Full Spectrum Dominance - F. William Engdahl book

A pretty lucid summary of the geopolitical manuevering to gain control over Earth's remaining resources. My reading confirms much of what Engdahl says. Great minds think alike, or, fools seldom differ. You decide.

A video in 2 parts.



Part 1 (13 min)



Part 2 (21 min)

Calls grow to supplant dollar as global currency

Maybe America can pay its bills with 'freedom fries'?

Source
July 6, 2009
The call to find an alternative to the U.S dollar as the global reserve currency is gaining momentum as France joined calls by China, India and Russia for a review of the world's currency practices.

French Finance Minister Christine Lagarde challenged the dollar's supremacy “in a world that has changed because of the crisis and the growing role of emerging countries.”

The questioning of the U.S. dollar as the key currency for central banks by a leader of a major European economy gives renewed life to the issue at this week's Group of Eight summit meeting in L'Aquila, Italy. The U.S. dollar has long served as the dominant medium of exchange, and tends to dominate the official money reserves that countries hold through their governments and at their central banks.

In the first quarter of 2009, 65 per cent of the world's allocated foreign exchange holdings were held in U.S. dollars, according to the International Monetary Fund. That's the highest in seven quarters.

The push for an alternative is being driven in large part by concern over the weakened state of the U.S. economy.

The country is forecasting fiscal deficits for the next decade.

That's leading large holders of U.S. debt such as China to worry that the U.S. dollar may not be as safe as it once was. In addition, the dollar has been volatile on international currency markets, and the U.S. is running ongoing trade deficits.

Diversification would likely take years, because unwinding large reserve positions of U.S. dollars too quickly would devalue them. And despite concerns about the greenback, it has maintained its international appeal, in part because investors need the value of their U.S. dollar holdings to stay high.

With the U.S. continuing to require willing lenders to fund deficits, the situation has become what top Barack Obama economic adviser Lawrence Summers once dubbed “a kind of balance of financial terror.”

That U.S. Treasury bills appreciated in the immediate wake of the financial crisis was proof of the dollar's strength, as “people fled to a stable place,” said Paul Wachtel, a professor at New York University.

Still, the risk of a move away from the greenback is not without precedent, said Shaun Osborne, chief currency strategist of TD Securities. “The U.S. is a bit complacent about this. Most U.S. officials appear confident there will be no quick switch away from the dollar. But we have seen before, with the decline of the pound, that these things can happen quickly, in the space of years.”

Recent comments may be as much about politics as economics.

Large developing countries are seeking a greater role at the International Monetary Fund. China controls only 3.66 per cent of the votes at the body, despite being the world's third-largest economy.

“A little bit of nationalism, a little bit of searching for someone to blame for the economic crisis,” Prof. Wachtel said. “Plus, it's a changing world: diversification of reserves might make sense.”

Canada and Japan both reaffirmed their support for the greenback this week.

“It's an issue that we have not addressed, other than to say that in the midst of what is still a significant global recession, it's important that we aim for stability,” Finance Minister Jim Flaherty said on Friday. “The stability has been based on the U.S. dollar as the global currency.”

Whether and how this will actually come up at the G8 summit remains unclear. Russia is a G8 member, and China and India are set to join the discussions on the second day of the three-day meeting, but all are playing down the prospect of formal talks just yet.

Chinese Vice-Foreign Minister He Yafei said yesterday: “You may have heard comments, opinions from academic circles about the idea of establishing a super sovereign currency. This is all, I believe, now a discussion among academics. It is not the position of the Chinese government.”

The Chinese central bank, the world's largest external holder of U.S. debt, reiterated its call for a new international reserve currency in a policy review published last week. It has proposed an International Monetary Fund-created unit called Special Drawing Rights as an alternative reserve currency.

Regardless of what happens at the G8 summit, some analysts expect a diversification in large countries' currency practices.

Alternatives like the euro, yen, Chinese yuan, and Special Drawing Rights all have drawbacks, said Benjamin Cohen of the University of California-Santa Barbara. “A more fragmented currency system seems in the offing, with much competition and no money clearly dominant,” Prof. Cohen said.

With files from Bloomberg News and Reuters

End of the Dollar

Will the 'Dollar Wars' Kill
What's Left of the American Dream?

Countries yoked to America's currency, and therefore its cratering empire, want to kick the dollar to the curb. And that's bad news for the U.S.

By Scott Thill
Source
June 26, 2009

Here's a terrible joke: An elderly man walks into a bar and says, "I got good news and I got bad news."

"What's the good news?" the bartender asks.

"I stayed out of the stock market, so my retirement dollars are safe."

"What's the bad news?"

"They're dollars."

OK, I said it was a terrible joke. But that may be what the dollar is becoming, now that the critical mass of wartime spending, rampant consumption, hyper-real finance and environmental collapse has hit the fan.

The hangover from the last three presidential terms, but especially the last two, has taken the American economy down the rabbit hole, with the international monetary system begging for mercy while hitched to its off-the-ralls crazy train. But the ride has stopped, and some countries yoked to America's currency, and therefore its cratering empire, don't want to get back on.

Namely, Brazil, Russia, India and China, loosely termed BRIC by Goldman Sachs economist Jim O'Neill, who is not alone in predicting the four countries' ascendant power, as the United States and the Eurozone fade into the 20th century.

With Brazil and Russia lording over a large share of what's left of the planet's natural gas and oil, and China and India providing a titanic labor force that rivals the intelligence, productivity and regimentation of workers anywhere outside their borders, BRIC is in the house, big time. And it wants a say in what's going on, as Marvin Gaye sang.

What's going on is that the dollar, to which the majority of the planet's economies and currencies are now reliant, has us all by the proverbial balls, and BRIC is screaming about it in the press. Something has to give, it's saying, and that thing is the dollar.

"There is a lot of political and economic posturing involved," Rachel Zimeba, lead analyst at economist Nouriel Roubini's RGE Monitor, explained to AlterNet. "But I think there is substance to it. China has been trying, relatively unsuccessfully, to diversify for a couple of years, which has conflicted with its desire to have undervalued exports. Same thing has happened to countries in the Middle East, which are pegged to the dollar. And we're going to see even more pressure to diversify from these countries to reduce the share of their [dollar] assets.

"They see that the U.S. has a rising debt burden and record financing needs. Over time, they are worried that inflation and a weaker dollar will reduce the value of those assets."

They should be worried. Since the Bush administration took office, the dollar has lost 33 percent of its value. And since the Bushies left office, the dollar has been on autopilot, hovering beneath the pound and euro and jockeying for position with the Canadian dollar for the bronze medal in underperforming currencies, losing or gaining altitude every time a politician from Russia or China slams or praises it in the press. Like the American economy itself, the Humpty Dumpty dollar is wobbling on the fence, hoping reality doesn't hop along and give it a shove.

The good news? It could land softly.

"This is not an overnight thing," Ziemba added. "Same thing goes for these countries' attempts to turn their own currencies into transactional and reserve currencies."

That's reassuring, especially to what's left of those who still have a lot of dollars, as the American unemployment rate rises to levels nearly unseen since World War II. But once you wormhole a bit further into the future, the dollar's fate is much more murky.

"The debate between the inflationists and deflationists is red-hot these days, as the U.S. financial system continues to wobble and the 'real' economy of goods and services staggers," explained Jim Kunstler, author of The Long Emergency, World Made By Hand and the riotously acerbic column "Clusterfuck Nation." "The fate of the dollar in the short-term depends on which way this really goes. But in the long term, both sides say the dollar is toast."

Helping push America off the debt-soaked cliff it built for itself by hitching its future to hyper-real derivatives and unsustainable deregulation and development is beginning to look less like sacrilege and more like prudent international monetary policy. Whereas in the past, China and Russia's public protestations about the hegemonic corruption of the American empire would have been shooed away like jealous flies, now more countries are joining in the anti-American chorus, even as they shake President Barack Obama's hand and hope openly for a kindler, gentler global village.

What's going on behind the scenes is anybody's guess. But it's probably a good guess that more than a few long knives have been unsheathed.

"Geopolitically, I suspect there is whispered consensus between our various partners and rivals that the American situation is pretty hopeless," Kunstler cracked, "and that they would now all more or less benefit from the diminishment of U.S. power across the board. The Chinese, for instance, must know that we will never again ramp up the orgy of credit spending. Why keep throwing away their wealth to keep us consuming?"

It's a good question. One of the BRIC members' solutions to the conundrum is to spend more time on their own currencies, as well as those of the beleaguered International Monetary Fund, which has its own currency, called special drawing rights. The SDRs are pegged to a currency basket, containing the U.S dollar, the euro, the yen and the U.K. pound sterling. In other words, the currencies of the 20th century's superpowers.

BRIC, the purported superpowers of the 21st century, have been buying SDRs like mad lately. When BRIC met in mid-June in the Siberian city of Yekaterinberg, it committed to giving $80 billion to the IMF, with China carrying the lion's share at $50 billion. Add that to the $250 billion that the G20 coughed up in April, and the IMF is quickly becoming the planet's reserve bank of choice.

“There is a need to make the IMF a true representative of the world’s leading economies," Russian Finance Minister Alexei Kudrin asserted in June. "It’s not there right now,” he said, adding that it would be a decade before what People’s Bank of China Governor Zhou Xiaochuan recently called a super-sovereign reserve currency mounted enough of a challenge to displace the dollar.

In the meantime, Russia, China and the other BRIC members are putting their money where they want their mouths to be, which is in the International Monetary Fund's ear. But whether that super-sovereign reserve currency is the SDR is too soon to say.

"The SDR can't handle the load in its current form," Zimeba argued. "You'd need a payment system that accepted the SDR, for one. But where it can grow is in reserve assets, and this upcoming issuance of IMF bonds denominated in SDR will be a significant increase. But SDRs will only be open to governments, not the secondary market where they can be traded, which fails the requirements of convertibility and liquidity.

"Right now, the SDR doesn't have that mechanism. But that can change over time. In the near term, this is a way towards diversification, because the dollar doesn't have a majority share in the SDR."

Kunstler adds: "They're obviously hedging their bets as much as possible. Put yourself in their shoes. They see the U.S. financial system's stupendous swindles, and they know the score. So their interests are strictly tactical and strategic in the interests of their survival. They also surely want to try to insure the continuation of world trade, with or without the U.S. consumer."

Which is why BRIC, and by extension the countries beneath its heel or shaking its hand, are diversifying their dollars and dumping cash into the IMF, where they can attempt to influence the international monetary system in their favor. The United States has so far committed $108 billion, including $5 billion siphoned from the controversial war-funding bill that passed in mid-June.

In addition, it has arranged for the IMF to receive over $500 billion altogether, mostly to prop up zombie European banks that drank too much of the derivatives Kool-Aid. So BRIC has an uphill battle ahead of it. But it's gaining strength, and wants to convert that to IMF say-so.

"They want more significant voting rights in the IMF," Ziemba said. "The money is in exchange for leverage. China has talked in detail about how the over-reliance on the dollar was adding to global instability, creating a situation where the optimal monetary policy for the U.S. is not optimal for countries tacked to the dollar. But it's fairly obvious that, in five to 10 years, the role of these countries in the global economy will only increase. But they also have to figure out how much responsibility they want to take on."

Or can take on. BRIC is ascendant for sure, but it's about to inherit a global economy and environment that is nothing like the respectively stable climates American and European empires have enjoyed over the last few hundred years. From the econopocalypse to climate crisis and beyond, BRIC is quickly going to find its hands full of problems that will doubtlessly dampen its upward surge. Sure, the dollar is toast, but so is Earth's biodiversity and store of natural resources. It's hard to build a superpower on that heap.

"I think all nations are losing the ability to control events at the global level," Kunstler concluded. "It's a symptom of the crack-up of globalization, per se: A set of transient economic relations that only existed because of special conditions, namely, the final blowout of the cheap energy era. With that over, it's now a mad scramble for each player to survive.

"Observers seem to think that China will become the new global hegemon, but I doubt it. They have problems with water, food, overpopulation and environmental degradation that are much worse than ours. The world is comprehensively headed for a reduced standard of living."

Scott Thill runs the online mag Morphizm. His writing has appeared on Salon, XLR8R, All Music Guide, Wired and others.

Why the dollar is dying

Update: June 24, 2009
A new world is being born, one without the US dollar greasing the wheels of commerce
BRIC & SCO summits: Reinventing the wheel

Updates: June 18, 2009
Fed Buying Treasuries; China Selling Treasuries

Russia, China to Promote Ruble, Yuan Use in Trade


Probably the most important meeting in the world is going on right now in Russia: but, only a few people will notice the article below. Yet, it details the most critical change occurring currently creating a new world order and eradicating the United States financial and military hegemonic plans. And the change will be soooo quiet. Not really quiet; it's just that people's attentions are being focussed elsewhere. The information is here for all who are interested in it.

As the dollar enters its death cycle, Americans are focussed on GM and Sarah Palin's new blooper. The fall of the dollar will be a big surprise for many....but don't worry, it will happen gradually (for the near future).

I highly recommend this long but lucid article on why the US Empire is being superceded by the power of Shanghai Cooperation Organisation SCO; and BRIC (Brazil, Russia, Inda and China). See When China awakes, it will shake the world. - Napoleon Bonaparte

If switching to another reserve currency or basket of currencies disables the American military stranglehold on earth, I say, Bring it on!

For those of you who prefer the Americanised version of news with its 'happy ending' see Dollar poses dilemma for Bric countries , the BBC version of the SCO summit.

De-Dollarization: Dismantling America’s
Financial-Military Empire
The Yekaterinburg Turning Point

by Michael Hudson
Global Research, June 13, 2009
Source
The city of Yakaterinburg, Russia’s largest east of the Urals, may become known not only as the death place of the tsars but of American hegemony too – and not only where US U-2 pilot Gary Powers was shot down in 1960, but where the US-centered international financial order was brought to ground.

Challenging America will be the prime focus of extended meetings in Yekaterinburg, Russia (formerly Sverdlovsk) today and tomorrow (June 15-16) for Chinese President Hu Jintao, Russian President Dmitry Medvedev and other top officials of the six-nation Shanghai Cooperation Organization (SCO). The alliance is comprised of Russia, China, Kazakhstan, Tajikistan, Kyrghyzstan and Uzbekistan, with observer status for Iran, India, Pakistan and Mongolia. It will be joined on Tuesday by Brazil for trade discussions among the BRIC nations (Brazil, Russia, India and China).

The attendees have assured American diplomats that dismantling the US financial and military empire is not their aim. They simply want to discuss mutual aid – but in a way that has no role for the United States, NATO or the US dollar as a vehicle for trade. US diplomats may well ask what this really means, if not a move to make US hegemony obsolete. That is what a multipolar world means, after all. For starters, in 2005 the SCO asked Washington to set a timeline to withdraw from its military bases in Central Asia. Two years later the SCO countries formally aligned themselves with the former CIS republics belonging to the Collective Security Treaty Organization (CSTO), established in 2002 as a counterweight to NATO.


Yet the meeting has elicited only a collective yawn from the US and even European press despite its agenda is to replace the global dollar standard with a new financial and military defense system. A Council on Foreign Relations spokesman has said he hardly can imagine that Russia and China can overcome their geopolitical rivalry,1 suggesting that America can use the divide-and-conquer that Britain used so deftly for many centuries in fragmenting foreign opposition to its own empire. But George W. Bush (“I’m a uniter, not a divider”) built on the Clinton administration’s legacy in driving Russia, China and their neighbors to find a common ground when it comes to finding an alternative to the dollar and hence to the US ability to run balance-of-payments deficits ad infinitum.

What may prove to be the last rites of American hegemony began already in April at the G-20 conference, and became even more explicit at the St. Petersburg International Economic Forum on June 5, when Mr. Medvedev called for China, Russia and India to “build an increasingly multipolar world order.” What this means in plain English is: We have reached our limit in subsidizing the United States’ military encirclement of Eurasia while also allowing the US to appropriate our exports, companies, stocks and real estate in exchange for paper money of questionable worth.

Members of Shanghai Cooperation Organisation

"The artificially maintained unipolar system,” Mr. Medvedev spelled out, is based on “one big centre of consumption, financed by a growing deficit, and thus growing debts, one formerly strong reserve currency, and one dominant system of assessing assets and risks.”2 At the root of the global financial crisis, he concluded, is that the United States makes too little and spends too much. Especially upsetting is its military spending, such as the stepped-up US military aid to Georgia announced just last week, the NATO missile shield in Eastern Europe and the US buildup in the oil-rich Middle East and Central Asia.

The sticking point with all these countries is the US ability to print unlimited amounts of dollars. Overspending by US consumers on imports in excess of exports, US buy-outs of foreign companies and real estate, and the dollars that the Pentagon spends abroad all end up in foreign central banks. These agencies then face a hard choice: either to recycle these dollars back to the United States by purchasing US Treasury bills, or to let the “free market” force up their currency relative to the dollar – thereby pricing their exports out of world markets and hence creating domestic unemployment and business insolvency.

When China and other countries recycle their dollar inflows by buying US Treasury bills to “invest” in the United States, this buildup is not really voluntary. It does not reflect faith in the U.S. economy enriching foreign central banks for their savings, or any calculated investment preference, but simply a lack of alternatives. “Free markets” US-style hook countries into a system that forces them to accept dollars without limit. Now they want out.

This means creating a new alternative. Rather than making merely “cosmetic changes as some countries and perhaps the international financial organisations themselves might want,” Mr. Medvedev ended his St. Petersburg speech, “what we need are financial institutions of a completely new type, where particular political issues and motives, and particular countries will not dominate.”

When foreign military spending forced the US balance of payments into deficit and drove the United States off gold in 1971, central banks were left without the traditional asset used to settle payments imbalances. The alternative by default was to invest their subsequent payments inflows in US Treasury bonds, as if these still were “as good as gold.” Central banks now hold $4 trillion of these bonds in their international reserves – and these loans have financed most of the US Government’s domestic budget deficits for over three decades now! Given the fact that about half of US Government discretionary spending is for military operations – including more than 750 foreign military bases and increasingly expensive operations in the oil-producing and transporting countries – the international financial system is organized in a way that finances the Pentagon, along with US buyouts of foreign assets expected to yield much more than the Treasury bonds that foreign central banks hold.

The main political issue confronting the world’s central banks is therefore how to avoid adding yet more dollars to their reserves and thereby financing yet further US deficit spending – including military spending on their borders?

For starters, the six SCO countries and BRIC countries intend to trade in their own currencies so as to get the benefit of mutual credit that the United States until now has monopolized for itself. Toward this end, China has struck bilateral deals with Argentina and Brazil to denominate their trade in renminbi rather than the dollar, sterling or euros,3 and two weeks ago China reached an agreement with Malaysia to denominate trade between the two countries in renminbi.[4] Former Prime Minister Tun Dr. Mahathir Mohamad explained to me in January that as a Muslim country, Malaysia wants to avoid doing anything that would facilitate US military action against Islamic countries, including Palestine. The nation has too many dollar assets as it is, his colleagues explained. Central bank governor Zhou Xiaochuan of the People's Bank of China wrote an official statement on its website that the goal is now to create a reserve currency “that is disconnected from individual nations.”5 This is the aim of the discussions in Yekaterinburg.

In addition to avoiding financing the US buyout of their own industry and the US military encirclement of the globe, China, Russia and other countries no doubt would like to get the same kind of free ride that America has been getting. As matters stand, they see the United States as a lawless nation, financially as well as militarily. How else to characterize a nation that holds out a set of laws for others – on war, debt repayment and treatment of prisoners – but ignores them itself? The United States is now the world’s largest debtor yet has avoided the pain of “structural adjustments” imposed on other debtor economies. US interest-rate and tax reductions in the face of exploding trade and budget deficits are seen as the height of hypocrisy in view of the austerity programs that Washington forces on other countries via the IMF and other Washington vehicles.

The United States tells debtor economies to sell off their public utilities and natural resources, raise their interest rates and increase taxes while gutting their social safety nets to squeeze out money to pay creditors. And at home, Congress blocked China’s CNOOK from buying Unocal on grounds of national security, much as it blocked Dubai from buying US ports and other sovereign wealth funds from buying into key infrastructure. Foreigners are invited to emulate the Japanese purchase of white elephant trophies such as Rockefeller Center, on which investors quickly lost a billion dollars and ended up walking away.

In this respect the US has not really given China and other payments-surplus nations much alternative but to find a way to avoid further dollar buildups. To date, China’s attempts to diversify its dollar holdings beyond Treasury bonds have not proved very successful. For starters, Hank Paulson of Goldman Sachs steered its central bank into higher-yielding Fannie Mae and Freddie Mac securities, explaining that these were de facto public obligations. They collapsed in 2008, but at least the US Government took these two mortgage-lending agencies over, formally adding their $5.2 trillion in obligations onto the national debt. In fact, it was largely foreign official investment that prompted the bailout. Imposing a loss for foreign official agencies would have broken the Treasury-bill standard then and there, not only by utterly destroying US credibility but because there simply are too few Government bonds to absorb the dollars being flooded into the world economy by the soaring US balance-of-payments deficits.

Seeking more of an equity position to protect the value of their dollar holdings as the Federal Reserve’s credit bubble drove interest rates down China’s sovereign wealth funds sought to diversify in late 2007. China bought stakes in the well-connected Blackstone equity fund and Morgan Stanley on Wall Street, Barclays in Britain South Africa’s Standard Bank (once affiliated with Chase Manhattan back in the apartheid 1960s) and in the soon-to-collapse Belgian financial conglomerate Fortis. But the US financial sector was collapsing under the weight of its debt pyramiding, and prices for shares plunged for banks and investment firms across the globe.

Foreigners see the IMF, World Bank and World Trade Organization as Washington surrogates in a financial system backed by American military bases and aircraft carriers encircling the globe. But this military domination is a vestige of an American empire no longer able to rule by economic strength. US military power is muscle-bound, based more on atomic weaponry and long-distance air strikes than on ground operations, which have become too politically unpopular to mount on any large scale.

Click to enlarge image

On the economic front there is no foreseeable way in which the United States can work off the $4 trillion it owes foreign governments, their central banks and the sovereign wealth funds set up to dispose of the global dollar glut. America has become a deadbeat – and indeed, a militarily aggressive one as it seeks to hold onto the unique power it once earned by economic means. The problem is how to constrain its behavior. Yu Yongding, a former Chinese central bank advisor now with China’s Academy of Sciences, suggested that US Treasury Secretary Tim Geithner be advised that the United States should “save” first and foremost by cutting back its military budget. “U.S. tax revenue is not likely to increase in the short term because of low economic growth, inflexible expenditures and the cost of ‘fighting two wars.’”6

At present it is foreign savings, not those of Americans that are financing the US budget deficit by buying most Treasury bonds. The effect is taxation without representation for foreign voters as to how the US Government uses their forced savings. It therefore is necessary for financial diplomats to broaden the scope of their policy-making beyond the private-sector marketplace. Exchange rates are determined by many factors besides “consumers wielding credit cards,” the usual euphemism that the US media cite for America’s balance-of-payments deficit. Since the 13th century, war has been a dominating factor in the balance of payments of leading nations – and of their national debts. Government bond financing consists mainly of war debts, as normal peacetime budgets tend to be balanced. This links the war budget directly to the balance of payments and exchange rates.

Foreign nations see themselves stuck with unpayable IOUs – under conditions where, if they move to stop the US free lunch, the dollar will plunge and their dollar holdings will fall in value relative to their own domestic currencies and other currencies. If China’s currency rises by 10% against the dollar, its central bank will show the equivalent of a $200 million loss on its $2 trillion of dollar holdings as denominated in yuan. This explains why, when bond ratings agencies talk of the US Treasury securities losing their AAA rating, they don’t mean that the government cannot simply print the paper dollars to “make good” on these bonds. They mean that dollars will depreciate in international value. And that is just what is now occurring. When Mr. Geithner put on his serious face and told an audience at Peking University in early June that he believed in a “strong dollar” and China’s US investments therefore were safe and sound, he was greeted with derisive laughter.7

Anticipation of a rise in China’s exchange rate provides an incentive for speculators to seek to borrow in dollars to buy renminbi and benefit from the appreciation. For China, the problem is that this speculative inflow would become a self-fulfilling prophecy by forcing up its currency. So the problem of international reserves is inherently linked to that of capital controls. Why should China see its profitable companies sold for yet more freely-created US dollars, which the central bank must use to buy low-yielding US Treasury bills or lose yet further money on Wall Street?

To avoid this quandary it is necessary to reverse the philosophy of open capital markets that the world has held ever since Bretton Woods in 1944. On the occasion of Mr. Geithner’s visit to China, “Zhou Xiaochuan, minister of the Peoples Bank of China, the country’s central bank, said pointedly that this was the first time since the semiannual talks began in 2006 that China needed to learn from American mistakes as well as its successes” when it came to deregulating capital markets and dismantling controls.8

An era therefore is coming to an end. In the face of continued US overspending, de-dollarization threatens to force countries to return to the kind of dual exchange rates common between World Wars I and II: one exchange rate for commodity trade, another for capital movements and investments, at least from dollar-area economies.

Even without capital controls, the nations meeting at Yekaterinburg are taking steps to avoid being the unwilling recipients of yet more dollars. Seeing that US global hegemony cannot continue without spending power that they themselves supply, governments are attempting to hasten what Chalmers Johnson has called “the sorrows of empire” in his book by that name – the bankruptcy of the US financial-military world order. If China, Russia and their non-aligned allies have their way, the United States will no longer live off the savings of others (in the form of its own recycled dollars) nor have the money for unlimited military expenditures and adventures.

US officials wanted to attend the Yekaterinburg meeting as observers. They were told No. It is a word that Americans will hear much more in the future.

Notes

1 Andrew Scheineson, “The Shanghai Cooperation Organization,” Council on Foreign Relations,

Updated: March 24, 2009: “While some experts say the organization has emerged as a powerful anti-U.S. bulwark in Central Asia, others believe frictions between its two largest members, Russia and China, effectively preclude a strong, unified SCO.”

2 Kremlin.ru, June 5, 2009, in Johnson’s Russia List, June 8, 2009, #8.

3 Jamil Anderlini and Javier Blas, “China reveals big rise in gold reserves,” Financial Times, April 24, 2009. See also “Chinese political advisors propose making yuan an int’l currency.” Beijing, March 7, 2009 (Xinhua). “The key to financial reform is to make the yuan an international currency, said [Peter Kwong Ching] Woo [chairman of the Hong Kong-based Wharf (Holdings) Limited] in a speech to the Second Session of the 11th National Committee of the Chinese People’s Political Consultative Conference (CPPCC), the country’s top political advisory body. That means using the Chinese currency to settle international trade payments …”

4 Shai Oster, “Malaysia, China Consider Ending Trade in Dollars,” Wall Street Journal, June 4, 2009.

5 Jonathan Wheatley, “Brazil and China in plan to axe dollar,” Financial Times, May 19, 2009.

6 “Another Dollar Crisis inevitable unless U.S. starts Saving - China central bank adviser. Global Crisis ‘Inevitable’ Unless U.S. Starts Saving, Yu Says,” Bloomberg News, June 1, 2009. http://www.bloomberg.com/apps/news?pid=20601080&sid=aCV0pFcAFyZw&refer=asia

7 Kathrin Hille, “Lesson in friendship draws blushes,” Financial Times, June 2, 2009.

8 Steven R. Weisman, “U.S. Tells China Subprime Woes Are No Reason to Keep Markets Closed,” The New York Times, June 18, 2008.

Related:
BRICs May Buy Each Other’s Bonds in Shift From Dollar
Is the First World Being Turned into the Third World?

When China awakes, it will shake the world. - Napoleon Bonaparte

Update 19-6-09 China’s Got a New Currency…
and It Sure AIN’T the Dollar
Update on SCO and BRIC 17-6-09 De-Dollarization: Dismantling America’s Financial-Military Empire The Yekaterinburg Turning Point

This is a well written explanation of the beginning of the end for the dollar and why it is occurring. It may take a few years, but there is no doubting the lucidity here. Long but exceptional article.

Update on BRIC 12-6-09 Emerging BRIC powers and the new world order

China's ascendency bodes dark days
for the American economy.

There are actually quite a few Americans and Others who still think that US economic hegemony will save the world from collapse. And we will live happily ever after. They are still thinking this is a downturn in the business cycle and that the stock market rally proves things will go back to 'normal' in a year or two.

It seems like a psychotic break with reality when one reads the progress China is making with harmonious oil and gas contracts globally - and China isn't using bombs to seal the deal either. The alliance of the BRIC countries has surpassed the power of the US now, with all its military prowess.

Anyone who does not see the fall of the dollar coming must seriously be still reading the business cycle fairytale told by American media. Below are just a few of the current articles which are not presented as important in Western news - but which I suspect determine the future of international relations.

Iran Signs Major Gas Deal With China;
Is Europe Next?

By Bruce Pannier, RFE/RL
June 6, 2009
Source Iran has found its long-sought-after partner to help develop part of the world's largest natural-gas field, even as the possibility of linking it to a future pipeline to Europe seemed to rise.


China came out the big winner on June 3 when representatives from the China National Petroleum Corporation (CNPC) and the National Iranian Oil Company (NIOC) met in the Chinese capital and signed a $4.7 billion contract for developing Phase 11 of the South Pars gas field. South Pars, shared between Iran and Qatar, has estimated gas reserves of some 14 trillion cubic meters, enough to supply Europe's gas needs for about a quarter of a century.

The CNPC's gain is the French energy company Total's loss. In 2004, Total signed a memorandum of understanding with NIOC to develop Phase 11, one of 24 sections that make up the Iranian part of South Pars, and among those with the highest potential.

However, according to Iranian officials, the French company delayed signing the final agreements for too long, despite warnings from Tehran that time was running out. Total said just a few months ago it would not be ready to sign such a contract for some time yet. Total, in an official statement released on June 3, said it still wants to be part of the deal, but that does not appear to be an option.

However, the Iranian government is offering the French company an opportunity to participate in the development of other sections of South Pars and in the production of liquefied natural gas. NIOC managing director Seifollah Jashnsaz, who was in Beijing for the signing, told reporters he hoped daily production at the site would reach some 50 million cubic meters (some 18 billion cubic meters annually).

The deal is a boon for China because the country's continued economic growth hinges on access to energy resources. Iran profits not only from the Chinese investment but also from a high-profile agreement that demonstrates Tehran can attract partners to major projects, despite international sanctions. Read entire article

South Pars Gas Field

South Pars Gas field is the biggest independent gas reserve in the world which is shared by Iran ‎and Qatar

Geithner Goes Begging In China;
What It Means To You …

Money and Markets
June 05, 2009
text
So this is what it’s come to: Our Treasury Secretary, Timothy Geithner, has to jet off to Beijing to beg for mercy from our biggest global creditor. He has to sit by and be lectured in the ways of finance by Chinese officials. He has to endure the laughter of Chinese students at Peking University, who openly scoffed at his reassurances that “Chinese financial assets are very safe.”

And he has to abandon plans to pressure China on its currency.

The Obama administration had previously been arguing that the yuan was undervalued, artificially subsidizing Chinese manufacturers at the expense of U.S.-based firms. The bottom line? The balance of world financial power is shifting and not in a good way for America.

Worse, I see no evidence that we’re doing anything about it! Instead, we get a bunch of happy talk and spin, with little or no action.

Washington Happy Talk vs. Reality on the Ground in China

Before, during, and after Geithner’s China trip, the Washington spin machine was shifting into overdrive. I’ve already seen a few reports calling Geithner’s trip a success. Geithner himself has been making statements like the following: “I’ve actually found a lot of confidence here in China, justifiable confidence, in the strength and resilience and dynamism of the American economy and I think a very sophisticated understanding … of the steps we’re taking and why they’re so important not just to the United States but to China and the rest of the world.”

Excuse me, but does anyone believe that for a second? I sure as heck don’t. And neither do the Chinese. The reality on the ground in China is much more skeptical and severe. For example, Bloomberg recounted a conversation in which Geithner was lectured about U.S. profligacy: Yu Yongding, a former central bank adviser who acted as the interviewer for The China Daily newspaper, told Geithner: “I worry about details. We will be watching you very carefully.” Read entire article

China influence to grow faster
than most expect: Soros

Sun Jun 7, 2009
By Edmund Klamann
Source
SHANGHAI (Reuters) - Financier George Soros said on Sunday that China's global influence is set to grow faster than most people expect, with its isolation from the global financial system and a heavy state role in banking aiding a relatively swift economic recovery.

He reiterated his cautious views regarding the surge in global stock markets, although he said it may have further to go given liquidity in the markets and that many investors are still sitting on the sidelines. "In many ways, Chinese banking has benefited from being isolated from the rest of the world and is in better shape than the international banking system," he told an audience at Shanghai's Fudan University.

China's extensive capital controls have helped to shield its financial institutions from the worst of the global financial crisis. "The influence of the state is also greater. So when the government says 'lend', banks lend," Soros added. "This puts China in a better position to recover from the recession and that is in fact what has happened."

New loans by Chinese banks surged to record levels in the first quarter, spurring optimism over recovery prospects for the world's third-largest economy. POSITIVE FORCE "China is going to be a positive force in the world and the market, and as a consequence, its power and influence are likely to grow. Personally, I believe it's going to grow faster than most people currently expect," Soros said. Read entire article

Russia, China should dump dollar in trade
- Medvedev

Fri Jun 5, 2009
Source
MOSCOW (Reuters) - Russia and China should consider switching to domestic currencies in bilateral trade without going to the dollar, Russia's president Dmitry Medvedev said in an interview with Kommersant daily published on Friday. China has already entered similar agreements with Brazil and Belarus.

The deal involves a currency swap agreement between the two countries. Trade turnover between Russia and China reached about $50 billion in 2008 and is set to increase. "I think that we can think about such positions, for example the rouble against yuan," Medvedev was quoted by Kommersant as saying. Russia's own attempt to switch to the rouble in bilateral trade with Belarus has so far not been successful.

Leaders of Brazil, Russia, India and China, known by their BRIC acronym, are meeting in the Russian city of Yekaterinburg on June 16 to discuss the role of the dollar in the global financial system among other issues.

Medvedev said bilateral currency deals between trade partners ease impact of the economic crisis in an environment when many countries have difficulties tapping international capital markets.

Russia to build large-scale gas pipelines to China

(AFP/Xinhua)

2006-03-21
Source
Russia will build two large-scale gas pipelines to China within five years, the head of Russian gas giant Gazprom said here Tuesday after signing a deal with China's biggest energy firm. Read entire article

The cautious seldom err. -Confucius

Things I read December 9, 2008

Former ISI Chief: Mumbai And 9/11 Both “Inside Jobs”
For years, people who have followed the money trail on 911 have said it leads back to the ISI. Here is the Ex ISI Chief suggesting the same. Must be another case of when 'is' isn't 'is'.

The Curse of Global Capitalism
Any parasite which draws more from its host than the host can sustain, will eventually kill it...Some cancers are too far spread to be removed at no cost. And yet to continue living with it is a guarantee of a slow and painful death, from which no recovery will be possible. Some very clear thinking here.

Blame the Takers, Not the Makers

Sponsor an Executive
Have a laugh.

US: Blackwater used grenades on unarmed Iraqis
Bastards...they ought to be flayed.

Men really are the weaker sex, say scientists
Maybe this is not a bad thing.

India, Russia sign 10 new energy agreements
Looks like the Empire has come up against a BRIC wall.

The panopticon economy
It's the new Big Brother house. But we wont be seeing inside it on television.

OBAMA REVITALIZES DISASTER CAPITALISM: THE SHOCK DOCTRINE RECEIVES A MAKE-OVER

Obama to send 'clear message' to Russia over neighbors
What nonsense! Especially after the whole world knows Georgia started the war at the behest of the USA.

Russia against U.S. missiles in any European anti-missile plans
And Russia's response.