The Decline Of Dollar Hegemony

While the GOS is going into spasms of ecstasy today over Michael Cohen's revelation, the big news of the day came from Germany.

The US monopoly over the global payments infrastructure has been challenged by Germany's foreign minister, Heiko Maas, who has suggested that the European Union should set up its own payment system that would give Brussels independence from Washington.

Maas wrote in the German daily Handelsblatt on Tuesday that the EU should "strengthen European autonomy by creating payment channels that are independent of the United States — a European Monetary Fund and an independent SWIFT system."

Swift is a global payment management system based in Belgium that allows financial institutions to send and receive information about transactions. Swift claims political neutrality, but it has reportedly bowed to US influence in the past, blocking transactions to Cuba and Iran.

What Germany is talking about is something that Russia has already created and is rolling out.
Germany will not be using Russia's SWIFT system, it only works for Russia's domestic market and some non-Western markets, but it is proof that it can be done.

The other thing that Maas mentioned was a European Monetary Fund, an alternative to the IMF. Once again, the BRICS nations already created that three years ago.

A new bank dedicated to the emerging BRICS countries opened for business in China's commercial hub of Shanghai on Tuesday, the official Xinhua news agency reported.

The so-called emerging BRICS countries are made up of Brazil, Russia, India, China and South Africa, and their "New Development Bank" has been seen as a challenge to the Washington-based International Monetary Fund and World Bank.

If Germany decides to leave the dollar hegemony system, the rest of Europe will follow, taking with it the world's largest market.
Trump is directly forcing Germany to make this choice, a choice that they would probably prefer not to make.

Trump has caused virtually all of Asia to break away from dollar hegemony, and now Europe is looking to do the same.
China has also rolled out the petroyuan this year.
Without both Asia and Europe, dollar hegemony will be history. That means our massive trade and budget deficits, not to mention our military empire, will be unsustainable.

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Raggedy Ann's picture

Where are the exit doors? Diablo

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"The “jumpers” reminded us that one day we will all face only one choice and that is how we will die, not how we will live." Chris Hedges on 9/11

JekyllnHyde's picture

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A riddle wrapped in a mystery inside an enigma

@JekyllnHyde There go all the social programs, education aid, SS, medicare....

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@Snode

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I've seen lots of changes. What doesn't change is people. Same old hairless apes.

EdMass's picture

@JekyllnHyde

Not Uncle Sam, us!

“Give me your tired dollars, your poor investments, your huddled savings yearning to breathe free, the wretched refuse of no longer useful cash on your teeming shores -- you foreign scum, Send these, the homeless dollars, tempest-tossed to me, I lift my lamp beside the golden door!

Wire transfers, cashiers checks and of course cash, gladly accepted”

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Prof: Nancy! I’m going to Greece!
Nancy: And swim the English Channel?
Prof: No. No. To ancient Greece where burning Sapho stood beside the wine dark sea. Wa de do da! Nancy, I’ve invented a time machine!

Firesign Theater

Stop the War!

Pluto's Republic's picture

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____________________

The political system is what it is because the People are who they are. — Plato
dervish's picture

Will the MSM be ramping up reports that Germany is a rogue nation now, and that regime change is necessary?

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"Obama promised transparency, but Assange is the one who brought it."

snoopydawg's picture

@dervish

this is the new go to accusation for when countries start getting too big for their britches and telling DC to go f*ck themselves.

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Which AIPAC/MIC/pharma/bank bought politician are you going to vote for? Don’t be surprised when nothing changes.

CB's picture

UnionPay is now the world's largest bankcard issuer. It's growth has been phenomenal in Central Asia, Africa and the ME. One of its interesting features in several countries is to pay workers (Uzbekistan has issued 20 million bankcards - 90% of which are wage cards). They are also in the process of incorporating block-chain technology and full financial services

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@CB are also used here to pay workers.

Not a good thing.

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I've seen lots of changes. What doesn't change is people. Same old hairless apes.

ggersh's picture

In god we trust is all they got, cause in reality
the dollar makes for good toilet paper.

Been following Jesse for years, one smart guy.

https://jessescrossroadscafe.blogspot.com/

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I never knew that the term "Never Again" only pertained to
those born Jewish

"Antisemite used to be someone who didn't like Jews
now it's someone who Jews don't like"

Heard from Margaret Kimberley

Cassiodorus's picture

I rather suspect that dollar-denominated assets will retain their value anyway. Nobody really wants there to be a dollar panic, which would ruin the whole of the global economy. The point appears to be that Europe and Asia do not want to lose further value on all the effort they've put into covering their dollar-denominated assets. At some later point, then, when collapse seems imminent, they will probably threaten a dollar panic.

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"The war on Gaza, backed by the West, is a demonstration that the West is willing to cross all lines. That it will discard any nuance of humanity. That it is willing to commit genocide" -- Moon of Alabama

@Cassiodorus say that it is the End of Civilization. Like Obama claimed that letting the six biggest banks fail would destroy the entire banking system instead of just destroying the financial elite. So the homeowners were sacrificed on the altar of Jamie Dimon's bonus.

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I've seen lots of changes. What doesn't change is people. Same old hairless apes.

Pluto's Republic's picture

...with their their newly minted Cross-border Interbank Payment System or CIPS. It can ramp up for any nations that would like to trade outside the dollar and SWIFT by using the Yuan as their reserve currency. Trades with the US would still require dollars, but hegemony would have no reason to reach into the Eastern hemisphere.

The passage below is excerpted from Foreign Policy magazine. It's study how the US will be dealing with the New-new world order. I marvel that the authors seem to have no idea what they sound like. They've been wallowing in their self-important bubble for waaay too long.

Too Big to Sanction

The RMB has already begun making its mark outside of China. It is becoming a currency of choice for several industries, including the Australian mining and Russian oil sectors: In 2015, the Russian gas giant Gazprom, under U.S. and EU sanctions for Moscow’s support of pro-Russian separatists in Ukraine, began shipping oil to China via RMB transactions — coinciding with a larger shift by Moscow to move away from the dollar and the Western financial system. And Australian mining companies have found that handling transactions in RMB with their Chinese counterparts gives them a competitive advantage over their global rivals.

US: The Horror

Prior to the Iran nuclear deal, the EU restricted Iranian financial institutions’ use of SWIFT, greatly limiting their access to much of the world’s financial networks. CIPS, created by China in 2015, serves as a SWIFT alternative that processes global RMB transactions. Just several dozen financial institutions currently use CIPS — mostly in China — but CIPS could become the payments system of choice for human rights violators, nations with sanctioned companies, and Western-designated terrorist organizations.

Beligerent US Response

If Beijing resists dialogue, the West should use international forums like the U.N. Security Council, the G-20, and the World Economic Forum to tie China to the very entities using the RMB for money laundering, terrorist financing, or other violations of international law. A “state sponsor of terrorism” or “blood money” tag is not in China’s best interest.A “state sponsor of terrorism” or “blood money” tag is not in China’s best interest. If there’s a unified effort, China-led systems like CIPS could lose credibility before they even have a chance to get off the ground. Still, achieving this coordination in the short term is unlikely. Meanwhile, the RMB will continue to grow more and more popular.

Capitulation and Colonial Bluster

The overall weakening of U.S. financial sanctions is inevitable. The United States needs to prepare for a world in which the threat of Western financial sanctions begins to ring hollow. As a first step, the United States should utilize the annual bilateral Strategic and Economic Dialogue’s economic track as an opportunity to raise concerns with China about potential undermining of U.S. policy objectives on sanctions. While a common understanding on the issue is unlikely, there should at least be an agreement on regular consultations between the two countries on sanctions.

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____________________

The political system is what it is because the People are who they are. — Plato

@Pluto's Republic

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I've seen lots of changes. What doesn't change is people. Same old hairless apes.

It is time that America became self-sufficient with balanced trade and get off the track of having just welfare clients/serfs and rich money managers.

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I've seen lots of changes. What doesn't change is people. Same old hairless apes.