China, Russia quit dollar

[Procrustes Stretched]

The two countries were accustomed to using other currencies, especially the dollar, for bilateral trade. Since the financial crisis, however, high-ranking officials on both sides began to explore other possibilities.

China, Russia quit dollar

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thank you Ayn Rand, Alan Greenspan, Ronald Reagan, Robert Rubin, Milton Friedman, many others, and the conservative economists who gave us the playbook to crash the world economy.

Three cheers for selfishness and greed!!!

Wall Street is doing well and America's middle class has fallen so far behind they can't be seen in the rear view mirror.

 

[Samson]

I think this is a positive actually.

About a quarter of the world's trade is done in non-dollar currencies, though most of that trade is between developed countries. They don't use the dollar because they trust each others' banking systems. Trading yuan for rubles will increase the imperative for each country to improve their banking systems - and hopefully the rule of law, which is implied - which is only good.

This will be difficult, as the Russian have no need of Yuan, and the Chinese don't want roubles.

Still, fascinating to watch the Chi-Coms and Ex-Reds haggling away.....

 

[52ndStreet]

China and Russia have decided to renounce the US dollar and resort to using their own currencies for bilateral trade, Premier Wen Jiabao and his Russian counterpart Vladimir Putin announced late on Tuesday.

Chinese experts said the move reflected closer relations between Beijing and Moscow and is not aimed at challenging the dollar, but to protect their domestic economies.

"About trade settlement, we have decided to use our own currencies," Putin said at a joint news conference with Wen in St. Petersburg.

China, Russia quit dollar

And all those dollars are coming home.

98% percent of the the worlds goods and services are transacted in U.S. Dollars.
Oil is bought and sold in U.S. Dollars. So I want to see how much business China and Russia will trans act by way of using their own currencies.?
American spare parts require dollars, not Rubles or Yuan.
I think China and Russia will be making a big mistake using their own currencies to do business. Are their currencies worth that much, when compared to the American dollar?

 

[loosecannon]

The dollar is the reserve currency of the world. This means that nations largely trade in U.S. dollars. You might say it's an international dollar-standard. If countries begin to dump their dollar-reserves to trade in their own currencies those dollars are going to come back to the United States.

That isn't what "reserve currency" means. Reserve currency means that is the currency that other central banks hold on their balance sheets to act as a backing for their fiat currency. An equivalent for gold.

But the dollar is the commodity exchange currency of the world because the major brokerage houses that sell commodities and commodity futures denominate in and trade in dollars.

Not trying to bust your chops but if you explain the simple things incorrectly people tend to get confused.

 

[loosecannon]

Keep crashing the currency, Obama.

In a globalized economy, where your economy relies on exports for growth, a weak currency is as good as it gets.

 

[loosecannon]

I think this is a positive actually.

About a quarter of the world's trade is done in non-dollar currencies, though most of that trade is between developed countries. They don't use the dollar because they trust each others' banking systems. Trading yuan for rubles will increase the imperative for each country to improve their banking systems - and hopefully the rule of law, which is implied - which is only good.

This will be difficult, as the Russian have no need of Yuan, and the Chinese don't want roubles.

But it encourages trade between them. China gains access to gas and oil, Russia gains access to cheap Chinese goods, without the need to accumulate dollars first. And it gives both nations a valuable political tool.

 

[Toro]

The dollar is the reserve currency of the world. This means that nations largely trade in U.S. dollars. You might say it's an international dollar-standard. If countries begin to dump their dollar-reserves to trade in their own currencies those dollars are going to come back to the United States.

That isn't what "reserve currency" means. Reserve currency means that is the currency that other central banks hold on their balance sheets to act as a backing for their fiat currency. An equivalent for gold.

But the dollar is the commodity exchange currency of the world because the major brokerage houses that sell commodities and commodity futures denominate in and trade in dollars.

Not trying to bust your chops but if you explain the simple things incorrectly people tend to get confused.

Kevin isn't necessarily incorrect from an operational standpoint. Currencies are generally cleared through central banks when companies do transactions with foreign companies so central banks have to hold a lot of what companies are transacting in. Because the dollar is the currency of choice for international trade, most of the reserves in central banks will be dollars.

Dollars as reserves (~62%) actually compose less than the value of trade in dollars (~75%). So central banks are actually holding less dollars for reserve diversification purposes.

 

[loosecannon]

He was correct in every way except that he incorrectly attributed reserve currency status for commodity exchange currency status.

The point being if we lose commodity exchange currency status our world will suffer a polar shift. It is far more important to our way of life than reserve currency status which actually is a burden.

 

[Toro]

He was correct in every way except that he incorrectly attributed reserve currency status for commodity exchange currency status.

The point being if we lose commodity exchange currency status our world will suffer a polar shift. It is far more important to our way of life than reserve currency status which actually is a burden.

The US benefits enormously from having the reserve currency of the world. Unfortunately for America, we are doing everything we can to make people not want the dollar. Fortunately, every other currency is worse.

 

[loosecannon]

By allowing other nations to use our dollar as a reserve currency we provide them the means to weaken their currencies providing them significant trade advantages.

The only benefit we realize is the ability to finance deficits one time.

But what isn't calculated yet is that whatever advantage we gained by other nations absorbing our dollars as reserves will be fully offset when they stop doing so.

IOW ALL of the advantage is reversible, while the disadvantage is cumulative.