From August of last year through December, foreigners dumped more than $550 billion in dollar based assets as the demise of the petrodollar in global trade continues to expand. And as we begin 2016, a new report out for January shows that more treasuries were dumped in that month alone than in any month on record.
The previous high of $48.1 billion in treasuries sent back to the U.S. was shattered in January as foreigners dumped their dollars at a rate of $57.2 billion. Much of this was tied to country’s using their dollar reserves to shore up their own currencies, but a large part also included less need for dollars to purchase oil and other commodities as the global economy moved strongly into recession.
Foreign governments and central banks sold long-term U.S. Treasuries at a record pace to start 2016, Treasury Department data showed Tuesday.
Net sales were $57.2 billion during January, exceeding the $48.1 billion rate of the previous month, according to figures released in Washington. It’s not clear from the data which countries were selling: While holdings attributed to China, the largest foreign owner of Treasuries, fell by $8.2 billion from December, the world’s second-biggest economy said earlier this year that its foreign-exchange reserves had declined by $99 billion in January. – Bloomberg
In addition to using dollar reserves to protect currencies, nations are beginning to transition away from the petrodollar as more bi-lateral facilities go online and offer alternatives to the 44 year polar reserve currency system. In fact, both China and Russia are expanding trade unions that allow country’s to trade directly in their own currencies, or in using the Yuan as a medium of exchange, and OPEC nations are slowly moving away from the dollar, as in the case of Iran now selling their oil in euros.
The summer of 2015 saw the beginning of the end for the petrodollar, and three months into the new year that trend is not diminishing. And as China, Russia, and even OPEC nations prepare for a new global financial system that no longer needs or requires dollars to function, the only thing remaining to watch is what the U.S. will do to either protect their status as the singular reserve currency, or accept the inevitable and work to be a part of the new financial paradigm.
Kenneth Schortgen Jr is a writer for Secretsofthefed.com, Examiner.com,Roguemoney.net, and To the Death Media, and hosts the popular web blog, The Daily Economist. Ken can also be heard Wednesday afternoons giving an weekly economic report on the Angel Clark radio show.