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“What China and Russia are doing is not about attacking the US dollar to destroy it. Rather, it is about creating an independent alternative reserve currency for other nations that want to protect themselves from the increasingly frequent financial attacks from the US Treasury, banks and Wall Street investment funds. “ 

JdN: All the photographs that illustrate this Engdahl article have been added by me.

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By F. William Engdahl – October 20, 2017 – Source Russia Insider

The People’s Bank of China has announced a payment-by-payment (PVP) system for transactions in Chinese yuan and Russian ruble. The declared objective is to reduce exchange risks in their trade .

The only conceivable risk would come from the US dollar and potential acts of financial warfare of the US Treasury against the Russian-Chinese trade which becomes very important in volume and value. In December, it should reach 80 billion dollars, an increase of 30% over 2016. And there is more, in this decision, an apparent technical evolution of China and Russia.

The official announcement, posted on the China Foreign Trade website (CFETS), adds an extremely important note stating that the CFETS plans to introduce a similar system for all the currencies of the countries concerned by the Chinese Roads Initiative. silk .

This confirms what I mentioned in an article published in April 2016, namely, that the great design behind the Silk Roads Initiative , Belt and Road Initiative (BIS), has a component entirely based on a motto, attached to gold, which could change the overall balance of forces for the nations of Eurasia, from Russia and the countries of the Eurasian Economic Union, to China, all over Asia .

Previously known as the New Silk Economic Road, Belt and Road Initiative BIS, is an extensive network of high-speed rail links that crisscross the countries of Eurasia, including Central Asia, Mongolia, Pakistan, Kazakhstan and of course the Russian Federation, extending as far as Iran, potentially to Turkey and East Africa. A total of 67 countries are currently participating, or have asked to participate, in the overall project. HSBC believes that the BRI infrastructure project, which now accounts for one-third of global GDP, will generate $ 2,500 billion in new trade annually. It’s a first-rate infrastructure that will change the game.

The construction of a reserve currency in dollars

The academic presentations of the theory of money and the theory of the reserve currency tend to be boring, in any case beyond my patience. The China-Russia Direct Money Settlement [No Middle] Settlement is one of the most dynamic developments to change the game since the Washington Treasury and Wall Street banks developed the dollar system. American at Bretton Woods in 1944.

It is not a question of reducing exchange risks between Russia and China. Their trade in own currencies, bypassing the dollar, is already significant since the United States sanctioned Russia in 2014 – a very stupid decision by the US Treasury under Obama administration.

It’s about creating a vast new alternative currency reserve zone or dollar-independent zones.

The domination of the American century, which the publisher of Time-Life, Henry Luce, proclaimed in 1941, was born at the end of the war.

In 1945, when the bombs stopped falling on Europe and Japan, President Harry Truman made it clear that there was no more room for a rival British Empire, canceling American loan-lease loans, and demanding that a bankrupt United Kingdom pay off its war debts, and, moreover, drastically reduce world trade denominated in the pound sterling, which at that time represented another 50% of world trade.

The British had based their hopes on rebuilding their empire over the Commonwealth and its preferred trading area in sterling.

For Washington and Wall Street after 1945, there was room for only one dominant monetary power, the United States.Great Britain was forced to swallow its great arrogant pride and turn to the newly created International Monetary Fund and, step by step, dismantle the settlements of the British Empire, starting with India, for reasons financial.

This opened the door to the dollar in the global economy, outside the communist countries. Since 1945, the power of the United States, as a world superpower, has been based on two pillars: the most powerful army and the dollar as the undisputed world reserve currency that allows Washington to control the global economy.

In 1944, the Federal Reserve held more than 70% of the world’s gold reserves. All other currencies were indexed to the dollar. The dollar alone was set to gold. In the 1950s, the postwar world desperately needed dollars to finance its reconstruction. The dollar began its ascent as a reserve or reference currency used by central banks, aided by OPEC’s oil-producing countries agreeing to sell their commodities in US dollars. . The bulk of world trade has been in dollars.

Nixon and the great inflation of the dollar

According to the Bretton Woods agreement, the US Federal Reserve guaranteed that other countries holding dollar reserves could trade them at any time for gold from the US Federal Reserve.

The Washington Hotel, located near the village of Bretton Woods in New Hampshire

In the late 1960s, France and other countries demanded gold in exchange for what they considered to be overvalued US dollars. The US industry, out of order, was rusting because of the lack of new investments and the US federal deficits exploded because of the Vietnam War.

Other nations were no longer willing to accept that the “dollar was as good as gold” . They were asking for gold, not something “ as good as gold”

After the ” Nixon Shock” , when the President tore up the Bretton Woods agreement in August 1971, leaving the dollar floating, freed from all redemption in gold, the world had no choice but to accept dollars inflated, an inflation that skyrocketed with the 1973 oil shock orchestrated by Secretary of State Henry Kissinger and the Rockefeller faction of American politics.

The suspension of dollar-gold convertibility was a Washington reaction to the fact that the central banks of France, Germany and other OECD countries were demanding more and more gold from the Fed for their paper and paper dollars. the American gold reserves were running out.

There are the roots of the most extraordinary global inflation in history. Began with US budget deficits during the Vietnam War in the 1970s, followed by the 400% rise in the price of oil in 1974 – a price that the US Treasury, in a secret deal with Saudi Arabia in 1974-75 , had promised that he would be paid by the rest of the world in dollars – the world supply of dollars has grown astronomically. The amount of dollars outstanding, which are no longer refundable in gold, increased by 2,000% between 1971 and 2015. Real estate production has not increased as much.

The fact that the dollar remains the largest reserve currency of foreign central banks – still 64% now – with the Euro at 20% as the closest rival, gives an extraordinary advantage to the US government.

Since 1971, the United States has had budget deficits for 41 of the last 45 years, the only exception being four years in the 1990s, when the baby boom generation peaked in its peak of income and peak of contribution payments in the 1990s. social Security. The Clinton US Treasury Department has done some accounting manipulation to record this exceptional effect as an extra tax, a fraud. Every year, since 2001, the US budget has found huge deficits, exceeding $ 1400 billion in 2009, during the financial crisis that began in 2008. Before the break in the link between gold and the dollar, the US deficit was 3 billion.

Rightly, other countries see it as a huge inconvenience. Their investments in US dollar denominated Treasury Bills for their own central bank reserves become worthless securities. Because they are more or less obliged to invest the commercial surpluses earned from their exports in US Treasury bonds or similar US securities, the annual influx of dollars to the United States, coming from the Chinese Central Bank, surplus Japanese dollars, Russian dollars before 2014, Germany and other surplus countries – allows the US Treasury to keep interest rates abnormally low. It also allows Washington to finance these deficits without major stress. This year, the US deficit reached $ 585 billion.

Indeed, China and Russia have financed in recent years the US military budget ….

“Re-examination of Hiram’s Key: Freemasonry: A Plan for a New World Order “

… by buying bonds and treasury bills that allow the Treasury to finance this deficit without raising interest rates.

The cynical irony is that the US military budget, funded by Russia and China who must hold dollar reserves to protect themselves against Washington’s potential regime currency wars, as happened against Russia after 2014 , aims to control Russia and China, and ultimately destroy their economies.

If Donald Trump’s tax reduction law becomes effective, US deficits will reach the moon.

This is the backdrop to better understand what China, Russia, and allied countries are preparing to reduce their vulnerability to what is on a ballistic trajectory towards a bankrupt global system of reserves. If China, Russia and other allied countries of Eurasia, especially the countries of the Shanghai Cooperation Organization and candidate countries such as Iran and Turkey are turning to bilateral agreements, such as China and Russia, to regulate their trade, the dominant currency will fall and other currencies will replace it. The Chinese yuan is the main candidate. The Russian ruble too.

The yuan’s reserve currency status

The very recent move towards a direct settlement of bilateral trade between China and Russia, along with other countries along the new Silk Road, is a major cornerstone in creating a viable alternative to the US dollar. a reference reserve currency.

About a decade ago, Western economists called this idea absurd. They claimed it would be decades before the world accepts the yuan as a reserve currency. The yuan was not convertible.

In 2016, China was admitted by the International Monetary Fund as one of the five major monetary components of the IMF’s Special Drawing Rights, calculated with a basket of currencies. This measure gave the yuan a major boost to its international acceptance.

Before 2004, the yuan was not allowed outside of China. Since then, the Chinese monetary authorities have laid the groundwork for the internationalization of the yuan. According to the Society for Global Interbank Financial Telecommunication (SWIFT), the internationalization of the RMB [ renminbi, theofficial name of the yuan] takes place in three phases, first as a means for trade finance, then for investment, and long-term reserve currency.

Now that “long term” looks a lot in the short term because China exceeds all the expectations of conventional economists with the internationalization of its yuan, this prospect of seeing the yuan become a world reference currency, or a reserve currency exceeding the share of the euro in the coming years, is what alarmed – to put it nicely – the US Treasury, the Federal Reserve and the Wall Street banks.

In a 2016 report, HSBC reported that since 2012, the yuan has become the fifth most used currency in the world.

Two years ago, in October 2015, China launched the China International Payments System (CIPS).Although this system has signed a cooperation agreement with the dominant SWIFT system, it gives an option to China, in case of US sanctions, allowing it to operate independently of SWIFT. In 2012, Washington lobbied the Belgian-based international SWIFT credit clearing system, through which almost all international transactions between banking institutions pass, so that it blocks clearing for all Iranian banks, to freeze 100 billion dollars of Iranian assets abroad and paralyze its ability to export oil. The fact did not go unnoticed in Beijing and Moscow, especially when some crazy US MPs called to exclude Russian banks from SWIFT after 2014.

In March of this year, Elvira Nabiullina, Governor of the Central Bank of Russia, said: “ We have finished working on our own payment system, and if something happens, all SWIFT transactions will work at the same time. interior of the country. We created an alternative . “

Creation of the new monetary architecture

Investments in the vast New Silk Roads initiative amount to trillions of dollars. In Asia alone, the Asian Development Bank estimates that an investment of $ 8 trillion will be needed over the next few years to bring these economies to effective growth. Beijing’s creation of the Asian Infrastructure Investment Bank (AIIB) last year was a major step towards securing international funding for the BIS project.

In April 2016, China announced its decision to create the Shanghai Gold Exchange, with the People’s Bank of China, as a major international center for gold pricing and gold exchange in yuan, by physical bullion regulation among banks, refiners, producers and brokerages. Added to this is China’s decision to launch a daily fixing of gold prices in yuan which could eventually replace London’s dominant listing, accused of manipulating world gold prices for years.

Announcing its New Silk Roads initiative, the Chinese government, in a little-noticed commentary, said the roads of its high-speed rail projects across Eurasia countries will now link to global markets in the regions. remote, inaccessible and known to have large untapped gold reserves.

What China and Russia are doing is not attacking the US dollar to destroy it. It is highly improbable and would not benefit anyone. Rather, it is about creating an independent alternative reserve currency for other nations that want to protect themselves from the increasingly frequent financial attacks of the US Treasury and Wall Street banks and hedge funds.

It is about building a crucial element of national sovereignty, because the dollar system is used today to ravage the economic sovereignty of the rest of the world. As Henry Kissinger would have said in the 1970s: “If you control the money, you control the whole world. “

The statement of the Chinese government, now that its direct settlement system between China and Russia is extended to other countries, along the New Silk Roads, adds another stone to the careful construction of this alternative monetary system a politically explosive, gold-backed, non-US dollar alternative that could protect the Eurasian nations of Washington and the EU’s financial war in the years to come.

This is what puts Washington in all its forms. His options vanish day by day. Military War, Financial War, Cyber ‹ ‹War, Color Revolution – All of this is becoming increasingly powerless from a country that has allowed its own industrial base and workforce to be destroyed in the interest of a financial oligarchy .

Thus the Roman Empire collapsed in the fifth century, as the British Empire between 1914 and 1945, and all other countries whose history is based on debt slavery.

F. William Engdahl