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CBDC Currency Reset

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By the numbers: The de-dollarization of global trade

Data suggests that US dollar reserves in central banks are dwindling, as is the influence of the US on the world economy. This presents a unique opportunity for regional currencies and alternative payment systems to enter the vacuum.

Because they do not adhere to the policies of the US and other western powers,over24 countrieshave been the target of unilateral or partial trade sanctions. These limitations, nevertheless, have turned out to be detrimental to the economies of the Group of Seven (G7) nations and have begun to impact the US dollar’s hegemony in world trade.

In its space, a“new global commercial bloc”has risen to the fore, while alternatives to the western SWIFT banking messaging system for cross-border payments have also been created.


Geopolitical analyst Andrew Korybko tellsThe Cradlethat the west’s extraordinary penalties and seizure of Russian assets abroadbroke faithin the western-centric paradigm of globalization, which had been declining for years but had nonetheless managed to maintain the world standard.

“Rising multipolar countries sped up their plans for de-dollarization and diversification away from the western-centric model of globalization in favor of a more democratic, egalitarian, and just one – centered on non-western countries in response to these economic and financial disturbances,” he adds.

Dwindling dollar reserves 

TheInternational Monetary Fund(IMF) recorded a decline in central bank holdings of US dollar reserves during the fourth quarter of 2020—which went from 71 percent to 59 percent—reflecting the US dollar’s waning influence on the world economy.

And it continues to worsen: Evidence of this can be seen in the fact that thebank’sholdingsof dollar claims have decreased from $7 trillion in 2021 to $6.4 trillion at the end of March 2022.

According to the Currency Composition of Official Foreign Exchange Reserves (COFER) report by the IMF, the percentage of US dollars in central bank reserves has decreased by 12 percent since 1999, while the percentage of other currencies, particularly the Chinese yuan, have shown an increasing trend with a 9 percent rise during this period.


The study contends that the role of the dollar is waning due to competition from other currencies held by the bankers’ banks for international transactions – including the introduction of the euro – and reveals that this will have an impact on both the currency and bond markets if dollar reserves continue to shrink.

Alternative currencies and trade routes

To boost global commerce and Indian exports, theReserve Bank of India(RBI) devised in July last year a rupee-settlement mechanism to fend off pressure on the Indian currency in the wake of Russia’s invasion of Ukraine and US-EU sanctions.

India has recently concludedagreementsfor currency exchanges of $75.4 billion with the UAE, Japan, and various South Asian nations. New Delhi has also informed South Korea and Turkey of its non-dollar-mediated exchange rates for each country’s currency. Currently, Turkey conducts business utilizing the national currencies of China (yuan) and Russia (ruble).

Iran has also proposed to theShanghai Cooperation Organization(SCO) a euro-like SCO currency for trade among the Eurasian bloc to check the weaponization of the US dollar-dominated global financial system.

Mehdi Safari, Iran’s deputy foreign minister for economic diplomacy, informed the media earlier in June last year that the SCO received the proposal nearly two months ago.


“They must use multilateral institutions like BRICS and the SCO to this aim – and related ones, such as currency pools and potentially even the establishment of a new currency whose rate is based on a basket of their currencies, to mitigate the effects of trade-related restrictions,” Korybko remarked.

The InternationalNorth-South Transport Corridor(INSTC) is being revived as a “sanctions-busting” project by Russia and Iran. The INSTC garnered renewed interest following the “sanctions from hell” imposed by the west on Moscow. Russia is now finalizing regulations that will allow Iranian ships free navigation along the Volga and Don rivers.

TheINSTCwas planned as a 7,200 km long multimodal transportation network including sea, road, and rail lines to carry freight between Russia, Central Asia, and the Caspian regions.

Ruble-Yuan Payment System

On 30 December, 2022, Russian President Vladimir Putin and his Chinese counterpart Xi Jinping held avideo conferencein which Putin reported that bilateral trade between the two countries had reached an all-time high with a 25 percent growth rate and that trade volumes were on track to reach $200 billion by next year, despite western sanctions and a hostile external environment.

Putin stated that there had been a “substantial growth in trade volumes” between January and November 2022, resulting in a 36 percent increase in trade to $6 billion. It is likely that the $200 billion bilateral trade target, if achieved by next year, will be conducted in Russian rubles and Chinese yuan, even though the details of the bilateral trade settlement were not specified in the video conferencebroadcast.


This is because Moscow and Beijing have already set up across-border interbankpayment networksimilar to SWIFT, increased their gold purchases to give their currencies more stability, and signed agreements to swap national currencies in several regional and bilateral deals.

In addition, both Russia and China appear to have anticipated a potential US seizure of their financial assets, and in 2014 they collaborated on energy-centered treaties to strengthen their strategic trade links.

In 2017, the ruble-yuan “payment against payment” system was implemented along China’s Belt and Road Initiative (BRI). In 2019, the two countriessigned an agreementto replace the dollar with national currencies in cross-border transactions and converted their $25 billion worth of trade to yuan (RMB) and rubles.

Independence from the dollar

This shift decreased their mutual reliance on the dollar, and currently, just over half ofRussia’s exportsare settled in US dollars, down from 80 percent in 2013. The bulk of trade between Russia and China is now conducted in local currencies.

Xinjiangin western China has also established itself as a key cross-border settlement center between China and Central Asia, making it a major financial hub in the region. Cumulative cross-border yuan settlement handled in Xinjiang exceeded 100 billion yuan ($14 billion) as early as 2013 and reached 260 billion yuan in 2018.


According to analyst Korybko, significant progress has been made in reducing reliance on the US dollar in international trade, but there is still much work to be done. He notes that the US is not likely to simply accept the challenges to its financial hegemony and is more likely to act to defend it.

“For this reason, it is expected that the US will try to enlist the support of key players by offering them preferential trade deals or the promise of such deals, while simultaneously stoking tensions between Russia, China, India, and Iran through information warfare and possibly threatening to tighten its secondary sanctions regime as ‘deterrence’.”

Eurasian Economic Union

Russia has been working to establishcurrency swap agreementswith a number of trading partners, comprising the five-member Eurasian Economic Union (EEU), which includes Russia, Armenia, Belarus, Kazakhstan, and Kyrgyzstan.

These agreements have enabled the Russian Federation to conductover 70 percentof its trade in rubles and other regional currencies. With a population of 183 million and a GDP over $2.2 trillion, the EEU poses a formidable challenge to western hegemony over global financial transactions.

Iran and the EEU have recentlyconcluded negotiationson the conditions of a free trade agreement covering over 7,500 categories of goods. When the next Iranian year begins on 21 March, 2023, a market with a potential size of 700 billion dollars will become available for Iranian goods and services.


BRICS is driving de-dollarization

The trend towards de-dollarization in international trade, particularly among theBRICS nations, has gained significant momentum in recent years – together they represent 41 percent of the world’s population, 24 percent of its GDP, and 16 percent of its commerce

In 2015, the BRICSNew Development Bank, recommended the use of national currencies in trade. Four years later, the bank provided 25 percent of its $15 billion in financial assistance in local currencies, and plans to increase this to 50 percent in the coming years.

This shift towards de-dollarization is an important step for emerging economies as they seek to assert their role in the global economic system and reduce their reliance on the US dollar. While the adoption of de-dollarization may present some challenges and uncertainties, it is an important step towards a more diverse a  balanced global economy.

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Swiss central bank reports massive loss

Last year’s $143 billion loss is the biggest in the regulator’s 116-year history.

The Swiss National Bank posted the biggest annual loss in its 116-year history as falling stock and fixed-income markets hit the value of its share and bond portfolio, the bank announced on Monday, citing preliminary estimations.

The SNB lost around 132 billion francs ($143 billion) in 2022, which is equal to about 18% of Switzerland’s projected gross domestic product and five times higher than its previous record loss of 23 billion francs ($25 billion) in 2015.

Almost the entire loss, 131 billion francs ($142.8 billion), was linked to collapsed foreign currency positions, having bought around $1 billion worth of stocks and bonds as part of a campaign to weaken the Swiss franc. This was partially offset by a $435.9 million increase in the value of the bank’s gold holdings.

The value of the Swiss central bank’s foreign-exchange reserves slumped about 17% last year and totaled 784 billion francs ($854.4 billion) in December down from 945 billion francs ($1 trillion) a year earlier when the SNB reported a 26 billion franc ($28.3 billion) profit.

The 2022 loss means the SNB will not distribute any profits to central and regional Swiss governments. It will be only the second time since its establishment in 1906 that it skipped its usual payout. Last year, the Swiss central bank paid out six billion francs ($6.5 billion) to the federal government and cantons, which will now be forced to review their spending plans.

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China Reveals Purchase of Over 1 Million Gold Ounces, First Addition to Reserves Since 2019

Nations around the world went on a buying spree for gold earlier this year, which analysts fear may hint at growing economic instability. The precious metal, long used as currency, is prized for its value stability amid the upheavals of capitalist boom and bust. However, it also has important industrial applications.

According to the most recent data published by China’s State Administration of Foreign Exchange, the socialist state recently made its first purchase of gold for its reserves in nearly three years.

The data, published at the start of the month, showed that China bought 1.03 million ounces of the precious metal, or the equivalent of 32 tons, worth $1.8 billion.

The buy increases China’s total gold reserves from 62.64 million ounces to 63.67 million ounces, or about $112 billion. It is the world’s sixth-largest stash of gold, after the US, Germany, Italy, France, and Russia.

The purchase came amid a flurry of buys by other countries. According to the World Gold Council, the third quarter of 2022, from July 1 to September 30, witnessed the largest-ever mass of gold purchases for such a time period at 399 tons. The high demand has driven up prices, which are currently around $1,775 an ounce.

According to reports in Chinese media, Beijing made the big buy was aimed partly at reducing the proportion of US dollar assets it holds. In the year prior to Q3 2022, China dumped $113.9 billion in US Treasury bills.

The purchase of gold is also seen as reflecting the increasing volatility of global markets, as whispers of a global recession in the coming year grow stronger.

However, China is also the world’s largest consumer of gold, using 1,100 metric tons last year. The malleable metal has wide applications in industry, but roughly 80% of gold used in industry goes into electronics, where it’s valued for its conductive properties and its resistance to tarnish. China is the world’s largest producer of electronic devices, manufacturing 36% of the annual total.


That central role has also made China the world’s largest buyer of semiconductor chips used in electronics – and made those chips an important battlefield in the stiffening competition between Beijing and Washington. US ally South Korea and the government in Taiwan, which enjoys informal US support, make most of the world’s computer chips, and China buys a large amount of them. Taiwan’s centrality in making high-end chips has also made American strategists fret about the implications of a potential Chinese takeover of the island, which Beijing sees as a rebellious Chinese province.

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https://www.kitco.com/news/2023-04-06/Texas-moves-to-create-gold-backed-digital-currency.html  Focus

Texas moves to create gold-backed digital currency

As lawmakers in the U.S. introduce bills pushing back against the creation of a U.S.-dollar-based central bank digital currency (CBDC), Texas is opting to go a different route with the creation of a state-issued, gold-backed digital currency.

Based on the text of Senate Bill 2334, which was introduced by state Senator Bryan Huges (R), and House Bill 4903, which was introduced by state Representative Mark Dorazio (R), the legislators are looking to require the state comptroller to establish a digital currency that is fully backed by gold and fully redeemable in cash or gold.

The comptroller shall establish a digital currency that is backed by gold so that each unit of the digital currency issued represents a particular fraction of a troy ounce of gold held in trust,” the bills state, adding that if needed, a private vendor can be enlisted to help establish the digital currency.

The comptroller would also be required to create a mechanism that would allow the new gold-backed digital currency to be used by citizens for their daily transactions. “In establishing the digital currency the comptroller shall establish a means to ensure that a person who holds the digital currency may readily transfer or assign the digital currency to any other person by electronic means.”

All gold reserves backing the digital currency would be held in a trust with the Texas Bullion Depository that is controlled by the comptroller or another entity appointed by the comptroller. “The trustee shall maintain enough gold to provide for the redemption in gold of all units of the digital currency that have been issued and are not yet redeemed for money or gold,” the bills read.

There will be no limit on the amount of gold-backed digital currency that Texans can purchase. As soon as a purchase is made, the comptroller will be required to “buy a fractional number of troy ounces of gold equal to the number of units of the digital currency issued to the purchaser, and issue to the purchaser a number of units of the digital currency equal to the amount of gold that the comptroller purchases with the money received from the purchaser.”

When someone holding the digital currency wants to redeem it for cash, all they would need to do is present it to the comptroller or a designated agent, who will then sell gold held in the depository account equal to the redemption amount and transfer the funds to the redeemer, minus any fees.

Holders can also elect to redeem the digital currency for gold. The comptroller or one of its designated agents “may manage redemption of the digital currency for gold by the use of bars or coins of standard sizes and may pay fractional remainders in cash as necessary to facilitate the transaction,” the bill states.

The value of each unit of the digital currency will be determined at the time of a transaction and “must be equal to the value of the appropriate fraction of a troy ounce of gold at the time of that transaction.”

I hope this is the real thing so that we do not have to sign up for FEDNOW effective July 1, 2023. If my State does not create our own currency, Texas money should be accepted by all businesses. When this becomes a reality, we are not going to need banks anymore.

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April 7, 2023 Joseph P. Farrell


These two articles come courtesy of W.G., with our thanks for passing them along to us. With these two states, Arkansas and Oklahoma joining the movement of states to recognize bullion as legal tender, and to restrict the movement to central bank digital currencies:

Let's look at the first article. The Oklahoma Bill would effectively prohibit the state or any business from accepting payment only in a central bank digital currency:

Last week, the Oklahoma House passed a bill that would ban some brick-and-mortar businesses and government agencies in the state from requiring payment in central bank digital currency (CBDC).

Rep. Clay Staires (R) introduced House Bill 1633 (HB1633) on Feb. 6. Under the proposed law, businesses providing “basic needs, selling or offering for sale goods or services during regular business hours” would be prohibited from requiring payment by a central bank digital currency. It would also bar them from prohibiting the use of cash.

Businesses providing basic needs” is defined as businesses selling “basic life essential goods or services” including grocery stores, utility companies, internet companies, pharmacies, and insurance companies.

State and local government agencies in Oklahoma would be bound by the same rules.

On March 23, the House passed HB1633 by a 79-11 vote.

In effect, the enactment of HB1633 would shield Oklahomans from being required to use a central bank digital currency when dealing with state and local agencies, or making purchases of “basic needs.”

While HB1633 requires businesses providing basic needs and government agencies to accept cash as legal tender, it does not mention gold or silver, but under state law, gold and silver are considered legal tender in the state of Oklahoma. That means

businesses would also be able to accept gold and silver, although there needs to be a mechanism to differentiate between the face value and market value of gold and silver coins.

This is good news because in effect it means that more and more people at the local and state levels are waking up to the fact that a digital and cashless society are the final steps in an architecture of slavery to the same oligarchs that have made such a mess of the modern western world. It's an indicator that we're watching the emergence of a parallel economy and financial system that are bypassing the metastasizing tumors of central banks.  What digital currencies are not are currencies at all; they are merely corporate coupons which in the hands of a central bank or government can be turned on or off at will, depending upon one's behavior:

Imagine if there was no cash. It would be impossible to hide even the smallest transaction from the government’s eyes. Something as simple as your morning trip to Starbucks wouldn’t be a secret from government officials. As Bloomberg put it in an article published when China launched a digital yuan pilot program in 2020, digital currency “offers China’s authorities a degree of control never possible with physical money.”

The government could even “turn off” an individual’s ability to make purchases. Bloomberg described just how much control a digital currency could give Chinese officials.

The PBOC has also indicated that it could put limits on the sizes of some transactions, or even require an appointment to make large ones. Some observers wonder whether payments could be linked to the emerging social-credit system, wherein citizens with exemplary behavior are ‘whitelisted’ for privileges, while those with criminal and other infractions find themselves left out. ‘China’s goal is not to make payments more convenient but to replace cash, so it can keep closer tabs on people than it already does,’ argues Aaron Brown, a crypto investor who writes for Bloomberg Opinion.”

Economist Thorsten Polleit outlined the potential for Big Brother-like government control with the advent of a digital euro in an article published by the Mises Wire. As he put it, “the path to becoming a surveillance state regime will accelerate considerably” if and when a digital currency is issued.

But as this article suggests, the major obstacle toward the use of bullion or specie in transactions is the difference between market value, and face value, of such media. This brings us to the bill before the Arkansas state House of representatives:

A bill introduced in the Arkansas House would make gold and silver legal tender in the state and would effectively repeal the state capital gains tax on gold and silver. Passage into law would eliminate barriers to using gold and silver in everyday transactions, a foundational step for the people to undermine the Federal Reserve’s monopoly on money.

Rep. Robin Lundstrum (R) and Sen. Jonathan Dismang (R) introduced House Bill 1718 (HB1718) on March 27. The legislation would make “gold and silver specie” legal tender in the state, meaning it would be recognized as a medium of exchange within the state. Practically speaking, this would allow Arkansans to use gold or silver coins as money rather than just as mere investment vehicles. In effect, it would put gold and silver on the same practical footing as Federal Reserve notes.

Specie” is defined as a “coin having gold or silver content; or refined gold or silver bullion that is coined, stamped, or imprinted with its weight and purity and valued primarily based on its metal content and not its form.” Under the proposed law, specie would include coins issued by the U.S. government or “other specie that an Arkansas court rules to be within state authority to make or designate as legal tender.”

By allowing the court to designate additional specie to be used as legal tender, Arkansas could free its citizens from potential supply constraints imposed by the use of only United States-minted gold and silver coin. More importantly, the people of the state of Arkansas would be able to define what specie is considered constitutional tender, further distancing themselves from potential control of their competing currency by Washington D.C. (Emphasis added)

Notably the Arkansas bill is defining specie not simply in terms of a stated value, but rather in terms of a stamp indicating its weight and purity, that is to say, its market not its face value. This is a bold - and essential - step toward being able to use such stamped specie as money.

It takes but a little thought to see why. Imagine, for a moment, that you have in your possession a Morgan silver dollar from the nineteenth century. The silver dollar is effectively an ounce of silver, and it is stamped with a value that says "one dollar." You could, of course, take that dollar and spend it to buy a soda from a local convenience store, in which case the clerk will assess its value as the stamped value of one dollar. You would, of course, be foolish to spend it this way, because the real value of the silver dollar, just on silver content alone, would  be several times one dollar, say, around

twenty dollars, even though its stamped value would be only one dollar. Add to this numismatic and collectors' features, and the Morgan dollar is usually worth more than even its silver content, depending on the proof condition of the coin. By making the weight and purity stamp the value of an ingot or coin, rather than a declared and completely artificial value of a mint, the medium becomes usable as a medium of exchange, because you're no longer withholding it because of its market value vs. its face value. The other thing this does is it stabilizes the prices of such specie rather dramatically.

In considering this measure, it becomes clear that Arkansas means business.  The next step? Bullion depositories and the use of certificates of deposit as money, with their full convertibility...

See you on the flip side...

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