munKNEE.com Your Key to Making Money
As it tries to punish Russia for the latter’s dismemberment of Ukraine, the West is discovering that the 
balance of power isn’t what it used to be. Russia is a huge supplier of oil and gas — traded in US dollars — which gives it both leverage over near-term energy flows and, far more ominous for the U.S., the ability to threaten the USD’s reign as the world’s reserve currency – and it’s taking some big, active steps towards that goal.
So says John Rubino (dollarcollapse.com) in edited excerpts from his original article* entitled Welcome to the Currency War, Part 14: Russia, China, India Bypass the Petrodollar.
The following article is presented by Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), the FREE Market Intelligence Report newsletter (sample here; register here) and www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) and has been edited, abridged and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. This paragraph must be included in any article re-posting to avoid copyright infringement.
Rubino goes on to say in further edited excerpts:
As Zero Hedge has noted [in edited excerpts from an article entitled] Russia Prepares Mega-Deal With India After Locking Up China With “Holy Grail” Gas Deal:
…[W]hile the West is busy alienating Russia in every diplomatic way possible, without of course exposing its crushing over-reliance on Russian energy exports to keep European industries alive, Russia is just as busy:
- cementing its ties with China, in this case courtesy of Europe’s most important company, Gazprom, which is preparing to announce the completion of a “holy grail” natural gas supply deal to Beijing and
- Rosneft, the world’s top listed oil producer by output, may join forces with Indian state-run Oil and Natural Gas Corp to supply oil to India over the long term….
We just have one question: will payment for crude and LNG be made in Rubles or Rupees – or in gold – because it certainly won’t be in dollars?…
While the U.S. is bumbling every possible foreign policy move in Ukraine…Russia is aggressively cementing the next, biggest (certainly in terms of population and natural resources), and most important New Normal geopolitical Eurasian axis: China – Russia – India. There is only one country missing – Germany – because, while diplomatically Germany is ideologically as close to the U.S. as can be, its economy is far more reliant on China and Russia, something the two nations realize all too well. The second the German industrialists make it clear they are shifting their allegiance to the Eurasian Axis and away from the Group of 6 (ex Germany) most insolvent countries in the world, that will be the moment the days of the current reserve petrocurrency will be numbered.
The U.S. Dollar Will Collapse When This Upcoming Event Happens
To understand why trade deals between Russia, China and India are potentially huge, a little history is useful:
- Back in the 1970s, the U.S. cut a deal with Saudi Arabia — at the time the world’s biggest oil producer — calling for the U.S. to prop up the kingdom’s corrupt monarchy in return for a Saudi pledge that it would accept only USDs in return for oil.
- The “petrodollar” became the currency in which oil and most other goods were traded internationally, requiring every central bank and major corporation to hold a lot of dollars and cementing the greenback’s status as the world’s reserve currency.
- This in turn has allowed the U.S. to build a global military empire, a cradle-to-grave entitlement system, and a credit-based consumer culture, without having to worry about where to find the funds. We just borrow from a world voracious for dollars.
…[I]f Russia, China and India decide to start trading oil in their own currencies, [however,] — or, as Zero Hedge speculates, in gold — then the petrodollar becomes just one of several major currencies [which would cause:]
- Central banks and trading firms, that now hold 60% of their reserves in dollar-denominated bonds, to have to re-balance by converting dollars to those other currencies. Trillions of dollars would be dumped on the global market in a very short time, which would:
- lower the dollar’s foreign exchange value in a disruptive rather than advantageous way,
- raise domestic U.S. interest rates and
- make it vastly harder for us to bully the rest of the world economically or militarily.
The West seems not to have grasped just how vulnerable it was when it got involved in this latest backyard squabble but it may be about to find out [because] it could end up being an absolute “win-win” for Russia, China and India…whose
- currencies would gain prestige, giving their governments more political and military muscle (while that of the U.S. is diminished) and
- the gold and silver they’ve vacuumed up in recent years would rise in value more than enough to offset their depreciating Treasury bonds.
Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.
*http://dollarcollapse.com/currency-war-2/welcome-to-the-currency-war-part-14-russia-china-india-bypass-the-petrodollar/ (Copyright © DollarCollapse.com)
Related Articles:
Russia could initiate a much scarier financial attack on the U.S. than dumping its holdings of U.S. Treasury bonds were America to impose sanctions because of Russia’s actions in the Crimea. Read More »
2. Financial Warfare: What Would Russia’s Sale of US Treasury Holdings Mean for U.S.?
News events from the Crimean Peninsula have increased paranoia in the mainstream financial press and certain corners of the internet [that Russia, in response to any economic sanctions implemented by the West, might engage in some form of retaliatory financial warfare. Read More »
3. Will We See Financial Warfare Between U.S. & Russia?
There is little the United States can do militarily to change the outcome in Ukraine…but this does not mean the United States is helpless. No sooner had the Russian invasion become clear than the White House announced the possibility of economic sanctions against Russia….By implementing such sanctions, the United States has moved in the direction of a new kind of warfare — not kinetic war involving ships, planes and missiles — but financial war involving cash, stocks, bonds and derivatives. The policy question, and an important question for investors, is how far can this type of financial warfare go and how effective can it be? What will the impact of financial war be on markets in general and investors in particular? Read More »
4. What Would USD Collapse Mean for the World?
I came to the conclusion several years ago that it was just a matter of time before the world realized that the relative functionality of the U.S. dollar was about to go belly up – to collapse. [Below is an explanation as to why I have come to that conclusion and what I think it would mean for the well-being of the world.] Words: 881 Read More »
5. The U.S. Dollar Will Collapse When This Upcoming Event Happens
If we want to better understand the answer to the elusive question of “When will the fiat US dollar collapse?”, we have to watch the petrodollar system and the factors affecting it. Read More »
6. Shift From U.S. Dollar As World Reserve Currency Underway – What Will This Mean for America?
Today, more than 60% of all foreign currency reserves in the world are in U.S. dollars – but there are big changes on the horizon…Some of the biggest economies on earth have been making agreements with each other to move away from using the U.S. dollar in international trade…[and this shift] is going to have massive implications for the U.S. economy. [Let me explain what is underway.] Words: 1583 Read More »
The American dollar will be overthrown…in as short a period as 5 to 10 years says one analyst while another believes it will happen as early as 2015, 2016 latest. Here’s why. Read More »
8. The Beginning of the END for the U.S. “Petrodollar”!
A major portion of the U.S. dollar’s valuation stems from its lock on the oil industry and if it loses its position as the global reserve currency the value of the dollar will decline and gold will rise. Iran’s migration to a non-dollar based international trade system is the testing of the waters of a non-USD regime…transition to a world in which the U.S. Dollar suddenly finds itself irrelvant. [Let me explain.] Words: 1200
9. Video: India to Pay for Iranian Crude Oil in Gold Instead of Dollars
The EU has delivered on its threat to ban the import of crude oil from Iran, in response to its nuclear programme. The latest round of sanctions prohibits any new oil contracts, while allowing for existing deals to run until July but Tehran is apparently finding ways to keep business pumping. Reports say Iran will keep supplying one of its biggest customers – India – but will get payment in gold instead of dollars. Video* length: 02:37 minutes.
10. Why America Should Relinquish Reserve Status for its Dollar
Conspiracy theory notwithstanding, claims that the reserve status of the U.S. dollar unfairly benefits the U.S. are no longer true. On the contrary, it has become a burden, both for America and the world. [Let me explain.] Words: 825
11. Will the Trickle Out of the U.S. Dollar Now Become a Torrent?
Yesterday, another brick was taken out of America’s dollar fundamentals. China and Russia have announced that they intend to stop using the U.S. dollar and begin to pay for trade between their two countries in renminbi and rubles, respectively, from now on. It begs the following question: Will the OPEC countries of the Middle East follow suit in abandoning the U.S. dollar? Words: 614
12. The U.S. Dollar: Too Big to Fail?
Those in the U.S. power structure know what the plan is if the U.S. dollar should fail. They are not admitting publically that there is even the remotest chance that it could happen but, rest assured, there is a plan. There is always a plan. To paraphrase Franklin Roosevelt, nothing happens by chance in government, so don’t be caught up in such a ‘surprise’ event – whatever it may be and whenever it occurs. Words: 1345
13. Is There a Viable Alternative to the Dollar as the Reserve Currency?
Within the recent retracement of the U.S. currency there has been endless speculation about the future role of the dollar as the world’s primary reserve currency. Moreover, there has even been conjecture that the dollar will no longer exist at some point in the near future but any case made for the vulnerability of the dollar falls short when it comes to naming alternatives. Words: 631
