Bloomberg (props yet again to Zerohedge); China makes a major move clearing the way for dropping the use of USD in international trade:

    Japan and China will promote direct trading of the yen and yuan without using dollars and will encourage the development of a market for companies involved in the exchanges, the Japanese government said.
    Japan will also apply to buy Chinese bonds next year, allowing the investment of renminbi that leaves China during the transactions, the Japanese government said in a statement after a meeting between Prime Minister Yoshihiko Noda and Chinese Premier Wen Jiabao in Beijing yesterday. Encouraging direct yen-yuan settlement should reduce currency risks and trading costs, the Japanese and Chinese governments said.

This is a subtle, but effective, method for China to slowly and inexorably take over trade in Asia. Some years ago I noted that it would be a simple matter for China to assert control over Japan by using its excess of US Dollars to buy yen, or even credibly threatening to do so, forcing the Yen higher and crushing Japan’s export-based economy. The Chinese have chosen the silk-gloved fist instead. “Look, it’s mutually agreed and beneficial.” Muahahahahaha. Maybe the threat was credibly made behind closed doors.

The above Bloomberg article also notes that China penned a currency swap with Thailand “to promote the use of the yuan in the Association of Southeast Asian Nations and establish free trade zones.”

By the way, for those who don’t remember, most international oil trades are settled in US Dollars. This action by China sends a clear message to oil exporters (Iran, Venezuela, Libya) that there’s a new settlement currency rising, inviting them to climb on board (before it’s too late). Japan has traditionally been a large purchaser and holder of US Treasuries.

China and Japan are the world’s third and fourth largest economies, respectively.

Meanwhile, passersby on Byrd Street overheard this refrain wafting from somewhere above:

Irene goodnight, Irene goodnight

Goodnight Irene, goodnight Irene

I’ll see you in my dreams

…

I asked your mother for you
She told me you was too young
I wished to God I’d never seen your face
I’s sorry you ever was born

…

Irene goodnight, Irene goodnight
Goodnight Irene, goodnight Irene
I’ll see you in my dreams

(Words & music by Huddie Ledbetter, 1936)