Japan and China Ditch the Dollar for Bilateral Trade

While American hawks will have been unsurprised that long-time antagonists Russia and China have ditched the dollar for bilateral trade, this year’s post-Christmas bombshell will shock many who believe that America’s ongoing reign as petrodollar superpower is assured.

From Bloomberg:

Japan and China will promote direct trading of the yen and yuan without using dollars and will encourage the development of a market for companies involved in the exchanges, the Japanese government said.

Japan will also apply to buy Chinese bonds next year, allowing the investment of renminbi that leaves China during the transactions, the Japanese government said in a statement after a meeting between Prime Minister Yoshihiko Noda and Chinese Premier Wen Jiabao in Beijing yesterday. Encouraging direct yen- yuan settlement should reduce currency risks and trading costs, the Japanese and Chinese governments said.

This is a Japan that remains under the yoke of American imperial occupation. That simple logistical fact means that this cannot have been an easy decision.

Of course — having run the gauntlet of twenty years of Keynesian (or, more accurately, Bernankean) failure — it is probable that Japan is growing sick of Anglo-American demand-side economics. Having unsuccessfully taken Bernanke’s Rooseveltian Resolve treatment for so long — and now watching America doing the exact same thing to herself — the temptation of closer relations with young, vigorous China will be strong for the Japanese.

And so China moves one step closer to her monetary endgame — dethroning the debased petrodollar as the global reserve currency, and replacing it with the yuan.

What will America — grossly indebted to her enemies, dependent on foreign oil and goods, and bogged down in her role as world policeman — do about it?

The Sun sets over the Petrodollar Empire

22 thoughts on “Japan and China Ditch the Dollar for Bilateral Trade

  1. I was surprised that Japan ditched the dollar – Japanese Prime Ministers were constantly referred to as “America’s puppies.” Anyways, merry crisis and a happy new fear……

    • For me it’s the biggest shock of the year: maybe not as big in immediate impact as Fukushima, or Libya, or Egypt, but big in terms of surprise, and ultimately huge in its economic implications. Japan is — for better or worse — an American imperial fiefdom.

      And Merry Christmas and a Happy New Year to you and everyone reading.

  2. I’ve gone back to read some of yours on ‘What is Money’ from earlier this year. I think we see some things in a similar way. If the petrodollar falls and the dollar weakens and, in particular, if any gold-backed currency rises in its place, the American economy will reduce its Chinese imports, begin re-establishing domestic manufacturing, reduce its role as world policeman, and increase domestic energy production (natural gas) and usage.Political realignment will occur since a new approach to running our fiscal affairs will be required. I think Huntsman and Paul are the only two active candidates who see these events coming, but it looks as though Romney will be the establishment choice to run against Obama. These earlier mentioned world events will overtake the election issues which are mostly domestic and set a new agenda for the coming years.

  3. This is the moment of USA collapse. Ukraine is allowing the issuance of Gold currency (converting Hr to Au Coins), and now this. I think Ukraine is a test bed for Russia and China. It is still in direct contact with the Kremlin.

    I watched CCTV this morning, and noted the informative information from Satellite launches, military games, the Chinese-Japanese currency agreement, North Korea.

    Then I watched the local news. House fire, retail shopping crowds, sport.

    And they say the Communists keep the people in the dark!

    Buy land people. And run sheep. The export income will keep you ahead of the pack, before your government bans exports to “Unfriendly evil axis nations”.

    I don’t know about your respective nations, but my local abattoir can’t get enough sheep. $125 AUD for 6 month lamb!

  4. Correction of post. This is the moment of the USA dollar collapse. The USA has enough “Trinkets” to go without imports for a long time. It will open its borders to high net wealth immigration and this will prop up its economy.

  5. So US global power is eroding, the country is no longer in a position to keep its aims it formulated some 70 years ago. I think Japan did what it did not with any hostile motives or intentions toward the US but to protect its own interest and companies.
    Well this is the run of events, empires come and go, nothing lasts forever.


    “Plans were developed to control what was called a Grand Area, a region encompassing the Western Hemisphere, the Far East, the former British empire – including the crucial Middle East oil reserves – and as much of Eurasia as possible, or at the very least its core industrial regions in Western Europe and the southern European states. The latter were regarded as essential for ensuring control of Middle East energy resources. Within these expansive domains, the US was to maintain “unquestioned power” with “military and economic supremacy,” while ensuring the “limitation of any exercise of sovereignty” by states that might interfere with its global designs. ”


    • Chomsky nails it:

      The costs of the Bush-Obama wars in Iraq and Afghanistan are now estimated to run as high as US$4.4 trillion – a major victory for Osama bin Laden, whose announced goal was to bankrupt America by drawing it into a trap. The 2011 military budget – almost matching that of the rest of the world combined – is higher in real terms than at any time since World War II and is slated to go even higher.

  6. Not too fast America still controls most of the ME oil producing countries, and will continue to do so for the foreseeable future, including Iraq, Libya, Saudi and they are not going to let others just take control. It will not happen, who knows maybe the Anglo oligarchs are suicidal.

    • They are certainly adopting suicidal policies. What good is air superiority over the middle east when Iran controls the Strait of Hormuz, and Egypt the Suez Canal? Certainly America is still the greatest power in the region. But they are also the most fragile.

      • The USA certainly appears to be skating on thin ice…or whatever metaphor you like. I always enjoyed hearing the Chinese Communists, back in the 60’s when I was a shortwave radio listening kid, on a very faraway sounding Radio Peking, calling the U.S. a “paper tiger.”

        But things have looked so fragile and unsustainable for so long, yet just keep on going, that I sometimes wonder if they won’t somehow manage to keep the ship afloat forever. Ten or twelve years ago I never would have thought the US could maintain the position it has for this long, exchanging dollars for oil and all the other things it needs or wants. Yet it has, seemingly. I suppose it will just go on until it doesn’t, and that whatever happens could happen with great suddenness, and from a direction few of us expect.

        • Well in the 60s America was a creditor to the world. It was the greatest manufacturer and innovator on Earth. Now it is debtor to the world, reality TV capital of the world, and addicted to foreign goods as well as oil.

          Khrushchev noted America was a “paper tiger with nuclear teeth”. I think that’s why America has survived so long on exhaust fumes. But nuclear-armed superpowers have crumbled before…

  7. Pingback: Time to Attack Iran? « azizonomics

  8. Pingback: The Edge of Bankruptcy « azizonomics

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s