China has entered into a swap agreement with the European Central Bank. This agreement is described by market observers as “huge” or “humongous”. It is the largest currency swap agreement ever done by China and will allow the European Union and China to reduce the amount of dollars required for bilateral trade. Eric Brooks, research director at Forex.com, told CNN that “it’s a way of promoting European and Chinese trade, but not doing it with the US dollar. It’s a bit like cutting out the middleman, all of a sudden there’s potentially no US dollar risk.” The deal between the ECB and People’s Bank of China established a swap facility that could total as much as 350 billion yuan and €45 billion.
The Chinese state news agency Xinhua published a scathing editorial dedicated to the US fiscal problems and debt ceiling crisis in which it laid out the roadmap for a “de-Americanized” world. This editorial is widely seen as an ultimatum. China demands a new global monetary system in which the dollar won’t be the base currency. Beijing also demands a greater role for the BRICS countries in the decision making processes in the International Monetary Fund and the World Bank. After a temporary solution for the US debt ceiling crisis was found, Xinhua published a second editorial lambasting Washington for its inability to resolve its financial issues in a decisive manner:
“Politicians in Washington have done nothing substantial but postpone once again the final bankruptcy of global confidence in the US financial system… prolonging the fuse of the US debt bomb one inch longer”.
It is safe to assume that we’re witnessing a slow collapse of the dollar-based global monetary system. When China, Russia, the EU and the UK are actively working to bypass the dollar for trade and investment, it is only a matter of time until the current system collapses on itself. A new debt ceiling confrontation in Congress is scheduled for early spring 2014 and is likely to accelerate the collapse.
Article Source: http://voiceofrussia.com/2013_10_21/China-makes-a-move-against-the-US-dollar-9551/