8 Minute Read

Forex Trading: Dedollarization

February 26, 2015

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The death of the USD as reserve status of the world and #1 currency will not be as dramatic  as William Wallace in Braveheart…

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or Quint’s from Jaws…

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not even Kurtz from Apocalypse Now…

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and absolutely not even Bambi’s mother (definitely not as sad)…

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Not at all. Those were dramatic, immediate, shocking, and in the case of William Wallace and Bambi, tear-jerkingly sad. The death of the USD will be like thousands of paper cuts bleeding to death over decades. Off the top of my head, I cannot even think of a movie reference that would be equivalent (although I am sure I could find a great western where one of the cowboys gets gut-shot by John Wayne).

The reason I bring this up is simple: for the last two years, I have been on a mission to make sure people understand that the dollar is losing its place as the worlds leading reserve currency. Here’s a brief timeline:

1999: China and Russia decide to move away from the Petrodollar.

2009: China decides to start settling trade in RMB.  Prior to this ZERO percent of Chinese trade was settled in RMB.

2009: China establishes the dim sum bond market.

2009: IMF chief discusses the SDR conversion to a currency of trade.

2011: China makes international trade agreements called direct swap agreements with Brazil, India, Russia, South Africa, Japan, and Australia to use non-USD transactions in international trade.

2012: China ends all Petrodollar usage.

2013: BRICS announce the creation of the NDB or New Development Bank to compete against the World Bank which was a creation of the Bretton Woods Act of 1944.

2013: The IMF and the United Nations call for a new global currency, joining the chorus of the BRICS and the Eurozone.

2013: China makes direct swap agreements with the European Union and the United Kingdom.

2014: China makes direct swap agreements with Switzerland and Canada.

2015: 30% of all Chinese trade will be settled in RMB.  This was zero in 2009.

2015: 2% reserve status.  This was zero in 2009.

2015: The RMB is the 5th largest currency in the world and 2nd most used next to the USD.

2015: Russia officially funds the BRICS NDB, set to start funding international transactions for the BRICS later in 2015

It didn’t happen overnight, but as you can see, China has made tremendous inroads to becoming a currency to take seriously in a fairly short time as the historical change in the reserve status continues.

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