Moral Outrage
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The Straits of Hormuz and a new Reserve Currency to challenge the Dollar

An unintended consequence of QE had been to spur several countries to think very seriously of how they could replace the dollar as their settlement currency for international deals.

The list of countries accumulating gold (Russia, China, India) is similar to the list of countries that were reported to be talking about the need for a new reserve currency to replace the dollar. I wonder if those who are seriously thinking of trying to unseat the dollar and create a currency which is backed by something other than debt and is not under the control of America’s corrupt banks and even more corrupt government, are investing in gold as a precursor to making a real bid for a new currency.

[Apart from a new Reserve Currency, there is also a ‘settlement currency’] In 2000, Iraq signed an agreement to sell its oil, all its oil, in Euros. Iran was contemplating doing the same at around the same time.

In January of this year the India Times reported that India was talking to Iran about moving out of dollar settlements so as to be able to buy Iranian oil despite a US embargo. India said it was discussing settling in Gold. India has also just signed a settlement agreement with China to use the Yuan.

China and Russia have been trading directly in their own currencies and using them both interchangeably for settlement for over a year. China and Japan will promote direct trading of the yen and yuan without using dollars.

The list of countries and trades no longer using the dollar for settlement for their trade is now considerable.

On Dec.28th, the Iranian news service reported, Iran and China signed two agreements on expansion of trade ties and joint investments. These trades too will not be settled in Dollars or in Euros.

Three days after that, The China Post reported that President Obama had signed a new law in which the U.S. imposes sanctions on banks dealing with Iran.

On Jan 7th, came the news that, Iran and Russia replaced the U.S. dollar with their national currencies in bilateral trade. So now almost none of Iran’s oil will be traded in Dollars.

I think the stand-off with Iran in the Straits of Hormuz over sanctions is as much to do with the moves to replace the dollar as anything else. The stand off is as much with China and its allies as it is specifically with Iran.

[Read full article]

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