Pepe Escobar: From Minsk to Wales, Germany is the key

From Minsk to Wales, Germany is the key

Published time: August 28, 2014 09:27
 
Ukraine's President Petro Poroshenko (L), Russia's President Vladimir Putin (top centre R) and Belarus' President Alexander Lukashenko (3rd R from Putin) meet with high-ranking officials and presidents from Kazakhstan and the European Union in Minsk, August 26, 2014.(Reuters / Alexei Druzhinin)

Ukraine’s President Petro Poroshenko (L), Russia’s President Vladimir Putin (top centre R) and Belarus’ President Alexander Lukashenko (3rd R from Putin) meet with high-ranking officials and presidents from Kazakhstan and the European Union in Minsk, August 26, 2014.(Reuters / Alexei Druzhinin)

 
The road to the Minsk summit this past Tuesday began to be paved when German Chancellor Angela Merkel talked to ARD public TV after her brief visit to Kiev on Saturday.

Merkel emphasized, “A solution must be found to the Ukraine crisis that does not hurt Russia.”

She added that “There must be dialogue. There can only be a political solution. There won’t be a military solution to this conflict.”

Merkel talked about “decentralization” of Ukraine, a definitive deal on gas prices, Ukraine-Russia trade, and even hinted Ukraine is free to join the Russia-promoted Eurasian Union (the EU would never make a “huge conflict” out of it). Exit sanctions; enter sound proposals.

She could not have been more explicit; “We [Germany] want to have good trade relations with Russia as well. We want reasonable relations with Russia. We are depending on one another and there are so many other conflicts in the world where we should work together, so I hope we can make progress”.

The short translation for all this is there won’t be a Nulandistan (after neo-con Victoria ‘F**k the EU’Nuland), remote-controlled by Washington, and fully financed by the EU. In the real world, what Germany says, the EU follows.

Geopolitically, this also means a huge setback for Washington’s obsessive containment and encirclement of Russia, proceeding in parallel to the ‘pivot to Asia’ (containment and encirclement of China).

It’s the economy, stupid

Ukraine’s economy – now under disaster capitalism intervention – is… well, a disaster. It’s way beyond recession, now in deep depression. Any forthcoming IMF funds serve to pay outstanding bills and feed the (losing) creaking military machine; Kiev is fighting no less than Ukraine’s industrial heartland. Not to mention that the conditions attached to the IMF’s ‘structural adjustment’ are bleeding Ukrainians dry.

Taxes – and budget cuts – are up. The currency, the hryvnya, has plunged 40 percent since early 2014. The banking system is a joke. The notion that the EU will pay Ukraine’s humongous bills is a myth. Germany (which runs the EU) wants a deal. Fast.

The reason is very simple. Germany is growing only 1.5 percent in 2014. Why? Because the Washington-propelled sanction hysteria is hurting German business. Merkel finally got the message. Or at least seems to have.

The first stage towards a lasting deal is energy. This Friday, there’s a key meeting between Russian and EU energy officials in Moscow. And then, later next week, it will be Russian, EU and Ukrainian officials. The EU’s energy commissioner, Gunther Oettinger, who was in Minsk, wants an interim deal to make sure Russian gas flows through Ukraine to Europe in winter. General Winter, once again, wins any war.

(L-R) Kazakhstan's President Nursultan Nazarbayev, Russia's President Vladimir Putin, Belarus' President Alexander Lukashenko, Ukraine's President Petro Poroshenko, High Representative of the European Union for Foreign Affairs and Security Policy Catherine Ashton, European Commissioner for Energy Guenther Oettinger, European Commissioner for Trade Karel De Gucht pose on the sideline of a summit in Belarus' capital of Minsk on August 26, 2014. (AFP Photo / Kirill Kudryavtsev)

(L-R) Kazakhstan’s President Nursultan Nazarbayev, Russia’s President Vladimir Putin, Belarus’ President Alexander Lukashenko, Ukraine’s President Petro Poroshenko, High Representative of the European Union for Foreign Affairs and Security Policy Catherine Ashton, European Commissioner for Energy Guenther Oettinger, European Commissioner for Trade Karel De Gucht pose on the sideline of a summit in Belarus’ capital of Minsk on August 26, 2014. (AFP Photo / Kirill Kudryavtsev)

Here, essentially, we have the EU – not Russia – telling Ukrainian President Petro Poroshenko to stuff his (losing) ‘strategy’ of slow-motion ethnic cleansing of eastern Ukraine.

Moscow has always insisted the Ukraine crisis is a political problem that needs a political solution. Moscow would accept a decentralization solution considering the interests – and language rights – of people in Donetsk, Lugansk, Odessa, Kharkov. Moscow does not encourage secession.

Poroshenko, on the other hand, is your typical Ukrainian oligarch in a dance of oligarchs. Now that he’s on top, he does not want to become road kill. He might, if he relies on ‘support’ by the neo-Nazis of Right Sector and Svoboda, because then there will never be a political solution.

The Empire of Chaos, needless to say, does not want a political solution – with a neutral Ukraine economically tied to both the EU and Russia; economic/trade integration across Eurasia is anathema.

It’s all about NATO

In parallel, every EU diplomat with a conscience – well, they do exist – knows that the non-stop hysteria about the Russian‘threat’ to Eastern Europe is a Washington-peddled myth designed to boost NATO. Secretary-General Anders ‘Fogh of War’ Rasmussen sounds like a scratched CD.

It’s hardly a secret in Brussels that larger EU powers simply don’t want permanent NATO bases in Eastern Europe. France, Italy and Spain are forcefully against it. Germany is still sitting on the wall, carefully weighing how not to antagonize both Russia and the US. Needless to say, the Anglo-American “special relationship” badly wants the bases, supported by the hysteria unleashed by Poland and the Baltic states – Estonia, Latvia and Lithuania.

So Fogh of War is on a predictable roll, talking “rapid reinforcements”, “reception facilities”, “pre-positioning of supplies, of equipment, preparation of infrastructure, bases, and headquarters” and “a more visible NATO presence.” This graphically proves, once again, that the Empire of Chaos couldn’t give a damn about Ukraine; it’s all about NATO expansion – the key talking point next week at the Wales summit.

The no-holds-barred neoliberal asset-stripping, wild privatization and outright looting of Ukraine, disguised as loans and ‘aid’, is now unstoppable. Yet gobbling up Ukraine’s agriculture and energy potential is not enough for the Empire of Chaos. It wants Crimea back (that future NATO base in Sevastopol…). It wants missile defense deployed in Poland and the Baltics. It would even love regime change in Russia.

And then there’s MH17. If sooner rather than later is proved the Empire of Chaos fooled Europe into counterproductive sanctions based on the flimsiest ‘evidence’, German public opinion will force Merkel to act accordingly.

Germany was the secret behind the Minsk summit. Let’s see if Germany will also be the secret behind the Wales summit. In the end it’s up to Germany to prevent Cold War 2.0 getting hotter by the day all across Europe.

The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.

Pepe Escobar is the roving correspondent for Asia Times/Hong Kong, an analyst for RT and TomDispatch, and a frequent contributor to websites and radio shows ranging from the US to East Asia.

Fonte: Russia Today

TRNN: The Islamic State, Assad, and the Contradictions Faced by the US in Syria Investigative journalist Patrick Cockburn says the U.S. will need to work with Syria and Iran to defeat ISIS, thereby reversing its policy towards Assad

JESSICA DESVARIEUX, TRNN PRODUCER: Welcome to The Real News Network. I’m Jessica Desvarieux in Baltimore.President Barack Obama has authorized the military to conduct surveillance flights over Syria. With U.S. airstrikes already happening in Iraq against extremist group The Islamic State, these surveillance flights are being seen as a possible prelude to attacks on the Islamic State in Syria. But where the twist comes in is that the Islamic State in Syria is fighting to topple Syrian President Bashar Assad. That has been the very same objective of the U.S. for the past two years. So now that ISIS seems to be the most imminent threat, will the U.S. coordinate with Assad to bring ISIS down? And what role has the U.S. played in creating the rise of this fanatic group to begin with?Now joining us to help answer some of these questions is our guest, Patrick Cockburn. Patrick is an investigative journalist who has been a Middle East correspondent since 1979 for the Financial Timesand presently works for The Independent. He also has a new book out called The Jihadis Return: ISIS and the New Sunni Uprising. And he joins us now from Ireland.Thanks for being with us, Patrick.PATRICK COCKBURN, JOURNALIST, THE INDEPENDENT: Thank you.DESVARIEUX: So, Patrick, there are so many contradictions in this story. Let’s try to work out some of these contradictions. First explain the U.S.’s objectives in Syria. And how did it come to be that they are now fighting the very same forces that they once supported?COCKBURN: Yes. It’s something of a diplomatic disaster. The U.S. supported the opposition to President Bashar al-Assad to weaken and replace him over the last three years. But over the last year and a half, the main opposition has been jihadis, al-Qaeda type organizations, and over the last six months it’s been the Islamic State, ISIS, which the U.S. is fighting in or were helping the Iraqi government and the Kurdish government fight in Iraq. So in one country they’re supporting the government against ISIS, in Iraq, and in Syria they’re doing exactly the opposite, they’re opposing the government, which is fighting ISIS. And I don’t think this contradiction can go on very long. I think soon they’ll have to decide whose side they’re on.DESVARIEUX: Yeah, and that’s a good question, because there are consequences depending on which side they choose, because if they look to topple Assad, that benefits ISIS. If they look to attack ISIS, that helps Assad. So it seems like quite a mess. What would you suggest they do?COCKBURN: Well, there’s no doubt in my mind that the great threat to both these countries is ISIS, which is a very horrible, in many ways fascist organization, very sectarian, kills anybody who doesn’t believe in their particular rigorous brand of Islam. They killed last week a single tribe that opposed them. They killed 700 members. Another 1,500 have disappeared. So these are big-scale massacres. So I think they should oppose ISIS. But they need to do it effectively, which means that they have a parallel policy with the Syrian government, which they’ve been trying to overthrow. I don’t think they’re going to have a U-turn in that policy, because it would be to humiliating. But covertly I think that they’re shifting their ground. They need to prevent Assad’s government falling to ISIS.DESVARIEUX: Yeah. And the drumbeats of war are really getting louder here in the United States, Patrick. I’m going to pull up an example of Secretary of Defense Chuck Hagel. He was recently asked at a press conference about whether ISIL posed a 9/11 threat. Here’s his response.~~~CHUCK HAGEL, U.S. SECRETARY OF DEFENSE: ISIL is as sophisticated and well funded as any group that we have seen. They’re beyond just a terrorist group. They marry ideology, sophistication of strategic and tactical military prowess. They are tremendously well funded. Oh, this is beyond anything that we’ve seen. So we must prepare for everything. And the only way you do that is you take a cold, steely hard look at it and get ready.~~~DESVARIEUX: “Get ready” you just heard Secretary of Defense Chuck Hagel say. So what should we be potentially getting ready for, Patrick? What is the U.S.’s real interest in getting potentially back into Iraq and now Syria? You said something about covert operations. But is it possible that we could even see boots on the ground there?COCKBURN: You know, this means so many different things. You know, at one point it meant a few years ago in Iraq that there were 150,000 American soldiers in Iraq. That was awful lot of boots. I don’t think we’re going to see that again or anything like that. I don’t think we’ll see that in Syria. But will there be American airstrikes in Iraq [incompr.] on a more extensive basis? I think there will. Will the same things happen in Syria? It’s really quite likely, because it’s absurd to combat ISIS in Iraq but not on Syria, because ISIS can then get back over the border. It’s effectively abolished the frontier.And this is a pretty big place now that they rule. ISIS rules an area which is bigger than Britain, bigger than the state of Michigan. It has a population of 6 or 7 million people. So this isn’t something that can be easily contained, and it’s very difficult to eliminate.DESVARIEUX: And, Patrick, at the end of the day, what’s this all about? I mean, whose interest is it, really, to defeat ISIS?COCKBURN: Well, I think that this is a rather extraordinary organization. It combines extreme religious fanaticism with military efficiency. It’s won a lot of victories during the summer, and pretty extraordinary ones. There are 350,000 soldiers in the Iraqi army, or there used to be, and they were attacked by two or three thousand members of ISIS in Mosul, and they disintegrated. This caught everybody by surprise. I mean, everybody, including myself, knew the Iraqi army was pretty bad, very corrupt, but I don’t think we expected it just to disintegrate in a single day’s fighting.In Syria they’re also getting stronger and stronger. It doesn’t get reported much because it’s so dangerous, as we saw with poor James Foley, for any journalists to go there. But they’ve been advancing westwards. They’ve won three or four victories, overrun Syrian army bases in the last few weeks, without anybody paying much attention.So this is an expanding organization which could quite soon rule territory right from the Iranian border to the Mediterranean.DESVARIEUX: So is it fair to say, I mean, Iran has a vested interest too to defeat ISIS?COCKBURN: It certainly does. I mean, in Iraq, there’s a rather extraordinary combination of people who previously were confronting each other and certainly didn’t like each other, like the U.S. and Iran, various factions in Kurdistan, various politicians in Baghdad, Saudi Arabia, Turkey. All these people have been brought together by a single factor, which is fear, fear of ISIS. It’s a very frightening organization. And all these countries, I think, are now rather frightened by what they see.DESVARIEUX: So, Patrick, in your book you speak of what could be done to end all of this. You write, quote,

“Given that the insurgency is not dominated by ISIS, JN, and all other al-Qaeda type groups, it is unlikely that even Washington, London, or Riyadh now want to see Assad fall. But allowing Assad to win would be seen as a defeat for the West and their Arab and Turkish allies.”

So what are your predictions here? How do you see this all being resolved?COCKBURN: I think it’s difficult to predict, because it depends on some very important decisions in Washington and elsewhere about where they stand. They are responsible for quite a lot of what has happened. In Iraq we had al-Qaeda in Iraq, which had become a force after the U.S. invasion of 2003. This had been reduced in strength by the U.S. and the Iraqi government about seven or eight years ago. But as Iraq was becoming more peaceful, uprisings started in Syria in 2011, which were backed by the U.S. and its allies. And that led to war in Syria, to the civil war in Iraq starting again. And it was in this crucible that ISIS moved from being a quite small, marginal organization to being an extremely powerful one. It was really the result of miscalculations about the long-term outcome of the war in Syria that led to ISIS’s present victories and the creation of their caliphate.DESVARIEUX: The Independent quoted Prime Minister David Cameron as saying that cooperation with Iran will be necessary to deal with ISIS. Do you agree?COCKBURN: Yes. I mean, it’s a strange situation, because the Iranians are very frightened by what’s happening, because ISIS used to be an organization they were fighting is Syria and Damascus, a long way away. Now ISIS is taking towns that are 20 miles from the Iranian border. So they want to defeat it. So they have a parallel policy with the U.S.But it’s difficult, certainly, for the U.S. to then have a U-turn and say, the Iranians that we used to demonize, that we said were our great enemy in the Middle East, now suddenly they’re our pals, they’re our friends. Similarly with Damascus. So I think it’s difficult for them to make a U-turn, though it’s necessary for them to do so and do so pretty quickly, without being humiliated. And so a lot of what they do they may try to do covertly.

August 27, 14

Fonte: The Real News Network

Colonization by Bankruptcy: The High-stakes Chess Match for Argentina

abutres

By Ellen Brown

If Argentina were in a high-stakes chess match, the country’s actions this week would be the equivalent of flipping over all the pieces on the board.

David Dayen, Fiscal Times, August 22, 2014

August 27, 2014 “ICH” – Argentina is playing hardball with the vulture funds, which have been trying to force it into an involuntary bankruptcy. The vultures are demanding what amounts to a 600% return on bonds bought for pennies on the dollar, defeating a 2005 settlement in which 92% of creditors agreed to accept a 70% haircut on their bonds. A US court has backed the vulture funds; but last week, Argentina sidestepped its jurisdiction by transferring the trustee for payment from Bank of New York Mellon to its own central bank. That play, if approved by the Argentine Congress, will allow the country to continue making payments under its 2005 settlement, avoiding default on the majority of its bonds.

Argentina is already foreclosed from international capital markets, so it doesn’t have much to lose by thwarting the US court system. Similar bold moves by Ecuador and Iceland have left those countries in substantially better shape than Greece, which went along with the agendas of the international financiers.

The upside for Argentina was captured by President Fernandez in a nationwide speech on August 19th. Struggling to hold back tears, according to Bloomberg, she said:

When it comes to the sovereignty of our country and the conviction that we can no longer be extorted and that we can’t become burdened with debt again, we are emerging as Argentines.

. . . If I signed what they’re trying to make me sign, the bomb wouldn’t explode now but rather there would surely be applause, marvelous headlines in the papers. But we would enter into the infernal cycle of debt which we’ve been subject to for so long.

The Endgame: Patagonia in the Crosshairs

The deeper implications of that infernal debt cycle were explored by Argentine political analyst Adrian Salbuchi in an August 12th article titled “Sovereign Debt for Territory: A New Global Elite Swap Strategy.” Where territories were once captured by military might, he maintains that today they are being annexed by debt. The still-evolving plan is to drive destitute nations into an international bankruptcy court whose decisions would have the force of law throughout the world. The court could then do with whole countries what US bankruptcy courts do with businesses: sell off their assets, including their real estate. Sovereign territories could be acquired as the spoils of bankruptcy without a shot being fired.

Global financiers and interlocking megacorporations are increasingly supplanting governments on the international stage. An international bankruptcy court would be one more institution making that takeover legally binding and enforceable. Governments can say no to the strong-arm tactics of the global bankers’ collection agency, the IMF. An international bankruptcy court would allow creditors to force a nation into bankruptcy, where territories could be involuntarily sold off in the same way that assets of bankrupt corporations are.

For Argentina, says Salbuchi, the likely prize is its very rich Patagonia region, long a favorite settlement target for ex-pats. When Argentina suffered a massive default in 2001, the global press, including Time and The New York Times, went so far as to propose that Patagonia be ceded from the country as a defaulted debt payment mechanism.

The New York Times article followed one published in the Buenos Aires financial newspaper El Cronista Comercial called “Debt for Territory,” which described a proposal by a US consultant to then-president Eduardo Duhalde for swapping public debt for government land. It said:

[T]he idea would be to transform our public debt default into direct equity investment in which creditors can become land owners where they can develop  industrial, agricultural and real estate projects. . . . There could be surprising candidates for this idea: during the Alfonsin Administration, the Japanese studied an investment master plan in Argentine land in order to promote emigration.  The proposal was also considered in Israel.

Salbuchi notes that ceding Patagonia from Argentina was first suggested in 1896 by Theodor Herzl, founder of the Zionist movement, as a second settlement for that movement.

Another article published in 2002 was one by IMF deputy manager Anne Krueger titled “Should Countries Like Argentina Be Able to Declare Themselves Bankrupt?” It was posted on the IMF website and proposed some “new and creative ideas” on what to do about Argentina. Krueger said, “the lesson is clear: we need better incentives to bring debtors and creditors together before manageable problems turn into full-blown crises,” adding that the IMF believes “this could be done by learning from corporate bankruptcy regimes like Chapter 11 in the US”.

These ideas were developed in greater detail by Ms. Krueger in an IMF essay titled “A New Approach to Debt Restructuring,” and by Harvard professor Richard N. Cooper in a 2002 article titled “Chapter 11 for Countries” published in Foreign Affairs (“mouthpiece of the powerful New York-Based Elite think-tank, Council on Foreign Relations”). Salbuchi writes:

Here, Cooper very matter-of-factly recommends that “only if the debtor nation cannot restore its financial health are its assets liquidated and the proceeds distributed to its creditors – again under the guidance of a (global) court” (!).

In Argentina’s recent tangle with the vulture funds, Ms. Krueger and the mainstream media have come out in apparent defense of Argentina, recommending restraint by the US court. But according to Salbuchi, this does not represent a change in policy. Rather, the concern is that overly heavy-handed treatment may kill the golden goose:

. . . [I] n today’s delicate post-2008 banking system, a new and less controllable sovereign debt crisis could thwart the global elite’s plans for an “orderly transition towards a new global legal architecture” that will allow orderly liquidation of financially-failed states like Argentina. Especially if such debt were to be collateralized by its national territory (what else is left!?)

Breaking Free from the Sovereign Debt Trap

Salbuchi traces Argentina’s debt crisis back to 1955, when President Juan Domingo Perón was ousted in a very bloody US/UK/mega-bank-sponsored military coup:

Perón was hated for his insistence on not indebting Argentina with the mega-bankers: in 1946 he rejected joining the International Monetary Fund (IMF); in 1953 he fully paid off all of Argentina’s sovereign debt. So, once the mega-bankers got rid of him in 1956, they shoved Argentina into the IMF and created the “Paris Club” to engineer decades-worth of sovereign debt for vanquished Argentina, something they’ve been doing until today.

Many countries have been subjected to similar treatment, as John Perkins documents in his blockbuster exposéConfessions of an Economic Hit Man. When the country cannot pay, the IMF sweeps in with refinancing agreements with strings attached, including selling off public assets and slashing public services in order to divert government revenues into foreign debt service.

Even without pressure from economic hit men, however, governments routinely indebt themselves for much more than they can ever hope to repay. Why do they do it? Salbuchi writes:

Here, Western economists, bankers, traders, Ivy League academics and professors, Nobel laureates and the mainstream media have a quick and monolithic reply: because all nations need“investment and investors” if they wish to build highways, power plants, schools, airports, hospitals, raise armies, service infrastructures and a long list of et ceteras . . . .

But more and more people are starting to ask a fundamental common-sense question: why should governments indebt themselves in hard currencies, decades into the future with global mega-bankers, when they could just as well finance these projects and needs far more safely by issuing the proper amounts of their own local sovereign currency instead?

Neoliberal experts shout back that government-created money devalues the currency, inflates the money supply, and destroys economies. But does it? Or is it the debt service on money created privately by banks, along with other forms of “rent” on capital, that create inflation and destroy economies? As Prof. Michael Hudson points out:

These financial claims on wealth – bonds, mortgages and bank loans – are lent out to become somebody else’s debts in an exponentially expanding process.  . . . [E]conomies have been obliged to pay their debts by cutting back new research, development and new physical reinvestment. This is the essence of IMF austerity plans, in which the currency is “stabilized” by further international borrowing on terms that destabilize the economy at large. Such cutbacks in long-term investment also are the product of corporate raids financed by high-interest junk bonds. The debts created by businesses, consumers and national economies cutting back their long-term direct investment leaves these entities even less able to carry their mounting debt burden.

Spiraling debt also results in price inflation, since businesses have to raise their prices to cover the interest and fees on the debt.

From Sovereign Debt to Monetary Sovereignty

For governments to escape this austerity trap, they need to spend not less but more money on the tangible capital formation that increases physical productivity. But where to get the investment money without getting sucked into the debt vortex? Where can Argentina get funding if the country is shut out of international capital markets?

The common-sense response, as Salbuchi observes, is for governments to issue the money they need directly. But “printing money” raises outcries that can be difficult to overcome politically. An alternative that can have virtually the same effect is for nations to borrow money issued by their own publicly-owned banks. Public banks generate credit just as private banks do; but unlike private lenders, they return interest and profits to the economy. Their mandate is to serve the public, and that is where their profits go. Funding through their own government-issued currencies and publicly-owned banks has been successfully pursued by many countries historically, including Australia, New Zealand, Canada, Germany, China, Russia, Korea and Japan. (For more on this, see The Public Bank Solution.)

Countries do need to be able to buy foreign products that they cannot acquire or produce domestically, and for that they need a form of currency or an international credit line that other nations will accept. But countries are increasingly breaking away from the oil- and weapons-backed US dollar as global reserve currency. To resolve the mutually-destructive currency wars will probably take a new Bretton Woods Accord. But that is another subject for a later article.

Ellen Brown is an attorney, founder of the Public Banking Institute, and author of twelve books, including the best-selling Web of Debt. In The Public Bank Solution, her latest book, she explores successful public banking models historically and globally. Her 200+ blog articles are at EllenBrown.com.

Fonte: International Clearing House

40 Central Banks Are Betting This Will Be The Next Reserve Currency

Tyler Durden's picture

As we have discussed numerous times, nothing lasts forever – especially reserve currencies – no matter how much one hopes that the status-quo remains so, in the end the exuberant previlege is extorted just one too many times. Headline after headlines shows nations declaring ‘interest’ or direct discussions in diversifying away from the US dollar… and as SCMP reports, Standard Chartered notes that at least 40 central banks have invested in the Yuan and several more are preparing to do so. The trend is occurring across both emerging markets and developed nation central banks diversifiying into ‘other currencies’ and “a great number of central banks are in the process of adding yuan to their portfolios.” Perhaps most ominously, for king dollar, is the former-IMF manager’s warning that “The Yuan may become a de facto reserve currency before it is fully convertible.”

The infamous chart that shows nothing lasts forever…

Nothing lasts forever… (especially in light of China’s recent comments)

 

As The South China Morning Post reports, Jukka Pihlman, Standard Chartered’s Singapore-based global head of central banks and sovereign wealth funds (who formerly worked at the International Monetary Fund advising central banks on asset-management issues), notes that:

 
 

At least 40 central banks have invested in the yuan and several others are preparing to do so, putting the mainland currency on the path to reserve status even before full convertibility

The US dollar remains in charge (for now)…but

 
 

The US dollar is still the world’s most widely held reserve currency, accounting for nearly 33 per cent of global foreign exchange holdings at the end of last year, according to IMF data. That ratio has been declining since 2000, when 55 per cent of the world’s reserves were denominated in US dollars.

 

The IMF does not disclose the percentage of reserves held in yuan, but the emerging market countries’ share of reserves in “other currencies” has increased by almost 400 per cent since 2003, while that of developed nations grew 200 per cent, according to IMF data.

As SCMP goes on to note, the rising popularity of the yuan among central bankers is probably mainly due to Beijing’s extremely favourable treatment of them as it has sought to encourage investment in the yuan.

 
 

For example, central banks enjoy preferential treatment in the qualified foreign institutional investor category, both on the size of the quota and the length of the lock-up period. The QFII quotas given to central banks are not publicly known, but some of those announced by investing central banks are up to 10 times larger than others in the programme and, most importantly, free of any capital controls.

 

“Central banks and sovereign funds have special treatment,” Pihlman said. “They have the ability to invest in a way that any other investor does not have. When it comes to convertibility, there is nothing formally out there, but it is fully convertible.”

As Pihlman explains, things are accelerating…

 
 

Pihlman said “a great number of central banks are in the process of adding [yuan] to their portfolios”.

 

The [yuan] has effectively already become a de facto reserve currency because so many central banks have already invested in it,” he said. “The [yuan] may become a de facto reserve currency before it is fully convertible.”

 

The central banks more likely to add yuan holdings in the future were the ones with “strong trade linkages to China” and those which had relatively large levels of reserves which could consider diversifying more for return-related reasons, he said.

 

The [yuan's] convertibility may be already there for central banks in a way that has got them comfortable to start investing in the currency,” Pihlman said.

We leave it to a former World Bank chief economist, Justin Yifu Lin, to sum it all up…

 
 

“the dominance of the greenback is the root cause of global financial and economic crises,”

It appears the world is beginning to listen

 Fonte: Zero Hedge