Is Saudi Arabia and China looking to ditch the dollar in a new oil deal?

[khinkali]

Personally, I believe that it would be insane to bet on CNY. China is a paper dragon. It has huge economic structural problems. At best, it will have a seat at the table when a new global reserve currency is created, e.g., the inclusion of CNY in the use of SDRs. Read post #20 in this thread:

I chose my words badly when I wrote the defacto world currency. I mean the leading World currency, based on which parts of the World are set for growth and their likely future economic alignment.

I agree that China has problems, but their human capital is rising fast. Scientists and engineers bringing skills back to China following Western education. China will give that knowledge a Chinese flavour and catch up in technology, even with a flawed social system.

Maybe there are four possibilities?

1. USD remains hegemonic through 2099. I find this unlikely.
2. A global reserve currency or SDR approach that underpins currency exchange and international contracts. Maybe less unlikely but I believe that any attempt to agree it de jure would lead to its death by bickering and I can't really see it evolving organically.
3. The West will remain USD focused (e.g. trade between Canada in New Zealand being agreed in USD) and trade between say DRC and Indonesia switches from USD to CNY. While much is said about India, Russia, Turkey switching from USD to using their national currencies, the reality is more likely to be the formula switching from USD to CNY.
4. A heterogeneous currency environment. Largely underpinned by real world assets, not just "full faith and credit" and "I promise to pay the bearer".

A single "standard" currency for contracts and conversions can make things easier (e.g. aquariums can use jellyfish as a unit of account when trading for USD is illegal), but technology is moving to a place where I don't think we'll need that single standard measure.

For example, how will the LTC/ETH price be determined, two seconds from now? It won't be set by activity in the LTC/ETH markets. Will it be set by the LTC/USD and ETH/USD markets, or the LTC/USDT and ETH/USDT markets, or the LTC/BTC and ETH/BTC markets? The reality is that LTC/ETH follows all three, to varying degrees.

I'm not saying that will happen, a bi-polar world is likely to gravitate to USD and CNY while non-aligned countries will use both.

asset backed blockchain money simply will not work because you cannot verify the assets any better than today. I say I own xyz tons of gold and derive whatever shitcoin from it, but there is still a huge question of how to prove this fact and even worse such a proof being accepted.

Though PAXG is small (still well under $1 billion market cap) it is effective, as can be seen in its price stability. The advantage of blockchain over the legacy system is not in authenticating the reserves of some commodity or stock. You still need to trust the issuer in both models.

The advantage is in guaranteeing its behaviour further down the custody chain. e.g. naked shorts in the USA and untransparent CDOs in the run up to 2008. Those are problems that blockchain can specifically answer. You can see how Kraken holds your coins, but you can't easily see if your broker loaned your stocks to three people without your knowledge.

That is why Russia and China are stockpiling gold. They want a seat at the table in the new regime.

US, some allies, OECD think that it's going to continue to be their table. It has been for quite a while and they have become complacent.

 

[JackAlabama]

It is not gold that would be the next global reserve currency, but a gold-backed currency (or SDRs). The amount of gold that a nation holds is what determines the public's faith in its currency.

That is why Russia and China are stockpiling gold. They want a seat at the table in the new regime.

Gold backed currency does not work (it has been tried and failed) since you cannot prove (or no one believies in your proof) how many gold you own.
Direct settlement would be outrageous in todays age. Imagine sending gold on ships across the board to buy cars.
That does not mean they wont try commodity money again (and fail again).

 

[Golden Fleece]

Gold backed currency does not work (it has been tried and failed) since you cannot prove (or no one believies in your proof) how many gold you own.

Of course it works -- as long as other nations hold the reserve currency nation accountable. When President Nixon took the USD off the gold standard, the plan was to return to the gold standard after a dollar devaluation. But all the other countries of the world failed to hold the U.S. accountable. Hopefully, countries have learned their lesson and that will never happen again (regardless of whatever becomes the global gold-backed reserved currency).

Few remember that in 1971, Nixon explicitly said that the suspension of gold convertibility by trading partners was being done “temporarily.”

I spoke to two members of the Nixon administration, the late Paul Volcker and Kenneth Dam, who were with the president at Camp David the weekend the suspension was announced. They both confirmed to me that the intention was for the suspension to be temporary.

The plan was to convene a new international monetary conference; devalue the dollar against gold and other currencies, primarily the deutsche mark, Swiss franc and the Japanese yen; and then return to the gold standard at the new exchange rates.

The first part did happen. There was an international monetary conference in Washington, D.C., in December 1971. The dollar was devalued against gold (from $35.00 per ounce to $42.22 per ounce in stages) and other major currencies by about 10–17%, depending on the currency.

Yet the second part never happened. There was never a return to a gold standard. While countries were negotiating the new official exchange rates, they also moved to floating exchange rates on international currency markets.

The U.S. was initially greatly punished by the loss of more than half its gold reserves over twenty years. So, a gold-backed system does work -- as long as nations are held responsible for their reckless spending by the loss of their gold and the demise of their national currency.

In 1950, the U.S. had about 20,000 tons of gold. By 1970, that amount had been reduced to about 9,000 tons. The 11,000-ton decline went to U.S. trading partners, primarily Germany, France and Italy, which earned dollars and cashed them in for gold.

 

[Martin Everson]

​

Saudi Arabia and China will align on everything from security to oil​

https://www.spa.gov.sa/2407997

China says it's moving to buy oil and gas in the yuan — a move that could threaten the dollar's global dominance in the long run​

https://markets.businessinsider.com...hina-buy-gulf-oil-energy-rmb-currency-2022-12
---- quote start

At a summit with Arab leaders on Friday, China's President Xi Jinping pushed for the settlement of energy trades in the Chinese yuan — a move that could weaken the US dollar's global dominance in the long run.

At the summit, Xi said China will continue to import large quantities of oil and gas from Gulf states and conduct its settlement in the Chinese yuan, or RMB, according to a statement from China's foreign ministry. Most of the world's trade is now denominated in the US dollar.

"The Shanghai Petroleum and Natural Gas Exchange platform will be fully utilized for RMB settlement in oil and gas trade," Xi said, according to a transcript of his speech published by the government-owned China Daily. He did not specify when the change would go into effect.

It's not clear if any of the Gulf nations are taking up the proposal, but Saudi Arabia — the world's top oil exporter — has been in talks to use the yuan to settle its energy sales to major consumer China.

Such a move would chip away at the US dollar's role as the world's reserve currency, spurring "de-dollarization."

---- quote end

 

[GeneralGogol]

Good luck.

They seem to forget one small detail: the USD and the GBP were the da facto reserve currencies of their century because they were open, had rule of law and because people trusted their economies and their currency. Latest stock market decline shows more than ever what currencies are deemed safe heaven and these are all open economies with rule of law (CHF, USD).

China is trying to force their currency as a reserve currency. That's an autocratic dictatorship of a country that is trying to force their non-open, non freely traded currency as a reserve currency.

People vote with their feet and with their wallets. There is not a single person in this forum, no matter how pro-China he is, that would willingly put his wealth in RMB. That says it all. Chinese people themselves certainly do all they can to escape the claws of the Chinese economic system and move their wealth to the West.

"Indepenent thinkers" can claim the USD is going to be dethroned as global reserve currency. Self-proclaimed "smart" economists have been warning about it since the 1980s and probably will keep crying about it well through the 2050s.

 

[JackAlabama]

Good luck.

They seem to forget one small detail: the USD and the GBP were the da facto reserve currencies of their century because they were open, had rule of law and because people trusted their economies and their currency. Latest stock market decline shows more than ever what currencies are deemed safe heaven and these are all open economies with rule of law (CHF, USD).

China is trying to force their currency as a reserve currency. That's an autocratic dictatorship of a country that is trying to force their non-open, non freely traded currency as a reserve currency.

People vote with their feet and with their wallets. There is not a single person in this forum, no matter how pro-China he is, that would willingly put his wealth in RMB. That says it all. Chinese people themselves certainly do all they can to escape the claws of the Chinese economic system and move their wealth to the West.

"Indepenent thinkers" can claim the USD is going to be dethroned as global reserve currency. Self-proclaimed "smart" economists have been warning about it since the 1980s and probably will keep crying about it well through the 2050s.

Times change fast these days.
There are certain entities and nations which lost 100% held in USD (confiscated) and it was not FTX related due to certain events in 2022. It can't be much worse than that.
So, the USD proved to not having much rule of law either and "with trend is your friend", more to come.

 

[Martin Everson]

Times change fast these days.
There are certain entities and nations which lost 100% held in USD (confiscated) and it was not FTX related due to certain events in 2022. It can't be much worse than that.
So, the USD proved to not having much rule of law either and "with trend is your friend", more to come.

Glad you saw that too . One of the reasons I created the below thread. Pandora's box was opened with that move they pulled. But I never hold any dollars or use dollars too risky for my nationality.

https://www.offshorecorptalk.com/th...th-to-avoid-future-potential-sanctions.36646/
Hopefully there is no blow back on my island over FTX saga. But I hedge myself there in case there is.

P.S When it comes to finance or geopolitics its crazy to put one yourself in one camp. I play both sides like UAE, Saudi, India etc and think with logic and reason rather than deep emotions that often triggers people .

 

[Martin Everson]

Amid US-Saudi Rift, Xi Jinping's Minister Eyes Pleasing Gulf Kingdom With Free Trade Zone 'As Soon As Possible'​

https://www.msn.com/en-us/news/worl...ee-trade-zone-as-soon-as-possible/ar-AA16VBt1

 

[GeneralGogol]

The data suggest that the RMB was the only currency actively *sold* by reserve managers in '22. This is despite presumably one of the most extreme periods of dollar "weaponization" ever.

On what was supposed to be the best time for RMB it's the only currency that foreigners are dumping.
But of course that won't stop the doomers here from predicting that USD is going to lose the global reserve status any day now...

Source:

https://twitter.com/x/status/1642895513732218881

 

[Martin Everson]

China to work with Asian neighbours to grow use of local currencies over US dollar in trade, investment​

https://www.scmp.com/economy/global...ian-neighbours-grow-use-local-currencies-over

Malaysia, China to Discuss ‘Asian Fund’ to Cut US Dollar Dependency​

https://www.bloomberg.com/news/arti...o-discuss-asian-fund-to-cut-dollar-dependency

Bye-Bye Dollar: China's Yuan Emerges As Most Traded Currency in Putin's Russia​

https://www.msn.com/en-us/money/new...-traded-currency-in-putins-russia/ar-AA19s05o

Why Saudi Arabia Is Following Iran to Join China and Russia's Security Bloc​

https://www.msn.com/en-us/news/worl...n-china-and-russias-security-bloc/ar-AA19fk9x
Bypass the dollar is the strategy and when global wealth is moving east exciting times ahead .

 

[khinkali]

The data suggest that the RMB was the only currency actively *sold* by reserve managers in '22. This is despite presumably one of the most extreme periods of dollar "weaponization" ever.

How would Bank of International Settlements figures enlighten us, regarding the move (predicted by some) to a new economic system replacing Western hegemony?