Beginning of the End of U.S. Dollar Hegemony

You'd get a better reception for this headline here.

FYI these countries have needed to do this for a LONG time, and the Putin shots at America are nothing new. By the way, you do know this fund is denominated is US dollars, right?

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By the way, you do know this fund is denominated is US dollars, right?

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So what?

The recent Russo-Sino gas deal wasn't in U.S. dollars and the Chinese, Russians and Indians are buying as much gold as they can get their hands on. Speaking of precious metals tell me how the repatriation of the German's bullion from the Federal Reserve Bank back to Deutsche Bundesbank is going.

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The recent Russo-Sino gas deal wasn't in U.S. dollars and the Chinese, Russians and Indians are buying as much gold as they can get their hands on.

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My response as well.. so what?

US dollars are still far and away the primary currency used for trade and financial transactions (euro/yuan not anywhere remotely close). The dollar has been the most stable in its history following the crisis, even China has been increasing their buying of longer dated US notes and bonds because even they admit "there isn't a market deeper and more liquid in the world". The dollar doomers really need to do their homework before they declare an imminent end to the dollar's reserve currency status.

I bet you think the dollar has weakened since the beginning of QE, huh?

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Speaking of precious metals tell me how the repatriation of the German's bullion from the Federal Reserve Bank back to Deutsche Bundesbank is going.

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Same as it was before the made they original annoucement and exactly like it was after the decided to nix the transfer... irrelevant. Completly and utterly irrelevant to the global financial system.

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BennyAndTheInkJets

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I'll tell you what. As I write the price of gold is $1313.80. Since you have so much faith in the U.S. dollar I will pay you exactly that - $1313.80 - for every ounce of pure gold that you can deliver.

Would you like some of that action? Put up or shut up.

ETA: The same offer applies for pure silver at $21.02 per ounce.

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I'll tell you what. As I write the price of gold is $1313.80. Since you have so much faith in the U.S. dollar I will pay you exactly that - $1313.80 - for every ounce of pure gold that you can deliver. Would you like some of that action? Put up or shut up. ETA: The same offer applies for pure silver at $21.02 per ounce.

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Come back with that offer when gold hits 1500 and silver hits 35. It'll give the majority a chance to recoup.

I agree metals are not a bad play right now.

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s the Bank of China still holding a ton of dollars?

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There are two parts to Chinese dollar holdings.

China is very secretive regarding the composition of its FX reserves, which hit a record $3.99T (which goes to the weakening renminbi) at the end of the 2nd quarter. Back of the napkin has this as give or take ~60% USD, so we'll just say $2.4T. The other part is their Treasury holdings that you could technically consider to be dollars since they have to buy and are denominated in dollars, that are at $1.27T.

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Do they have any known plans to start selling them off, if they haven't already

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Well they had been in the 2000's for sheer diversification purposes, which makes absolute sense and they should have. Hell I'm pretty sure the Fed was advising them to do this at some point . The problem is they used the euro as a diversifier and then were got hit with the euro crisis. They can't use the ruble that much because for all the political chest beating, Russia is still not developed in the sense of market breadth and volatility (ask LSURussian about the late 90's default). So they've actually been forced recently to go back into Treasuries and dollars because of how stable and liquid the US is. Don't pay attention to the political announcements and speeches at the IMF, follow the money and you will see exactly how countries really feel about the US. China needs the US 100x more than the US needs China right now, we are their anchor of financial stability. The couldn't control their currency how they do now if not for Treasuries and dollars. That will change with time, as does everything, but it won't be to extent or haste that dollar doomers will tell you.

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Beginning of the End of U.S. Dollar Hegemony
BRICS flip us the bird.

LINK

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I'll be laughing my a** off at the BRICS when the USD goes from the current 80 to around 130 to 150 in the next 5 to 8 years. Russia will come apart at the seems with a strong USD and ~$60/bbl crude oil.

All of the dollar doomsayers are going to feel the pain betting against the dollar IMO.

Anyone know where the USD index was at at the start of QE? About 78. After 6 years of QE it is at roughly 80, in other words the USD has been stable while the Fed has put trillions of dollars into circulation. I don't see a dollar crash (though a move to 74 to 76 wouldn't shock me) while the US is in the middle of ending QE.

My Dad taught me a valuable lesson. Never bet against the currency that strippers put in their panties.

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On the other hand, the amount of dollars that could potentially enter circulation (and that are out of direct control of the Fed) does somewhat concern me. Aside from Chinese holdings, financial institutions in the US are holding more dollars in reserve than probably ever (I would say it's definitely true in nominal terms, probably true in real terms).

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That's the funny thing, when the primary dealers signed up to access the Fed's window in '08 they also signed up to comply with the increased regulation that comes with such an option. I've talked about it alot, Dodd-Frank and BASEL III have increasingly made dealers no longer dealers, just brokers. There are very few market makers out there anymore since these institutions can't take risk. They used to be able to buy a position from a seller, put a positive carry hedging position on the opposite end of this trade and then hold this till another counterparty wanted to buy. No longer the case, they immediately look to unload most risk because of risk capital requirements. This is not the case for Treasuries as they have very low risk capital requirements.

The other side of this is when the Chinese sell Treasuries or unwind FX reserves, they'll either sell to large asset managers or these same banks. So the end result is that you have a situation where even though the Fed can't just directly reverse-repo out reserves or raise reserve requirements to restrict money in the system, they still have a lot of regulatory oversight over these institutions in addition to having even more control over short-term rates with the new reverse repo facility (I think my thread is on the second page here). Hence I don't have a lot of concerns on the potential for a flooding of the system with dollars, in addition to that fact that even though Chinese dollar reserves are very subtantial, they're still only ~20% of M2.

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I say this because a few years ago, the monetary base actually started to exceed M1, which had never happened before.

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As you probably know that's just due to excess reserve build-up, which gets included in the monetary base but not M1 since its still not techinically "in-the-system". The Fed still has direct control over these reserves through a couple different methods.

If you are doing a thread on this, the super nutcase goldbugs have to get their due.
U.S. Dollar - Ring-Fenced and Checkmate.
More recent Jim Willie "bombshell."
Jim Sinclair - Putin Has Nuclear Economic Bomb.
Russia's Petro-Ruble Challenges U.S. Dollar Hegemony.