Gyroscopic Investing

China's answer to the SWIFT international payments system is CIPS and will go live this September or October.  Cross border yuan payments are currently very clunky to do.

SWIFT processes 44.6% of it payments as USD and acts as the platform for the world's reserve currency.

Remember how the U.S. and EU were pressuring SWIFT to kick Russia out because of the Ukraine annexation?  Well, SWIFT just gave Russia a seat on its board.  Ouch!

Why?  SWIFT is deathly scared of CIPS.

Should you be, too?

I don't see it being much a threat at all for a couple of reasons...

A) How is it going to work if the Yuan doesn't float and move very well as a cross-border medium of exchange...the USD is the world's currency because it is transportable anywhere in massive amounts and value adjusts with other currencies based on demand.

OK, pretty much everything else I was going to list has to do with the above. If they go into transporting dollars then it comes down to system confidence and while Iran and Russia may not trust a US dominated system, pretty much everyone else does as compared to the alternatives. So yeah, it may pick up the pariah state business...which ain't much comparatively speaking.

Bottom Line: Until the Yuan acts like the USD it isn't a threat...doom porn as you would say.

A seed isn't the beginning of the end but only when the evidence is self-evident to literally everyone?  I guess it's a matter of perspective.  Markets are forward-looking so by the time the latter is reached, the damage will have long been already done.

Sure the yuan isn't going to literally replace the USD anytime soon, but China is angling to get the yuan to back up the IMF's SDR along with the USD and EUR, which is highly likely to be the next world reserve currency.  And guess what they are doing with all of the trillions of USD we've been sending them?  While the USA is busy playing Keystone cop under a bumbling idiot of a President and corrupt war hawk politicians, they're investing all that USD into building real productive assets and buying loyalty around the world.  Look at how many countries ignored Washington's (Obama?) warnings and joined the China-backed Asian Infrastructure Investment Bank which now has 40 or so countries signed up.  Over 60% of the world's population lives in Asia alone.

The real problem is when the rest of the world doesn't have to buy its commodities and finished goods via SWIFT in USD, they will dump their USD.  And I wonder... to whom?

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I'm bullish on the US short and long term. Someone is always going to take us over supposedly...70s-80s the Russians, 90s the Japanese, 2000s Europe and now China. We are slackers when we can be and aren't when we can't be.

...The Triumph of the Optimists

Kbg wrote: I'm bullish on the US short and long term. Someone is always going to take us over supposedly...70s-80s the Russians, 90s the Japanese, 2000s Europe and now China. We are slackers when we can be and aren't when we can't be.

Are you familar with how the British Empire fell and what happened to the British Pound?  It's instructive.  I'm only bullish on the USA as Keystone cop up to another 15 years or so until China takes up the torch.  What is very worrying about that is the lack of established traditions hard fought in terms of human and animal rights.  And no one keeps their money in the country.  Is 15 years enough time for them to hit the reset button?

China will not be the world's leading nation until it truly learns to innovate and is able to establish the rule of law. Is the US going to share world power with China increasingly, oh yes. Is it going to eclipse the US, not in our lifetimes. They've already alienated every country on their periphery, and thus the free ride they've had the last 35 years is over. Their demographics are a mess as well.

Personally I don't mind a little more competition on the world stage, it will help check us of our lesser instincts. The post WW2 world was a major historical fluke. There's never been anything like it. I'd say we are just reverting to more balance.

Desert wrote:

MachineGhost wrote:

Kbg wrote: I'm bullish on the US short and long term. Someone is always going to take us over supposedly...70s-80s the Russians, 90s the Japanese, 2000s Europe and now China. We are slackers when we can be and aren't when we can't be.

Are you familar with how the British Empire fell and what happened to the British Pound?  It's instructive.  I'm only bullish on the USA as Keystone cop up to another 15 years or so until China takes up the torch.  What is very worrying about that is the lack of established traditions hard fought in terms of human and animal rights.  And no one keeps their money in the country.  Is 15 years enough time for them to hit the reset button?

I can picture the U.S. dollar losing reserve status, but only when I see a combination of currency and culture that is capable of taking it over.  China?  No way.  Nobody trusts China, including the Chinese.

Who trusts the US government?

IMF representatives are set to give the all-clear for China's yuan to be included in its Special Drawing Rights basket, laying the groundwork for a favorable decision by policymakers, Bloomberg reports. As part of the process scheduled for every five years, staff members will present their recommendation to the fund's executive board for a vote in November. China took another step toward liberalizing its financial system on Friday, after the PBOC removed the cap on deposit rates (and cut interest rates for the sixth time since last November).

Lets consider for a moment these clueless careerist IMF bureaucrats are out of touch with the real world and have the worst timing possible.

Finally, the beginning of the end!

The International Monetary Fund is expected to grant China's yuan reserve currency status at an executive board meeting today, in a decision that will elevate the renminbi and China's influence in the global economy. The group's benchmark currency basket, also known as special drawing rights, so far only contains the dollar, euro, pound and yen. While the decision is likely to be announced later today, the yuan will not officially become a reserve currency until September 2016.

What do you think this means for the PP assets?