The more you use dollar sanctions, the more countries will cooperate to defeat them.
Another Big Leap for China
Eurointelligence has a great article today on the US overusing sanctions as a financial threat.
The result took a while but it’s Another Big Leap for China
China’s Cross-Border Interbank Payment System is not nearly as mature as the global clearing and settlement systems used by the west. But it is growing fast, and it is maturing. This week we read that China Development Bank agreed a loan of $290m to South Africa channelled through CIPS, the first intra-Brics loan agreement, denominated in renminbi. There will be a lot of firsts going forward. The overall size of CIPS compared to western payment systems is small. But the infrastructure is now there, and it gives China and its trading partners a route to diversify away from dollar-dominated flows. Another layer of this system is Brics Pay, a blockchain-based technology that connects CIPS and other domestic payment systems of the Brics countries. CIPS also has its communication layer, which makes it independent of Swift, the inter-bank communication system dominated by the west.
The dollar is the single biggest global chokehold enjoyed by the US. The fact that all dollar transactions at one point go through the US gives the US government the ability to impose secondary sanctions on foreign companies and banks.
We are observing this in many areas: when countries apply their choke-holds, the rest of the world innovates around this, and diversifies away from it. Alternative payments systems exist only because the US has made excessive use of its financial powers. When the foreign policy community in the US discovered the potential of the dollar as a coercion tool, they did not factor in that the potential of the tool depletes the more frequently it is used. When the Biden administration used its choke-hold on high-performance semiconductors by banning their sale to China, they also misjudged China’s ability to develop their own.
We expect the same to happen also with China exercising its choke-hold over rare earths. While it will not be easy for the rest of the world to make itself independent on magnets that are essential for electric engines, it is not impossible to reduce one’s reliance on China, as Japan did in 2010 when China first applied its rare-earth choke-hold by banning their sale to Japan after an incident near the disputed Senkaku Islands in the East China Sea.
Note that the discussion is not about using BRICS as a currency. Rather it describes BRICS nations using non-SWIFT mechanisms to avoid dollars.
I have been discussing the ultimate demise of Swift for years.
What Does China Do With a Dollar That’s No Longer Risk Free?
In light of Fed actions against Russia, I pinged Michael Pettis at China Financial Markets some questions on China’s reserves on March 18, 2022.
Please consider my 2022 Pettis Q&A post What Does China Do With a Dollar That’s No Longer Risk Free? Buy Gold?
Q&A With Michael Pettis
Mish: Will China now hold more commodities and fewer dollars despite the pro-cyclical nature of it? More Euros or Yen over dollars? More gold?
Michael Pettis (emphasis mine):
1: “Given that so much of China’s “reserves” are now indirect and held by state-owned banks (all the increase since 2017) it’s hard to say what the currency composition of China’s reserves are.
2: “Officially the US dollar is still by far the biggest component, but it is slowly declining.
3: “I expect that this will continue as far as the official reserves go but, as you know, the hard part of reducing the US dollar component of your reserves is figuring out what the alternative should be, and with such high and growing reserves (once you include the indirect reserves at the state-owned banks) that is a very difficult question to resolve.”
Not Now Does Not Mean Never
The demise of the current US-dollar financial system with SWIFT at the heart of it is underway. I just cannot tell you when the system crumbles, nor can anyone else.
Although the dollar avoidance the BRICs seek is much easier said than done, not now doesn’t mean never. The recognition phase has started.
Most do not realize the EU is involved even though it wants no part of the BRIC structure. Importantly, the EU’s annoyance at SWIFT is far more significant than any yapping by Brazil.
So, don’t be surprised if something truly significant starts with the EU, not the BRICs. That’s an idea I have not seen anyone else suggest.
A true BRICS currency still seems unlikely to me for reasons discussed many times.
However, SWIFT-avoidance is well underway and that will soon enough be a major success.
Trump has threatened BRICS nations with 100 percent tariffs if they create a competing currency.
But SWIFT, not a trading currency was and still is the real risk to the US.
For discussion, please consider More Gold Backed BRIC Currency Silliness on Dethroning the Dollar
Flashback Hoot
On April 13, 2022 I commented Janet Yellen Warns China on Russia and Creating a Bipolar Global Financial System
In a question and answer session, Yellen said that the United States needed to work hard with China to avoid a bipolar global financial system that pits democracies against autocratic countries.
Is that a hoot or what?
Related Posts
September 19, 2023: Lesson of the Day: Sanctions Don’t Work Because They Create New Markets
A person who touted a buyer’s cartel sanction success, now complains the buyers cartel leaks like a sieve.
The Real Risk to the Dollar
On September 15, 2025 I noted Trump’s Big Miscalculation on Sanctions in a Dollar-Based Transaction World
Sanctions and tariffs have not only united China and Russia, but also the world against dollar dominance.
I have pooh-poohed a BRICS currency for decades. And I still do.
At the same time, however, I cautioned the key idea behind BRICS is not a trading currency, but a way to avoid sanctions.
That has come to fruition, not through BRICS, but rather through CIPS. It’s not yet complete because it still uses SWIFT for some functions.
Lessons of the Day
- The more you depend on sanctions, the less they work.
- That’s the real risk to the dollar.
Ironically, that is the risk to China right now on rare earth minerals.
The acronym CIPS will become Trumps worst nightmare and possibly the worst news ever for Americans quality of life and standard of living. This is what happens when an economically illiterate criminal ~ without a diplomatic bone in his body becomes president.
Elections have consequences!
As we discuss this: Russia, India and China can now trade outside the US SWIFT system in local currencies and possibly gold for oil. China could even be off-loading dollars to Russia in this scenario.
The farmers at this mornings coffee meeting were positively gloating about Trump forcing China to buy our soybeans. They really do not understand that it was Trump that stopped China from buying them in the first place. Worst of all is the fact that prices were so depressed and most of them had to sell at those depressed prices to make their payments for seed, fertilizer and fuel. The suspension of reality with the farmer is profound.
One of the loudest Trump backers and boasters has a farm that I am negotiating with the bank to acquire as he has defaulted on his loans. Just got a text from my small towns banker in fact.
This is playing out exactly as I thought it would when I elected to diversify my farm and not plant any soy or corn into this terrif fying market.
You know nothing, and are too lazy to even look at a futures chart. LOL
us farmers have been wards of the state forever. no wonder they are as dumb as housing project dwellers.
I think food stamps started as part of the New Deal AAA plan to control crop prices. Farmers are indeed wards of the political state.
Can’t wait for the day when our dollar is not the reserve or shares this with other currencies. It will be a time when both the government and population wakes up to reality. About time.
The demise of the current US-dollar financial system with SWIFT at the heart of it is underway. I just cannot tell you when the system crumbles, nor can anyone else.
Probably on next recession.
US is currently in 38 trillion debt.
Annual deficit of 2 to 3 trillion while economy is in good shape.
Inflation of over 2% for years.
Treasury yield is in upward trend.
Gold and Bitcoin are at all time high.
On next recession there will be real trouble.
There will be global chaos.
The Global South has a backup plan in place. The chaos will hit the US and their vass… hum, satellites hard.
All said and done,Debt and Deficit are still the big problem US faces.
Bill O’Reilly just explained why President Trump quietly has the upper hand against China’s Xi Jinping — and the mainstream media isn’t talking about it
“It wasn’t well reported in America, but Xi fired seven generals last week. That’s not a good sign. He’s worried.”
“The 1.5 billion people in China need to eat. They don’t have IRAs, gold cards, or mortgages to refinance. They have to sell overseas — and America is their biggest market.”
“So Trump goes in there with an advantage. Because of our consumer spending and booming stock market, we can outlast Xi.”
“And the new deals Trump’s making with Malaysia, Cambodia, and Japan? All of that boxes China in.”
O’Reilly: “Trump goes in with a bigger, stronger hand — he just has to play it cleverly.”
The Biden years weakened America. The Trump years are already reshaping the world order again.
Nonsense. China simply replaced US ag products with those from other countries. China has also replaced US markets with others and continues to grow its manufacturing. China needs export markets in order to import materials it can’t produce itself (as does every country). China has a couple of major problems. It still has 100s of millions of peasants that expect to increase their standard of living and productivity. And it has 100s of millions of under-paid laborers that expect to move to a middle-class standard of living. China already produces enough to flood world markets in almost every category, and can’t expect to continue export growth simply because the world doesn’t have the wealth to absorb it all. China has to do what the US did in the ’50’s and ’60’s: vastly increase the wages of its workers to increase internal consumption and investment for internal consumption. But that goes deeply against conservative Chinese culture. Trump has nothing to do with any of it.
China’s total Exports in 2024 were valued at US$3.58 Trillion, according to the United Nations COMTRADE database on international trade.
China’s main export partners were: the United States, Hong Kong and Vietnam.
The top three export commodities were: Electrical, electronic equipment; Machinery, nuclear reactors, boilers and Vehicles other than railway, tramway.
Total Imports were valued at US$2.59 Trillion. In 2024, China had a trade surplus of US$991.41 Billion.
China Exports By Country
UnitedStates $525.65B 2024
Hong Kong $290.87B 2024
Vietnam $161.85B 2024
China’s Best Customers for its Exports
The latest available country-specific data shows that 55.6% of products exported from China was bought by importers in:
United States of America (14.7% of the Chinese total), Hong Kong (8.1%), Vietnam (4.5%), Japan (4.3%), South Korea (4.1%), India (3.4%), Russia (3.2%), Germany (3%), Malaysia (2.8%), Netherlands (2.55%), Mexico (2.52%) and Thailand (2.4%).
From a continental perspective, almost half (48.2%) of mainland China’s exports by value was delivered to fellow Asian countries while another 20.7% was sold to importers in Europe. China shipped 18.5% worth of goods to buyers in North America.
In US, they don’t need to be fired. The whole government starting from president is corrupt making money using their posts.
China doesn’t need USD which is not useful as China can’t buy or won’t buy from US. China is using its own chip now.
That’s why China is reducing its treasury holding from 1.3 trillion to 700 billion now.
China can sell what the world want and can buy back.
Russia, major world food and oil supplier is China’s neighbour.
Trump is not MAGA but MIGA ( Make Israel Great Again )
– Ironically, that is the risk to China right now on rare earth minerals.
> Yes, and it’s about to unfold soon, when you consider the alternatives. The Largest deposits seem to be in China, but others Countries with large reserves are Australia, Russia, Brazil, India, and Vietnam (of course the US as well). Some of these we have been in negotiations with already I believe. I think Brazil is the Optimal Target for the US to deal with, as they have an extremely small output fr what they have available. We also have a decent relationship with India, who is another good target for us to work with. As we are pushed to deal with these alternatives, they are probably all open to discussions, if approached Fairly and we offer assistance from the US in any way that we can. Why wouldn’t they be?
>> I know Trump boasted about Greenland, but they have made it clear nothing is for sale. They are working with 2 others right now, but it’s messy, convoluted and Greenland is very strict, as they should be, with who, how, what, and when. They know what they have, and are not prepared to sell it away to anyone just yet, it would appear.
During sunrise the skies are red. At noon It’s UVB. ASML produces extreme EUV and deep UV DUV machines which make the most advance chips. TSM produces them. INTC attempt to compete with TSM failed. China attempt to make EUV and DUV machine failed. Samsung failed. If Xi invades Taiwan the mag7 will be comatose for a decade. ASML made a new all time high.
China’s progress on making advanced chips is largely unknown as it’s very secretive about it. Your conclusion they have failed is irrational. They will succeed. The only unknown is in how long it will take for them to succeed.
CIPS is already 1/7th the size of SWIFT and will double next year. The Yuan is already twice the size of the Dollar too. It’s over already.
I’m tired of the dollar is doomed in anything like the near term bologna. I’ve left on the details for just reason #3 to shorten this post and have highlighted the biggie. Try to sue in China, suckers:
Why isn’t the yuan a trusted currency for international exchange?
Grok 3 AI:
The yuan (or renminbi, RMB) is used in international trade—China is the world’s largest exporter, and RMB settlements have grown from ~1% of global payments in 2013 to ~3–4% in 2025 (per SWIFT data). However, it remains far behind the US dollar (~59% of global payments) and euro (~20%). Below are the core structural reasons it is not a fully trusted reserve or settlement currency, backed by data and mechanics:
1. Lack of Full Capital Account Convertibility
2. State Control Over Exchange Rates
3. Rule of Law & Institutional Risks
– No independent judiciary: Contracts in RMB are ultimately subject to CCP policy. Example: 2021 Evergrande default—foreign bondholders recovered ~10¢ on the dollar after Beijing prioritized domestic stability.
– Sanctions risk: Holding RMB assets means exposure to potential US/EU sanctions (e.g., if Taiwan conflict escalates, RMB bonds could be frozen).
– Comparison: USD benefits from US courts’ predictability; London’s for GBP, etc.
4. Shallow & Inaccessible Bond Markets
5. Geopolitical & Network Effects
Bottom Line
The yuan is trusted for trade finance with China (e.g., Belt & Road loans), but not as a store of value due to convertibility controls, policy opacity, and geopolitical risk. Full internationalization requires:
1. Capital account liberalization (politically risky—see 2015 crisis).
2. Independent central bank & courts.
3. Deep, open bond markets.
Until then, the RMB will remain a regional, not global, currency.
Try to find another country with a large liquid currency and bond market with the same judicial guarantees and protected by a large military. You won’t find one. That simple calculation is often missed by those who say the Dollar is finished.
Your points 1 thru 5 can be equallly applied to America. Any foreigner who invests in the US is an idiot, as their assets can be frolzen or seized at any time.
To avoid sanctions, simply don’t do business with Sanctionistan (America), a terrorist group posiing as a country
Is that what Jack Ma told you?
crumbling evil empire 101. the chinese have observed the western empires doing the same dance for centuries. the chinese are still making up for being humiliated by the opium wars in 1800s. having italian citizenship i LOL at the piker empire amerika has. the Romans lasted 1500 years. amerika peaked 1945-1971. short fuse empire. trump is a perfect president. he is very indicative of the modern amerikan boomer. democracy works. always has. since greek and roman times. read the republic by plato. they knew.
From Nixon onwards, US lost the Trust globally, gradually.
FDR defaulted on amerikan citizens. Nixon defaulted on foreign holders. after. the battle of 9.11.01 the world no longer fears amerika. our response was pathetic. our military are just grifters like the rest of amerikans. democracy works perfectly. grifters elect grifters and also serve in grifter military services. hat tip republic of plato. go read it.
China has a sready direction and an effective drive toward that goal
The US, with the 4 year election cycle and now with donOld doing the mental weave every week, has no hope of forward progress for anyone but our new tech overlords
US’ huge Debt and Budget Deficit make Trump behave this way as, regards US economy and Finance.
“interesting”—how is it so, especially when the facts show donOld raised the debt the fastest in his first term, and is doing it again in his second term?
Donaldo Trumpolini may have met his Rommel in North Sanctiona..
Didn’t Rommel commit Harry Caray?
Rommel lost in Northa Afric.
China invested in REEs and the processing of REEs in order to sell REEs and processed REEs. And, with the exception of a brief episode with Japan in 2010 and their dealings with our international bully in chief, all they have done is sell people tons and tons of REEs and processed REEs. In the 2010 incident, Japan – perhaps inspired in their skullduggery by HRC – captured and detained the Captain of Chinese fishing boat, and China refused, until his release, to sell them REEs. Sort of sounds square to me.
The dollars will come home to USA where they were born. But selling massive amounts of reserve treasuries takes time. Then the subsequent conversion of the resulting $US into another currency will take even more time, unless the currency is so liquid it can handle the exchanges. US interest rates will rise in the meantime. Hoo haa.
Trump’s desire for Trade Surplus will also do the same,as $ shortage will occur globally, forcing nations to resort to other means to meet their import obligations.
It is very difficult to have confidence in any system in the hands of today’s “so called” world leaders including our own.
I strongly disagree with the “including our own” part.
THOSE are the ones I have ZERO confidence in.
The mag7 leaped forward: NVDA: 4.89T + MSFT: 4.03T + AAPL: 3.99T + Googl: 3.24T + AMZN: 2.44T + Meta: 1.89T +TSLA: 1.53T = $22.01T
” … During the 2024 election campaign, President Donald Trump suggested that he would implement a major change in the US’ policy approach away from its prior widespread use of international sanctions. …”
https://www.spglobal.com/market-intelligence/en/news-insights/research/us-sanctions-approach-trump-second-term
The only thing I know for certain is that if a different system is created, I need to have a way to access it for my own use. Diversification of assets is a core tenet of my philosophy and that now extends to money transfer systems given the shenanigans going on now.
I’ve heard rumors of Trump admin thinking about capital controls at some point when SHTF no different than China limiting the amount of money that can leave the country.
Hopefully, I will have all of that setup next year and be payment system diversified and move some money out now.
Begs the question, got exit strategy?
The problem with exiting is lifestyle loss. My wife and I are in late 70s and have deep roots in Toronto – especially related to hobbies which are not easily duplicated in non-western style countries. We’ve visited south but not the far east but don’t see any viable opportunities anywhere. Politics versus culture to put it simply.
I wish MPO would tell us where he’s going. We could all go there together. Papa Dave could make the gin and tonics and Michael Engel could teach a class. I would keep everyone up to date on conspiracies. Is it Belize? Thailand? Slovenia?
I’ve already told, I’m going to be mobile but I will have a base of operations on an island. I’ll be overlooking the ocean from my new diggs when I’m not traveling.
But if you want to get started, the website below will help you out. I have no affiliation with it in any way shape or form but it’s a good place to start.
https://adventurefreaksss.com/
nomad capitalist is a good read. to make your dough stretch, do as my currency trader pal did for decades. follow the currency devaluations. bring bags of usd and gold and live like a king on the cheap. thailand in 90s……..
THANKS!.
brooklyn is a great escape FYI. spent half my life there. live deep in immigrant hoods, more remote than going to most locales on earth. russia in the 90s was fantastic. tokyo is the greatest city on earth. own some gold in hand is diverse enough for everyone including a decamillionaire and even a small time billionaire. mexico city aka CDMX is best city in north amerika. close to home, too.
My main reason to live in Japan would be to live amongst people with a BMI of 20 to see if I could start living that way. I already have natto and seaweed for breakfast, but then I get hangry.
I’d give natto a try, if I could get hold of any. Apparently it’s the richest source of spermidine….
https://www.ageproof.co.uk/why-spermidine-supplements-dont-work-and-why-you-should-eat-natto-instead/
Owning gold in hand in deep immigrant hoods in NY probably isn’t a wise thing.
If you’re happy in Toronto stay there. I think at your age, you’ll probably miss the worse of the apocalypse anyway. It’s also a reason I want to leave ASAP before I become “institutionalized” myself.
You could consider Queensland – the locals speak English, they like North Americans and the winter is like your summer.
australia and new zealand are heaven on earth.
And the taxation is hell on earth. Great place to visit, not a great place to be a tax resident.
It’s not that bad. The first $18,200 is tax-free, then 16% up to $45,000, then 30% up to $145,000. GST is 10% but not on food or medical.
Offsetting that is free hospital care, paid for by a 2% levy on income, or up to 3.5% for income over $180,000.
Good surf too!
There’s good surf south of about Bundaberg – there is a 1,400 mile reef blocking the swell in the north….
“ especially related to hobbies which are not easily duplicated in non-western style countries”
Such as..?
Russia is a “non-Western” Western country anyway, have you seriously checked it out?
If your hobbies are more important than everything that’s going on in the West and the direction it is going you are probably (still…) living well enough where you live now anyway.
One of the MANY reasons (and not the most important one) I am leaving the West for good is exactly the freedom to enjoy the few hobbies I still have as a 51yo with a family, by the way…
“Begs the question, got exit strategy?”
For those desperate to escape the utter madness and dystopia ALL of the West is plunging into to live in a safe and stable place where to have a NORMAL life for themselves and for their family, now and into the foreseeable future (not the “holiday” destinations for childless pensioners to retire, which are what’s usually mentioned and are in fact also mentioned in this thread) the choice should be obvious: the Russian Federation if you are a white European wishing to live in a culturally European society and China if you are of Oriental decent and feel more culturally compatible with an Asian country with Asian values and lifestyle.
I myself am in the final stages of moving (back) to Russia, my wife and children have already moved for good this summer and I am in Italy to complete the sale of my house and car.
I hope the world avoids any more common currencies. (At least if they’re managed by humans.). It concentrates too much power into too few hands. It hides imbalances. And to the extent its composition depends on one or combination of metrics, the metrics gets distorted or the flaws eventually cause a crisis that threatens the whole system instead of being limited to the national level.
Having the $US as reserve and trading currency has been a huge convenience to international trade. Countries could transact without having to constantly convert currency on the foreign exchange markets, possibly even affecting their own currency valuation in the process. But as you rightly point out, eventually there are big drawbacks for not just the users but the issuer itself also.
> Having the $US as reserve and trading currency has been a huge convenience to international trade.
Reasonable claim. Never really thought about it bit wonder whether precious metals were as good, with a different set of risks but possibly more manageable.
With the sophistication of IT these days, I’d eschew a single currency and go with precious metals and commodities and national currencies.
China sets ‘technological self-reliance’ as a key goal for the next 5 yearsProposal sets out tech target for the first time in at least a decade, with the aim to make ‘rapid breakthroughs in key technologies’
https://www.scmp.com/economy/china-economy/article/3330667/china-sets-technological-self-reliance-key-goal-next-5-years
They have no interest in letting Americans treat them as coolies ever again. When you review key, high quality scientific papers in all fields on Google Scholar, they are a very large number of Chinese scientists listed as authors.
The Chinese have an average IQ of 106 and a huge numerical advantage. If and when Communism gets out of the way, there’ll be no stopping them, or keeping up….
They seem to be doing fine WITH communism. I’m not saying we should get any more communism than we already have, but they seem to have a more collective cultural mindset that is generally OK with how policy is determined. The people have no say – so it’s just like America. Consider the American defense industry: oriented entirely toward profits rather than some collective goal. Or the American healthcare racket. It’s like how Matt Taibbi once described Goldman Sachs: “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money”.
You exaggerate but not that much. China’s organization is definitionally fascist (ironically, given the way Communists always go on about fascism). They capture the benefit of an element of private property but always subsumed to what benefits the State. The US is a corrupt oligarchy, but it is still a lot better than totalitarian China.
Try saying the kinds of things Americans say about Trump… about Xi in Hong Kong.
Point taken. On the other hand, the president isn’t really in charge here. As they say, if you want to know who is in power, look at who you can’t criticize. 🇮🇱
Amen. The Mockingbird media has done their utmost to remove any “sentience” from the sheep regarding any of that.
What Communism?!?
They have long abandoned it and are more of a version of Fascism (if you know what Fascism actually is), which is why they are going to be THE world superpower and replace the US.
The key aspect of Communism (and one of the main reasons for which it is always going to eventually crash and burn, since it is literally contrary to human nature) is that there is no private property and state expenditures make up all of the GDP.
China, and Russia for that matter, not only have private property and a very dynamic private sector but state expenditures make up LESS of their respective GDPs than in basically ALL of the Western countries!
The key difference, which makes those two countries the (re)emerging superpowers that they are is that the state (and not the oligarchs or however we like to call them in the West not to call them what they really are) controls (in China especially, in Russia it’s still an ongoing process which started with Putin) the overall direction of the economy and the general socio-political direction of the nation and key sectors of it are under total state control.
They both are as good of a mix as you can get between the best aspects of Capitalism and of Socialism [*].
[*] NOT Communism, there is a difference. Exactly like there is a difference between Fascism and National Socialism, although in our “modern” world where words have lost all meaning Socialism and Communism and Fascism and “Nazism” (another made up word itself) are used interchangeably.
Those figures in the studies did not include the rural areas and only certain urban conglomerations. Even the latest study in 2019 used the original figures from the 2001 study.
IQ is not significantly affected by education. It relates to the hardware of the mind, not the software. The East-Asian IQ advantage is also found in Western countries.
Professors Rushton and Jensen states that there are now, “hundreds of studies involving millions of people which confirm a three-way divergence between the major races – East Asians 106, Caucasians 100, African-Americans 85 and Africans 70.” (Ashkenazi Jews are 115)
(page 240)
https://www1.udel.edu/educ/gottfredson/30years/Rushton-Jensen30years.pdf