Wednesday, November 24, 2010

Russia And China Quit The Dollar

http://www.chinadaily.com.cn/china/images/attachement/jpg/site1/20101124/0023ae73cfef0e569b3f59.jpg

The Russians and Chinese have agreed to stop pegging their bi-lateral trade in dollars and use their own currencies.

The yuan has now started trading against the Russian ruble in the Chinese interbank market, while the renminbi will soon be allowed to trade against the ruble in Russia, according to a statement made by Vladimir Putin after a meeting with Chinese Premier Wen Jiabao.

This is arrangement between China, the world's chief manufacturing economy and Russia, whose economy is based on selling natural resources (particularly energy) has some interesting implications.

In spite of all the commotion in the West and the handshakes and expressions of good will between Russia and China, there's actually only a few points of common ground here.

Russia, with a declining population and a state controlled economy cannot provide the two things China really needs, an alternative market to America for its cheaply produced consumer goods and investment of its capital. On the other hand, China is unlikely to want to pay the prices Russia is demanding for its fossil fuel energy.And unlike the EU, they are not locked in to dealing with the Russians because of issues of pipeline control.

Things Russia has to offer that China definitely wants include military and nuclear technology, and in fact the Russians have already made a deal with the Chinese to build two nuclear reactors for China's Tianwan nuclear power plant. But given the centuries-old antagonism between the two countries and their long border,it remains to be seen what the Russians are actually willing to supply to China.

The chief impact, of course, is psychological. Countries that delineate their commodities trade in dollars, like the members of OPEC have in effect been importing US inflation into their own economies for years. Two major economic powers abandoning the dollar for their bi-lateral trade could give other countries similar ideas..especially oil and gas producers.

Meanwhile, the US continues to deliberately let our own vast gas, oil and coal resources go unused and fallow instead of using them to achieve energy independence and create wealth and prosperity.

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4 comments:

louielouie said...

i don't know if i entirely agree with the statement in the last paragraph.
china has been buying up shares of numerous companies that hold rights to mineral deposits in the US. these will be shipped to china for consumption there.
we couldn't find energy independence if we used both hands.
this is just one example

Freedom Fighter said...

Hi Louie,
The vast majority of US energy resources aren't for sale or development to anyone, because of various 'environmental' regs pushed by the Dems.

Coal isn't being mined,oil isn't being drilled, natural gas isn't being pumped.

BION, even with all the restrictions, the US is one of the top five energy exporters in the world.

The reason we haven't achieved energy independence lies elsewhere.

First, there's what I like to refer to as the Arab Oil Producers Government Pension Augmentation Plan, where Presidential libraries, honorariums, consulting fees,retainers, investments in certain financial instruments and foundations get paid out to retiring politicians and government by certain cash flush oil producing nations.

Ask the Clintons,the Bushes, SecDef Gates and a whole bunch of others how that works. Heck, the Sultan of Dubai indirectly paid for Hillary's campaign via Mr. Bill. Illegal as hell, but it happened.

Another part of the puzzle lies in the fact that government in general loves the status quo, because higher gas prices mean higher tax revenues. In my native state that means the county, the state and the feds garner about eighty cents plus per gallon in taxes - the higher the price, the more they make.

However, if I'm right,the time is not far off when the American people are going to demand an end to this garbage..because the associated costs of defending our gas station attendants is too high. And with, say, a President Palin they just might get it.

Regards,
Rob

The Pagan Temple said...

Meanwhile, the US continues to deliberately let our own vast gas, oil and coal resources go unused and fallow instead of using them to achieve energy independence and create wealth and prosperity.

That aggravates me as well, but there's an upside. Those presently untapped reserves will be around a lot longer.

government in general loves the status quo, because higher gas prices mean higher tax revenues.

That's a good point, and there's also the point that higher gas prices mean higher oil company profits, ergo more incentive to purchase oil company stock. Add to this the obvious fact that less production equals less capitol expenditure to begin with and this results in even greater profit margins on that oil that is produced and sold at higher prices due to supply and demand.

B.Poster said...

This certainly is something that should be monitored closely. RIGHT NOW Russia and China are the two most powerful nations on earth. How they act and what they do will likely have a major impact on us.

I agree with you on your last sentence. By developing more of our own oil and gas reserves, using coal to oil technologies, and building more refineries would give us greater utility for our national secuirty interests than any thing we are currently doing. In addition, such a policy would have the added benefit of creating large numbers of high paying jobs and they would probably be union jobs on top of that!!

Also, I agree that the cost of defending our "gas station attendents" is to high. Not only this but it is undermining our national security. There is a VERY DANGEROUS situation developing to the south of our border, right on our border. The drug war in Mexico is beginning to spill over into America. Miltiary intervention in Mexico may soon be necessary to defend our country. Unfortunately the nrvrddsty forces and the necessary equipment is not available right now. They to busy defeding our gas station attendents and they are being worn down to the breaking point while doing it!! As such, basic national defense is problematic at this point.

Finally, the reasons why we haven't developed energy independence are very well summarize in your previous reply. I think the primary problem is enviro whackos. In any event development of our own oil and gas reserves and securing our borders should be our top priorities right now. Who ever the Republican nominee is for President these should be the centerpieces of his or her capaign. We are going to:
1.) Secure our borders and 2.)develop ALL of our oil and gas reserves, utilize oil to coal technologies, and build more refineries. Its debateable which one should come first. Both of these will help our economy tremendously. All of those who aren't here legally are using up social services creating a tremendous strain on our economy.