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A panel discussion on global financial risk at Davos January 23, 2019

Posted by hslu in China, 美國, Economics, Renminbi, Trade, U.S. dollar, 一帶一路, 中國.
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https://www.bloomberg.com/news/videos/2019-01-22/dalio-weber-on-rethinking-global-financial-risk-davos-panel-video

 

 

 

A Chinese financial regulator, a professor on macroeconomics, a hedge fund boss and a world-class bank CEO discussing global financial crisis with heavy emphasis on China.

An eye-opening panel discussion.

The end of dollar hegemony is near August 27, 2018

Posted by hslu in China, 石油, 美國, Economics, Energy, Oil, Russia, Trade, Trump, U.S. dollar, 川普, 中國.
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Source: Yahoo News

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http://flip.it/DMljla

The unintended consequence of U.S. sanctions against Russia, Iran, Turkey, China and many other countries, companies and individuals in the world is the rise of Renminbi as an alternative to U.S. dollar in global trades.

The U.S. sanctions forced these nations to come up with a new “SWIFT” system to move money without the use of the current SWIFT network which is controlled by the America.

Trump initiated the sanctions against the world and China’s currency received wider acceptance.

因果報應啊。

Another thing which reduces the global demand of the U.S. currency is, strangely enough, the rise of the shale oil production in the U.S. As America produces more from tight formations, oil imports from foreign countries is reduced by as much as 6 million barrels every day. At roughly $70 per barrel for WTI, that’s a reduction of $420 million of U.S. dollar in global commodity trades every day.

And what might be the consequence of that? It is hard to say now but it will happen when people are least expected.

America is at it again, but June 24, 2018

Posted by hslu in China, 特朗普, 美國, Economics, Globlization, Japan, Renminbi, Trade, Trump, U.S. Foreign Policy, 川普, 中國.
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Source: Flipboard

http://flip.it/rSfnzn

Japan’s yielding to America’s pressure in 1985 at the Plaza Hotel in New York was the beginning of the end of Japan’s brief dominance in world trade. The Plaza Accord and what Japanese government chose to do afterwards started the the long and devastating decline of the Japanese economy. To this date, Japan is still counting the lost decades with no end insight.

Source: Google image

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America used atomic bombs to defeat the Japanese empire in 1945 without invading Japan. Forty years later, America used another nuclear bomb, this time a financial one, to finish Japan once and for all.

The author compared the current escalatingl trade war between China and the U.S. to what the U.S. has done to Japan in 1985. He cited several reasons that China might face the same fate as Japan did 40 years ago. Among them a less developed financial system, not as innovative as Japan and an alarming debt level.

However, he misses several key differences between Japan in 1985 and China in 2018:

  • America is fighting the trade war against China on its own. Worse, America under Trump is fighting an escalating trade wars against its former allies and many other countries at the same time. America is destined to lose the trade war and suffer significant job losses judging by recent history. Back in 1985, America had help from Great Britain, France and West Germany.
  • In 1985, Japanese yen was forced to strengthen against American dollar and other major currencies via market manipulation by the U.S. and its allies. Renminbi isn’t freely traded now and its exchange rate is set by the Chinese government. Lately, Renminbi has been losing value against the U.S. dollar which will alleviate the impacts of America’s tariff against China.
  • America is much weaker now economically compares to the U.S. in 1985. The U.S. has fought two wars with nothing to show for except dead bodies and several trillion dollars down the drain. America is facing terrorist threat daily. The war on terror is a tax on all Americans and it is like a cancer with no cure on American economy. Growth rate has been stuck at a lower level for many years. Wage growth hasn’t caught up with inflation. Debts at every levels are much higher. Federal deficit is approaching 5% of GDP. Welfare spending is shooting through the roof. Defense spending is standing ata ridiculous 3.5% of the GDP. And the demographics isn’t helping either.
  • Chinese government is a centralized government. It can react to market changes more quickly and be more efficient in policy execution and adaptation.
  • China has a much bigger domestic market while Japan’s economy was heavily dependent on export.

中美角力,暗潮洶湧,鹿死誰手,尙不知也。

Trading oil futures with Renminbi January 7, 2018

Posted by hslu in 石油, 美國, Energy, Renminbi.
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It is about to happen because the Shanghai International Energy Exchange (INE) 上海國際能源交易中心 will soon open to take your renminbi in exchange for energy future contracts.

https://www.bloomberg.com/news/articles/2018-01-01/how-china-will-shake-up-the-oil-futures-market-quicktake-q-a

Foreign traders are welcome because INE is registered in a pilot free trade zone in Pudong, Shanghai where foreign financial companies can set up their branches there. The headquarter of INE is 5 miles from my Pudong apartment near the Lujiazui financial district. I shall pay it a visit in time.

Crude oil, natural gas, and petrochemical products can be traded there.

Will the foreign energy traders come? I don’t know because China has capital flow restrictions but these restrictions may be less stringent in the pilot free trade zone for both the foreign companies and locals working with foreign institutions.

Will renminbi replaces US dollar as the dominant petro currency?

Probably not anytime soon giving the closer tie between Saudi Arabia and U.S. right now. However, with U.S. shale oil productions fixing to rise, thus reducing oil imports, as oil trades firmly above $50 a barrel and as Chinese economy grows, Saudi has to compete with Russia and other oil exporters to sell its oil to the Middle Kingdom. It is a given that China will insist on using renminbi to settle energy contracts on INE.

Will Saudi take renminbi for its oil? It probably has to.

Source: Bloomberg

 

 

Soon, financial institutions and national oil companies around the world will increase their renminbi reserves if they haven’t done so already to deal with China in the lucrative energy sector.

Next time when we visit Shanghai, we will check the INE out.

 

The World should hold America accountable September 3, 2015

Posted by hslu in China, Cold War, Congress, Debt and deficit, Economics, Euro, Global Affair, Politics.
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Jack Lew talked about holding China accountable for renminbi during a CNBC interview with Steve Liesman. He should first talk to Japan’s Abe about Japanese yen because yen has depreciated more than 50% from its high just a few years ago.

What a hypocrite.

Source: CNBC

Source: CNBC

I say that the world should hold America government, Federal Reserve, U.S. Congress, U.S. Treasury Department, American rating agencies and Wall Street too-big-to-fail banks accountable for the mess they have created after the implosion of the sub-prime mortgage crisis.

The damages to the world were too numerous to mention: Great recession; Euro crisis; PIGSS bailout; QEs; mounting national debts and millions upon millions of people losing their jobs all over the world.

Did America pay for this financial crimes? No.

Did any American Congressman or Senator pay for this financial crime they helped created via Fannie and Freddie? No.

Did any of the big banks CEOs pay for this financial crimes? No.

Did any of the American agencies pay for this financial crime? No.

Did any person in American government pay for this financial crime? No.

Jack Lew, hold your government and your Wall Street buddies accountable for this financial crime first before talking about holding other country accountable.

The world order created by America will soon disappear under the feet of the United States. It is not if but when.

Here is what I have to say to Jack Lew: 財大氣粗。

Russia, Saudi, China and Renminbi July 11, 2015

Posted by hslu in China, Economics, Energy, Global Affair, Middle East, Oil, Putin.
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For years, Saudi has been the largest oil exporter to China averaging about 20% of China’s total import. Things got a bit unsettling for Saudi since 2014 when Saudi’s export to China dropped to 16%. The bottom fell out for Saudi in 2015 when Saudi lost that number one position to Russia.

2015-06-24   Russia overtakes Saudi Arabia as largest supplier of oil to China

Source: The Guardian

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So what have happened from 2013 to May 2015?

In 2013, Rosneft, Russia’s de facto national oil company, signed an $85 billion 10 year deal with China’s Sinopec to deliver 100 million tonnes of crude over 10 years.

Rosneft then overdid itself by singing an absolutely unprecedented deal worth $270 billion which would over the years double Russia’s oil export to China. Rosneft would get a $70 billion pre-payment from China too.

In return, China would get a steady supply of crude oil and the deal will be consummated not in U.S. dollar but in Renminbi 人民幣.

China could cut its oil import from Angola but it didn’t. Russia’s gain became Saudi’s loss. Why?

Is China sending a message to Saudi: I’ll cut oil import from Angola and keep buying your oil if you agree to take Renminbi.

I am sure the discussion is going on behind closed doors and I am sure that America is not invited.

I know that this is too big a risk for Saudi’s to take right now because Saudi has been tied closely with the U.S. after 1973 oil embargo.

But, who knows, it may happen some time.

One thing at a time.

Didn’t Saudi keep its oil productions purposely high to maintain its share of oil export in the world? And who got killed in the propose?

None other than many oil producers in the U.S. and the high paying jobs in North Dakota and Texas.

Be patient. The U.S. wants to get Iran off the sanction list while promising Iran a free hand to develop nuclear weapons after 15 years. In exchange, Iran can export its oil without restrictions.

Last time I checked, China also bought a significant amount of oil from Iran too and it is likely that this transaction is also paid by Renminbi also.

USD out. RMB in. September 28, 2014

Posted by hslu in China, Cold War, Economics, Global Affair, Middle East, Military.
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It’s happening now. The pace will pick up. It’s a matter of when, not if. When it’s finally here, Americans will find them poorer and the U.S. federal government will run out of place to borrow.

Have you heard of ‘NCO1: as in New Currency Order #1.

I bet you haven’t. It is okay. About 99.9999% of Americans do not know what it is. So, don’t get too antsy about it. Nothing is imminent just yet.

So, if you want to skip the rest of what I have to say, be my guest. Go play with your video games or update your Facebook pages on your iPhone and waste your life away.

But, if you are curious, you might want to stay around, check it out and see for yourself.

Of course, I am talking about U.S. dollar losing its reserve currency status of the world.

As of now, about 61% of the foreign currency reserves on the balance sheets of central banks in the world are in U.S. dollar; mostly in the forms of US Treasury notes and bonds. Since US economy used to account for 25% of the world economy, 61% says a lot about the importance of the greenbacks.

Well, that ratio was about 71% at the turn of the century; about 14 years ago and the pace of decline is accelerating.

The reasons are very simple:

1. Foreign countries are sick of listening to U.S. government and Wall Street bankers telling them what to do.

2.   Diminishing purchasing power of the U.S. dollar because U.S. Federal Reserve has cranked up the printing press and significantly increased the supply of the U.S. dollar in the world.

3.  The Fed has no plausible exit strategy to deal with this unprecedent monetary experiment. When economy starts to pick up in America, the excessive liquidity in the financial system will push the economy into overdrive. Inflation will come. Interest rate will rise and the potential damage to the world will be unmeasurable.

According to the latest data, as many as twenty three countries have started accumulating Chinese renminbi in their central banks. There are probably seventeen more countries which have some renminbi on their books but decide to keep the matter to themselves for various reasons that I don’t know of. Maybe they are afraid of America. Maybe they want to wait and make sure China won’t implode from within. They may think that America will wise up and reverse course of being the jerk around the world in many aspects of people’s life.

Well, the  U.S. dollar is still the reserve currency in the world and many countries, including China, still depend on U.S. dollars for international trades; particularly when it comes to oil because America told Saudi Arabia and other Arabic countries many decades ago that U.S. government will keep the royal families in power, silence on their human rights recordsand supply them with the most advanced weaponsin the world in exchange for settling crude oil trades in the U.S. dollars.

Some economists believe that the Chinese yuan or Renminbi is destined to take over U.S. dollar as the reserve currency of the world particularly after the executive order NCO1 was announced by China. But, I don’t think China wants that headache and all China wants is to weaken the  U.S. dollar and provide an alternative reserve currency to minimize the danger of currency hegemony.

Well, bilateral trades of many countries with China has been settled in Renminbi without having to resort to U.S. dollars.

One thing I don’t expect to happen is for certain countries to abandon the U.S. dollar any time soon. This will for sure keep the U.S. dollar in high demand. When Saudi is tired of the U.S. or Saudi’s royal family is chased away from power, then the demise of the U.S. dollar will be near and the day of the redbacks will be upon us.

Time will tell if the world abandons the U.S. dollar. But things seem to be heading that way.

      

The tide has turned against US $ July 7, 2014

Posted by hslu in China, Cold War, Economics, Energy, Euro, Global Affair, Health Insurance, Islam, Obama, Oil, Politics.
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The US dollar will lose its reserve currency status sooner than many people have expected. Mark my words. The downfall of the US has just been accelerated a bit.

Some ananlysts have suggested 10 to 15 years. A few said 20. In all likelihood it will be sooner now because the world has more or less united against America the bully since the start of  financial crisis of 2008.

China fired the first shot with bilateral trade agreements with many countries and these trades will be settled in renminbi instead of US dollar. The latest was Gazprom’s 30 year, $40 billion gas deal with China which will be settled in renminbi. Not USD.

Today, France has joined the party because it is tired of being jerked around by America also. I guess the Frenchmen have just about had it up to their eyebrows with the $9 billion fine American regulator placed on BNP Paribas.

France call it ‘re-balancing.’ I call it ‘get rid of the US dollars’ because it will lose more value if you decide to hold on to it.

Consider you forewarned.

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Source: CNBC mobile site.

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Source: CNBC mobile site.

Even Total wants to settle its crude oil trades in Euro instead of USD. And what about airplanes made by Airbus? They are now settled in USD even within EU which totally doesn’t make sense.

Well, since France is doing the bidding for the Chinese government, China can sit back and watch the confrontation from the sideline. In the mean time, keep expanding the renminbi agreements with more funds and more countries.

Well, having France in China’s corner isn’t enough yet. If Saudi Arabia decides to use riyal to settle the Kingdom’s crude oil exports, the death of US dollar as world’s reserve currency will be preordained.

Is Saudi happy with the US? Probably not: not when the US abandoned Egypt or after the US allowed Iran keeps its nuclear capabilities. The US isn’t trustworthy. America only looks after its own interest and does what’s good for itself. Just take a look of the recent history of the middle east and you’ll know. Saudi isn’t stupid. They see what every other country see. The day will come.

The plot just got more interesting now.

Redbacks for Greenbacks, anyone? June 28, 2014

Posted by hslu in Economics, Global Affair.
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Greenbacks = US dollars

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Redbacks = Chinese Yuan or renminbi
人民幣 in Chines

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The Redbacks will be a lot more popular a few years down the road. The ascend of the Redbacks against the Greenbacks will resume and you might want to diversify into the Redbacks to get some protection before it’s too late.

US sanction pushed Russia into China’s arms June 9, 2014

Posted by hslu in China, Cold War, Economics, Global Affair, Obama, Politics.
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Russia’s large corporations are interested in doing business using Renminbi, Hong Kong dollars and Singapore dollars according to the top guy of Deutsche Bank Russia.

Well, China wanted this to happen and to China, Russia’s 投坏入抱 正中其下怀. And China has no one but Obama to thank for. This is because that Russian’s Central Bank will have to establish a fair amount of reserve positions in renminbi to handle bilateral trades which will in time help making renminbi a major currency in the world. With enemies America (many of them in South America too) has in the world, one of this days US dollar will be in danger of losing its reserve currency status in the world.

Putin already have Crimea no matter what the new president of Ukraine or Obama say or do. Obama continues to push for more sanctions against Russia because Obama doesn’t want to be seen as a midget next to Putin.

Go ahead Obama, Xi Jinping says: “I’m Lovin’ It.”

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