yuan rise ?

 

[Banglar Lathial]

Good start. Attempts should be made to bring all the oil/gas producing countries within this fold. One must list the countries that are currently the largest holders of US$ bills and US govt bonds, tick off those countries that are occupied by the US military and thus, can not exercise any sovereign decisions or adopt independent foreign policy.

Also, countries like Venezuela and Bolivia should be actively persuaded to join this noble gesture of dumping the dollar. In this way, China can also start to gain foothold in Latin America, perhaps, expand into Mexico later on, to 'extend its close friendship to the USA' should the need arise. It is only natural that if USA would place itself firmly in countries around China, then China might start thinking of returning the favour.

I am quite hopeful that Chinese think tanks would have calculated all the necessary implications of such a move and the govt would have prepared well ahead of time for this eventuality. More and more countries that have been ignored by the West should be brought to the Chinese fold by economic and political incentives to expand the network of countries that would be active users of the new global currency.

Also, as most of the largest oil/gas producers in the world are Muslim majority countries in Middle East and Central Asia, it would be prudent of China to expand its knowledge and familiarity with the Muslim world, and try to find sympathetic elements that could help expel the American influence in the 'puppet states'.

If all of these objectives are successfully secured, it may be safe to say that the death knell for the dollar would be sounded.

 

[Banglar Lathial]

this is very good news and i hope china and iran and russia the best in their fight against the west but i have a question
i think china policy is keeping the yuan low so the chinnese goods can be cost effective and compete in the world wont that make the value of the yuan rise ?

Bro, it's not quite as simple as that. Low/high exchange rate ALONE does not determine the level of exports, though it surely affects it. I think China is trying to rely more on domestic consumption and investment for generating its economic growth for the near to mid term future, in that case, relatively lower reliance on exports would be helpful.

The problem with export-driven economies is that their fortunes swing very quickly with the declines of fortunes in their major export markets. It is a poor strategy to see all your plans and hopes smashed because some distant country made faulty economic decisions. For that reason, nobody would ideally like to rely on exports alone for their domestic growth. Probably, China would try to move away from exports as much as possible for their growth as well.

 

[Mahmoud_EGY]

Bro, it's not quite as simple as that. Low/high exchange rate ALONE does not determine the level of exports, though it surely affects it. I think China is trying to rely more on domestic consumption and investment for generating its economic growth for the near to mid term future, in that case, relatively lower reliance on exports would be helpful.

The problem with export-driven economies is that their fortunes swing very quickly with the declines of fortunes in their major export markets. It is a poor strategy to see all your plans and hopes smashed because some distant country made faulty economic decisions. For that reason, nobody would ideally like to rely on exports alone for their domestic growth. Probably, China would try to move away from exports as much as possible for their growth as well.

if this is the new strategy of china this is good news for all
to tell you the truth our local egyptian goods cant compete with low prices of china

 

[Banglar Lathial]

if this is the new strategy of china this is good news for all
to tell you the truth our local egyptian goods cant compete with low prices of china

I don't know for certain if that is the new strategy, but that seems to be the case going by some of their recent decisions. The low price of Chinese goods has to do with numerous factors like economies of scale, labour costs etc. That is why not all Chinese goods are cheaper than BD goods, for example, and in those cases, BD goods are more favoured in BD.

As an example, a few decades ago, mostly Western but foreign multinational companies in general dominated the domestic pharmaceuticals market in Bangladesh, but for the last decade or so, Bangladeshi companies have successfully driven them out of the domestic market, and now all the top 10 pharmaceuticals company in the market are domestic. Today, Bangladesh exports pharmaceuticals to more than 80 countries (the number should have risen to more than 120, if not 140 countries by now if not for this incompetent govt). The point is that price is not the only factor determining competitiveness, and nor is price determined by exchange rate alone.

 

[anarchy 99]

the yuan will not displace the dollar as THE reserve currency, but it will erode the amount of dollars the world holds as the dollar will have more competition from more reserve currencies.
this will make the world absorb less and less dollars and the US wont be able to print dollars and have low domestic US inflation while the rest of the world gets all the infaltion.

the thing that gives the US such a MASSIVE advantage where it can live beyond its means by going into massive deficits (massive military and welfare budgets) and have low coupon rates on its bonds is because the world uses dollars for trade (energy, agriculture, raw materials, manufactured goods, services trade), investment and finance.
they use all the dollars it has accumulated and invests its surpluses in US bonds thus keeping interest rates low in the US.

but the US federal reserve can monetize the debt even if foreigners are not buying US bonds because it can print dollars and buy the bonds. they know the world will still absorb the extra dollars in circulation.
this is the key.

its the ability of the fed to monetize the debt WITHOUT having massive domestic inflation is what makes the US live beyond its means.
china might buy bonds, but will demand a higher rate, but for the US the higher rates are unacceptable due to the high level of public debt.

if we can start to use our yuan in trade, investment and finance.....that will cause a lot less demand for dollars.
china is the largest exporter, 2nd largest importer, 2nd largest trading nation.
when china moves, you better believe it will cause big shifts.

i believe the yuan is not being held globally for a few reasons, one of it is the lack of capital account convertibility(investment and finance flows), the other is the lack of financial products (especially deep and liquid bond markets).
only 10 out of the 40 items in the capital account are fully convertible.

i believe more bilateral currency swaps need to be done with more countries. and the yuan should be allowed to directly trade against more currencies like we did against the japanese yen.

if you want convert the yuan to the ruble currently you need to buy US dollars and then convert it to ruble.
the US dollar acts as the intermidiate currency.

direct trading like between yuan-yen is when you can have yuan and directly buy yen without having to convert it to US dollars.
this will decrease the demand for dollars.

these little steps must be taken to gradually erode the amount of dollars the world is willing the absorb, that will limit the amount of dollars the fed can print to shore up their deficits.

without the dollar as the reserve currency, the US will have to live within its means and wont be able to have such massive military budgets. the cost of deficits will be much higher and US domestic inflation will be much higher and input costs will be high.

must develop the financial markets, especially the bond and commodity markets.
derivatives must be developed (futures, options and swaps) too.
the derivatives market is massive, its over $600 TRILLION, they are traded in dollars.

 

[JayAtl]

the yuan will not displace the dollar as THE reserve currency, but it will erode the amount of dollars the world holds as the dollar will have more competition from more reserve currencies.
this will make the world absorb less and less dollars and the US wont be able to print dollars and have low domestic US inflation while the rest of the world gets all the infaltion.

the thing that gives the US such a MASSIVE advantage where it can live beyond its means by going into massive deficits (massive military and welfare budgets) and have low coupon rates on its bonds is because the world uses dollars for trade (energy, agriculture, raw materials, manufactured goods, services trade), investment and finance.
they use all the dollars it has accumulated and invests its surpluses in US bonds thus keeping interest rates low in the US.

but the US federal reserve can monetize the debt even if foreigners are not buying US bonds because it can print dollars and buy the bonds. they know the world will still absorb the extra dollars in circulation.
this is the key.

its the ability of the fed to monetize the debt WITHOUT having massive domestic inflation is what makes the US live beyond its means.
china might buy bonds, but will demand a higher rate, but for the US the higher rates are unacceptable due to the high level of public debt.

if we can start to use our yuan in trade, investment and finance.....that will cause a lot less demand for dollars.
china is the largest exporter, 2nd largest importer, 2nd largest trading nation.
when china moves, you better believe it will cause big shifts.

i believe the yuan is not being held globally for a few reasons, one of it is the lack of capital account convertibility(investment and finance flows), the other is the lack of financial products (especially deep and liquid bond markets).
only 10 out of the 40 items in the capital account are fully convertible.

i believe more bilateral currency swaps need to be done with more countries. and the yuan should be allowed to directly trade against more currencies like we did against the japanese yen.

if you want convert the yuan to the ruble currently you need to buy US dollars and then convert it to ruble.
the US dollar acts as the intermidiate currency.

direct trading like between yuan-yen is when you can have yuan and directly buy yen without having to convert it to US dollars.
this will decrease the demand for dollars.

these little steps must be taken to gradually erode the amount of dollars the world is willing the absorb, that will limit the amount of dollars the fed can print to shore up their deficits.

without the dollar as the reserve currency, the US will have to live within its means and wont be able to have such massive military budgets. the cost of deficits will be much higher and US domestic inflation will be much higher and input costs will be high.

must develop the financial markets, especially the bond and commodity markets.
derivatives must be developed (futures, options and swaps) too.
the derivatives market is massive, its over $600 TRILLION, they are traded in dollars.

good lord man , from proclaiming that you guys will erode dollars when the current standard is 0.3% of yuan penetration vs. 85% dollars to China will demand a higher rate - when China just bought more bonds at a lower interest , where China will lose money when they sell it but yet buys it like all of the world-- I don't know if you think writing a long winded post here means it gives your claims to be true.

 

[manofwar]

With all the tall clams and predictions of an imminent Dollar collapse, these trolls don't realise that China stands to lose around 2 trillion dollars if this actually happens!! And they are gloating about it!!