This is not news that will sit for long. It is not being reported in the MSM here but, if accurate, it is stunning information.
First, from Commodity Online service: China and UAE ditch US Dollar, will use Yuan for oil trade
NEW YORK (Commodity Online): The US dollar is fast losing out its reserve currency status with China aggressively replacing the dollar with the Yuan as a currency for bi-lateral trade. The latest is an agreement signed between the China and the United Arab Emirates (UAE), which will use the Yuan for oil trade.
The deal is worth around $5.5 billion dollars and the Chinese central bank said that the deal aims at “strengthening bilateral financial cooperation, promoting trade and investments and jointly safeguarding regional financial stability”
Earlier, Russia and Iran had decided to use Rubles as a means of currency. With both China and Russia converting their bi-lateral trades into non-US dollar deals, the greenback is now under threat of losing out its status as the world reserve currency. And the impact of such a transition will essentially tip the balance of global power.
And now from China Money Report, an investors' site. "Gold for Oil: India and Iran Ditch Dollar":
According to a new and yet unconfirmed report, India bought oil from Iran using gold. India certainly has the gold resources to fund the oil, while Iran is under pressure by the West, due the continuation of its nuclear program.
There were reports that officials have been floating this idea for some time, and now, as the EU finally decided upon an oil embargo on Iran, more details became available, yet still pend confirmation.
Oil is priced in US dollars, and bypassing the greenback posed challenges for both parties. Two banks are reportedly involved in this deal: India’s state owned UCO Bank and Turkey’s state owned Halkbank.
Both banks don’t have any business with the US and therefore are less vulnerable to sanctions. According to the report, an Indian delegation has spent time in Tehran and finalized the details of the transactions. The annual capacity of trade between these two countries is 12 billion dollars.
UAE, China Agree to Drop Dollar, Trade UAE Oil for Yuan
The dollar is losing reserve currency status before your eyes. When the Euro crisis resolves one way or another, a tsunami will hit the dollar.
The currency swap agreement between China and the United Arab Emirates [UAE] signed during Premier Wen Jiabao’s tour of the Persian Gulf region ending today, will raise eyebrows in the western capitals, especially London and Washington. The list of countries with which China has such deals is slowly and steadily lengthening and this is the first such deal with a Gulf Cooperation Council [GCC] state.
We can thank our 100-0 Congress for this. Not smart unless they are really chomping at the bit for dramatic escalation and repercussions.
Global research provides some decent background in Tehran Pushes to Ditch the US Dollar:
The official line from the United States and the European Union is that Tehran must be punished for continuing its efforts to develop a nuclear weapon. The punishment: sanctions on Iran's oil exports, which are meant to isolate Iran and depress the value of its currency to such a point that the country crumbles.
But that line doesn't make sense, and the sanctions will not achieve their goals. Iran is far from isolated and its friends – like India – will stand by the oil-producing nation until the US either backs down or acknowledges the real matter at hand. That matter is the American dollar and its role as the global reserve currency.
The short version of the story is that a 1970s deal cemented the US dollar as the only currency to buy and sell crude oil, and from that monopoly on the all-important oil trade the US dollar slowly but surely became the reserve currency for global trades in most commodities and goods. Massive demand for US dollars ensued, pushing the dollar's value up, up, and away. In addition, countries stored their excess US dollars savings in US Treasuries, giving the US government a vast pool of credit from which to draw.
(cut)
If the US dollar loses its position as the global reserve currency, the consequences for America are dire. A major portion of the dollar's valuation stems from its lock on the oil industry – if that monopoly fades, so too will the value of the dollar. Such a major transition in global fiat currency relationships will bode well for some currencies and not so well for others, and the outcomes will be challenging to predict. But there is one outcome that we foresee with certainty: Gold will rise. Uncertainty around paper money always bodes well for gold, and these are uncertain days indeed.
A couple weeks ago Alex Kane provided us with of evidence Iran wants talks. There are talks in the making.
ANKARA, Jan. 19 (Xinhua) -- Turkish and Iranian foreign ministers on Thursday called on relevant parties to resume nuclear talks with Iran as soon as possible for regional stability.
At a joint press conference held in Turkey's capital Ankara Thursday, Turkey's Foreign Minister Ahmet Davutoglu and his Iranian counterpart Ali Akbar Salehi hoped that the nuclear talks between Iran and five permanent members of the United Nations Security Council plus Germany could be held at Istanbul as soon as possible.
"The key thing is to start negotiations and ease tensions at once. And Turkey is ready to provide any help or any contributions to the resumption of nuclear talks since it is high time for talks and a settlement," said Ahmet Davutoglu.
I.e., we chose these sanctions when there were alternatives.
A fair amount written about Saddam threatening to trade in another currency
yeah, i think the first day after the invasion bush reversed his just implemented dollar switcheroo.
there’s some background on what buying oil in dollars means for our economy in this article:
Tehran Pushes to Ditch the US Dollar
Report: India and Iran are hammering out a deal to trade oil for gold
(Katleen)A fair amount written about Saddam threatening to trade in another currency
I also recall very well reading about the theory about a switch in oil currencies being a major motivation for the Iraq war – and I recall that Krugman dismissed that as well, not making sense.
link to pkarchive.org . My intuition prefers Krugman.
it may have been a theory wrt it being motivation to go to war but it wasn’t a theory bush switched it the day after the invasion. unlikely that was just a coincidence.
Annie, when the americans put the iraqi oil back on the market they wanted to do it in dollars. That’s indeed not a coincidence. That doesn’t make it significant.
i guess i do not agree, i think it makes it significant.
I find it hard to imagine the americans doing otherwise than using dollars when they put oil on the market. I also find it hard to imagine the americans would delay putting oil back on the market.
Tuyzentfloot, the americans were not putting oil on the market. when you invade a country the resources do not become yours. the iraqis were putting oil on the market. the americans forced them to change the exchange into dollars against their will. this happened immediately after they invaded. some might assert it was the reason they invaded. you have offered nothing to refute that assumption.
Annie, I gave a link to a reaction by Paul Krugman where he claims it’s politically and economically implausible that the choice of oil currency motivated the invation. I indeed didn’t make the distinction between the Iraqis or the US putting oil on the market. But I don’t know if it makes much difference. Note that I’m not claiming there’s no advantage for the US if dollars are used. Just that it’s not a major factor. Actually I’m not claiming much, I just trust Krugman on this.
Saddam didn’t just threaten, he changed to the Euro and made a healthy profit because of it.
B.S. The USA is now being destroyed by Israeli so-called high-IQ smarts on the geopolitical situation. Israel does not know what it means to operate on the geopolitical front. Zero understanding of how consequences produce the future; never had it in the history of the religion, even. Proof? Simple: what’s happening.
Unless Israel has set out to destroy the US specifically, in line with its vaunted self-proclaimed IQ over everything (something every sentient being should question), then the USA has doomed itself by hitching its star to the vagrant stupidity of Israel (doubtful whether Netanyahu could get elected dogcatcher in Philly, from whence he came). If the latter, Israel is destroying the USA and is doing it on purpose because it has another whale in sight to gravitate towards as a parasite. China? The Chinese are not that stupid. They call Israeli-backed businessmen: Tai Ren. A major sneer no one in the USA understands.
The outcome? One of these three options, or maybe all three:
(1) WWIII — and US right-wing Jewish groups are to blame, and should be.
(2) Anti-semitism in the USA as a result of (1), once the American People find out. And they will.
(3) A destruction of over 400 years of protected US Jewry that those who should be protecting it failed to do. By implicating and threatening the lives of the 98% who held the 2% in high regard, they placed the 98% in danger, and there will be a cost for this.
MRW: I tend to believe that Israel has made a long term bet against the US. It has been using our country’s military to set the stage for a post-US world wherein Israel’s neighbors / potential regional competitors will be reduced to chaotic, failed state status thereby mitigating Israel’s need for broad US-like protection.
Meanwhile, the future host for the Israeli virus is, in my view, most likely being established in India because of its historical Hindu/Muslim divide, natural resources and the fact that it serves as a geographic bulwark against an unsympathetic China.
China/India both support a Palestinian statehood. They have nowhere to turn.
Well, shit … The Saudis ‘support’ a Palestinian state, but that doesn’t mean much, does it? Instead, follow Israeli investment in India, joint terrorism programs, overlap in geo-political interests, etc.
China/India both support a Palestinian statehood. They have nowhere to turn.
China and India extended formal recognition of the 1988 Algiers Declaration. Like the Russian Federation, the have already been hosting Embassies of the State of Palestine for years. Last year the Mercosur nations followed suit extending recognition to Palestine within the 67 borders.
The US routinely adopts legislation that requires others to recognize the Jewish State of Israel. Can you imagine what would happen if Russia, China, India, the Organization of Islamic Cooperation, and the Mercosur nations adopted sanctions against countries that don’t recognize Palestine? That might get someone’s attention.
slowereastside, I agree.
“Instead, follow Israeli investment in India, joint terrorism programs, overlap in geo-political interests, etc”"..slowereastside
Hehehe….that relationship may not work out as well as Israel hoped.
AIPAC helped the India lobby get started in the US by showing them the ropes in DC thinking that would lock them into Israel. After AIPAC helped India get US help for their (peaceful) nuclear facilities and also steered them in approaching US multinationals for investments and off shore plants…..Israel is now losing industry and jobs to India and has already cut into their IT and has almost wiped out all their diamond industry cutting jobs.
India might go along with Israel along on some geo stuff like Pakistan and why wouldn’t they–Israel is the one putting the energy into that shit stirring, isn’t costing India anything.
But I don’t think India is going to be US servant like to Israel. ….its a huge country with a huge population that has had a taste of economic progress at lolng last and they aren’t to screw it up for Israel for any reason. IMO
Sheeeeit – this is what Ive been saying!!! (nice work annie!)
Pepe Escobar’s “the myth of a isolated Iran” is another piece (along with Michael Klare’s recent essays) worth reading on this topic…..
Brazil and South America are also involved in the “ditching of the dollar” – basically the Global South is in revolt and are finding ways around the dollar. Expect an invasion of Venezuela soon……
thanks dan. yeah, i watched an RT interview w/escobar the other day. this news is flying around the internet right now. not sure how the US plans on reeling in all these countries if russia, china and india won’t play. these are the 3 out of 4 of the BRIC countries.
News about the deal between Iran and India was just on RT.
really, i would love to see that.
Pepe also did a great interview on antique.com with Scott Horton.
link to antiwar.com
Curious how Germany got into hot water with the US for voting with BRIC against the Libya intervention:
link to ecfr.eu
Invasion? How crude. Everybody would scream IMPERIALISM and WARMONGERING. The good old days when most Americans believed in the ‘good war’ are over.
How about a ‘natural’ disaster and ‘humanitarian relief’ operation? Much easier to sell to American voters, esp. Democrats and those who feel guilty about the not so good WOT
link to nowpublic.com
Good point Antidote — I keep hearing that the Venezuelans are killing West Indian Manatees en masse. You heard that too? We gotta save the Manatee!!
There you go: What’s needed is another vegetarian eco-fascist to put an end to such despicable specism
Wasn’t that the real reason why Gaddafi was taken out? He had been making noises about moving away from the dollar in addition to his campaign to create a common African currency.
Wasn’t that the reason they tried taking out Chavez a few years back?
Pan-African Currency and Oil/Resource Exchange apparatus I believe…..No way Uncle Sam was letting that happen…. I think the beef with Chavez was more to do with Venezuelan “interference” into the American project in Colombia…….He has to sell his oil in dollars, cuz we’re the only market that can use some of the oil they produce- i guess its a particular crude that requires heavy refining etc…
Venezuela’s crude is heavy and sour, whereas the most favored crude is light and sweet. A big chunk goes to the US Gulf Refineries which are designed to refine the heavy, sour crudes but Venezuela is diversifying away from the US in recent years into Europe and Asia. Venezuela sends almost as much oil to Caribbean countries (including Cuba) as to the US and does so under very favorable financial conditions and sometimes below cost – which also annoys the hell of of US oil companies. So the US is annoyed with Venezuela for both political/imperial and financial/commercial perspectives.
The world is full of robbers and no cops.
“a common African currency.” backed by 200 to 400 tons of gold reserves. Where do you suppose that ended up? Precious metals traders have been abuzz for some time that thats where the LME got the 200 tons for Chavez which has recently been delivered to several non-western locations. Watch the trade in the next 6 weeks. It’s about to get very interesting.
great work, indeed, annie. i guess playing chicken with iran doesn’t seem like such a genius idea. and ‘the flying lizards’. ha. can’t listen at work, but we need more arty, obscure music videos to help make our points, don’t you think so? or maybe not. don’t want to alienate the ‘main stream’.
Annie,
The Debka story (Iran sell oil to India for gold) has been out for several days but no one has been able to corroborate it. Fwiw. -N49.
—————–
NEW DELHI: Unfazed by the US and EU sanctions, India on Thursday said that it is open to all mechanisms for payment, “whatever it takes,” to buy Iranian oil as it contributes around 12 per cent of New Delhi’s oil imports and it’s difficult to find replacement on this scale.
link to economictimes.indiatimes.com
N49. i didn’t read the debka story but there are lots of reports about this
link to independent.co.uk
this is more recent. last night when i put up this draft there was very little online, now it’s all over:
link to asianage.com
Times of India story from today: Gold for Iran oil? Govt declines any comment.
I wouldn’t consider Debka a decent source. They’re basically a propaganda outfit. The problem is that they do occasionally hit on something. This might be one of those times – we’ll have to wait and see.
Great post. I think it shows that no matter what, if someone has something they want to buy, there’s always a work-around. Wasn’t Saddam “illegally” selling oil to avoid the limits of the sanctions?
Hmm, I wonder what the reaction would be if the Mexican drug cartels moved away from the dollar.
So Israel’s determination to push the US into heavy sanctions and then war with Iran may result in this kind of blowback: more economic destabilisation and loss of global influence. Meanwhile Israel demands the tap is kept open on the massive subsidies and grants it receives from the US taxpayer, at the same time its actions are doing untold damage to the US economy. Nice. Israel sits around the swimming pool sipping drinks while it sends the bill to US workers and soldiers.
I think USA wants a war or otherwise to persuade Iran to stick with the dollar for ALL oil sales. Israel wants to be the king of the mountain. No-one really cares about an over-the-time-horizon A-bomb.
So, two different bad-guys (USA and Israel), two different reasons, two different elements of the USA’s oligarchy (BIG-ZION and BIG-BANKs (and maybe also BIG-OIL)), convergence of interests — whammo! a Shiny New War.
Once the world has an alternative to the US consumer market, the major economic powers will have the clout to force the US to change both its economic and its foreign policy.
The US consumer market is weighed under with unpayable levels of debt and not in any shape to dictate buying terms to the rest of the world. The US has cut back on a lot of foreign goods recently. Luxury goods manufacturers are all looking East for clients. Producers of fancy French wines have more or less given up on the US.
this is less about getting out from Washington’s control than it is getting away from the control of the “New York money men” as General Wesley Clark called them … it is good, ultimately, for America because it takes away israeli/zio-control little by little … and *news flash* Iran is not developing a nuclear weapon and has not started a war in centuries
BRIC countries are the fastest growing in the World and are huge. The US and Europe are more advanced, but stagnant.
If it comes down to whether BRIC can use Mideast Oil or stay relying on the dollar, it is not hard to figure stuff out. The UNESCO vote was really a surpriser- it really showed the US is isolated and the more it works to prop up military occupation(s) of Middle East peoples, the more it acts against it own interests, because those people are going to go another way.
Yes it sucks, maybe we are not going to have the OK lifestyle we now have and will end up living more like people in BRIC countries, because that’s where the economy is. Running rampant over the mideast countries and trying to force them to obey just makes the Ship of State go down faster. True, conquest can be a way to spread power and get resources, but sometimes conquest can lose. They should try a policy of building people up rather than trying to suppress others. That way we could all benefit.
The US doesn’t have the money for a 5 or 10 year or forever engagement in Iran.
link to news.yahoo.com
WASHINGTON (AP) — Pentagon leaders outlined a plan Thursday for absorbing $487 billion in defense cuts over the coming decade by shrinking U.S. ground forces, slowing the purchase of a next-generation stealth fighter and retiring older planes and ships. In a bid to pre-empt election-year Republican criticism, Defense Secretary Leon Panetta said the plan shifts the Pentagon’s focus from the wars in Iraq and Afghanistan to future challenges in Asia, the Mideast and in cyberspace. More special operations forces like the Navy SEALs who killed Osama bin Laden will be available around the world, he said
Israel has an answer to this problem. After Israel destroyed the US, she is heading to India:
link to youtube.com
Israel loves India so much. The question is: how many Indians believe that after Israel destroyed it’s former love, the USA?
That’s a catchy, pretty song.
I heard that during segregation in the US, African officials were allowed into segregated places if they wore their national costumes, showing they were exotic I guess.
The man looked Jewish and not Indian , not subtle. That’s one sick commercial.
Sure was, I gave it to my wife, and the other was interesting too.
Just to lighten things up, here’s another kind of money song, link to youtube.com
The original version of the Money song was the best, by far. But the song’s so good, the girls did pretty good.
Could someone explain how this shift away from the US dollar would affect China, which has, what, two trillion dollars loaned to the US? Would China have conflicting interests, etc?
If Iran gets lots of yuan, it will be able to easily buy lots of Chinese goods.
What does China make?
Practically everything.
Including missiles.
This is a little OT, but it seems the best place to put it. It looks like there may be some problems in marketing Israeli government bonds. The price of credit default swaps (cds) on the same has been rising recently — link to zerohedge.com
A cds price is an insurance premium that bond holders pay against the possibility of default. This is a market reaction indicating that the big players in the bond markets are getting a little nervous about these bonds. I am not sure what this means if anything. Is it just general bond market uncertainty or could it be uncertainty growing because of BDS?
These types of things can be forecasts for coming changes. If I recall correctly, S. African bonds suffered a major investor confidence crises shortly before Botha capitulated and ended Apartheid.
Wolftone:
the problem is American Federal Reserve trying to dictate where you can purchase, sell, donate etc. and where you cannot. China is emphatically interested in being able to make such decisions regardless of views of American government, be it Federal Reserve, President, Congress or National Conference of Churches.
And so is India, Turkey, Brazil etc.
The USA established the hegemony of the US$ at the Bretton Woods conference in 1944 while the allies were in a weakened position because of World War II:
link to en.wikipedia.org
The zionist sanctions that are pushed through Congress are proving to be against US economic interests and will have a major impact on the US ability to fund deficits with Treasuries as other countries move to alternative currencies.
I doubt this will be fully explained in the mainstream media. As long as our politicians get their zionist pay checks they will continue to do whatever Israel wants.
yeah, Bretton Woods. 96% of americans have n0 idea what happened there.
You’re right, Annie, but Ron Paul folks do know about Bretton Woods. Hopefully a few so worried about ruin of our welfare safety net will listen to them, but I fear they won’t understand the interplay of federal funding for such welfare with the value of the dollar–don’t drop entitlements oe even seriously monitor fraud there, even when the day comes no big players will loan you cash to pay for said entitlements except at real usury rates.
Not to be a debbie downer, but the bretton woods system was still a fixed exchange rate system – it wasn’t until the end of the bretton woods system that the dollar became a “floating” currency, all the better for financial liberalization.
The bretton woods system is what made american manufacturing, it basically said that the US would not be able to hoard interest payments from europe as they rebuilt – it would have to be reinvested/capitalized, and made sure that no country could manipulate currencies.
We can bash on the bretton woods system, but lets also remember that it worked. for a long time. and I think at the time of the end of WWII the US had every right to dollar dominance, we held over half the world’s wealth and something like 70% of capital. the bretton woods system was as benevolent a system of exchange as there ever was….
“yeah, Bretton Woods. 96% of americans have n0 idea what happened there”
They probably don’t know where it is either. A beautiful area located at the base of Mt.Washington on route 302. Been through there often. The whole general area of Vermont, New Hampshire and Maine is magnificent.
Agreed!!
Annie, well done on keeping up with this development. Krugman is wrong on this. The crude oil market is the biggest market in the world. There is a reason why the Petrodollar deal was made in the first place: it confers huge advantages to the US. In return, the US guaranteed security.
But according to Krugman, the Petrodollar deal doesn’t help the US, so they needn’t have bothered. Does that make sense? No. As a rule, when an economist tries to persuade you of something that makes no sense, it really really doesn’t makes sense. Even more so when its a Nobel prize winning economist. (BTW, there isn’t actually a Nobel Prize in economics. Alfred Nobel never established one. What the media calls the Nobel Prize in Economics is actually the “Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel”. )
The Petrodollar system allows the US to buy oil with bits of paper that it can print as much of as it likes. Could this be an advantage? Now suppose OPEC decides they would rather be paid in gold. Which is easier to come by, gold or bits of paper you can print at will?
I agree with Opaleye… don’t know exactly what Krugman said on the PetroDollar, but once the USA “loses’ the Petrodollar” – that is to say it is not the dominant currency traded for oil, then the USA Dollar is truly worthless (not worth very much at the moment anyway-
Iraq was invaded for just this reason – and I’m not alone in that opinion.
Sanctions against Iran were and are truly stupid… not to mention that China backs Iran and China holds our debt in its hands.
Politicians may be getting rich taking the Lobby’s money, but they’re sinking our economy by doing so. Sounds treasonous to me.
Crazy sanctions with different time fuses set for banking resyriction and other ones set on the oil (July 1) and petrochemicals to kick in. Greece that relies on Iran for 35% of its needs asked for a 6-month grace period before complying, and it looks like the US will grant it. It’s also desperate for the advantageous financing it had been getting from Iran. Iran supplies the daily flow of 600,000 barrels to Europe, which is a quarter of its daily output.
Hoo boy. Our special-interests-based political system, with the Israel lobby right at or near the top, is driving our country over a ledge. How stupid are we to let this happen? I just hope the next hegemon is less bloodthirsty and idiotic…
Sigh. Another nail in once great America’s coffin.
Today’s Financial Times discusses the rise in oil prices because Iran has threatened to immediately shut off oil to Europe which will especially hurt Eastern Europe, Greece and Italy.
Then there is this report that oil the US military is dependent upon in Afghanistan is supplied by guess who, Iran:
January 28, 2012
How The U.S. Military In Afghanistan Is Breaking The Sanctions On Iran
link to moonofalabama.org
‘Iran sanctions backlash– oil buyers ditch dollar’ – There is an ancient saying, which says, ‘every stick has two ends’, it looks like ‘our’ lawmakers didn’t know that or forgot about it ,…
Iran announced today that it’s about to cut the supply of oil to Europe. It’s about time, it’s been taking crap for years without fighting back.
Looks like a game of chicken to me..and Iran may win it.
First, the US can’t ‘force’ anyone to not buy from Iran, it can twist arms but that’s all.
Second, I haven’t seen where the UN has legitimized the Iran embargo.
Third, sanctioning Iran’s Bank doesn’t mean countries have no way to pay Iran, Russia (for a big one) and other countries can and might act as their banker.
Fourth, Europe only accounts for 18% of Iran’s oil sales.
It’s pretty clear from other countries official statements not everyone is going along with the US embargo.
Another pointless Israeli inspired, sucking oxygen out of the universe f- upped issue just because they are US pampered lunatics.
link to ft.com
Saudi may Aid Turkey in Oil
“Turkish official said as a private group, Tupras was free to talk to Saudi Arabia about alternative supply – but added that Ankara was considering asking President Barack Obama for a waiver from the US sanctions against buying oil from Iran.’
“There is no binding decision for us other than [the] decisions of the United Nations.”
link to indrus.in
Iran sanctions: India exploring Russia payment route
January 29, 2012
Igor Kryuchkov
With the US and the EU imposing fresh sanctions against Iran, India is exploring all possibilities to keep the Iranian oil flowing as it is critical to its energy security. One of the options being discussed is firming up an arrangement with Russia’s Gazprombank for paying to Iranian oil.
link to reuters.com
Oil industry sees China winning, West losing from Iran sanctions
link to abcnews.go.com
UN Nuclear Inspection Gets Under Way in Iran
i was just collecting a few more iran links this morning thinking of writing another update on this issue american. i read those indrus and reuter articles. this is hot news. in fact the author of the reuters article Zhdannikov, i got a little lost following him, he’s in davos right now..i think. i bet lots of deals are being made in davos.
tony karon @ time magazine has an iran article up to. it’s hot.
Yep, I think you should stay on top of this regularly annie…..
It will be interesting to see if O dilutes the whole embargo thing is by giving certain countries like Turkey a pass to keeping buying from Iran and if he doesn’t seeing if Turkey does anyway.
All I see so far is the EU-US cutting their nose (and some others) off to spite their face.
I am really interested to see how far Russia (and China) will go financially and trade wise to protect their Iran interest …….cause the US will not get into anything too threatening with Russia and their buddy China..if anyone in DC still has any sense at all.
It should also be mentioned that Saudi Arabia is already at maximum sustained output. They don’t have the capacity to make up the shortfall of Iran oil exports.
Saudi Arabia has already announced it’s able to crank out an additional 2 MM barrels to compensate for Iran’s. Maybe this spooking and raising of the price is a little help from Uncle Sam to balance the budget to pay for the $129 billion package in social spending promised by the king to the restless natives…
… The fiscal break-even price for the United Arab Emirates, Iran and Iraq has also risen to between $80 and $100 a barrel, according to IMF estimates. Mohammed Al Hamli, UAE oil minister, last year told an industry conference that the “reasonable” price for oil was between $80 to $100 a barrel. ”
Financial Times had an article on this a couple of weeks back:
“Saudi Arabia targets $100 crude price
By Javier Blas and Guy Chazan
Saudi Arabia is aiming to keep oil prices at about $100 a barrel, a third above its previous public target, in a sign that Riyadh needs higher oil revenues to sustain a big rise in public spending.
Ali Naimi, the Saudi oil minister, on Monday for the first time said the world’s largest oil producer aimed to keep oil prices at the triple-digit level.
“Our wish and hope is we can stabilise this oil price and keep it at a level around $100 [a barrel],” Mr Naimi told CNN. “If we were able as producers and consumers to average $100 I think the world economy would be in better shape.”
Brent crude oil prices rose 56 cents on Monday to $111 a barrel amid rising tension between western nations and Iran over Tehran’s nuclear programme.
Full article:
link to ft.com
annie, here’s the last para of Tony Karon’s Time piece:
“It’s precisely because prospects for achieving a breakthrough in the P5+1 format remain slim that the Obama Administration may be seeking more direct channels of communication with the Iranian leadership to avoid a slide into confrontation. Such channels would necessarily be discreet — in public, the Iranians continue to play hardball, late last year declining an offer of establishing military-to-military links to prevent confrontation through misunderstandings among forces deployed in the Gulf — and would allow the two sides to engage on some of the strategic conflicts that undergird the nuclear issue. But in an election year, and given the domestic politics on both sides, notes professor Gary Sick of Columbia University, the public posture among leaders will remain hostile in order to forestall any backlash. Absent a discreet, direct channel between the Obama Administration and Iran’s key decisionmakers, the chances of stumbling into confrontation remain high.”
Read more: link to globalspin.blogs.time.com
****
I don’t pretend to have understood all of this article, but the notion of discreet private communications between the US and Iran to diffuse the tension makes sense to me.
“In addition, countries stored their excess US dollars savings in US Treasuries, giving the US government a vast pool of credit from which to draw.”
and . . .
“But there is one outcome that we foresee with certainty: Gold will rise. Uncertainty around paper money always bodes well for gold, and these are uncertain days indeed.”
. . . indicates to me that the Casey Research writer who wrote this piece picked up by Global Research has no understanding of how reserve accounting works. Zero understanding.
The USGOV does not draw down on foreign investment in this country as a credit pool. This is absolute lunacy.
When a foreign government buys US Treasuries, it is essentially banking at the Federal Reserve. It goes into something the Fed calls a “securities account.” It is no different than if you or I were to put money in a savings account at a local bank, except in the geo-economic world, the measurement of that parking is called # of US govt treasuries. In addition, in order for that foreign government to get its money out of the Fed, it has to move those ‘dollars’–a non-convertible currency–to its Fed “reserve account” (like a checking account) and convert it to something. The conversion can be to something it wants to buy or sell to us, in which case the ‘dollars’ gets transferred to an American bank via a spreadsheet change, or if it wants the money denominated in another currency, it has to do what you or I do: buy those currencies on the open market at the going exchange rate.
I urge all of you, as I have before in a heated discussion on this topic, to read Warren Mosler’s The 7 Deadly Innocent Frauds of Monetary Policy. Buy the book (which contains handwritten errata) or read online for free, without the two or three corrected errors:
link to moslereconomics.com
WSJ of last Tuesday:
“… News of a coming embargo by Iran’s largest oil-export market shocked the country’s troubled economy. Iran’s currency, the rial, fell 10% to a record low on Monday, while gold prices rose. The ban is set to take effect on July 1, following a review to ensure the weaker EU economies can find, and afford, new sources of oil. The EU also agreed to freeze the assets of Iran’s central bank, the conduit for the country’s oil revenue, and ban trade with its petrochemical industry.
… The Obama administration applauded the EU decision on Monday and backed it up by blacklisting Iran’s third-largest bank, Bank Tejarat, one of Tehran’s few remaining conduits for trade with the West. The move followed President Barack Obama’s approval last month of sanctions on Iran’s central bank that are due to take effect later this year.
… Oil prices rose slightly at news of the embargo. Crude for March delivery closed at $99.58 per barrel in New York trading Monday, up $1.25, or 1.3%. Europe accounts for about 20% of oil revenue in Iran, the world’s fourth-largest oil producer. The embargo could cost Iran $5 billion to $10 billion in oil revenue for 2012, and more in subsequent years, said Trevor Houser, a partner at New York-based economic-research firm Rhodium Group.
… The economic pressure could fuel political dissent ahead of parliamentary elections on March 2, following the government’s move last year to reduce public subsidies that had helped secure the support of rural and lower-income voters.
… Iranian officials have said they would seek to replace Europe’s market with buyers in Asia, as U.S. officials call on consumers of Iranian oil in Asia and Africa to find other sources, with mixed success. China, Iran’s No. 2 buyer after the EU, has rejected calls to halt its consumption of Iranian oil. India said Monday it would keep buying crude oil from Iran and is working with Tehran to find a way to settle payments despite sanctions.
The EU imports about 600,000 barrels of Iranian oil daily, more than a quarter of Tehran’s daily exports, according to the International Energy Agency. But those imports fall unevenly, with some of Europe’s most-stressed economies—Greece, Italy and Spain—among the top customers.
Refiners in Spain and Italy have already begun to phase out Iranian oil purchases in anticipation of the embargo, and Saudi Arabia has offered to help fill the gap. But Greece has sought a slower implementation of the ban to protect its economy. Under Monday’s agreement, the EU said it will review the policy’s effects on member states by May 1, a condition sought by Greece. However, any move to reverse or delay the embargo would require the unanimous decision of the EU’s 27 members, officials said.
Italian Foreign Minister Giulio Terzi said the impact of the oil embargo on the Italian economy will “be negligible, almost zero.” Greek Foreign Minister Stavros Demas said Greece benefited from favorable financing terms in its Iran purchases, and that it will need help not only to find new suppliers but to also get the favorable financial terms they enjoyed from Iran. Greece has been buying 35% of its oil from Iran.
link to online.wsj.com
The concept of “printing money” is a hangover from the days when we were on the gold standard. It has absolutely no application in today’s US economic world. Zero application since 1971 or ’72 when we went off it. It was used to describe a condition in which the amount of paper money in circulation, which was supposed to be backed by gold and could be converted to gold (therefore a convertible currency), exceeded the amount of gold available to back it up.
Tying the US dollar to gold (or any metal) is an idiocy, because he who controls the metal controls the dollar, and the economic life of everyone in the country.
That is what happened in 1764 when Britain passed The Currency Act to bankrupt and control its American colony…and it was that, not the Tea Party, which caused the American Revolution. Benjamin Franklin went to England in 1750 and was shocked by the poverty of the ordinary people in the streets, because he’d never seen anything like that before. The American colony used something called Colonial Scrip: paper money, which as he wrote of the American population at the time “Impossible to find a happier and more prosperous population on all the surface of the globe.”
When asked by the Brits how we paid for our poor houses, he said, we don’t have any. He said “We issue it [paper] in proper proportion to make the products pass easily from the producers to the consumers. In this manner, creating ourselves our own paper money, we control its purchasing power, and we have no interest to pay to no one.’
The British bankers were furious and got Parliament to pass The Currency Act, which prohibited the American colony from issuing its own money and forced it to use currency it issued backed by gold. Naturally, it did not send over enough gold to back up the currency and the American colony fell onto hard times within the year. As Franklin wrote in his papers, we would have been more than happy to pay a small tax on tea had we still our own currency.
This is what started the American Revolution, and why it’s written into our Constitution that only Congress has the right to create money.
Then, of course, Hamilton started a US Bank (private) that had a 20-year charter in 1790 or 1791. He was in cahoots with the British bankers. When it ended in 1810, or thereabouts, congress voted not to renew the charter. Rothschild, who was the power behind the Bank of England, went ballistic, and vowed to destroy us. That’s what precipitated the War of 1812 that none of us are taught in school. The Brits won, and we had to go back on a gold-backed dollar that the Bank of England and the Rothschilds controlled. When Abraham Lincoln couldn’t get the money to win the civil war from England–because they had all the gold–someone in his cabinet reminded him of the constitutional authority he had, and Lincoln created Greenbacks–PAPER MONEY–to pay the soldiers, and it saved the day.
Edit: Paper money (like the Greenback) was legal tender based on the ‘full faith and credit of the United States’. As the great economist Hyman Minsky used to say, “Anyone can create money; the problem lies in getting it accepted.”
I want to correct the record here: it appears it was 1763 when Franklin went to England, not 1750. Also contains the attribution for the Franklin quote:
link to coburns.biz