BIGGER THAN THE US; BIGGER THAN THE EU
The emerging Eurasian bloc headed by China and Russia will be the world's major economic grouping - and soon! The SCO already includes China, Kazakhstan, Kyrgyzstan, Russia, Tajikistan, Uzbekistan as full members, and observer states India, Iran, Mongolia and Pakistan may be promoted to full membership at the next meeting in Russia. In terms of population, resources and manufacturing capacity, the SCO is now the world's largest economic entity.
The implications of the emergence of the SCO have scarcely been discussed in the European; US or Australian media. Nations near the new group have shown more interest. ASEAN will attend the next meeting as guests, as will the US, who will doubtless be lobbying the Russians to block the admission of Iran. Australia has expressed no desire to attend, despite the fact that founding member China is our largest trading partner.
So far, the main agreement of the present SCO is to allow trade between member states in their own currencies. This move is intended to avoid the necessity of holding national reserves of $US, the long-standing international reserve currency. The Chinese hold vast $US reserves, and they have expressed concerns about its future stability and value. An extension of the agreement to trade in national currencies would be an exchange rate fixing mechanism, which would be equivalent to having an internal basket-of-currencies as a trade medium - a de facto SCO common currency, an Asian euro.
Concerns about the future of the US$ are rife. If the collapse anticipated by many occurs, the world will need the size, wealth and dynamism of the SCO to help rebuild the world economy. Good luck to all at the next meeting, which begins in Moscow on March 27.
Comments and updates:
Russian President Dmitry Medvedev has invited his Iranian counterpart to participate in an upcoming Shanghai Cooperation Organization (SCO) summit.
Iran's ambassador to Russia, Mahmoud Reza Sadjadi, was quoted as saying by IRNA on Monday that President Ahmadinejad would attend the summit, which will be held in Russia's Yekaterinburg city.
"Its six full members account for 60% of the land mass of Eurasia and its population is a third of the world's. With observer states included, its affiliates account for half of the human race."
It is well-known that China holds (and keeps on buying U.S. Treasury Notes (because it doesn't want the U.S. dollar devalued?) We are talking of a couple of trillion dollars I believe.
The story below outlines how China is lessening its holdings of U.S. currency (without lowering it value of the money market) by transforming it into material wealth. Besides the metals I've seen reference to their stockpiling cement too.
Like feudalism, capitalism is a worldwide economic system with the sole purpose of increasing capital through constant growth. The nation states are preparing for continued onslaught.
We must creat a moneyless stateless world society of cooperation.
Yours to incite World insight, Trevor Goodger-Hill
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'Copper Standard' for the world's currency system?
By Ambrose Evans-Pritchard
16 Apr 2009
www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/5160120/A-Copper-Standard-for-the-worlds-currency-system.html
Hard money enthusiasts have long watched for signs that China is switching its foreign reserves from US Treasury bonds into gold bullion. They may have been eyeing the wrong metal.
China's State Reserves Bureau (SRB) has instead been buying copper and other industrial metals over recent months on a scale that appears to go beyond the usual rebuilding of stocks for commercial reasons.
Nobu Su, head of Taiwan's TMT group, which ships commodities to China, saidBeijing istrying to extricate itself from dollar dependency as fast as it can.
"China has woken up. The West is a black hole with all this money being printed. The Chinese are buying raw materials because it is a much better way to use their $1.9 trillion of reserves. They get ten times the impact, and can cover their infrastructure for 50 years."
"The next industrial revolution is going to be led by hybrid cars, and that needs copper. You can see the subtle way that China is moving into 30 or 40 countries with resources," he said.
The SRB has also been accumulating aluminium, zinc, nickel, and rarer metals such as titanium, indium (thin-film technology), rhodium (catalytic converters) and praseodymium (glass).
While it makes sense for China to take advantage of last year's commodity crash to restock cheaply, there is clearly more behind the move. "They are definitely buying metals to diversify out of US Treasuries and dollar holdings," said Jim Lennon, head of commodities at Macquarie Bank.
John Reade, metals chief at UBS, said Beijing may have a made strategic decision to stockpile metal as an alternative to foreign bonds. "We're very surprised by Chinese demand. They are buying much more copper than they will need this year. If this is strategic, there may be no effective limit on the purchases as China's pockets are deep."
Zhou Xiaochuan, the central bank governor, piqued the interest of metal buffs last month by calling for a world currency modelled on the "Bancor", floated by John Maynard Keynes at Bretton Woods in 1944.
The Bancor was to be anchored on 30 commodities - a broader base than the Gold Standard, which had caused so much grief in the 1930s. Mr Zhou said such a currency would prevent the sort of "credit-based" excess that has brought the global finance to its knees.
If his thoughts reflect Communist Party thinking, it would explain the bizarre moves in commodity markets over recent weeks. Copper prices have surged 49pc this year to $4,925 a tonne despite estimates by the CRU copper group that world demand will fall 15pc to 20pc this year as construction wilts.
Analysts say "short covering" by funds betting on price falls has played a role. But the jump is largely due to Chinese imports, which reached a record 329,000 tonnes in February, and a further 375,000 tonnes in March. Chinese industrial demand cannot explain this. China has been badly hit by global recession. Its exports - almost half GDP - fell 17pc in March.
While Beijing's fiscal stimulus package and credit expansion has helped lift demand, China faces a property downturn of its own. One government adviser warned this week that house prices could fall 50pc.
One thing is clear: Beijing suspects that the US Federal Reserve is engineering a covert default on America's debt by printing money. Premier Wen Jiabao issued a blunt warning last month that China was tiring of US bonds. "We have lent a huge amount of money to the US, so of course we are concerned about the safety of our assets," he said.
The beauty of recycling China's surplus into metals instead of US bonds is that it kills so many birds with one stone: it stops the yuan rising, without provoking complaints of currency manipulation by Washington; metals are easily stored in warehouses, unlike oil; the holdings are likely to rise in value over time since the earth's crust is gradually depleting its accessible ores. Above all, such a policy safeguards China's industrial revolution, while the West may one day face a supply crisis.
Beijing may yet buy gold as well, although it has not done so yet. The gold share of reserves has fallen to 1pc, far below the historic norm in Asia. But if a metal-based currency ever emerges to end the reign of fiat paper, it is just as likely to be a "Copper Standard" as a "Gold Standard".
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China Copper move may secure Cu supply but jeopardise US recovery
A recent article by Ambrose Evans-Prichard seems VERY significant (ie A 'Copper Standard' for the world's currency system?)
It suggests that China is rapidly running down its $US foreign exchange holdings to buy huge quantities of strategic inputs to its production system. This is just confirming information that was already out there - see cpds.apana.org
If correct this means one of two things.
Firstly it may mean that China expects, and is moving to try to ensure, that the global financial crisis will result in a general breakdown in the global market economy. China may be ensuring access to the resources needed to manufacture (say) hybrid cars as Evan's Prichard suggested - but, if a run on US Treasuries prevents the US government from funding its stimulus / bank rescue packages and budget deficits which was already a risk, then there is going to be no real market demand for whatever China intends to manufacture because there will be no economic recovery elsewhere for years.
Secondly it may mean that China has made a huge blunder which will be written up in history books as one of the causes of the coming Great Depression - because its commercial desire for profit has caused it to ignore macroeconomic policy imperatives.
In either event it is likely that the whole economic and geopolitical game is going to be changed.
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WORLD VIEW NEWS SERVICE
China's prospects as the first major economy to recover gives it a crucial role to lead the world economy as a whole and the Central Asian region in particular. Following up on a $25 billion loan to Russia that China dished out in February, it has agreed to lend $10 billion to Kazakhstan. China expects both the recipients to reciprocate by bolstering their energy supplies to China.
We may be witnessing the signs of a seismic shift in the geopolitics of Central Asia.
Australia can mitigate the effects of severe recession, perhaps, by opening its arms wide to embrace its Chinese investors. Very wide.
When the U.S. payments deficit pumps dollars into foreign economies, these banks are being given little option except to buy U.S. Treasury bills and bonds which the Treasury spends on financing an enormous, hostile military build-up to encircle the major dollar-recyclers China, Japan and Arab OPEC oil producers. Yet these governments are forced to recycle dollar inflows in a way that funds U.S. military policies in which they have no say in formulating, and which threaten them more and more belligerently. That is why China and Russia took the lead in forming the Shanghai Cooperation Organization (SCO) a few years ago.
MOSCOW, April 8 (Itar-Tass) - Moscow will host a conference of the Shanghai Cooperation Organization on April 15 on counteracting threats to regional security, Russian Foreign Minister Sergei Lavrov said on Wednesday.
"A workshop will take place in Moscow on April 15, devoted to the SCO's activity to counteract threats to regional security," the minister said.
"Efforts are underway to coordinate the convention on fighting terrorism, which will be presented for discussion at the SCO summit in Yekaterinburg in June," Lavrov said.
Daily Times comment jolted me. If a correct observation, then
China wins. USA is trying hard for guns and butter...never works. China is continuing an economy of butter...always works. US congress wastes much too much resources on nonproductive programs and falls for too many (big brain) domino theories. Maybe it is time for US to take a back seat, rest and regroup for commerce without stupid wars.
Hu said the 2009 SCO summit will be held in Yekaterinburg in mid June.
Russia and its neighbors argued at a conference Friday that they should play a stronger role in stabilizing Afghanistan because the threat of drugs and terrorism on their doorstep gives them a vital stake in the matter.
"Afghan drug traffic has become a most serious threat to the security of Russia and countries of Central Asia. The efforts being taken to fight this evil so far are insufficient," Foreign Minister Sergei Lavrov said at a daylong conference of the Shanghai Cooperation Organization, which is led by Russia and China and includes four Central Asian countries.
The SCO and the Afghan government proposed an "action plan" to step up the training of drug agencies, combat the laundering of drug money, improve border controls and carry out joint operations.
