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The land of the rising sun is relocating to Europe and the Middle East via the new Silk Road.  Is it because of petrodollar oil in those sand dune hills?  If you remove the rose-colored West-centric glasses and dig a little bit deeper, it would appear there are golden yuans and rubles instead.

Gold is the spectre haunting our monetary system… “If Chinese selling of Treasuries became a threat to US interests, a US president could freeze Chinese accounts with a phone call.  The Chinese know this. They are stuck with their dollars. They fear, rightly, that the US will inflate its way out of its $19 trillion mountain of debt (as of Nov. 2, 2017 the total is 20.5 Trillion). China’s solution is to buy gold. If dollar inflation emerges, China’s Treasury holdings will devalue, but the dollar price of its gold will soar. A large gold reserve is a prudent diversification.  Russia’s motives are geopolitical. Gold is the model 21st century weapon for financial wars. The US controls dollar payments systems and, with help from European allies, can eject adversaries from the international payments system called SWIFT. Gold is immune to such assaults. Physical gold in your custody cannot be hacked, erased, or frozen. Moving gold is a simple way for Russia to settle accounts without US interference.” – James Rickards via Telegraph UK, Apr. 2016

That prescient observation sums up why the glue that could make the petroyuan trade much “stickier” is gold.

So Russia is doing what and conspiring with whom?

Russia Triples Gold Reserves in Preparation for Full-Scale Economic War with the United States… “The impetus for the massive increase in Russian gold reserves is their desire to break away from the hegemony of the U.S. petrodollar and dollar-based payment systems. Currently, over 60 percent of global reserves and 80 percent of global payments are denominated dollars. The reason gold is so critical is that it cannot be manipulated by U.S.-based economic warfare, as it cannot be frozen out as other forms of digital and paper fiat can beThe strategic significance of gold is so great, that even when oil prices and Russian financial reserves were collapsing in 2015, they continued to acquire gold.  In fact, during the second quarter of 2017, Russia accounted for 38 percent of all gold purchased by central banks. The massive increase in Russian gold reserves has taken place while simultaneously abstaining from purchasing foreign currency for more than two years… In addition to being the largest international purchaser of gold, Russia is also one of the three biggest gold producers in the world, as the Central Bank of Russia purchases gold from domestic mines using commercial banks and not in the open market… Additionally, Russia is simultaneously pursuing other strategic dollar alternatives besides gold.  Russia and China have built a non-dollar payment system for regional trading partners. One of the most threatening uses of U.S. financial influence has been its utilization of the SWIFT… Russia clearly understands its vulnerability to U.S. domination and has worked diligently to reduce that vulnerability. In turn, Russia has created an alternative to SWIFT. ‘There was the threat of being shut out of SWIFT. We updated our transaction system, and if anything happens, all SWIFT-format operations will continue to work. We created an analogous system,’ Elvira Nabiullina, head of Russia’s central bank, reported to Vladimir Putin. Russia is also part of a reported Chinese plan to install a new international monetary order that excludes U.S. dollars. Under that plan, China could buy Russian oil with yuan and Russia could then exchange that yuan for gold on the Shanghai Exchange.” – FreeThoughtProject, Oct. 2017

Of course, Iran wants a piece of the action as well, while sticking its big fat nuclear foot in the door.  I’m not sure how many pairs of shoes are left over because millions of shoes were definitely tossed at Iranian TVs at every POTUS since Jimmy Carter.

Iranian Supreme Leader Khamenei Reveals Methods to Isolate US… “’We can nullify US sanctions, isolate it by various methods such as eliminating the dollar, replacing it with national currencies in bi/multi-lateral economic transactions … You [Putin] have a strong personality and are a man of decisions and actions. That’s why one can talk, logically cooperate with Russia, as a major power, on great works which demand resolution, efforts,’ Khamenei said, as quoted by his website.” – Sputnik, Nov. 2017

Iran at the Nuclear table in 2006

What is the significance of a Silk Road in this geopolitical monetary mayhem, you ask?  The U.S. sort of bowed out gracefully, which could turn out to be a “yuge” mistake.

Ports, Pipelines, and Geopolitics: China’s New Silk Road Is a Challenge for Washington… “’Today, the ground of Khorgos is mud (a Chinese city near the border with Kazakhstan),’ says Guo Jianbin, deputy director of the Khorgos Economic Development Zone administration committee, accenting his words with a booted stamp. ‘But soon it will be paved with gold… Exchange will replace estrangement, mutual learning will replace clashes, and coexistence will replace a sense of superiority,’ China’s president Xi told the opening of the Belt and Road (aka Silk Road) Forum in Beijing in May. It’s a vision of inclusive globalization that bolsters Chinese leadership credentials at a time when the U.S. is wavering on its international commitments. Belt and Road spans some 65 countries, covering 70% of the planet’s population, three-quarters of its energy resources, a quarter of goods and services and 28% of global GDP—some $21 trillion. Beijing’s rationale is clear: these are large, resource-rich nations within its reach, with a severe infrastructure deficit, which China has the resources and expertise to correct. By boosting connectivity, China can spur growth in the short term, gain access to valuable natural resources in the mid term and create new booming markets for its goods long into the future…  Meanwhile, the AIIB, the new Beijing-headquartered multilateral development bank, established in 2016 to fund Belt and Road projects but also to show the world that China can run a real, multilateral development bank according to international standards. Washington made fierce attempts to persuade nations not to join it, but few listened and 80 nations are now members, including staunch U.S. allies Australia and Britain.  ‘When the Chinese government proposed the idea there was some misunderstanding, and some questions and even suspicions,’ Asian Infrastructure Investment Bank (AIIB ) president Jin Liqun tells TIME in his Beijing office. ‘Misunderstanding is understandable. It takes time for people to appreciate the concept.’ America remains in denial about what Belt and Road really signifies.” – TIME, Oct. 2017

Silk Road Rail Links Europe and China… “The first cargo trains have left Baku’s Alyat port in Azerbaijan and are heading for Turkey… the journey time between Europe and China down from more than a month to two weeks, the line is expected to boost trade in the region. An initial capacity of 5 million tons of freight per year is expected to more than double in coming years.” – EuroNews, Nov. 2017

With the “yuge” Silk Road crisscrossing the Asian continent all the way to Europe and the Middle East, what is the best way to keep all those trade transactions from being skimmed off the top by Uncle Sam?

China-Ruble Settlement and the Dollar System… “The Peoples’ Bank of China has just announced a payment-versus-payment (PVP) system for Russian ruble and Chinese yuan transactions. The stated aim is to reduce currency risks in their trade. The only conceivable risk would be from the US dollar and potential acts of US Treasury financial warfare to damage Russian-Chinese trade which is becoming very significant in volume and value… The official announcement, posted on the website of the China Foreign Exchange Trade System (CFETS) adds the enormously significant note that CFETS plans to introduce similar PVP systems for yuan transactions with other currencies based on China’s Belt and Road initiative. This confirms what I discussed in an article I posted in April 2016, namely that the grand design behind China’s Belt, Road Initiative (BRI) has an integral gold-based currency component that could change the global balance of power in favor of the nations of Eurasia, from Russia and the nations of the Eurasian Economic Union to China and across all Asia. Earlier termed the New Economic Silk Road, the BRI is a vast network of high-speed rail linkages being constructed criss-crossing the countries of Eurasia including Central Asia, Mongolia, Pakistan, Kazakhstan and, of course, the Russian Federation and extending to Iran, potentially to Turkey and East Africa… encompasses countries generating almost one-third of global GDP, will generate an additional $2.5 trillion worth of new trade annually.  This isn’t chump change for the world economy. It’s a game-changer of the first order… Two years ago, in October 2015, China initiated the China International Payments System (CIPS). While it has signed a cooperation agreement with the dominant SWIFT, it gives a potential option in event of US sanctions on China to function independent of SWIFT. In 2012 Washington pressure on the private Belgian-based SWIFT international bank clearing system, through which virtually every international transaction between banking institutions goes, to block international clearing for all Iranian banks, froze $100 billion in Iranian assets overseas and crippled her ability to export oil. The point was not missed in either Beijing or in Moscow, especially when some foolish US Congressmen called for SWIFT exclusion against the Russian banks after 2014.” – New Eastern Outlook, Oct. 2017

So how do the petroyuan and gold tie into this dastardly scheme?

China will ‘compel’ Saudi Arabia to trade oil in yuan — backed by gold, and that’s going to affect the US dollar… “’I believe that yuan pricing of oil is coming and as soon as the Saudis move to accept it — as the Chinese will compel them to do — then the rest of the oil market will move along with them,’ Carl Weinberg, chief economist and managing director at High Frequency Economics.” – CNBC, Oct. 2017

Keep an eye on my Twitter thread on this topic for the latest updates, but in the meantime…

Challenging the Dollar: China and Russia’s Plan from Petroyuan to Gold… “For China, Iran and Russia, as well as other countries, de-dollarization has become a pressing issue. The number of countries that are beginning to see the benefits of a decentralized system, as opposed to the US dollar system, is increasing. Iran and India, but also Iran and Russia, have often traded hydrocarbons in exchange for primary goods, thereby bypassing American sanctions. Likewise, China’s economic power has allowed it to open a 10-billion-euro line of credit to Iran to circumvent recent sanctions. Even the DPRK seems to use cryptocurrencies like bitcoin to buy oil from China and bypass US sanctions. Venezuela (with the largest oil reserves in the world) has just started a historic move to completely renounce selling oil in dollars, and has announced that it will start receiving money in a basket of currencies without US dollars. (This is not to mention the biggest change to have occurred in the last 40 years). Beijing will buy gas and oil from Russia by paying in yuan, with Moscow being able to convert yuan into gold immediately thanks to the Shanghai International Energy Exchange. This gas-yuan-gold mechanism signals a revolutionary economic change through the progressive abandonment of the dollar in trade.” – GlobalResearch, Oct. 2017

By the way, alternative payment and institutional systems for credit cards, sovereign investment funding, and miscellaneous currency payment remittances are in place, too.

Sanctions-hit Russia mulls payment system tie-up with China to cut reliance on the West… “Moscow considers expanding its Karta Mir network through links to Chinese services. Russia’s Medvedev says the world shouldn’t be dominated by one currency… Noting the rise of China’s Unionpay system and Beijing’s efforts to internationalize its currency, the yuan, Medvedev told a press conference in Beijing that Russia was developing its own payment system, known as Karta Mir.  ‘At the present moment it is being discussed whether Karta Mir should be linked to Chinese payment systems,’ he said, while standing alongside Chinese Premier Li Keqiang. That would have ‘good prospects’ and ‘avoid those problems that sometimes arise when you use American payment systems’, Medvedev said, mentioning Visa and Mastercard without elaborating. Around 14 million Mir cards, which translates as ‘World’ or ‘Peace’, have been issued in Russia, according to the Russian National System of Payment Cards (NSPK), or about 10 per cent of the country’s population.  NSPK was established in 2014 and is wholly owned by the central bank. More than 380 banks working in Russia accept the cards, which are issued by 120 banks. Practically all trade and service points, including cafes, shops, restaurants and service stations, accept them.” – South China Morning Post, Nov. 2017

Can China Union Pay challenge Visa and Mastercard?… “China is quietly crafting the initial building blocks of what we may call a ‘parallel order’ that will initially complement, and later possibly challenge, today’s international institutions. This order is already in the making. It includes, among others ,institutions such as the BRICS-led New Development Bank and the Asian Infrastructure Investment Bank (to complement the World Bank), Universal Credit Rating Group (to complement Moody’s and S&P), China Union Pay (to complement Mastercard and Visa), CIPS (to complement SWIFT), the BRICS (to complement the G7), and many other initiatives. Of all these, OBOR, a vast plan of infrastructure projects to connect Asia, is arguably the most visible. One important, though often overlooked key element of the China-led emerging parallel order is China UnionPay (CUP), which seeks to complement existing global actors such as VISA and Mastercard. CUP is China’s domestic bank card organization, the association for China’s banking card industry and the only interbank network in the country.” – Post Western World, May 2017

What is China UnionPay (CUP)?…  “As the name suggests, China UnionPay (or UnionPay) was established in the Peoples Republic of China, with the blessing of the Chinese government, to provide a payment processor for four major Chinese banks. With a Monopoly on clearing for domestic Chinese payments, UnionPay grew rapidly as the wider Chinese economy flourished. Although a World Trade Organisation ruling in 2012 confirmed that the processor had an unfair competitive advantage, paving the way for liberalisation of Chinese payment processing in 2015, UnionPay had already leveraged its position to become the world’s largest supplier of payment cards (with over 5 billion cards issued bearing its logo)… Visa and MasterCard (and even American Express) products continued to be offered by Chinese banks for customers travelling abroad, but to ensure Chinese customers could pay easily, many foreign retailers (especially luxury goods retailers) adopted UnionPay as an additional payment method. As a result, UnionPay can now be used in over 150 countries.” – CreditCards.com UK

Geoswift partners with Bank of Shanghai to launch payment remittance services… “Geoswift, a provider of cross-border payments between China and the rest of the world, announced its partnership with Bank of Shanghai to launch a new remittance service in 2017. This announcement was made at Money 20/20 Las Vegas today. This partnership will enable businesses and individuals globally to remit funds into China through a secure and efficient medium that is well recognized by China’s regulators, combining the network and market expertise of Geoswift and Bank of Shanghai. This service allows continuous real-time remittance of funds from seven currencies USD, GBP, HKD, CAD, AUD, JPY and EUR to the local currency RMB for recipients in China. The service uses a fixed daily rate to minimize risks arising out of foreign exchange fluctuations, and is designed to provide ease of transaction and transparency for both the sender and receiver.” – TheAsianBanker, Oct. 2017

It appears they may have all the bases covered to DE-DOLLARIZE.  One little detail not to forget is that China’s yuan joined the elite IMF club in Oct. 2016 as part of its basket of reserve currencies.

Plan Your Trade, Trade Your Plan

TraderStef on Twitter

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