China and Russia do Bilateral Deals for Oil and trade; US tries to acquire wealth through debt

Bloomberg has reported another nail in the coffin of the US Dollar. No, it wasn't a single report that said that, but if you read between the lines on two separate reports you can see it. Read here:

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aEl6C1pBm8VQ

By Bloomberg News

June 30 (Bloomberg) -- Russian companies may invest in oil exploration and natural gas distribution in China after the two nations signed an agreement to expand trade, the Chinese government said.

Russian companies may participate in the construction of underground natural gas storage tanks in China, the National Development and Reform Commission said on its Web site today, citing a Sino-Russian cooperation plan approved on June 17. Chinese companies are encouraged to develop oil and gas fields and build gas liquefaction plants in Russia, the commission said.

China and Russia signed an agreement worth $3 billion to cooperate in trade and investment in areas including light industries, high technology and energy, the Ministry of Commerce said on June 17. Oil exports from Russia to China over the next 20 years will surpass $100 billion, Russia’s Prime Minister Igor Sechin said then.

The two nations may set up a joint venture in China to manufacture equipment for nuclear power plants, the government said today.

-- Wang Ying. Editors: Ang Bee Lin, Clyde Russell.

To contact Bloomberg News staff on this story: Ying Wang in Beijing at +86-10-6649-7562 or ywang30@bloomberg.net

And here:

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aG7dxkAkzrAk

June 30 (Bloomberg) -- China may soon allow companies in its southern provinces of Yunnan and Guangxi to use yuan to settle cross-border trade with Southeast Asia to reduce foreign- exchange risks, a government official said.

China, the world’s third-biggest economy, is seeking to make it easier for companies to do business in yuan and to expand trade with so-called Golden Triangle nations after the global recession choked sales to the U.S. and Europe. Chinese officials, including President Hu Jintao, have called for reducing its dependence on the dollar and the creation of a new global reserve currency.

The People’s Bank of China has agreed to provide 650 billion yuan ($95 billion) to Argentina, Belarus, Hong Kong, Indonesia, Malaysia and South Korea through so-called currency- swaps. Yesterday, the central bank signed an agreement with Hong Kong to allow the settlement of cross-border trade in yuan.

Trade in Yuan

Malaysia, Indonesia, Brazil and Russia have all indicated interest in settling transactions in the currency. PT Perusahaan Listrik Negara, Indonesia’s state utility, may negotiate to pay its Chinese suppliers and contractors in yuan to cut foreign- exchange costs, Finance Minister Sri Mulyani Indrawati said on April 24.

“As China’s role in the global economy becomes more significant, it’s natural that more countries will want to trade in the Chinese currency and to hold it in their reserves,” said Pan Hejun, Vice Mayor of Nanning.

Why is this happening? Here you have China moving away from the dollar and ASEAN nations following suit and you have China and Russia inking deals for energy interdependence. Think those contracts will be settled in dollars? I didn't think so.

So what does this mean for the US dollar. As deals like this become more commonplace, the US dollar will be less and less relevant. The world sees our unsustainable spending and knows that it can't continue. Either we will have to monetize that debt (my vote) or we will have to cut the spending (not likely).

Even though other countries do the same thing (or at least try) the US has been allowed to get away with it for 40 years because of our economic, militaristic, and cultural dominance. Those days are ending.

Welcome to a world with a reserve currency no longer dominated by US dollars.