China rocks the dollar - Paul Kanjorski and the 550 billion dollar drawdown

Are China's recommendations likely to be taken up? The US is knackered for the forseeable future and let's face it, the Chinese are making sense:

BEIJING (Reuters) - The United States has plundered global wealth by exploiting the dollar's dominance, and the world urgently needs other currencies to take its place, a leading Chinese state newspaper said on Friday.

The front-page commentary in the overseas edition of the People's Daily said that Asian and European countries should banish the U.S. dollar from their direct trade relations for a start, relying only on their own currencies.

A meeting between Asian and European leaders, starting on Friday in Beijing, presented the perfect opportunity to begin building a new international financial order, the newspaper said.

The People's Daily is the official newspaper of China's ruling Communist Party. The Chinese-language overseas edition is a small circulation offshoot of the main paper.

Its pronouncements do not necessarily directly voice leadership views. But the commentary, as well as recent comments, amount to a growing chorus of Chinese disdain for Washington's economic policies and global financial dominance in the wake of the credit crisis.

"The grim reality has led people, amidst the panic, to realize that the United States has used the U.S. dollar's hegemony to plunder the world's wealth," said the commentator, Shi Jianxun, a professor at Shanghai's Tongji University.

Shi, who has before been strident in his criticism of the U.S., said other countries had lost vast amounts of wealth because of the financial crisis, while Washington's sole concern had been protecting its own interests.

"The U.S. dollar is losing people's confidence. The world, acting democratically and lawfully through a global financial organization, urgently needs to change the international monetary system based on U.S. global economic leadership and U.S. dollar dominance," he wrote.

Shi suggested that all trade between Europe and Asia should be settled in euros, pounds, yen and yuan, though he did not explain how the Chinese currency could play such a role since it is not convertible on the capital account.

A two-day Asia-Europe Meeting (ASEM) of 27 EU member states and 16 Asian countries was set to open on Friday. Though few analysts expect much in the way of concrete agreements, Shi said it could prove momentous.

"How can Europe and Asia grasp each other's hands and together confront the once-in-a-century global financial crisis sparked by the U.S.; how can they construct a new equitable and safe international financial order?" he said.

"The world is waiting for this Asian-European meeting to achieve big results in financial cooperation."

(Reporting by Simon Rabinovitch; Editing by Ken Wills)
http://www.globalresearch.ca/index.php?context=va&aid=10688

On the "death of the dollar" thread last week:-

The idea of placing the dollar as reserve currency with a basket of currencies is being floated, and rockyracoon has posted on this in detail. The writer of the blog homes in on the US's very high level of indebtedness as ultimately likely to lead to an end to the currency's reserve role, but at the moment it may be a case of "any familiary port in a storm" and people are pursuing dollars for the want of anything better.

Does the rise of the dollar make it more or less likely that Chinese money will be pulled out of it ? Chinese wealth has propped the dollar up for years?

On another thread, Slimbuddha is saying the Euro may be banjanxed as euro region banks have loaned so much to the emerging Eastern European and Latin American economies that are now contracting.

Quote :

Shi suggested that all trade between Europe and Asia should be settled in euros, pounds, yen and yuan, though he did not explain how the Chinese currency could play such a role since it is not convertible on the capital account.

Interesting stuff. The Chinese currency only converts to the dollar at the moment or what? Is this for businesses only or something and in terms of the hard currency it is not kept by other central banks at all? I don't understand the half of this but it's interesting all the same. I don't know how the dollar as reserve world currency could allow America a bunch of free credit or whatever happened... Is it because the dollar is convertible to everything then it gets printed more and diluted among the world's currencies and business ? Or is it not directly the result of international debt being issued only in the dollar so America's debt falls with the fall of international business ?

from two years ago:

Quote :

China to gradually make capital account convertible: official
(Xinhua)
Updated: 2006-04-12 19:24

China is pushing forward its currency Renminbi (RMB)'s capital account convertibility gradually and in a stable manner, said an official with the State Administration of Foreign Exchange (SAFE), ruling out both an adventurous leap and conservative cautiousness.

Li Dongrong, deputy director of the SAFE made the remark here recently at a working conference held by SAFE on foreign exchange management.

The rules for converting the RMB under capital accounts must be put forward step by step, Li said.

The current mission is to strengthen regulations governing the cross-border flow of capital and promote a more balanced international balance of payments, according to the conference.

RMB convertibility under capital accounts is a complicated issue, said SAFE Director Hu Xiaolian in March. It is a process that should be adapted to China's economic development, capability of macro-control and financial regulation, the maturity of financial markets and the risk management capability of market players, Hu said.

"There is no timetable for China's RMB convertibility under capital accounts," said Hu.

http://www.chinadaily.com.cn/china/2006-04/12/content_566489.htm

As far as I understand, China does most of its foreign trading in dollars and also has loaned vast amounts to US banks in dollar form.

This has not been great for them recently as the dollar is worth a lot less than it was a couple of years ago. Now it seems to be increasingly volatile, which is also not great for a trading.

It was about September 15th - here's the facts: on Thursday at about 11 o'clock in the morning, the Federal Reserve noticed a tremendous drawdown of ...... money market accounts in the United States to the tune of 550 billion dollars ........... was being drawn out in a matter of an hour or two.

The Treasury opened up its window to help, they pumped 105 billion dollars in the system and quickly realised they could not stem the tide, we were having an electronic run on the banks. They decided to close the operation, close down the money accounts and announce a guarantee of $250,000 per account so there wouldn't be further panic out there and that's what actually happened.

If they had not done that, their estimation was that by 2 o'clock that afternoon, five and a half trillion dollars would have been drawn out of the money market system of the United States which would have collapsed the entire economy of the United States and within 24 hours, the world economy would have collapsed.

--Rep. Paul Kanjorsky