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Working around the dollar

Watu3

I.T.S. Senior
Nov 17, 2017
1,375
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The US has long enjoyed economic benefits of the dollar being the world's reserve currency and more recently has been using the dollar as a weapon against China, Russia, Venezuela, and others by restricting investments, credit and international trade to limit other countries ability to obtain dollars or conduct trade. Well, if you are a pain in the butt long enough, others will work together to find a work around. Interesting reading....

"....two stories on the front page of this morning’s Wall Street Journalillustrate the
phenomenon beautifully. The paper won’t connect the dots for you, so we will…
“Huawei Manages to Make Smartphones Without American Chips,”says one
of the headlines.
Huawei is the Chinese tech giant that’s been in Washington’s crosshairs for many years
now, long before Donald Trump entered the realm of presidential politics. (We know
from the 2013 Edward Snowden leaks that the NSA burrowed its way into servers at
Huawei headquarters.)
Last May, the Trump administration banned U.S. shipments to Huawei. It was a blow to
companies like Qualcomm and Intel, which supplied Huawei with chips. Last month, the
Commerce Department partially reversed that ban — but too late for Huawei’s (former)
U.S. suppliers.
The Journal tells us Huawei’s latest smartphone contains no U.S. parts, per an analysis
by UBS and a Japanese lab called Fomalhaut Techno Solutions.
“While Huawei hasn’t stopped using American chips entirely, it has reduced its reliance
on U.S. suppliers or eliminated U.S. chips in phones launched since May, including the
company’s Y9 Prime and Mate smartphones, according to Fomalhaut’s teardown

analysis.”
Sucks to be Qualcomm or Intel, huh? Or a host of smaller companies like North
Carolina’s Qorvo Inc.… Massachusetts-based Skyworks Solutions… or Cirrus Logic of
Austin, Texas.
“China and Russia Are Partners — and Now Have a $55 Billion Pipeline to
Prove It,” says the other headline.
This is a huge story in both Russian and Chinese media today, while the nonfinancial
U.S. media are obsessed with impeachment and “Cyber Monday.” Here’s a tweet and
screengrab from China’s state-run CGTN network…

The “Power of Siberia” pipeline went into operation today, delivering Russian natural
gas to China. The Journal calls it “a physical bond strengthening a new era of
cooperation between two world powers that have separately challenged the U.S.”
The paper reminds us the pipeline is part of a 30-year, $400 billion gas deal signed by
Russian President Vladimir Putin and Chinese President Xi Jinping in May 2014.
What the Journal neglects to point out — but we pointed out way back then
— was an eyebrow-raising phrase in the joint statement issued by the two
leaders.
"The sides intend to take new steps to increase the level and expansion of spheres of
Russian-Chinese practical cooperation... including an increase in direct payments in
the Russian and Chinese national currencies in trade, investments and loan
services." [Emphasis ours.]
Anyway, sucks to be a U.S. producer of liquefied natural gas, huh? American LNG
exports to China were growing rapidly as recently as last year. Then came the trade war
and Chinese tariffs on LNG and those exports shriveled to literally zero. Now with
cheaper Russian gas flowing, there’s no chance of those exports resuming.
“Can a new financial system blunt the dollar’s role in financial warfare? The
answer is yes, and it’s happening before our eyes,” says Jim Rickards.
Thing is, “this new system will not involve Russian rubles, Chinese yuan or even the
euro. None of those existing currencies has the liquid bond markets and rule of law
needed to perform as the dominant reserve currency. Instead, this new system is based
on gold.
“Almost unnoticed, Russia and China have been accumulating massive quantities of
physical gold bullion. Russia’s gold reserves have increased from 600 tonnes to 2,230
tonnes in the past 10 years. China’s gold reserves have increased from 600 tonnes to
1,942 tonnes over the same period.
“The new system will be a hybrid of the oldest form of money — gold — and the newest

— digital currency. Russia and China are building encrypted-permissioned distributed
ledgers. This is basically a blockchain for members only. They are creating new digital
tokens.
“You can think of these as a Putin coins or Xi coins,” Jim goes on. “The coins
can be fixed at a value equal to an anchor, perhaps the IMF’s world money called
SDRs. Once the coin’s value is fixed, it’s simple to convert each coin to a weight of gold
at market prices.
“The coup de grâce comes when Russia and China announce a new trading network
that includes Turkey, Iran, North Korea and peripheral states in Eastern Europe and
Central Asia. Invitations to join would also be extended to fellow BRICS nations
including Brazil, India and South Africa.
“Member nations would agree that trade among them be invoiced in the new digital
currency. Iran would sell oil to China. China would sell electronics to Russia. Russia
would build nuclear plants for Brazil. Trading partners would periodically settle the
balance of payments in physical gold, which could simply undergo a title change in a
neutral depository run by the new network.
“This system is impervious to U.S. sanctions since no dollars are
involved,” Jim concludes. “The physical gold cannot be hacked, frozen or erased
because it’s not digital. The tokens are just a way to keep score and a convenient
medium of exchange.
An age of U.S. dominance in financial warfare would come to an end.”?

The US's current policy of self-isolation makes cooperative arrangements among other countries ever more attractive and the US less able to respond because each year we have fewer allies.
 
The US has long enjoyed economic benefits of the dollar being the world's reserve currency and more recently has been using the dollar as a weapon against China, Russia, Venezuela, and others by restricting investments, credit and international trade to limit other countries ability to obtain dollars or conduct trade. Well, if you are a pain in the butt long enough, others will work together to find a work around. Interesting reading....

"....two stories on the front page of this morning’s Wall Street Journalillustrate the
phenomenon beautifully. The paper won’t connect the dots for you, so we will…
“Huawei Manages to Make Smartphones Without American Chips,”says one
of the headlines.
Huawei is the Chinese tech giant that’s been in Washington’s crosshairs for many years
now, long before Donald Trump entered the realm of presidential politics. (We know
from the 2013 Edward Snowden leaks that the NSA burrowed its way into servers at
Huawei headquarters.)
Last May, the Trump administration banned U.S. shipments to Huawei. It was a blow to
companies like Qualcomm and Intel, which supplied Huawei with chips. Last month, the
Commerce Department partially reversed that ban — but too late for Huawei’s (former)
U.S. suppliers.
The Journal tells us Huawei’s latest smartphone contains no U.S. parts, per an analysis
by UBS and a Japanese lab called Fomalhaut Techno Solutions.
“While Huawei hasn’t stopped using American chips entirely, it has reduced its reliance
on U.S. suppliers or eliminated U.S. chips in phones launched since May, including the
company’s Y9 Prime and Mate smartphones, according to Fomalhaut’s teardown

analysis.”
Sucks to be Qualcomm or Intel, huh? Or a host of smaller companies like North
Carolina’s Qorvo Inc.… Massachusetts-based Skyworks Solutions… or Cirrus Logic of
Austin, Texas.
“China and Russia Are Partners — and Now Have a $55 Billion Pipeline to
Prove It,” says the other headline.
This is a huge story in both Russian and Chinese media today, while the nonfinancial
U.S. media are obsessed with impeachment and “Cyber Monday.” Here’s a tweet and
screengrab from China’s state-run CGTN network…

The “Power of Siberia” pipeline went into operation today, delivering Russian natural
gas to China. The Journal calls it “a physical bond strengthening a new era of
cooperation between two world powers that have separately challenged the U.S.”
The paper reminds us the pipeline is part of a 30-year, $400 billion gas deal signed by
Russian President Vladimir Putin and Chinese President Xi Jinping in May 2014.
What the Journal neglects to point out — but we pointed out way back then
— was an eyebrow-raising phrase in the joint statement issued by the two
leaders.
"The sides intend to take new steps to increase the level and expansion of spheres of
Russian-Chinese practical cooperation... including an increase in direct payments in
the Russian and Chinese national currencies in trade, investments and loan
services." [Emphasis ours.]
Anyway, sucks to be a U.S. producer of liquefied natural gas, huh? American LNG
exports to China were growing rapidly as recently as last year. Then came the trade war
and Chinese tariffs on LNG and those exports shriveled to literally zero. Now with
cheaper Russian gas flowing, there’s no chance of those exports resuming.
“Can a new financial system blunt the dollar’s role in financial warfare? The
answer is yes, and it’s happening before our eyes,” says Jim Rickards.
Thing is, “this new system will not involve Russian rubles, Chinese yuan or even the
euro. None of those existing currencies has the liquid bond markets and rule of law
needed to perform as the dominant reserve currency. Instead, this new system is based
on gold.
“Almost unnoticed, Russia and China have been accumulating massive quantities of
physical gold bullion. Russia’s gold reserves have increased from 600 tonnes to 2,230
tonnes in the past 10 years. China’s gold reserves have increased from 600 tonnes to
1,942 tonnes over the same period.
“The new system will be a hybrid of the oldest form of money — gold — and the newest

— digital currency. Russia and China are building encrypted-permissioned distributed
ledgers. This is basically a blockchain for members only. They are creating new digital
tokens.
“You can think of these as a Putin coins or Xi coins,” Jim goes on. “The coins
can be fixed at a value equal to an anchor, perhaps the IMF’s world money called
SDRs. Once the coin’s value is fixed, it’s simple to convert each coin to a weight of gold
at market prices.
“The coup de grâce comes when Russia and China announce a new trading network
that includes Turkey, Iran, North Korea and peripheral states in Eastern Europe and
Central Asia. Invitations to join would also be extended to fellow BRICS nations
including Brazil, India and South Africa.
“Member nations would agree that trade among them be invoiced in the new digital
currency. Iran would sell oil to China. China would sell electronics to Russia. Russia
would build nuclear plants for Brazil. Trading partners would periodically settle the
balance of payments in physical gold, which could simply undergo a title change in a
neutral depository run by the new network.
“This system is impervious to U.S. sanctions since no dollars are
involved,” Jim concludes. “The physical gold cannot be hacked, frozen or erased
because it’s not digital. The tokens are just a way to keep score and a convenient
medium of exchange.
An age of U.S. dominance in financial warfare would come to an end.”?

The US's current policy of self-isolation makes cooperative arrangements among other countries ever more attractive and the US less able to respond because each year we have fewer allies.
Yeah we can always count on the enginuity of China to use stolen chip technology to stiff us. Still, results are the same.
 
China is going to do what China does, but making ourselves patsies by amping up their motivation and isolating ourselves from our allies only aids and abets the Chinese, Russia, Turkey, and their growing list of supporters. Trump's election has brought Putin better news everyday.
 
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