China and Russia bypass USDollar

I told you this would happen. The USDollar's reign as the world's reserve currency is being eroded. Hello, gold and silver.

http://www.bloomberg.com/news/2010-09-08/china-russia-push-yuan-ruble-trading-to-diminish-dominance-of-u-s-dollar.html

China and Russia plan to start trading in each other’s currencies as the world’s second-biggest energy consumer and the largest energy supplier seek to diminish the dollar’s role in global trade.

“Given the risk to the dollar and U.S. assets from their fiscal position they want to reduce their dependence on the dollar as an invoicing currency,” Bhanu Baweja, global head of emerging markets fixed income, currency and credit research at UBS AG, said in a phone interview from London. “It makes sense for two large economies to exclude a third, overly dominant economy from their trading equation.”

In the wake of the global financial crisis, which forced the U.S. economy into recession, both China and Russia have called for the dollar’s role in the financial system to be diluted. Volatility in major currencies is putting the global recovery at risk Zhang Ping, the head of China’s National Development and Reform Commission, said last month. President Dmitry Medvedev last year suggested Russia, holder of the world’s third-largest foreign-currency reserves, reduce its holdings of dollar.

Dollar Elimination

“China wants to reduce the volatility in its access to primary goods,” he said. “They want to reduce their dependence on the dollar in trade transactions.”

“Gradually the dollar is being eliminated from the foreign-trade settlement flows,” said Dariusz Kowalczyk, a Hong-Kong based senior economist at Credit Agricole CIB. “People are beginning to trade Asian currencies without intermediation via the dollar.”