Part 2-KTFA:
Backdoc: WOW! THE GERMAN GDP IS GOING TO GET HIT WITH A HAMMER SOON! THE IMPACT FALLS WHERE? RIGHT! THE EURO!!
IF COMMODITIES TAKE A DOUBLE DIP GLENCORE, VW, D.B. COULD BECOME A FINANCIAL NEGATIVE TRIGGER ON THE EURO! DOC IMO
Thunderhawk: Backdoc Alert
VIDEO: German exports plunge as China, VW cloud German growth outlook
German exports plunged in August by their largest amount since the height of the global financial crisis and leading institutes cut 2015 growth forecasts in the latest sign that an emerging market slowdown is hurting Europe's largest economy.
http://ift.tt/1N2gf7B*
....
Backdoc: WOW! THE GERMAN GDP IS GOING TO GET HIT WITH A HAMMER SOON! THE IMPACT FALLS WHERE? RIGHT! THE EURO!!
IF COMMODITIES TAKE A DOUBLE DIP GLENCORE, VW, D.B. COULD BECOME A FINANCIAL NEGATIVE TRIGGER ON THE EURO! DOC IMO
Thunderhawk: Backdoc Alert
VIDEO: German exports plunge as China, VW cloud German growth outlook
German exports plunged in August by their largest amount since the height of the global financial crisis and leading institutes cut 2015 growth forecasts in the latest sign that an emerging market slowdown is hurting Europe's largest economy.
http://ift.tt/1N2gf7B*
....
************
Backdoc: IS THIS WHAT THE FED FEARS MOST? HOW DO YOU RAISE RATES IN A DECLINING JOB MARKET AND SLOWING ECONOMIES ESPECIALLY WHEN MANY ARE IN COMPLETE CONTRACTION OR DEFLATION? DOC
**********
Thunderhawk: Backdoc Alert
VIDEO: Recession buzz is heating up on Wall Street
Wall Street is getting increasingly nervous about the prospects for recession, both on a global and domestic level.
Slowing global growth has been one of the predominant investing themes in 2015, causing enough turmoil to send both the S&P 500 and the MSCI World Index down about 4 percent.
The $73.5 trillion global economy is expected to grow 3.1 percent in 2015 and 3.6 percent in 2016, according to the latest International Monetary Fund projections. Those numbers, though, are heading lower and could be revised even more before all is said and done.
http://ift.tt/1LiuyFU
************
Backdoc: WE KNOW "THE DEAL" WILL HAVE TEETH BUT HOW LONG WILL IT TAKE ESPECIALLY SINCE THE NON DEAL PRODUCERS WILL EXPLOIT THE CHALLENGE! DOC IMO
************
Thunderhawk: Backdoc Alert
Crude awakening: Beware oil's 'dead cat bounce'
The current recovery in oil prices could prove to be nothing more than a short-lived "dead cat bounce," analysts have warned, pouring cold water on hopes of a sustained recovery in crude.
http://ift.tt/1VFNo09
************
Backdoc: I LOVE THIS QUOTE IN THE LAST PARAGRAPH!
"ALL THE MONEY PRINTING WILL END IN TEARS"
LETS JUST HOPE THE TEARS WE ARE CRYING WILL BE TEARS OF JOY!! LOL
************
Thunderhawk: Backdoc Alert Has the Fed lost markets’ confidence?
Traders are starting to doubt the U.S. Federal Reserve (Fed)'s command of monetary policy, according to Societe Generale's famously pessimistic strategist, Albert Edwards.
There is "increasing evidence of a loss of confidence that the Fed is actually in control", after its rate-setting committee, led by Chair Janet Yellen, seemed to brush aside concerns about deflation by choosing not to raise interest rates at its September meeting, Edwards argued in a research note.
Yellen cited concerns about instability elsewhere in the world when she spoke about her decision. The Fed has since been criticized for assigning too much importance to market turmoil elsewhere, rather than focusing on the U.S. domestic economy, when making its call. There have also been concerns that uncertainty of when rate rises will happen is now more of a drag on stock markets than a small rate rise, which has been long expected, would be.
Edwards points to "the continuing slide in U.S. break-even inflation expectations" in the bond market as a clear sign that bond market traders, at least, do not "believe the Fed is in control any more." U.S. bonds due for repayments in five years are now below their January low and are now only 20 basis points above the euro zone, despite an apparently healthier U.S. economy.
Edwards drew comparisons between the U.S. at the moment and Japan in 1995 – when the surging value of the yen made exports for Japanese businesses extremely difficult.
The strategist, who is well-known for his uber-bearish predictions, added: "All this money printing will ultimately end in tears."
http://ift.tt/1MfSdmG
************
Backdoc: TALK ABOUT AN ACCIDENT WAITING TO HAPPEN, THAT WOULD SEIZE UP CREDIT! BIG TIME!!
LIQUIDITY!!
************
Thunderhawk: Will China Dumping US Bonds Undermine Global Finance?
China, Russia and Brazil have recently been selling US Treasuries, hedging their fiscal risks and stirring volatility on Wall Street, potentially signaling a more significant slowdown in the global economy coming up.
Several emerging markets, including China, Brazil, Russia and Taiwan, previously among the biggest buyers of US governmental bonds, have recently been selling them at the fastest pace since 1978. US bonds, commonly referred to as ‘Treasury notes' or ‘Treasuries' are, however, widely regarded as being among the most ‘safe haven' assets in the financial world, meaning the emerging markets must have serious reason to cash those out for the more volatile money liquidity.
http://ift.tt/1MgTi1R
************
Backdoc: PRESSURE IS MOUNTING ON THE U.S. TREASURY BONDS AS COUNTRIES RAMP SELLING TO SUPPORT THEIR DECLINING CURRENCIES IN THIS DEFLATIONARY ECONOMY! DOC IMO
**********
Thunderhawk: Why the Yuan is Catching up to the Greenback
Expert Yaroslav Lissovolik told Radio Sputnik that the preeminence of the US dollar is being challenged by the world's central banks' search for alternative reserve currencies, such as those of emerging markets, and gold.
While the US remains a safe haven for investment, its preeminence is being challenged by the increasing use of emerging market currencies such as the Chinese yuan for international trade, and central banks' need for more reserve currencies, Yaroslav Lissovolik, Professor of International Economics at Russia's Diplomatic Academy, said.
Several emerging markets — including China, Brazil, Russia and Taiwan — have recently been selling US treasury bonds at the fastest pace since 1978.
"The role of gold may further expand, partly because there will be demand from the central banks for gold to store reserves, and generally the picture we're seeing today is still that of excess demand, high demand on the part of the central banks for more reserve currencies," said Lissovolik.
Low interest rates in the US also give central banks reason to diversify into emerging market currencies, in order to seek higher yields and high return.
"There are not enough reserve currencies out there in the world, there is a shortage of them."
"In order for that trend to continue you need more emerging markets like China, like for example Brazil, Russia, to stabilize their economies, raise their share in the world economy in terms of financial transactions, and then there's more scope for the central banks of the world to use their currency, as reserve currency."
The Chinese yuan, which is the fourth most popular currency for financial market operations, is one such candidate, said, Lissovolik, and the Chinese government's loosening of currency control makes it more attractive as a potential reserve currency for the world's central banks.
In addition, the Asian Infrastructure Investment Bank will also increase the share of emerging markets in financial transactions and the world's investments, by conducting investment for infrastructure projects.
"This competition between currencies is partly predicated on the share of the country's trade in the world economy, its share of investment, and its share in financial markets, and clearly if you don't take just the past several months, if you take the past five to ten years, clearly China has grown tremendously in terms of its weight in the world economy, and its role in the world as well."
http://ift.tt/1N27Ele
************
ThunderHawk MASSIVE ALERT
China Launches Yuan-Based International Payment System
Up to 19 major banks were named as direct participants in CIPS, with 38 Chinese banks and up to 140 foreign financial institutions named as indirect participants.
China launched the first phase of its China International Payment System (CIPS) in Shanghai on Thursday, allowing cross-border transactions in the Chinese national currency, the yuan.
CIPS’ first phase provides clearing and settlement services, according to the People’s Bank of China announcement. Its launch is said to remove hurdles to the yuan’s internationalization by reducing transaction costs and processing times.
Up to 19 major banks were named as direct participants in CIPS, with 38 Chinese banks and up to 140 foreign financial institutions named as indirect participants.
The launch bolsters China’s efforts to join the International Monetary Fund’s (IMF) Special Drawing Rights (SDR) basket. An announcement on the State Council’s website cited SWIFT transaction services data as calling the yuan one of the world’s top five payment currencies last November.
CIPS is vying to overtake SWIFT in the region. Developed and administered by the People’s Bank, the system operates from 9 am to 8 pm Beijing time (01:00-12:00 GMT).
Local media reported that the Beijing-based Industrial and Commercial Bank of China (ICBC), one of the 19 direct CIPS participants, has cleared its first transaction of 35 million yuan ($5.5 million) in Singapore.
Another direct participant, Standard Chartered Bank said it had also cleared its first transaction with the Swedish home furnishing retailer IKEA through CIPS.
Additionally, China has adopted the IMF's Special Data Dissemination Standard (SDDS), a move also seen to further internationalize the yuan.
http://ift.tt/1P0U5G2
************
Dnari131: haha Hawk I pounced on this one this morning. Wild ain't it!???? Whomever doesn't wanna use SWIFT can now use this one!
Why risk western penalties and sanctions when you don't have to now?
Countries can now trade direct as countries continue to dedollarize....repricing of gold through the single trade window is also more probable...silver wholesellers already barely hangin on as it is..
What happens win BIG players start buying...mine production down 30% this year too I think
Backdoc: IS THIS WHAT THE FED FEARS MOST? HOW DO YOU RAISE RATES IN A DECLINING JOB MARKET AND SLOWING ECONOMIES ESPECIALLY WHEN MANY ARE IN COMPLETE CONTRACTION OR DEFLATION? DOC
**********
Thunderhawk: Backdoc Alert
VIDEO: Recession buzz is heating up on Wall Street
Wall Street is getting increasingly nervous about the prospects for recession, both on a global and domestic level.
Slowing global growth has been one of the predominant investing themes in 2015, causing enough turmoil to send both the S&P 500 and the MSCI World Index down about 4 percent.
The $73.5 trillion global economy is expected to grow 3.1 percent in 2015 and 3.6 percent in 2016, according to the latest International Monetary Fund projections. Those numbers, though, are heading lower and could be revised even more before all is said and done.
http://ift.tt/1LiuyFU
************
Backdoc: WE KNOW "THE DEAL" WILL HAVE TEETH BUT HOW LONG WILL IT TAKE ESPECIALLY SINCE THE NON DEAL PRODUCERS WILL EXPLOIT THE CHALLENGE! DOC IMO
************
Thunderhawk: Backdoc Alert
Crude awakening: Beware oil's 'dead cat bounce'
The current recovery in oil prices could prove to be nothing more than a short-lived "dead cat bounce," analysts have warned, pouring cold water on hopes of a sustained recovery in crude.
http://ift.tt/1VFNo09
************
Backdoc: I LOVE THIS QUOTE IN THE LAST PARAGRAPH!
"ALL THE MONEY PRINTING WILL END IN TEARS"
LETS JUST HOPE THE TEARS WE ARE CRYING WILL BE TEARS OF JOY!! LOL
************
Thunderhawk: Backdoc Alert Has the Fed lost markets’ confidence?
Traders are starting to doubt the U.S. Federal Reserve (Fed)'s command of monetary policy, according to Societe Generale's famously pessimistic strategist, Albert Edwards.
There is "increasing evidence of a loss of confidence that the Fed is actually in control", after its rate-setting committee, led by Chair Janet Yellen, seemed to brush aside concerns about deflation by choosing not to raise interest rates at its September meeting, Edwards argued in a research note.
Yellen cited concerns about instability elsewhere in the world when she spoke about her decision. The Fed has since been criticized for assigning too much importance to market turmoil elsewhere, rather than focusing on the U.S. domestic economy, when making its call. There have also been concerns that uncertainty of when rate rises will happen is now more of a drag on stock markets than a small rate rise, which has been long expected, would be.
Edwards points to "the continuing slide in U.S. break-even inflation expectations" in the bond market as a clear sign that bond market traders, at least, do not "believe the Fed is in control any more." U.S. bonds due for repayments in five years are now below their January low and are now only 20 basis points above the euro zone, despite an apparently healthier U.S. economy.
Edwards drew comparisons between the U.S. at the moment and Japan in 1995 – when the surging value of the yen made exports for Japanese businesses extremely difficult.
The strategist, who is well-known for his uber-bearish predictions, added: "All this money printing will ultimately end in tears."
http://ift.tt/1MfSdmG
************
Backdoc: TALK ABOUT AN ACCIDENT WAITING TO HAPPEN, THAT WOULD SEIZE UP CREDIT! BIG TIME!!
LIQUIDITY!!
************
Thunderhawk: Will China Dumping US Bonds Undermine Global Finance?
China, Russia and Brazil have recently been selling US Treasuries, hedging their fiscal risks and stirring volatility on Wall Street, potentially signaling a more significant slowdown in the global economy coming up.
Several emerging markets, including China, Brazil, Russia and Taiwan, previously among the biggest buyers of US governmental bonds, have recently been selling them at the fastest pace since 1978. US bonds, commonly referred to as ‘Treasury notes' or ‘Treasuries' are, however, widely regarded as being among the most ‘safe haven' assets in the financial world, meaning the emerging markets must have serious reason to cash those out for the more volatile money liquidity.
http://ift.tt/1MgTi1R
************
Backdoc: PRESSURE IS MOUNTING ON THE U.S. TREASURY BONDS AS COUNTRIES RAMP SELLING TO SUPPORT THEIR DECLINING CURRENCIES IN THIS DEFLATIONARY ECONOMY! DOC IMO
**********
Thunderhawk: Why the Yuan is Catching up to the Greenback
Expert Yaroslav Lissovolik told Radio Sputnik that the preeminence of the US dollar is being challenged by the world's central banks' search for alternative reserve currencies, such as those of emerging markets, and gold.
While the US remains a safe haven for investment, its preeminence is being challenged by the increasing use of emerging market currencies such as the Chinese yuan for international trade, and central banks' need for more reserve currencies, Yaroslav Lissovolik, Professor of International Economics at Russia's Diplomatic Academy, said.
Several emerging markets — including China, Brazil, Russia and Taiwan — have recently been selling US treasury bonds at the fastest pace since 1978.
"The role of gold may further expand, partly because there will be demand from the central banks for gold to store reserves, and generally the picture we're seeing today is still that of excess demand, high demand on the part of the central banks for more reserve currencies," said Lissovolik.
Low interest rates in the US also give central banks reason to diversify into emerging market currencies, in order to seek higher yields and high return.
"There are not enough reserve currencies out there in the world, there is a shortage of them."
"In order for that trend to continue you need more emerging markets like China, like for example Brazil, Russia, to stabilize their economies, raise their share in the world economy in terms of financial transactions, and then there's more scope for the central banks of the world to use their currency, as reserve currency."
The Chinese yuan, which is the fourth most popular currency for financial market operations, is one such candidate, said, Lissovolik, and the Chinese government's loosening of currency control makes it more attractive as a potential reserve currency for the world's central banks.
In addition, the Asian Infrastructure Investment Bank will also increase the share of emerging markets in financial transactions and the world's investments, by conducting investment for infrastructure projects.
"This competition between currencies is partly predicated on the share of the country's trade in the world economy, its share of investment, and its share in financial markets, and clearly if you don't take just the past several months, if you take the past five to ten years, clearly China has grown tremendously in terms of its weight in the world economy, and its role in the world as well."
http://ift.tt/1N27Ele
************
ThunderHawk MASSIVE ALERT
China Launches Yuan-Based International Payment System
Up to 19 major banks were named as direct participants in CIPS, with 38 Chinese banks and up to 140 foreign financial institutions named as indirect participants.
China launched the first phase of its China International Payment System (CIPS) in Shanghai on Thursday, allowing cross-border transactions in the Chinese national currency, the yuan.
CIPS’ first phase provides clearing and settlement services, according to the People’s Bank of China announcement. Its launch is said to remove hurdles to the yuan’s internationalization by reducing transaction costs and processing times.
Up to 19 major banks were named as direct participants in CIPS, with 38 Chinese banks and up to 140 foreign financial institutions named as indirect participants.
The launch bolsters China’s efforts to join the International Monetary Fund’s (IMF) Special Drawing Rights (SDR) basket. An announcement on the State Council’s website cited SWIFT transaction services data as calling the yuan one of the world’s top five payment currencies last November.
CIPS is vying to overtake SWIFT in the region. Developed and administered by the People’s Bank, the system operates from 9 am to 8 pm Beijing time (01:00-12:00 GMT).
Local media reported that the Beijing-based Industrial and Commercial Bank of China (ICBC), one of the 19 direct CIPS participants, has cleared its first transaction of 35 million yuan ($5.5 million) in Singapore.
Another direct participant, Standard Chartered Bank said it had also cleared its first transaction with the Swedish home furnishing retailer IKEA through CIPS.
Additionally, China has adopted the IMF's Special Data Dissemination Standard (SDDS), a move also seen to further internationalize the yuan.
http://ift.tt/1P0U5G2
************
Dnari131: haha Hawk I pounced on this one this morning. Wild ain't it!???? Whomever doesn't wanna use SWIFT can now use this one!
Why risk western penalties and sanctions when you don't have to now?
Countries can now trade direct as countries continue to dedollarize....repricing of gold through the single trade window is also more probable...silver wholesellers already barely hangin on as it is..
What happens win BIG players start buying...mine production down 30% this year too I think
Dnari131: Flashback from March 2015……..more on CIPS
The one Chinese innovation that could change the way we think about money
The new China International Payments System (CIPS), which is set to debut before the end of 2015, has been described as a “worldwide payments superhighway for the yuan.” What the creation of such a system means in the short-term is that the Chinese currency (officially known as the renminbi) has the potential to become a truly international, convertible currency and a more attractive currency for conducting international trade and finance. What it means in the long-term is that America’s long reign of economic dominance is at risk.
Ever since the end of World War II, the dollar has been the bedrock of the international financial system. The rise of a competitor currency to challenge the dollar seems almost impossible. While the euro and the yen have emerged as possible options for supplanting the dollar, they have never had the global clout of the U.S. dollar. China’s plans for the internationalization of the renminbi, though, are a different matter entirely. Given the size and heft of China’s economy, it only makes sense that China is creating a global payments system to make it easier for people to trade, invest and conduct transactions using the renminbi.
One way to measure how important the Chinese currency has become worldwide is to look at the percentage of international trade finance deals that are conducted using the renminbi. On a global basis, the renminbi accounts for nearly 9 percent of all trade finance deals worldwide, the second largest behind only the dollar. Moreover, as of January 2015, the renminbi is now the fifth most used payments currency in the world, trailing only the dollar, the euro, the pound sterling, and the yen. According to Wim Raymaekers, Head of Banking Markets at SWIFT, this is “an important milestone” that confirms the transition of the renminbi from an “emerging” to a “business as usual” payment currency.
One area where the launch of the new Chinese payments system could really have an impact is in the global energy markets. As a result of the so-called “petrodollar system” established between the U.S. and Middle East oil producers, oil exports are priced and transacted in dollars. Now imagine the price of oil being quoted in Chinese yuan and not U.S. dollars.
What if Saudi oil exporters decide they want yuan and not dollars for their oil? That means anyone buying or selling oil in commodity markets has to have a yuan bank account in addition to a dollar bank account. Given the voracious energy demands of China’s growing economy, it’s easy to see why a global payments system facilitating these trades makes sense.
A one-hundred Chinese yuan banknote is arranged next to a one-hundred U.S. dollar banknote. (Nelson Ching/Bloomberg)
Right now, of course, the renminbi does not pose a direct threat to the dollar. While 41 percent of all global payments involve the dollar, only 2 percent involve the renminbi. But think ahead a few years. If the Chinese economy continues to grow, if plans continue to internationalize the renminbi, and if gridlock in Washington continues, it’s at least theoretically plausible that the renminbi could eventually supplant the dollar as the reserve currency of choice around the world. Especially since the investment theme of “de-dollarization” has started to be picked up globally.
If the renminbi ever replaces the dollar, there are going to be effects felt from Wall Street to Main Street. For one, foreign investors won’t need to hold as many dollars since they’ll be conducting transactions in yuan instead. That means they will have fewer dollars to invest in dollar-denominated U.S. government debt — the same debt that is the key to financing massive U.S. budget deficits. To keep foreign investors investing in this dollar-denominated debt, the U.S. government would have to jack up interest rates. Moreover, if all the dollars held globally ever make their way back to the United States, that influx of dollars could lead to crushing domestic inflation and a whole host of uncomfortable economic consequences.
Of course, building the CIPS is just the next logical step in the internationalization of the renminbi. Things won’t change overnight — or perhaps ever. However, keep in mind that China has hatched a number of other plans to transform the international financial system. With the rise of the BRICS, for example, China is looking for alternatives to a Western-dominated international financial system. Last year, the Chinese helped to launch a new BRICS Development Bank based in Shanghai as a competitor to the World Bank and International Monetary Fund. Anyone want to guess whether this bank in the future will be making loans in dollars or yuan?
The internationalization of the renminbi is easier said than done. You don’t just wave your hands and your currency becomes the world’s primary reserve currency. You have to build trust. The Brookings Institution, for example, has recently highlighted five big political challenges facing the internationalization of the renminbi.
One big drawback, of course, is the fear of “capital controls” imposed by the Chinese government. In layman’s terms, you may shift your money into renminbi and not be able to get your money out when and how you need it. That understandably spooks anyone thinking of dumping dollars for yuan.
It’s only in the past decade that the Chinese have launched an aggressive drive to internationalize the renminbi. There’s still a lot to be done, but the creation of CIPS appears to be the next logical step in changing how the world thinks about the renminbi. If the Chinese economy is indeed taking over the world, it will need a currency that is also capable of taking over the world.
http://ift.tt/1Zi81z3
The one Chinese innovation that could change the way we think about money
The new China International Payments System (CIPS), which is set to debut before the end of 2015, has been described as a “worldwide payments superhighway for the yuan.” What the creation of such a system means in the short-term is that the Chinese currency (officially known as the renminbi) has the potential to become a truly international, convertible currency and a more attractive currency for conducting international trade and finance. What it means in the long-term is that America’s long reign of economic dominance is at risk.
Ever since the end of World War II, the dollar has been the bedrock of the international financial system. The rise of a competitor currency to challenge the dollar seems almost impossible. While the euro and the yen have emerged as possible options for supplanting the dollar, they have never had the global clout of the U.S. dollar. China’s plans for the internationalization of the renminbi, though, are a different matter entirely. Given the size and heft of China’s economy, it only makes sense that China is creating a global payments system to make it easier for people to trade, invest and conduct transactions using the renminbi.
One way to measure how important the Chinese currency has become worldwide is to look at the percentage of international trade finance deals that are conducted using the renminbi. On a global basis, the renminbi accounts for nearly 9 percent of all trade finance deals worldwide, the second largest behind only the dollar. Moreover, as of January 2015, the renminbi is now the fifth most used payments currency in the world, trailing only the dollar, the euro, the pound sterling, and the yen. According to Wim Raymaekers, Head of Banking Markets at SWIFT, this is “an important milestone” that confirms the transition of the renminbi from an “emerging” to a “business as usual” payment currency.
One area where the launch of the new Chinese payments system could really have an impact is in the global energy markets. As a result of the so-called “petrodollar system” established between the U.S. and Middle East oil producers, oil exports are priced and transacted in dollars. Now imagine the price of oil being quoted in Chinese yuan and not U.S. dollars.
What if Saudi oil exporters decide they want yuan and not dollars for their oil? That means anyone buying or selling oil in commodity markets has to have a yuan bank account in addition to a dollar bank account. Given the voracious energy demands of China’s growing economy, it’s easy to see why a global payments system facilitating these trades makes sense.
A one-hundred Chinese yuan banknote is arranged next to a one-hundred U.S. dollar banknote. (Nelson Ching/Bloomberg)
Right now, of course, the renminbi does not pose a direct threat to the dollar. While 41 percent of all global payments involve the dollar, only 2 percent involve the renminbi. But think ahead a few years. If the Chinese economy continues to grow, if plans continue to internationalize the renminbi, and if gridlock in Washington continues, it’s at least theoretically plausible that the renminbi could eventually supplant the dollar as the reserve currency of choice around the world. Especially since the investment theme of “de-dollarization” has started to be picked up globally.
If the renminbi ever replaces the dollar, there are going to be effects felt from Wall Street to Main Street. For one, foreign investors won’t need to hold as many dollars since they’ll be conducting transactions in yuan instead. That means they will have fewer dollars to invest in dollar-denominated U.S. government debt — the same debt that is the key to financing massive U.S. budget deficits. To keep foreign investors investing in this dollar-denominated debt, the U.S. government would have to jack up interest rates. Moreover, if all the dollars held globally ever make their way back to the United States, that influx of dollars could lead to crushing domestic inflation and a whole host of uncomfortable economic consequences.
Of course, building the CIPS is just the next logical step in the internationalization of the renminbi. Things won’t change overnight — or perhaps ever. However, keep in mind that China has hatched a number of other plans to transform the international financial system. With the rise of the BRICS, for example, China is looking for alternatives to a Western-dominated international financial system. Last year, the Chinese helped to launch a new BRICS Development Bank based in Shanghai as a competitor to the World Bank and International Monetary Fund. Anyone want to guess whether this bank in the future will be making loans in dollars or yuan?
The internationalization of the renminbi is easier said than done. You don’t just wave your hands and your currency becomes the world’s primary reserve currency. You have to build trust. The Brookings Institution, for example, has recently highlighted five big political challenges facing the internationalization of the renminbi.
One big drawback, of course, is the fear of “capital controls” imposed by the Chinese government. In layman’s terms, you may shift your money into renminbi and not be able to get your money out when and how you need it. That understandably spooks anyone thinking of dumping dollars for yuan.
It’s only in the past decade that the Chinese have launched an aggressive drive to internationalize the renminbi. There’s still a lot to be done, but the creation of CIPS appears to be the next logical step in changing how the world thinks about the renminbi. If the Chinese economy is indeed taking over the world, it will need a currency that is also capable of taking over the world.
http://ift.tt/1Zi81z3
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