Today’s infographic shows that the wind is shifting in international trade. With less countries and organizations using the dollar to settle international transactions, it slowly chips away at its hegemony of the dollar. China is at the epicenter and the country is making continued progress in cutting deals outside of the U.S. dollar framework. Deals shown in the graphic are currency flows between countries that have abandoned the dollar in bilateral trade, as well as countries that are considering such measures.
The most recent culmination of these trends is the creation of the Asian Infrastructure Investment Bank (AIIB), a China-led rival to the World Bank and IMF that includes 57 founding countries and $100 billion of capital. The United States is not a member and has actively lobbied its allies to avoid joining due to perceived governance issues.
Other recent deals by China include: a 30-year $400 billion energy alliance with Russia, a second energy deal focusing on natural gas worth $284 billion with Russia, and a deal removing tariffs on 85% of Australian commodity exports to China. Further, China and Russia have agreed to pay each other in domestic currencies in order to bypass the U.S. dollar.
It is not only the Chinese that are starting to question the viability of the dollar. A report in 2010 by the United Nations called for the abandonment of the U.S. dollar as the single reserve currency. The Gulf Cooperation Council has also expressed desires for an independent reserve currency.
In the short term, especially with a crashing Chinese stock market and fledgling Eurozone, the dollar will likely reign supreme. It’s still a stretch for the yuan to make its way into foreign reserve coffers so long as capital controls remain in place and the country’s bond market is not open or transparent to offshore investors. However, Beijing is currently mulling ways to internationalize the yuan, and each step it takes will take China closer to challenging dollar hegemony.
With more bilateral trade transactions bypassing the dollar, and the increasing internationalization of the Chinese financial system, the yuan is eventually going to give the dollar a run for its money.
Could China back their money with Gold? So it is actually worth something?
They key word here is “slowly.”
yahsure,
China doesn’t need to back it with gold to make it worth something.
They actually make things over there people all over the world want and, that their currency can be traded for, and that makes it worth more than gold.
The dollar is the bomb. Who else has enough paper currency out there to be the world currency?
No one, that’s who. The dollar will be the world currency for a long, long, time. Decades.
Sorry to burst any bubbles and fantasy MadMax scenarios.
However, we common people are still fucked, so carry on.
Back it with gold..
Fundamentally flawed thinking I’m afraid.
ANYONE who does that now will obliterate their economy in record time.
It won’t happen – not in China, not in the west.
yahsure says: Could China back their money with Gold?
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Yes!
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The day China announces it has backed its currency with gold, the dollar will be over.
More debt is denominated in us dollars than any other currency.
Look at Greece! When the ocean of IOU’s begins to completely drain & evaporate, it will be us dollars for which people are desperate.
Not gold.
Not guns.
Not ammo.
Not farmland.
Not vacation homes.
Not “stuff.”
Dollars.
One of the Republicunt CONgress Critters yelled at Yellen today, seriously.
We can’t be yellin’ at YELLEN , she could inflict terrible pain on us with the flip of a switch down at the FED, damn boy !
Dats what i meant. Announce they have money backed by Gold and its game over USA.