As a reminder, nothing lasts forever…
The World Bank’s former chief economist wants to replace the US dollar with a single global super-currency, saying it will create a more stable global financial system.
“The dominance of the greenback is the root cause of global financial and economic crises,” Justin Yifu Lin told Bruegel, a Brussels-based policy-research think tank.
“The solution to this is to replace the national currency with a global currency.”
The writing is on the wall for dollar hegemony. As Russian President Vladimir Putin said almost two months ago during the BRICs summit in Xiamen,
“Russia shares the BRICS countries’ concerns over the unfairness of the global financial and economic architecture, which does not give due regard to the growing weight of the emerging economies. We are ready to work together with our partners to promote international financial regulation reforms and to overcome the excessive domination of the limited number of reserve currencies.”
As Pepe Escobar recently noted, ‘to overcome the excessive domination of the limited number of reserve currencies’ is the politest way of stating what the BRICS have been discussing for years now; how to bypass the US dollar, as well as the petrodollar.
Beijing is ready to step up the game. Soon China will launch a crude oil futures contract priced in yuan. This means that Russia – as well as Iran, the other key node of Eurasia integration – may bypass US sanctions by trading energy in their own currencies, or in yuan. Inbuilt in the move is a true Chinese win-win; the yuan – according to some – will be fully convertible into gold on both the Shanghai and Hong Kong exchanges.
The new triad of oil, yuan and gold is actually a win-win-win. No problem at all if energy providers prefer to be paid in physical gold instead of yuan. The key message is the US dollar being bypassed.
China’s plans for oil futures trading go back more than two decades, with the government introducing a domestic crude contract in 1993 and stopping a year later amid an overhaul of its energy industry. But in 2013, we first hinted at the birth of the petroyuan was looming…
In doing so China is effectively lobbing the first shot across the bow of the Petrodollar system, and more importantly, the key support of the USD in the international arena… setting the scene for the petroyuan.
And now, we are within two months of it becoming a reality as China prepares to roll out a yuan-denominated oil contract within the next two months…
“Approval of the trading rules by the securities regulator marks the clearance of a major hurdle toward launch of the contract,” Li Zhoulei, an analyst with Everbright Futures, said by phone.
“The latest rules raised entry threshold for investors from the draft rules, which shows the government wants to avoid volatility when it first starts trading.”
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