Australia and China announce direct currency ties
Apr 06, 2013
The "world currency" is fast becoming only a regional currency. The dollar has been used since 1944 to make payments between countries in world trade, and with each transaction, the Fed gets a percentage. Essentially, this is a world tax on trade, and it costs businesses a lot of money. But in more recent years, China has been setting up its own competing system, whereby they can trade directly with other countries without going through the Fed. In other words, they bypass the dollar.
The latest country to announce direct currency exchanges with China is Australia. The announcement came on Friday, April 5.
(Reuters) - China and Australia will launch direct trading between the two currencies in Shanghai and Sydney within weeks to lower trade transaction costs, a foreign bank source with direct knowledge of the matter told Reuters on Wednesday.
The new currency deal will eliminate the spread between U.S. dollars and Australian dollars from the cost of converting between the yuan and the Aussie dollar.
Direct trading will begin soon after the announcements and no later than the first half of this year, the foreign bank source said.
"Considering heavy flows of mining transactions between China and Australia, the launch of direct Australian dollar-yuan trading will be significant move to reduct costs of both sides of mining trade...."
"For China alone, it will also be a major step towards regionalising and eventually internationalising the yuan by making the yuan direct tradable with major global currencies," the banking source said.
Each time a country reduces its dependency on the dollar in international trade, demand for the US dollar drops accordingly. This tends to weaken the dollar's value. China is moving toward the place where its yuan will replace the dollar as the world currency.
In terms of banking wars and currency wars, each time another country announces a currency exchange with China, it means that China has taken more territory on the battlefield. This kind of agreement is the financial equivalent to an army taking another hill on the battlefield. Babylon is losing territory little by little. Those who understand how this works will be able to take steps to profit by it. Those who decide to stick with the dollar will eventually man the life boats or go down with the ship.