US dollar gets another paper cut
Oct 09, 2015
There is an old saying about killing someone with a thousand paper cuts. This has been the Chinese strategy against the US dollar, especially since 2010 when the US congress refused to sign off the on IMF reform package.
The latest “cut” is the establishment of China’s alternative to the SWIFT system by which money is wired around the world through the Federal Reserve Bank. It is called the Crossborder Interbank Payment System (CIPS).
THE Industrial and Commercial Bank of China (ICBC) Singapore has cleared a yuan transaction on Thursday under China's long-anticipated international payment system.
ICBC Singapore said that it successfully cleared 35 million yuan (S$7.8 million) on the Crossborder Interbank Payment System (CIPS), China's international payment system which went live on Thursday.
It was for a trade settlement payment from Singapore's Raffemet Pte Ltd to Baosteel Resources in Shanghai, China and the transaction marks the first in Asia to be cleared through the newly launched CIPS, the bank said.
Any time payments are made outside of the SWIFT system, the Fed is unable to collect its world tax on international trade.
By using the SWIFT system to impose sanctions on other countries that the US does not like, the US government has ensured that an alternative system would be established. However, it could only be done by a country strong enough to stand up to the US government. That country is China, the main creditor of the US treasury.