As I mentioned above, nations all over the globe use U.S. dollars to trade with one another. This has created tremendous demand for U.S. dollars and has kept the value of the dollar up. It also means that Americans can import things that they need much more inexpensively than they otherwise would be able to.
The largest exporting nations such as Saudi Arabia (oil) and China (cheap plastic trinkets at Wal-Mart) end up with massive piles of U.S. dollars...
Instead of just sitting on all of that cash, these exporting nations often reinvest much of that cash into low risk securities that can be rapidly turned back into dollars if necessary. For a very long time, U.S. Treasury bonds have been considered to be the perfect way to do this. This has created tremendous demand for U.S. government debt and has helped keep interest rates super low. So every year, massive amounts of money that gets sent out of the country ends up being loaned back to the U.S. Treasury at super low interest rates...
And it has been a very good thing for the U.S. economy that the federal government has been able to borrow money so cheaply, because the interest rate on 10 year U.S. Treasuries affects thousands upon thousands of other interest rates throughout our financial system. For example, as the rate on 10 year U.S. Treasuries has risen in recent months, so have the rates on U.S. home mortgages.
Our entire way of life in the United States depends upon this game continuing. We must have the rest of the world use our currency and loan it back to us at ultra low interest rates. At this point we have painted ourselves into a corner by accumulating so much debt. We simply cannot afford to have rates rise significantly.
For example, if the average rate of interest on U.S. government debt rose to just 6 percent (and it has been much higher than that at various times in the past), we would be paying more than a trillion dollars a year just in interest on the national debt.
But it wouldn't be just the federal government that would suffer. Just consider what higher rates would do to the real estate market.
About a year ago, the rate on 30 year mortgages was sitting at 3.31 percent. The monthly payment on a 30 year, $300,000 mortgage at that rate is $1315.52.
If the 30 year rate rises to 8 percent, the monthly payment on a 30 year, $300,000 mortgage would be $2201.29.
Does 8 percent sound crazy to you?
It shouldn't. 8 percent was considered to be normal back in the year 2000.
Are you starting to get the picture?
We need other countries to use our dollars and buy our debt so that we can have super low interest rates and so that we can afford to buy lots of cheap stuff from them.
Unfortunately, the truly bizarre behavior of the Federal Reserve and the U.S. government over the past several years is causing the rest of the world to lose faith in our currency. In particular, China is leading the call for a "de-Americanized" world. The following is from a recent article posted on the website of France 24...
So why should the rest of the planet listen to China?For decades the US has benefited to the tune of trillions of dollars-worth of free credit from the greenback's role as the default global reserve unit.
But as the global economy trembled before the prospect of a US default last month, only averted when Washington reached a deal to raise its debt ceiling, China's official Xinhua news agency called for a "de-Americanised" world.
It also urged the creation of a "new international reserve currency... to replace the dominant US dollar".
Well, China now accounts for more global trade than anyone else does, including the United States.
China is also now the number one importer of oil in the world.
At this point, China is even importing more oil from Saudi Arabia than the United States is.
China now has an enormous amount of economic power globally, and the Chinese want the rest of the planet to start using less U.S. dollars and to start using more of their own currency. The following is from a recent article in the Vancouver Sun...
And over the past few years we have seen the global use of the yuan rise dramatically...Three years after China allowed the yuan to start trading in Hong Kong's offshore market, banks and investors around the world are positioning themselves to get involved in what Nomura Holdings Inc. calls the biggest revolution in the $5.3 trillion currency market since the creation of the euro in 1999.
Of course the U.S. dollar is still king for now, but thanks to a whole host of recent international currency agreements this status is slipping. For example, China just recently signed a major currency agreement with the European Central Bank...International use of the yuan is increasing as the world's second-largest economy opens up its capital markets. In the first nine months of this year, about 17 percent of China's global trade was settled in the currency, compared with less than one percent in 2009, according to Deutsche Bank AG.
And as I have written about previously, we have seen a bunch of other similar agreements being signed all over the planet in recent years...The swap deal will allow more trade and investment between the regions to be conducted in euros and yuan, without having to convert into another currency such as the U.S. dollar first, said Kathleen Brooks, a research director at FOREX.com.
"It's a way of promoting European and Chinese trade, but not doing it with the U.S. dollar," said Brooks. "It's a bit like cutting out the middleman, all of a sudden there's potentially no U.S. dollar risk."
1. China and Germany (See Here)But do you hear about any of this on the mainstream news?
2. China and Russia (See Here)
3. China and Brazil (See Here)
4. China and Australia (See Here)
5. China and Japan (See Here)
6. India and Japan (See Here)
7. Iran and Russia (See Here)
8. China and Chile (See Here)
9. China and the United Arab Emirates (See Here)
10. China, Brazil, Russia, India and South Africa (See Here)
Of course not.
They would rather focus on the latest celebrity scandal.
Right now, the global move away from the U.S. dollar is slow but steady.
At some point, some trigger event will likely cause it to become a stampede.
When that happens, demand for U.S. dollars and U.S. debt will disintegrate and interest rates will absolutely skyrocket.
And if interest rates skyrocket that will throw the entire U.S. financial system into chaos. At the moment, there are about 441 trillion dollars worth of interest rate derivatives sitting out there. It is a financial time bomb unlike anything the world has ever seen before.
There are four "too big to fail" banks in the United States that each have more than 40 trillion dollars worth of total exposure to derivatives. The largest chunk of those derivatives is made up of interest rate derivatives. In case you were wondering , those four banks are JPMorgan Chase, Citibank, Bank of America and Goldman Sachs.
A huge upward surge in interest rates would absolutely devastate those banks and cause a financial crisis that would make 2008 look like a Sunday picnic.
Right now, the leader in global trade seems content to use U.S. dollars for most of their international transactions. China also seems content to hold more than a trillion dollars of U.S. government debt.
If that suddenly changes someday, the consequences for the U.S. economy will be absolutely catastrophic and every single American will feel the pain.
The standard of living that all of us are enjoying today depends largely upon China. They can bring down the hammer at any moment and they know it.
Interesting article in connection with this topic:
"Huge Cracks in US Financial Fortress" [ [Link]]
(01 November 2013 / Dr. Jim Willie):
"US LEADERSHIP VANISHED
Many are the big ugly wild cards. Note the Afghan heroin industry and distribution across the NATO bases, the clearinghouse functions managed by JPMorguen via the Iraqi Export Bank in Baghdad. Note the pilfered US Gold reserves from Fort Knox by the Clinton-Rubin Admin, both revered men. Note the staged events on 910+1, complete with hidden coup d'etat. Note the Snowden files to reveal criminal deeds at the US Helm, the man labeled a traitor. The defensive tactics have turned more desperate and often border on the edge of amusing. In 2002, certain officers who attempted to reveal the sequence of events and the culpable parties from the big event the previous year were smeared with child pornography accusations. Memories fade. Few recall the Anthrax threat to the Congressional ventilation systems just before the Patriot Act passage, the threat as courtesy by the FBI. In general, the opponents to the fascist core axis are declared terrorists. The accusers are nazis deeply engaged in financial terror, war crimes, bond fraud on $trillion scale, central bank gold thefts, bond counterfeit, theft of large funds, murder to defend the fortress, with a cake that bears treason as icing.
The last three US Presidents have refused to submit to the USCongress their medical records, as required by law. The details of their narcotics addiction would not sit well with the American public or even naive Congressional members. Authority might not be followed. The world is watching. The world has identified the problem. The world has fingered the USDollar as the toxic paper, the USTBond as the acid element in their banking systems, and the US Bankers as the criminals in the room. The nations of the world have made grand strides in rallying behind China & Russia. The former has made a direct challenge to the US in global financial leadership. The latter has been making direct challenge to the US in global military leadership. The swing vote lies with the Saudis, who always hide behind daddy's cape, whatever nation will provide them cover for their multi-$billion thefts of national resources with pacification via bond recycling.
PETRO-DOLLAR FINAL DEATH THROES
The Saudis find themselves alienated from their US protector. They find themselves at friction-filled odds with Russia. They will find some measure of safe haven behind the Chinese cape. The Saudis are busily making their pivot to China. Note the large petro-chemical project begun last year near the Red Sea. The entire Arab Spring movement is a direct assault upon the Arab world, whose nations one after the other are run by autocrats better described as benevolent dictators. The USGovt strategy to spread democracy is intended to disrupt the royals sitting upon peacock thrones, as much as to dislodge valuable resources. In North Africa the objective was to derail the planned European development with new industries, equipped with roll-off port facilities, run by cheaper skilled Arab labor. In the rest of the Arab MidEast, the objective has been to let loose a band of Keystone Cops that unseat the House of Saud itself in a most bizarre sequence of events. The overthrow of Mosni in Egypt required a huge financial assist by the Saudis, hardly a team effort with the Obama Admin clown show. The retreat from Syria has angered the Saudi Royal family in unspeakable terms. They have responded by threatening the shutdown of US Embassies in Saudi Arabia. Hidden in the many conflicts are the Pipeline Politics, which the USGovt cannot afford to reveal. Doing so would make crystal clear its ulterior motives, its weakened position, and the rise of the Natural Gas Coop led by the Russian Gazprom giant. Revealing the fading power of OPEC as the Saudi weapon to enforce the King Dollar scepter would accelerate the Dollar Alternative movement led by the Eastern Alliance. The Syrian War was all about blocking the completion of the Shiite Gas Pipeline from Iran. The US could not stop the Iran-Pakistani Gas Pipeline. The weakness of the USDollar will be made evident by the strangle of natural gas pipelines, mostly run by Gazprom. The US lost the Pipeline Wars to Russia long ago.
The Western population is slowly coming to grips with the rise of the Shiite majority in Iraq. Yes, the United States lost the Iraqi War. Yes, the United States will soon have lost the Afghan War, except for the heroin booty. Valued at over $800 billion in narco profit annually, it has been the big prize on the battlefield supported by soldier blood & guts. At an estimated $6 trillion all-in war cost, thank the Bush II Admin for another folly that equals one third of the national debt. The great turning point for the Global Dollar Politics lies in the massive changes underway with the Petro-Dollar. The Saudis urgently seek a new protector for the Persian Gulf. It will be China to wear the cape. The Saudis will soon announce acceptance for oil payments in Euro terms, in Yen terms, in British Pound terms, and most important in Chinese Yuan terms. The effect will be felt like a gigantic crash impact of a 7-story building hitting the ground, marking the Death of the Petro-Dollar. It has served as the foundation for the USDollar for 40 years, since the Arab 1973 Embargo. The resolution involved a grand pact, engineered by Kissinger. It called for recycling Arab Oil Surplus into USTreasury Bonds, used to fill the many national banking systems across the world. The unraveling of the Petro-Dollar standard will bring about colossal reformation of the many national banking systems. They will ditch the USTBonds in favor of a mix of Chinese Yuan and Gold bullion. Later the same Yuan will become partially gold-backed. Game over for the King Dollar!"
[...]
"China just acquired the building that houses the world's largest gold vault. Contrast with the frenetic Chinese gold imports in the last several months from Hong Kong, totaling 2000 metric tons in the past two years. Conclude possibly that China has decided it will no longer settle for domestically held gold and has begun to expand its global vault facilities, kind of like golden colonies or outposts, better yet arsenals and armories. The acquisition is an important step in the Grand Paradigm Shift of power moving from West to East. To put it in military terms, the Chinese just established a beach head in South Manhattan. It is more than a beach head. They took control of the USFed Operational HQ. Game over!! The USFed just surrendered!! The last people to know will be Americans. Word will filter through Wall Street. Watch the Wall Street investment banks soon announce the news of Chinese Govt debt being sold on US soil, just like in London. The whores of Manhattan can pivot and salute the Eastern master. The Chinese have captured the flag, by acquiring under duress the trophy tower. May John Pierpoint Morgan roll over in his two-timing grave also, an efficient agent for the Bank of England in the recapture of the US Colony a century ago."
[...]
"The Grand Paradigm Shift is in progress. My sources indicate that the 5000 metric tons of Gold bullion moved from London to points East between April and July 2012. The flow eastward never stopped. The pace has continued. The Gold bullion continues to be shipped in enormous staggering volume. The Gold Community has only a rudimentary comprehension of what is happening in the clandestine shipment of gold. The pillars of the community seem either unaware or unwilling to report anything but the supersized Chinese purchases through the Hong Kong window, the Indian demand, and the Turkish demand. My belief is they lack insider contacts on the phenomenon movement of gold by the White Dragon Family and their Triad escorts. The agreements have already been made on the new Gold Trade Settlement system with its newly imposed Gold Trade Standard. They have agreed on a $7000/oz gold price, with a similarly exalted silver price of at least $250/oz. Decisions have been made final. The implementation is slow but steady. The game is over. The King Dollar is dead. All that remains is the funeral, the war in its wake, and the retaliation from the Satanic fortress and its legion of diabolical subjects."
Here's a fascinating interview on audio, also (downloadable mp3 file available here (scroll down a little bit and you'll find both 64 and 24 kbps files): [Link]TMRN-Presents-PTS-3073&s=afe94fd194c6f5b33f9d0d0c3af794f6 :
"The Plane Truth ~ Gas and Gold: Goodbye to the Petrodollar with Jim Willie - PTS 3073" [ [Link]]
(Time Monk Radio Network Interview 05 November, 2013 / With Host, Plane)