The headline should read -- The Dollar Fairytale is Dying: Trade Dollar Gets Dumped by UAE -- Rise in Oil Prices Now a Certainty. Well, more sad news for the US Dollar from both the Reuters ME desk and from the Financial Times. So it would appear that the US Dollar has few, if any, world trade allies left. For at least four years now, China has been pushing and successfully achieving a multitude of currency swap deals with smaller nations like Brazil, Malaysia Thailand and Belaruss but, more recently, I have also reported that China has made major currency swap deals with all ten of the ASEAN nations and, even more recent, China and India have arranged massive direct currency swaps -- worth billions -- with Japan. With such major country's now involved in the slow and sure de-emphasis and death of the trade dollar upon the world stage, is there anyone out there still stupid enough to not doubt the dollar's invinciblity now?
I have also been trawling the opinions of the likes Krugman, Brad De Long and other die-hard New Keynesians and their economic views have not changed much -- save the megabanks with QE and preserve the corrupt financial status quo in order to save the US economy!! I tend to favour the thoughts of Bill Black, Michael Hudson and other Minskiites in their own unothodox approach to a final resolution to this recession/de-leveraging problem. Professor Steve Keen, another Minsky-led no-bones economist, has much to say about a fitting and proper resolution here in a HardTalk interview with the BBC. And he doesn't mess around wasting any time or money propping up the elite financial status quo:
BEIJING Jan 17 (Reuters) - China and the United Arab Emirates on Tuesday signed a currency swap agreement worth 35 billion yuan ($5.54 billion), the People's Bank of China said, adding that the deal was effective for three years and would boost two-way trade and investment.
The agreement signed in Dubai was announced while Chinese Premier Wen Jiabao tours the Middle East, including the Emirates, and is the latest in a string of arrangements to facilitate greater use of China's yuan in international trade.
The PBOC announced the deal on its website (pbc.gov.cn) and said it was worth 20 billion dirhams, the UAE's currency.
In the first 11 months of 2011, trade between China and the UAE grew to $32.0 billion in value, a rise of 38.2 percent on the same period in 2010, according to Chinese customs data. Chinese exports to the UAE, worth $24.3 billion, dominated that trade.
The UAE is a relatively modest exporter of crude to China. In the first 11 months of 2011, it shipped 6.4 million tonnes of crude to China, a rise of 26 percent on the same period in 2010.
China has signed a series of currency swap agreements in recent years with key trading partners in a bid to boost the use of the yuan for the direct settlement of international trade. Other countries that have signed such deals recently include Thailand and South Korea.
Beijing's long-term ambition is to unseat the dollar as the dominant unit of international settlement for cross-border trade in goods and services, especially now that China is the world's single largest exporting nation and the second largest importer.
Internationalising the use of the yuan in trade would also strengthen the case for the Chinese currency to be included in the basket of key settlement currencies that the International Monetary Fund uses in its Special Drawing Right unit of account.
Besides the currency swaps, central banks from Japan to Nigeria have either discussed or agreed with China to hold yuan assets as part of their official foreign exchange reserves.