Thursday, September 06, 2012

Trade Settlement Crisis Update - China And Germany Agree To More Direct Trade Settlement Without Using The Dollar

I have written of dozens of anticipated economic and social outcomes over the last seven plus years on here.  Dozens have come to pass and dozens more are going to come to pass.  One is surrounding this very topic. 

Back in 2007 when the world economy was oblivious to anything other than a very few talking about a potential subprime housing bubble in the U.S., (actually prime turned out to be a bigger mess than subprime as noted on here before) when corporate CEOs were wildly bullish, when the mainstream media had convinced everyone that Wall Street carnival barkers were masters of the universe, when globalization was seemingly unstoppable, when Ben Bernanke said the economy was fine, when Treasury Secretary Paulson said he had never seen a global economy this strong, when Europe looked invincible and China was being bandied about as the successor to American hegemony, amongst other writings where I mocked all of these delusions, I noted that we were headed for a change in global trade settlement.  In other words, we would witness a currency market crisis of some sorts in coming years.   Depending on how one views coming change, trade settlement dynamics could be a crisis or it could be simply a change for the better.  And, I wrote that while no one could know for certain what new system would unfold, that direct or point-to-point trade settlement was a likely outcome rather than today’s use of floating currencies and a world reserve currency.  

A few people believe we will be going back to the gold standard for global trade settlement.  Something I have said is a horrible system that clearly not going to happen.   That would be one of the most corrupt, anti-democratic outcomes that I could imagine.  And, another very few believe that we should institute the “bancor” concept proposed by Keynes or SDR’s or Special Drawing Rights by the IMF.   But, most people around the world are simply oblivious to coming change.  That’s not really an indictment since families have greater concerns than understanding currency market dynamics.  But it is an indictment of economists and finance.  Regardless, all of these systems share fundamental flaws.  Maybe a topic for a future post.  But, I’m not going to type a treatise on the topic today. 

Today, right now, as I type this, Iran, Japan, India, Germany, China and Russia have all announced an intent to settle trade directly without use of the dollar, the world’s reserve currency.   That was exactly what I said would happen years ago; direct trade settlement.  Frankly, before anyone even acknowledged any type of trade settlement change was coming.  How was that call possible?  Well, for the very few who understand global trade settlement, they should know how unstable this current system is.   It has lurched from crisis to crisis since it was dumped on our laps thirty-odd years ago.  That was when the last system changed due to crisis. 

While direct settlement might not be the final outcome for trade, it offers a lot of flexibility and granularity.  Especially for democracy.  Maybe more on that in a future post but how about one example.  Democracy can demand proper regulatory, environmental, democratic and living wage dynamics are met within the specific dynamics of each particular nation.  Gold and bancor-type solutions as envisioned don’t deal with anything except money.  ie, The primacy of capital running roughshod over democracy as is the case today.      

As I noted many times on here, those countries forcing change into the currency and trade settlement market should be careful what they wish for.  The U.S., if forced to, will respond with equal economic force.   I’m not making moral judgements about what nation is right or wrong but rather simply stating that force will be met with force as the U.S. will redefine its economic interests in any changing trade developments.   Now, if you are a long-time reader, you can read between the lines.  Over the last seven years I have written extensively about China.  That includes the possible/probable coming trade conflict or worse with the United States.  And, as noted in a few of those posts, deregulated capitalism’s embrace of a communist nation has allowed China to upgrade its military and its influence around the world.  The American capitalists and, specifically Bill Clinton, Paul Krugman and others who were enthusiastic about this malfeasance, have forced the American people to upgrade a communist country’s military and political system with our money.  They have placed China and the United States squarely on a collision course in the game of political and military power.

The U.S. will win any trade settlement or currency war.  Guaranteed.  If you don’t appreciate this statement, you really don’t have any idea what is going on in the global economy.  China is a colony of American empire just as India was of Britain.  China is forced to make things at a price Americans will buy and in return we simply turn on the photocopy machine and print dollars to give to them in return.  That’s all we have to do.  We don’t have to work to buy anything China or any other country makes.  We simply have to print dollars.   That’s one of the top factors in why there are no jobs in this country.  Because this dynamic doesn’t require that we work to buy anything.  That is the top factor in why every Tom, Dick and Harry in our nation is now a financial genius, advisor, MBA, bankster, Wall Street criminal or pushes around paper for a living. Our number one export is printing dollars. ie, Pushing around paper.  Apparently, no one really understands this tie in with jobs, since I have never seen those words uttered anywhere.  Obviously this is astonishing and indicative of how horribly incompetent economists and financial clowns are.  Remember, the biggest financial bubble the world has ever seen.  The investor class is going to be devastated.  And, as noted before, finance-related employment could easily drop by two thirds or more as the system resolves itself.

That China owns any amount of our debt is absolutely meaningless.  All U.S. debt is domestic.  ie, It is all dollar-denominated.  This is nothing like Weimar Germany and we have mocked those who don’t understand this simple fact about money and debt.  We control our monetary destiny 100%.  China holds absolutely no sway over the U.S. other than that which is political by the U.S. Chamber of Commerce, corporations and corporate lobbyist thugs.  We hold total economic sway over China as a slave labor colony of American empire.  China realizes this and that is why they the major driver, along with Russia, to get out from under the dollar trade settlement system.   All of this is purely a global political power play.  Globalization is a manifestation of the state.  And, being capitalism is also a manifestation of the state, it is being used to exploit nations and prey upon people around the world.

Remember, as I noted before, this cycle is the end of entities preying on the American people.  It doesn’t matter if that is politicians, lobbyists, corporations, China or anyone else.  

Most people aren’t even aware of what is going on in currency markets.  But of the very few that are, most will overlook or even dismiss this recent announcement between China and Germany as they have prior similar announcements by other nations.  And, both the yuan and euro are certainly currencies I remarked years ago were headed for the dung heap or substantial devaluation when it was a very, very unpopular position to say so.   Whether China experiences massive inflation from this point forward or deflation, the yuan is headed south; another long time outcome on here.  While it is very hard to get accurate economic and financial market data out of China, there are now substantiated concerns that China is having a hard time getting needed dollars.  That’s quite hilarious because I wrote that this very dynamic was eventually going to happen back in 2008.   If this becomes a crisis, it will pit U.S. politicians squarely in a power play with China.  And, a worst case will be a major yuan devaluation in order to attract the dollars it needs.   Reading that in the Goldman Sachs propaganda that said China was unstoppable and was going to become the global dominant economy? 

As noted before, “free trade” and globalization are, in fact, defined by currency wars.  The last thirty years has been one big currency war as countries jockey to loot from each other by manipulating their currencies.   Every nation plays the game.  Because doing so is required to “win”.   That free trade dunces scream that protectionism today will destroy the global economy is absoeffinglutely hilarious.  Protectionism is the primary design point of “free trade”.  These con men are simply shills for the criminals around the world who created this mess and wish to perpetuate its looting.  Truly one of the most idiotic group of ideological hacks we see today.

The IMF, World Bank and the dollar are the lynchpins of U.S. corporate, military and political empire.  These vehicles, created at the end of a barrel of a gun after World War II, allow the U.S. to enslave, loot and manipulate the world.  Without them, U.S. corporate, military and political power would erode enormously.  Possibly even collapse in comparative terms.   Or, should I say our corporate empire most probably would collapse.

By the way, as it pertains to this post, both China and Germany are also looters teetering on their own crises.   That means if you live in Canada, Brazil, Australia or Russia, the shit is going to hit he fan.   The bullwhip effect I have written about is going to torch your economies as well.  But then all of these have been long-term thesis on here. 

China and Germany alone most certainly aren’t going to unseat the dollar as the world’s reserve currency.  That is preposterous.   But this trade settlement system is going to freeze up, fail, wither on the vine from lack of acceptance, experience a U.S. debt default or some crisis that is most likely permanent.  This system was never designed for stability.  It was never designed period.  It just literally came into existence overnight with the failure of the last unstable system; gold as a form of international trade settlement.  This system is clearly not sustainable and we are reaching the tipping point.  This announcement is just another almost imperceptible perturbation into the final outcome.  The world as you have known it is over.  It’s never coming back.  Change is coming.  But it won’t be the change political dunces think they will impart on the world.  It will be the change that is forced upon the world as the contradictions of deregulated free market capitalism start unwinding.   This global crisis is a crisis of capitalism.  And, the tens of trillions of dollars spend around the globe by its looters to save this system of exploitation and corruption have done absolutely nothing to save it.  

The concept of any nation holding a currency through which others must settle trade is a vestige of empire, colonialism, exploitation and corruption.  Global finance and globalization are dead; a pronouncement we uniquely made in 2008 when the financial ((capital)ism) markets collapsed.   At the time, not many could have believed that statement.  Most still can’t.  Can you hear me now? Smile with tongue out

Title link here.

posted by TimingLogic at 8:58 AM

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