How China Can Cause The Death Of The Dollar And The Entire U.S. Financial System

The death of the dollar is coming, and it will probably be China that pulls the trigger.  What you are about to read is understood by only a very small fraction of all Americans.  Right now, the U.S. dollar is the de facto reserve currency of the planet.  Most global trade is conducted in U.S. dollars, and almost all oil is sold for U.S. dollars.  More than 60 percent of all global foreign exchange reserves are held in U.S. dollars, and far more U.S. dollars are actually used outside of the United States than inside of it.  As will be described below, this has given the United States some tremendous economic advantages, and most Americans have no idea how much their current standard of living depends on the dollar remaining the reserve currency of the world.  Unfortunately, thanks to reckless money printing by the Federal Reserve and the reckless accumulation of debt by the federal government, the status of the dollar as the reserve currency of the world is now in great jeopardy.

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...

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".

So why should the rest of the planet listen to China?

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...

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.

And over the past few years we have seen the global use of the yuanrise dramatically...

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.

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...

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."

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...

1. China and Germany (See Here)

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)

But do you hear about any of this on the mainstream news?

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.

By  Michael Snyder

Read more from the source: http://theeconomiccollapseblog.com/archives/how-china-can-cause-the-death-of-the-dollar-and-the-entire-u-s-financial-system

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Chinese troops will have boots on the ground in Hawaii on Tuesday

Aloha Hawaiians!  If you see what you think are soldiers from the Communist Peoples Republic of ChinaArmy wandering about in your neck of the woods Tuesday through Thursday next week, your imagination is not playing tricks on you.

For the first time in history the U.S. Army will host the Communist Peoples Republic of China’s Army on American soil Nov. 12-14, 2013.

But don’t worry while Chinese soldiers will have boots on the ground in Hawaii, they are only really “simulating”.

“Simulating humanitarian assistance and disaster relief to a fictional third country”.

You can’t make this stuff up when GridEx 2 is doing it for you.

GridEx 2 (there was already a GridEx 1in November of 2011) is a massive ‘emergency drill’ planned to take place across the whole of North America with thousands of utility workers, business executives, National Guard officers, FBI antiterrorism experts and officials from government agencies, in the United States, Canada and Mexico (who) are preparing for an emergency drill in November that will simulate physical attacks and cyberattacks that could take down large sections of the power grid. (New York Times, Aug. 16, 2013).

The exercise is touted as a unified move “to test the resiliency of the U.S. power grid to withstand major damage causes by a natural disaster or deliberate attack”.

“Fears about the possible detonation of a nuclear warhead in the skies about the United States, for the purposes of creating an electromagnetic pulse aimed at sizzling electronics on the ground, have led a number of public figures to call for significant steps to strengthen the power grid.  Ex-CIA head R. James Woolsey is planing a campaign to convince state governments to pass laws requiring utilities to harden their electronics against potential EMP attacks.

“A key objective of GridEx 2 is to learn how governments would handle a loss of electrical power that is large enough to drastically affect the delivery of common and essential goods and services.” (NYT)

Hoping that the U.S., Canada or Mexico aren’t GridEx 2’s “fictional third country” and that the soldiers out on reconnaissance in Blue Hawaii don’t stamp ‘Made in China’ on it.

The New York Times reported on GridEx 2’s massive, Nov. 13-14 drill on August 16,  but never mentioned the participation of the Peoples Republic of China’s Army.

China’s Xinhua Agencies kicked in on November 6 reporting that American and Chinese soldiers will train together in the November exercise.

“The US military Pacific Commander, Samuel Locklear, said here Tuesday that a joint humanitarian assistance and disaster relief exercise to be held this month helps improve the relationship between the United States and China.” (Xinhua Agencies, Nov. 6, 2013)

”Locklear told a news briefing that the Pacific Command’s Army component commander in Hawaii has been looking forward to the Nov. 12-14 exercises “for some time”, as the Army will host the People’s Liberation Army soldiers of China to train together in a field environment, simulating humanitarian assistance and disaster relief to a fictional third country.

“Summing up his expectations for the joint exercise, Locklear said both militaries can learn something in disaster management and “better prepare tomorrow than yesterday”.

“In relation to our ability to do this with our Chinese counterparts”, he said, “this kind of exercise gives us a place to start, and get into the rhythm of understanding and trusting each other.”

“The joint exercise was announced during an August visit to Washington by Chinese Minister of National Defense Chang Wanquan, as China and the United States expand their military-to-military relationship and explore cooperation opportunities in non-traditional security areas.”

On August 19, Defense Secretary Chuck Hagel escorted China Minister of National Defense Gen. Wanquan during an honor cordon at the Pentagon.

In a same day press conference, Gen. Wanquan said China’s military has never supported any hacker actions, expressing at the joint press conference that the cyber space is a new field and cyberspace security threats have become a world wide problem. “China is one of the major victims of hacker attacks, suffering serious threats from network attacks,” he said.

Meanwhile, let’s hope the last one out of the GridEx 2 simulation exercise turns North America’s lights back on.

Read more:

http://canadafreepress.com/index.php/article/59113

http://beforeitsnews.com/china/2013/11/chinese-troops-will-have-boots-on-the-ground-in-hawaii-on-tuesday-2447796.html

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The disease that killed a million piglets in China has spread to the US!!!

America’s pork industry has been gripped by an outbreak of porcine diarrhea since mid-May, the first appearance of the condition in North America. US farmers havereported 768 cases of the disease, known as porcine epidemic diarrhea virus (PEDV), through the first week of October, which implies that many more thousands of animals could be affected.

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Although the disease is not transferable to humans, it has been devastating for the US pork industry. It causes severe “watery diarrhea and vomiting in nursing pigs,” according to information from the US’s National Pork Board. Almost all the piglets who get the disease die because of it, and farmers are reportedly filling “wheelbarrows of dead piglets.”

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Now researchers at the Virginia-Maryland Regional College of Veterinary Medicine at Virginia Tech say they’ve traced the virus back to eastern China’s Anhui province. Anhui is one of China’s major pig-farming areas, home to companies like the fast-growing Anhui Antai Agricultural Industry Group, which slaughtered 500,000 pigs last year.

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Pinpointing the origin of the virus isn’t going to provide much reassurance to US farmers. Years after it spread in China, it still hasn’t been controlled.

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Reports of PEDV outbreaks in China and Europe are not new, and have been mostly controlled with vaccination over the years. But starting in 2010, China suffered a severe outbreak of PEDV that killed more than 1 million piglets in less than two years. Scientists said the Chinese death toll was thanks to new vaccine-resistant strains of the disease.

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Anhui is a neighboring province to Shanghai, where thousands of dead pigs were discovered floating in the Huangpu River earlier this year, and had its own floating dead pig incidents. The Huangpu river pigs deaths have been attributed to “Porcine circovirus,” although some dead pigs found in the area also tested positive for PEDV, China’s state-run Global Times reported in March. Of the 36 samples tested by the Animal Disease Control Center in Zhejiang Province, 16 contained porcine circovirus and seven tested positive for porcine epidemic diarrhea virus, the paper reported.

Source: http://qz.com/138621/the-disease-that-killed-a-million-piglets-in-china-has-spread-to-the-us-and-no-one-knows-why/
http://endtimeheadlines.wordpress.com/2013/10/24/alert-disease-that-killed-a-million-piglets-in-china-spreads-to-the-us/

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Why China Wants To Dump the Dollar

China's Dagong credit rating agency on October 17th downgraded its United States sovereign credit rating to A- and maintained its negative outlook on America's solvency.  Dagong warned that despite Washington's last-minute resolution of the debt ceiling deadlock: "The fundamental situation that the debt growth rate significantly outpaces that of fiscal income and gross domestic product remains unchanged." China's official state-run news agency, Xinhua, reiterated its earlier statements that because of the contnuing risk of a United States debt default, it is "a good time for the befuddled world to start considering building a de-Americanized world." This language is code for Chinese want to abandon the U.S. dollar as the world's "reserve currency" and move international financial transactions to the renminbi, the currency of the People's Republic of China. Having benefited for twenty years from an undervalued currency that imported manufacturing jobs and exported lower priced products, China's economic advantage is being destroyed by America's oil and natural gas fracking boom. The Chinese communist authorities are terrified their loss of competitiveness will cause unemployment and the social consequences that flow from it. But with the terms of trade now substantially against China, convincing the world to dump the U.S. dollar as reserve currency and switch to the Chinese "renminbi" is their best hope to try to save tens of millions of manufacturing jobs.

When the Soviet Union collapsed in the early 1990s, China's economy began to implode and inflation skyrocketed from 10% to 25%. The United States, Europe, and Japan saved the Chinese economy by allowing China to devalue their currency by 68% and gain tariff-free export to world's largest markets. Under this new communist form of capitalism from 1993 to 2008, China's economy quadrupled, the U.S. economy doubled, Europe rose by half, and Japan stagnated.

Contract manufacturing is a very competitive business and historically had an average profit margin of only 3.5%. This assumes uncontrollable costs of about 75-80% for purchased inputs and 13.5% for energy. Companies primarily compete over managements' ability to get more productivity from an average of 8.5% in labor cost. But with China's labor rates initially 75% cheaper than the U.S., by moving production to China manufacturers could often double their profit margins to 7% of sales. Once positioned in China, manufacturers could also discount their sales prices to wipe out U.S. competition.

U.S. trade "experts" in 1993 expected Chinese workers' total factor productivity (TFP) would be less than a quarter of American workers' 1.25% annual productivity gain. This may not sound like a lot, but over a 15-year period Chinese manufacturers would produce a unit for 95% of original cost and U.S. manufacturers would be producing the same unit for 82% of cost. The "experts" predicted few jobs would be lost to China and America would gain new markets for high-tech manufactured goods.

Over the next 15 years, China grew the number of assembly workers involved in manufacturing for export to over 200 million workers. America lost about eight million manufacturing jobs to China, 40% of our 20 million production jobs. But even more damaging, every manufacturing job also lost four service jobs and another1.58 manufacturing jobs from subassembly manufacturers who locate near their customer.

China understood that as it sucked manufacturing jobs out of the U.S., the Chinese renminbi currency would be expected to rise in value and destroy their "cheap" labor advantage. As a communist nation, they adopted a national policy of recycling a portion of their export sales revenue into the purchase of U.S. Treasury bonds to drive up the value of the U.S. dollar versus the Chinese renminbi.

Fearing that every 10% increase in the exchange rate of the renminbi to the dollar would cause the loss of 35 million manufacturing jobs, by 2008 China had purchased $2 trillion in U.S. Treasury Bonds. China's bond purchases drove down U.S. interest rates and caused a real estate building boom employing millions of Americans. But when the real estate bubble burst, the "Great Recession" educated Americans on the pain of losing manufacturing jobs.

China's labor costs became even more uncompetitive versus the U.S. after 2008 financial crash drove down U.S. wages. In response, the communist nation began "administering" input costs by subsidizing the cost its state-owned export manufacturers paid to purchase energy. As a country that imports 70% of its oil needs, subsidies preserved China's manufacturing employment. But the subsidized prices increased the demand for oil and drove the international price of oil from a recession low of $40 up to $100 barrel.

The financial crisis caused such scandal in the U.S. banks were forced to slash their leverage risk from holding $25 down to $13 of assets for each $1 of deposits. The Chinese authorities directed their state-owned-banks to increase their leverage risk from $35 to $48 of assets for each $1 of deposits. China banks also increased infrastructure and commercial and residential property loans. Policy lending created such huge new inefficiencies in the Chinese economy that many bank loans can never be repaid.

"China's steady growth in oil demand has led it to become the world's largest net oil importer, exceeding the United States in September 2013" according to the U.S. Energy Information Administration. China's rising oil demand in September outstripped domestic production by 6.3 million barrels per day. But U.S. imports continue to fall as fracking technology increased production to 7.8 million barrels per day, the highest level since early 1989. Natural gas production is also rapidly increasing and America will soon be self-sufficient in this important industrial energy source. The price for 1000 cubic feet of natural gas averages about $3.50 in the U.S., versus over $12 in China.

China remains an impoverished nation, where 900 million people have an annual per capita income around the same level as Guatemala, $3,000-$3,500 a year, and 500 million have an annual per capita income around the same level as Nicaragua, $1,500-$1,700. China's per capita GDP is around the same level as the Dominican Republic. Stimulating the domestic consumer economy will not help manufacturers when the vast majority of Chinese cannot afford to buy the products they currently produce for export.

The Chinese benefited enormously from being allowed to devalue their currency and participating with the dollar as their reserve currency. But if China continues aggressive lending to failing businesses, they will generate higher inflation and make Chinese exports more uncompetitive. But allowing businesses to fail would cause unemployment and cause massive social and political problems. If China sells their $3.3 trillion of U.S. Bonds, the dollar will fall and America will become even more competitive. As China's economic decline becomes obvious, it is doubtful they will convince the world to allow China to devalue and make the renminbi the world's reserve currency.

China as the second largest economy in the world will continue to be a major international power. But its days as the low-wage, high-growth center of the earth are over. Their ability to project military power in Asia will also fade. China's future may be similar to what George Friedman of Stratfor famously said about the future of Japan after the end of its high-growth cycle: "it will play a different role."

Source: http://www.americanthinker.com/2013/10/why_china_wants_to_dump_the_dollar_1.html#ixzz2iYh6TVrk 

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Chinese Government Calls For World To Be ‘De-Americanized’

Chinese government mouthpiece says ‘Pax Americana’ has failed on all fronts.

China’s official news agency has called for the creation of a “de-Americanized world”, saying the destinies of people should not be left in the hands of a hypocritical nation with a dysfunctional government.

The first step in creating a de-Americanized world, all nations must try to shape an international system that respects the sovereignty of all nations and ensures the US keeps out of the domestic affairs of others, Xinhua said.

Heaping criticism and caustic ridicule on Washington, the Xinhua news agency called the US a civilian slayer, prisoner torturer and meddler in others’ affairs, and said the ‘Pax Americana’ was a failure on all fronts.

The official news agency of China, which is seen as the pretender to the world’s superpower crown, then rubbed in more salt, calling American economic pre-eminence just a seeming dominance.

“As US politicians of both political parties are still shuffling back and forth between the White House and the Capitol Hill without striking a viable deal to bring normality to the body politic they brag about, it is perhaps a good time for the befuddled world to start considering building a de-Americanized world,” the editorial said.

It asks why the self-declared protector of the world is sowing mayhem in the financial markets by failing to resolve political differences over key economic policy.

“… the cyclical stagnation in Washington for a viable bipartisan solution over a federal budget and an approval for raising debt ceiling has again left many nations’ tremendous dollar assets in jeopardy and the international community highly agonized,” the agency said.

It is not the first time Chinese leadership and newspapers have criticized Washington over a policy paralysis that threatens to devalue its dollar assets.

According to US Treasury Department data, China is the biggest foreign owner of US Treasuries at $1.28 trillion as of July. Besides, China also holds close to $3.5 trillion of dollar-denominated assets.

A US debt default and consequent credit downgrade would significantly erode the value of China’s holdings.

As the first step in creating a de-Americanized world, all nations must try to shape an international system that respects the sovereignty of all nations and ensures the US keeps out of the domestic affairs of others, Xinhua said.

“The developing and emerging market economies need to have more say in major international financial institutions including the World Bank and the International Monetary Fund, so that they could better reflect the transformations of the global economic and political landscape,” the editorial says.

It also called for an end to the use of the US dollar as the international reserve currency, a step that would ensure the international community could maintain a safe distance from the side-effects of domestic political turmoil in the United States.

- See more at: http://livefreelivenatural.com/chinese-government-calls-world-de-americanized/#sthash.4ZLCMuC8.dpuf

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220,000 pounds of poisoned dead fish scooped up in pollution-plagued China

Authorities have scooped up around 100,000 kilograms (220,000 pounds) of dead fish they say were poisoned by ammonia from a chemical plant, environmental officials and state media said Wednesday, in a reminder of the pollution plaguing the country.

The Hubei province environmental protection department, notified of the piles of dead fish in central China’s Fuhe River on Monday, pointed the finger at local company Hubei Shuanghuan Science and Technology Stock Co. Officials said sampling of its drain outlet showed that ammonia density far exceeded the national standard. The company said it wasn’t going to immediately comment. Inadequate controls on industry and lax enforcement of existing standards have worsened China’s pollution problem, stemming from three decades of breakneck economic growth.

High-profile incidents this year involving dead animals in rivers – not only deaths attributed to pollution but also carcasses dumped by farmers after die-offs at farms – have added to public disgust and suspicions about the safety of drinking water. The latest incident has affected the nearby fishing village of Huanghualao, where 1,600 residents make a living from fishing, said the village’s Communist Party secretary, Wang Sanqing. ”The dead fish covered the entire river and looked like snowflakes,” he said, adding that the village has 150 fishing boats and could lose up to 70,000 yuan ($11,400) per day. The environmental department warned the public not to eat the dead fish, but said drinking water was not affected. It said it ordered the company to suspend operations and fix the pollution problem. The official Xinhua News Agency said about 100,000 kilograms of dead fish had been cleared from 40 kilometers (25 miles) of the river, but did not cite a figure for the number of fish. The environmental department said only that “a great number of fish” had been recovered.
Source: CBC News endtimeheadlines

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