Secret moves launched by China, Russia, Japan, France, Arab States to end the Dollar

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Now here is an absolute indication that China and Russia will NOT be using dollars in energy settlements between countries.

Russia And China Discontinuing Energy Settlements In Dollars

news.bbc.co.uk — This is the real beginning of the rumored trend in hard FACT. It will definitely spread now. Russia is hoping to sign deals worth $5.5bn (£3.5bn) with China as Prime Minister Vladimir Putin visits Beijing. About 30 contracts in infrastructure, energy, mining, transportation and telecoms have been lined up.

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Good stuff Vector, Gold is real money and the other stuff is a scam. I wish the masses would have woke up long ago that compensation from a printing press was only good for the banker.

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Good stuff Vector, Gold is real money and the other stuff is a scam. I wish the masses would have woke up long ago that compensation from a printing press was only good for the banker.

Yep, the hand writing is on the wall.

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Putin set to sign huge China deals

Source: Agencies/Shanghai Daily | 2009-10-13



RUSSIAN Prime Minister Vladimir Putin arrived in Beijing last night for a visit expected to yield a slew of deals on cooperation in development of oil, gas and other strategic resources.

Putin was met by Foreign Minister Yang Jiechi when he arrived for the start of his three-day trip, his first visit to China since becoming prime minister in May.

Nearly three dozen contracts in energy, mining, transportation and infrastructure, worth more than US$5.5 billion, are due to be signed during Putin's visit, Russian Deputy Prime Minister Alexander Zhukov said in Moscow.

Over the weekend, Russian and Chinese negotiators met in Beijing to put the final touches on those agreements.

The two sides have "entered a new stage of long-term, strategic cooperation on energy," Chinese Vice Premier Wang Qishan said on Sunday, in his meeting with Russian Deputy Prime Minister Igor Sechin.

Sechin pledged to work with China to further expand crude oil trade and cooperation.

This year, Moscow signed a US$25 billion pact to help finance a pipeline to supply oil from its untapped Siberian reserves to China.

In exchange, China was guaranteed a 20-year supply of crude oil, just part of the US$100 billion in China-Russia energy-related deals agreed to this year.

Work on both the Russian and Chinese sections of the Siberian oil pipeline was due to wrap up by late 2010.

The pipeline is due to begin supplying China 1.5 million tons of oil annually, starting in 2011.

One of the agreements that might be signed during Putin's China visit is a contract to build a massive joint-venture refinery in the northern city of Tianjin, near Beijing.

State-run China National Petroleum Corp, which would own 51 percent of the venture, and its partner, Russia's Rosneft, plan to finish building the refinery by 2012, the 21st Century Business Herald newspaper reported yesterday.

"Energy cooperation is an important part of the China-Russian strategic cooperative partnership and the two countries' economic and trade cooperation," Wang Guangya, Chinese vice foreign minister, said last Friday.

During Putin's visit, President Hu Jintao would meet him and Premier Wen Jiabao would hold talks with him today.

Putin would also attend the 14th bilateral prime ministers' regular meeting and the eighth prime ministers' meeting of the Shanghai Cooperation Organization member states.

The SCO groups China, Russia, Uzbekistan, Tajikistan, Kyrgyzstan and Kazakhstan. Mongolia, India, Iran and Pakistan are observers of the regional organization.

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Obama Dollar Retreats Most Against Commodities in Wealth Shift

By Brendan Murray



Oct. 13 (Bloomberg) -- President Barack Obama’s effort to lead the world economic recovery by spending the U.S. out of its recession is undermining the dollar, triggering record commodities rallies as investors scour the globe for hard assets.

As threats of a financial meltdown fade, the currency is falling victim to an unprecedented budget deficit, near-zero interest rates and slow growth. The dollar is down 10 percent against six trading partners’ legal tender in Treasury Secretary Timothy Geithner’s first eight-and-a-half months, the sharpest drop for a new occupant of that office since the Reagan administration’s James Baker persuaded world leaders to boost the deutsche mark and yen by debasing the dollar in 1985. This year’s drop followed its best two quarters in 16 years.

“The dollar had been strong because the U.S. was a haven in the storm, and now that the storm is abating, who needs the dollar?” said Edmund Phelps, who won the 2006 Nobel Prize in economics and teaches at Columbia University in New York. “People got exasperated with the tiny returns on safe assets.”

Investors are sating their renewed risk appetites with developing nations’ stocks, currencies and the commodities some of them produce. Gold is up 19 percent this year, touching an all-time high $1,062.70 an ounce on Oct. 8. Copper has rallied 103 percent with the biggest three-quarter rise in at least 21 years. Crude oil, up 64 percent, just finished its steepest eight-month climb since 1999. Aluminum has gained 24 percent, propelled by its best two quarters in a dozen years or more.

Worst Since 1991

The MSCI Emerging Markets Index yesterday reached 950.34, the highest since August 2008, after the 22-year-old gauge’s biggest seven-month rally. The Dollar Index, which measures the currency against the euro, yen, pound, Canadian dollar, Swedish krona and Swiss franc, dropped to its lowest level since August 2008 on Oct. 8 after its worst two quarters since 1991.

The nonpartisan Congressional Budget Office estimates that the budget deficit for the fiscal year that ended Sept. 30, which included some of Obama’s $787 billion stimulus package and the lowest tax revenue in more than 50 years, was $1.4 trillion, more than India’s gross domestic product. The administration will announce the final figure by mid-October.

Faced with administration projections of shortfalls totaling $9.1 trillion over the next decade, Obama and Congress have pledged to restore discipline. Fed officials have discussed how -- but not when -- they plan to reduce the central bank’s balance sheet, which has doubled to $2.1 trillion under emergency lending programs to unfreeze the credit markets.

‘Lofty Assurances’

“The most important thing coming from investors in Asia, where I am, is despite all these lofty assurances by U.S. officials that there’s a credible exit strategy from both fiscal and monetary stimulus, they understandably don’t believe it,” said Stephen Roach, chairman of Morgan Stanley Asia in Hong Kong.

Geithner, 48, has adopted the past two administrations’ policy of publicly favoring a “strong dollar.” It fell 24 percent in George W. Bush’s first four-year term, which ended Jan. 20, 2005, and rose 1.3 percent in his second.

“We are going to do everything necessary to make sure we sustain confidence” in the U.S. economy, Geithner said Oct. 3 in Istanbul.

Lawrence Summers, director of the White House’s National Economic Council, echoed Geithner’s statement in an Oct. 8 interview. “He made it very clear that our commitment is to a strong dollar based on strong fundamentals,” Summers said.

U.S. Interventions

Those words may ring hollow without direct government action to support the dollar or more evidence that the fiscal and monetary stimulus will be short lived. The U.S. hasn’t moved to shore up its currency by purchasing dollars since 1995. It intervened to weaken the dollar against the yen in 1998 and to support the euro in 2000.

“Currencies that have the lack of support of petroleum, metals, and have a liberal central bank posture toward printing money are currencies that will continue to be punished,” said Peter Kenny, managing director in institutional sales at Knight Equity Markets in Jersey City, New Jersey. “The U.S. dollar is a classic example of that.”

Commodities “insist on validation and validity,” while currencies “are subject to politics and perception,” he said.

HSBC Holdings Plc economists Stephen King and Stuart Green said in a report this month that the end of U.S. economic supremacy is at hand.

Their report predicted the “demise of the West” amid “ongoing struggles in the developed world” and said that “emerging market nations are set to dominate world economic activity in the years ahead.” Titled “The Tipping Point,” the report said currencies will be weak in countries “still pondering exit strategies and faced with multiple years of debt repayment.”

Growth Prospects

“The most obvious candidates are the U.S. dollar and sterling,” they wrote. Emerging-market economies will expand 6 percent next year, more than three times the 1.8 percent growth in developed economies, they said.

China’s 9.5 percent economic growth and India’s 7.2 percent increase will lead all nations next year, the HSBC economists predicted. In contrast, GDP will expand 2.8 percent in the U.S., 1.2 percent in Japan and 0.7 percent in the 16-nation euro zone, they said.

“Asia is taking its place again on the world stage” and the wealth shift is occurring “more rapidly than anyone would have thought,” said Stephen Green, HSBC group chairman, in an Oct. 6 interview in Istanbul.

As the dollar slips, silver and gold have outperformed all major currencies since the Sept. 15, 2008, announcement of Lehman Brothers Holdings Inc.’s collapse as investors favored the metals over legal tender.

‘Sniff of Inflation’

“Gold serves as a hedge against inflation, and even though we are in the midst of a recession worldwide, the sniff of inflation is already in the air,” said Richard O’Brien, chief executive officer of Newmont Mining Corp., the largest U.S. gold producer, on Oct. 2.

The dollar is suffering even as American stocks rebound from a 13-year low reached in March. One reason: the 19 percent increase in the Standard & Poor’s 500 Index this year is trailing gains in stocks in most other nations.

Of 82 countries’ benchmark stock indexes tracked by Bloomberg, 60 performed better this year than the S&P 500 as of yesterday. Peruvian stocks lead the world with a 120 percent gain. The U.S. edged out gains by Bangladesh, New Zealand and Finland. Ghana, down 41 percent, is in last place.

Even measured against the March 9 start of the S&P 500’s biggest rally since the 1930s, the U.S. index’s 59 percent gain puts it in 39th place worldwide.

Highest Unemployment

With excess production capacity in the U.S. near an all- time high and unemployment at 9.8 percent, the highest in the Group of Seven, restoring the world’s largest economy to the 3 percent growth rate of the past two expansions may take years.

“The U.S. recovery is not yet clearly under way and other parts of the world, particularly emerging markets and commodity- based countries, are ahead of us,” said Michael Mussa, a senior fellow at the Peterson Institute in Washington and the International Monetary Fund’s former chief economist.

Niall Ferguson, a Harvard University professor, said that “it would be extraordinary” if the dollar didn’t weaken in the next year.

Obama administration officials are likely to tolerate a decline unless it “gets to an extent where it’s causing trouble,” Jim O’Neill, chief economist at Goldman Sachs Group Inc., said in an interview in Istanbul.

Excessive Drop

In an e-mail response to questions from Bloomberg News on Oct. 9, O’Neill said he considers the dollar’s recent drop excessive and predicted the currency will be stronger in a year, especially against the yen.

The dollar slumped to a postwar low of 80.63 yen in April 1995, only to rally 26 percent in the following two years. The Dollar Index reached a 10-year low in December 2004 on concern the U.S. current-account deficit was unsustainable, then rebounded 13 percent in 2006.

“We’re in the midst of a classic overshoot of the dollar,” said Michael Rosenberg, former head of foreign- exchange research at Deutsche Bank AG and a Bloomberg consultant. He said the U.S. outlook next year is more favorable than Japan and the euro area, the country’s current-account deficit is narrowing and the bond market isn’t reflecting inflation fears.

Rosenberg cited the 16 percent rise this year in the Reuters/Jefferies CRB Index of 19 commodities as evidence that the flight to raw materials isn’t widespread. Natural gas is down 49 percent and wheat has lost 31 percent.

Shorting the Dollar

The dollar is succumbing to momentum in a market that’s “lost its anchor,” Rosenberg said. “From 2001 to 2009, the best strategy was to close your eyes and short the dollar.”

The rebalancing of global wealth away from the U.S. as reflected in the dollar is likely to take years if not decades, said Carmen Reinhart, a University of Maryland economist who co- wrote a 2009 book with former IMF chief economist Kenneth Rogoff on the history of financial crises.

After World War II, the U.K. currency’s downfall was predicted “long before the sterling crisis of 1967 put the final nail in the coffin of the British pound as a reserve currency,” Reinhart said.

The dollar’s share of reserves in countries that report currency allocations fell in the second quarter to the lowest level since the euro was introduced in 1999. Reinhart predicted the dollar will remain the world’s most widely used currency for years and that any slide will be gradual until a viable alternative comes along.

“The euro hasn’t been fulfilling that role. The yen? Forget it. And the yuan is not convertible,” Reinhart said of the European, Japanese and Chinese currencies. “This is not something that’s around the corner here.”

Last Updated: October 13, 2009 00:01 EDT

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4 Ways to Short the U.S. Dollar

For decades, the U.S. dollar has been among the mightiest currencies in the world. Now, the question on some investors’ minds is how low will the dollar go?

On Friday, Oct. 9, the dollar Index, which tracks the U.S. dollar against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, touched 75.9, its lowest level since August 2008.

During the past year, the dollar has been subjected to formidable forces, and one of the most influential has been global economic momentum. Many countries that hold large reserves of U.S. currency – China is sitting on more than $2 trillion – are watching nervously as the nation’s debt continues to rise and its deficits with trading partners in Asia and the Middle East continue to grow, says Clyde Prestowitz, the president of the Economic Strategy Institute, a think tank in Washington, D.C., that advocates for responsible globalization and describes itself as nonpartisan.

In addition, the government stimulus package makes it unlikely that an already weak monetary policy intended to support U.S. exports will be reversed in the near term. The government’s decisions to print more dollars and increase government spending suggest the currency will continue to weaken.

In short, many signs point to the dollar’s decline. “I think the dollar is going to go down in the medium term, in three to five years,” says David Wyss, the chief economist at Standard & Poors. “Countries are diversifying away from the dollar reserves. China and the OPEC countries will be moving toward more evenly-weighted market baskets, which means they’ll be buying fewer dollars.”

As of Oct. 9, one dollar would convert to 67 euro cents, down from 73 euro cents a year ago. U.S. travelers certainly feel the pinch – one euro cost $1.47 as of Friday, up from $1.36 a year ago. In Japan, one dollar would convert to 88.4 yen, down from 100.5 yen a year ago.

Last week, more bad news leaked about the dollar. An article in The Independent said that China, Russia, Japan, France and Arab states in the Persian Gulf are planning to end dollar dealings for oil and move to a basket of currencies. Oil and finance officials in the Gulf later denied that report.

In any case, finding the next best alternative to the dollar will prove difficult, Prestowitz says. “The dollar market is by far the biggest and the most liquid and it’s the easiest one to get in and out,” he says. Also, should a global panic or war occur, expect the dollar to rise in value. “Whenever there is panic, people flee to the U.S. and the dollar strengthens,” Prestowitz says.

For now, investors who want to short the dollar have a few options. Analysts recommend buying up commodities – primarily gold and oil – as well as currencies of countries that produce commodities, and foreign stocks that are exposed to companies that aren’t holding much U.S. currency. In most cases, the best options are investing through mutual funds or exchange-traded funds.

Here are four ways to short the dollar:

Commodities

Expect most commodities to perform well against a declining U.S. dollar. In contrast to the dollar, which as a piece of paper is valuable only because the U.S. government says it is, commodities are typically solid things of inherent value. Historically, most currencies were backed by some sort of commodity.

Although pricey, gold is still the purest indicator of monetary impact and it’s far less volatile than most other commodities, says Axel Merk, the founder of Merk Investments. Two out of three of Merk's funds are bearish on the dollar. Although, gold hit a new record of $1,059.60 last week, it’s very likely to continue rising in the near term, he says. Silver, platinum and palladium also tend to rise when the dollar falls in value, but they’re subject to wilder swings; silver can move 10% in a day, he says.

“These are hedges against the weaker dollar but they have different dynamics,” says Merk. “You have to know their volatility. It feels good when they go up, but your stomach can turn upside down when they go down.”

Currently, some of the best-performing commodity-based ETFs include SPDR Gold Shares (GLD: 104.26, +0.70, +0.67%), which is up 18.8% year to date, as of Oct. 9, according to Morningstar. Also the iShares Dow Jones US Oil & Gas Exploration & Production Index Fund (IEO: 53.79, +0.15, +0.27%) is up 38.6% year to date. The firms within this fund are small oil and gas companies that have low-cost fields, are finding new fields and extracting more marginal gas and oil, and have leverage exposure to energy prices, says Bradley Kay, an ETF analyst at Morningstar.

Most commodity-based ETFs aren’t built to go against the U.S. dollar, but on a historical basis, they tend to rise as the dollars drops in value, says Nicholas Brooks, the head of research and investment strategy at ETF Securities, an asset management firm that’s based in London and issues ETFs.

Some mutual funds now show an inverse relationship to the U.S. dollar. Vanguard Precious Metals and Mining (VGPMX) is up 65% year to date and is primarily exposed to gold, platinum, palladium and steel and only 7% of its assets are in U.S. companies, says Harry Milling, a mutual fund analyst at Morningstar. (Last year, this fund was down 56%.) Also, Van Eck International Investors Gold (INIVX), which is composed of gold mining companies, is up 58.4% year to date. However, it isn’t highly diversified; the fund invests mainly in companies with potential for production growth, Milling says.

Foreign Currencies

Another option is investing in currencies of countries that produce a lot of commodities like the Canadian dollar and the Australian dollar.

Of course, there are more sophisticated ways to invest in foreign currencies than changing your money at the airport. Take ETFs, for example. The CurrencyShares Australian Dollar Trust (FXA: 90.64, -0.16, -0.17%) is up 29.3% year to date, while the CurrencyShares Canadian Dollar Trust (FXC: 96.28, -0.11, -0.11%) is up 16.1% for the same period. These funds fell last year by 20% and 15%, respectively. Their holdings are essentially bank accounts in their currency, Kay says. That means investors get capital appreciation as exchange rates change, but in some cases cash yields on the underlying holdings may be low.

Investors should also look for a mix of Western European currencies, in particular the Swiss franc and the Norway kroner, as well as the euro. Western Europe has maintained price stability, and Norway is one of the few countries with a surplus, Merk says.

Investing in foreign currency-based mutual funds is somewhat trickier – in part because investors will be exposed to the foreign currency and stock, says Gregg Wolper, a senior fund analyst at Morningstar. Fidelity Canada Fund (FICDX) is up 38.4% year to date, and it’s in the top 10% of Morningstar’s foreign large-blend categories, which is where the core international funds are. The Commonwealth Australia/New Zealand fund (CNZLX), which invests in both nations’ currencies, is up 38.1% year to date. The Vanguard European Stock Index (VEURX), which is exposed to currencies from Western European nations, including the United Kingdom, France, Germany, Switzerland and Spain, is up 29.8% year to date.

Foreign Stocks

To leverage against the dollar with foreign stocks, avoid stocks that are exposed to large multinationals or companies that conduct most of their business in U.S. dollars, Merk says.

“If you want something reasonably safe and not too volatile, stick to baskets of funds that have a broad range of stocks that cover developed countries,” says Wyss. “Those tend to be less volatile than the stocks of developing countries.”

For example, the Vanguard FTSE All-World ex-US ETF (VEU: 43.95, -0.05, -0.11%) holds large-cap stocks and keeps just 20% of its assets in emerging markets. The remaining 80% offers investors exposure to Europe, Japan, Canada and Australia. The fund is up 35% year to date.

The Vanguard FTSE All-World ex-US Small-Cap ETF (VSS: 82.84, +0.07, +0.08%) has climbed 56% since its April launch. Like its large-cap cousin, this fund keeps 80% of its holdings in developed markets, primarily the big commodity producers. The fund also avoids multinational companies that hold substantial amounts of U.S. dollars, Kay says. With this fund, you’re investing in local companies doing business in their local currencies.

Among mutual funds, the large-cap blend Fidelity Europe fund (FIEUX) is up 30.6% year to date and has 89% exposure to Western European stocks, primarily within the manufacturing sector. The Henderson European Focus A (HFEAX), a midcap-blend fund, has 67.1% exposure to Western Europe, primarily the U.K., Switzerland, France and the Netherlands, and is up 104.4% year to date. Investors looking for exposure to Australia can consider the DFA Asia Pacific Small Company I fund (DFRSX), a small-cap value fund which has 52% exposure to Australia, as well as nearly 27% exposure to industrial materials; it’s up 85.2% year to date.

Oil Futures

Oil prices rise when the U.S. dollar’s value falls – it’s a blunt adage that has made savvy investors a lot of money. But getting into the oil futures game can be quite risky for the average investor, says Wyss.

With oil futures, you’re often dealing with a single contract for delivery in a given month, and while your guess of where oil prices are headed may be right, you could end up losing money if your timing is off, he says. In addition, oil futures prices can change quickly, based on political events, like government turmoil or OPEC’s decisions.

One of the safer oil-based ETFs is the PowerShares DB Oil Fund (DBO: 26.11, +0.32, +1.24%), which has a year-to-date return of 32%, Kay says. Separately, the United States Oil Fund (USO: 38.15, +0.46, +1.22%) has a year-to-date return of 12%.

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Gold scores record peak above 1,068 dollars

Tue Oct 13, 12:59 pm ET

LONDON (AFP) – The price of gold forged a record high above 1,068 dollars an ounce here on Tuesday as the dollar sank against the euro.

On the London Bullion Market, gold struck 1,068.63 dollars an ounce, which was the highest level ever recorded.

Gold's latest pinnacle was recorded after the European single currency climbed as high as 1.4876 dollars, a level which was last seen in August 2008.

A struggling greenback makes the precious metal cheaper for investors holding other currencies, thereby boosting demand, analysts said.

The glamorous metal, used in jewellery, dentistry and electronics, has struck a series of all-time highs in recent weeks owing to the weak dollar.

The price of gold later pulled back to 1,057.50 dollars an ounce, which compared with 1,058.75 dollars an ounce late on Monday.

Current PM Prices:

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Abandoning the USS Dollar, As Gold Shines Again

Currencies / US Dollar Oct 13, 2009 - 02:40 PM By: Jennifer_Barry


Robert Fisk's article in The Independent on October 6, “The Demise of the Dollar,” has created many shock waves in the currency markets. Fisk reported that major Arab nations are secretly planning to dump the current petrodollar scheme in favor of pricing oil in a basket of currencies. Included in this basket will be the yen, yuan, euro, a new, pan-Arab currency, and gold bullion.

Co-conspirators include Saudi Arabia, Russia, Brazil, China, France, and the formerly compliant Japanese. This validated my July prediction that the Persian Gulf states will eventually accept yuan in exchange for oil.

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10/14/2009 17:53
CHINA – RUSSIA
New Moscow-Beijing axis to restrain the West

Russia and China sign deals worth US$ 3.5 billion, agree to develop jointly Central Asian energy resources. Washington forced to look on, silent, as the Taliban extend hand to SCO.



Beijing (AsiaNews) – The countries of Central and East Asia that belong to the Shanghai Cooperation Organisation (SCO) should better coordinate their action to better manage the Afghan crisis, join in an energy pact and limit Western influence in the region, Russian Prime Minister Vladimir Putin said on the sidelines of the SCO summit. Russia and China are SCO’s core members, and a “shared stance” by the two “on certain issues” can help “restrain some of our more hot-headed colleagues,” the Kremlin’s strongman said in message likely meant for US President Barack Obama.

In addition to Russia and China, SCO includes Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan. Iran, Mongolia, India and Pakistan have observer status.

Until this year, Moscow and Beijing were major rivals over the former Soviet republics of Central Asia and their resources. At present Moscow controls the region’s gas exports through Gazprom, but Beijing has challenged its dominance with a deal in June to buy 40 billion cubic metres of gas annually from Turkmenistan starting next year. Work on a 7,000-kilometre pipeline from Turkmenistan to China is slated for completion later this year.

Yet what could have led to confrontation has become the basis for cooperation.

Chinese Prime Minister Wen Jiabao yesterday reached a deal with his Russian counterpart. Russia's state-run natural gas monopoly Gazprom and China National Petroleum Corporation reached a framework agreement for the supply of about 70 billion cubic metres of gas a year.

No price has been set yet and no contract signed, said Gazprom's chief executive Alexei Miller, but the value of the agreement should be close to US$ 5 billion, analysts said.

Yesterday, Wen Jiabao also oversaw the signing of US$ 3.5 billion worth of business deals, including an order for ballistic missiles and two loans of US$ 500 million each from China’s from Development Bank and Agricultural Bank to Russia’s VTB and VEB. For Wen, deals with friendly markets like Russia’s are preferable.

The two countries have been brought together by the world’s financial crisis explains, and a shared desire to limit US influence in Central Asia.

Moscow urgently needs to sell its gas to markets outside of Europe, whilst Beijing needs energy, a situation that has instilled caution in Chinese leaders when it comes to dealing with the Kremlin.

Improving Sino-Russian relations have led Russia to change its mind on tougher Western sanctions against Iran and side with China.

US Secretary of State Hillary Rodham Clinton, who was in Moscow this week, pressed for Russian support on the issue, but Russia's Foreign Minister Sergey Lavrov dimmed US hopes, saying that even a threat of sanctions would be “counterproductive,” thus changing the position Russia took at the UN General Assembly last month. Now Moscow’s top diplomat backs China’s insistence on mediation as the better option.

Taliban leaders in Afghanistan and Pakistan have also praised Sino-Russian rapprochement, and called on neighbours to oppose the occupation of Afghanistan by foreign forces, pledging, “Once back in power we would establish good relations with all of Afghanistan’s neighbours”.

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Saudis want US to pay for reducing oil usage

Wednesday, October 14th, 2009 -- 9:35 am
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If you thought the executives at Goldman Sachs were the kings of backroom finance, think again.



Goldman Sachs, meet Saudi King Abdullah.

A new gambit by the oil-dealing kingdom would have Western oil guzzlers paying for using less oil. Sounds like the opposite of reality, you say? The Saudis say it's the only way they'll be able to afford helping the fight against global warming.

The New York Times frames the Saudi idea as, "if wealthy countries reduce their oil consumption to combat global warming, they should pay compensation to oil producers."

Saudi climate negotiator, Mohammad al-Sabban, described the position as a “make or break” measure for the oil-heavy kingdom in the lead-up to global climate negotiations in Copenhagen. In an email exchange with the times, al-Sabban said wealthy Western countries like the United States should help the Saudis with "economic diversification" by paying for oil they don't even use.

“Assisting us as oil-exporting countries in achieving economic diversification is very crucial for us through foreign direct investments, technology transfer, insurance and funding,” Sabban said in an e-mail.

“It is a very serious trend that we need to follow and influence if we want to minimize its adverse impacts on our economies and our people,”

Sabban said in another e-mail to OPEC officials. “That does not mean we would like to obstruct any progress or that we do not want to join any international agreement. We will do that if the deal is fair and equitable and does not transfer the burden to us.”

The Saudi position isn't new, but the shock over its position in the wake of record high oil prices and a global recession is.

Environmentalists say the idea is ludicrous.

“It is like the tobacco industry asking for compensation for lost revenues as a part of a settlement to address the health risks of smoking,” Jake Schmidt, the international climate policy director at the Natural Resources Defense Council, told the Times. “The worst of this racket is that they have held up progress on supporting adaptation funding for the most vulnerable for years because of this demand.”

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Breaking News: China to stop exports of domestically produced Gold

Source: local news in China via StellaConcepts on YouTube

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US Dollar Crashes Through Major Support Level

Posted: Oct 14 2009 By: Dan Norcini Post Edited:
October 14, 2009 at 12:51 am Filed under: Trader Dan Norcini

Dear Friends,
This evening in Asian trade, the Japanese Minister of Finance once again restated the new view out of Japan that the level of the Yen is no longer an obsession with the monetary authorities of that nation. His comments were interpreted by the Forex markets that intervention to stem the advance of the Yen is most unlikely. With that, market participants wasted little time bidding the Yen into a strong advance.

Those statements of his, combined with that of Federal Reserve Vice Chairman, Donald Kohn, that the US economy would not experience a quick or sharp recovery out of its recession, were both read by traders that US interest rates were not going anywhere anytime soon. Carry traders then beat the Dollar down below critical support near the 76 level on the USDX as they rushed into higher yielding currencies such as the Aussie and Loonie. The Euro also shot up to another new yearly high.

It is looking more and more like the current Administration has set on a course of deliberate destruction of the US Dollar and with it, the economic might that the US has enjoyed since post World War II. As said many times on the pages of this web site, the profligacy of the US has inescapable consequences and we are now seeing a rapid acceleration of the same. The fall in the Dollar is picking up momentum and that is why we are witnessing gold moving into new highs.

But gold is more than a Dollar phenomenon – Gold priced in terms of British Pounds and in Euros is relentlessly moving higher as both Great Britain and Europe, the fading West, are debasing their currencies as well.

Protect yourself from the theft of your wealth by these conscienceless politicians and monetary officials for they have sold their citizenry down the river and plundered them in the process far more thoroughly than Attila and his army of Huns ever did to Rome of old. At least the Roman inhabitants were aware of the rape and pillaging of their substance – when the general public finally awakens to the despicable looting of their treasures by these reeking buzzards, they will rush into gold with a fury that will shock even many of the readers of this site.

Click chart to enlarge this evening’s action in the US Dollar in PDF format with commentary from Trader Dan Norcini

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Dollar loses reserve status to yen & euro

By PAUL THARP
Last Updated: 3:16 AM, October 13, 2009
Posted: 1:44 AM, October 13, 2009

Ben Bernanke's dollar crisis went into a wider mode yesterday as the greenback was shockingly upstaged by the euro and yen, both of which can lay claim to the world title as the currency favored by central banks as their reserve currency.

Over the last three months, banks put 63 percent of their new cash into euros and yen -- not the greenbacks -- a nearly complete reversal of the dollar's onetime dominance for reserves, according to Barclays Capital.

The dollar's share of new cash in the central banks was down to 37 percent -- compared with two-thirds a decade ago.


Fed boss Ben Bernanke may be forced to raise rates in order to restore faith in the dollar — and help bring the euro and the yen back to earth.

Currently, dollars account for about 62 percent of the currency reserve at central banks -- the lowest on record, said the International Monetary Fund.

Bernanke could go down in economic history as the man who killed the greenback on the operating table.

After printing up trillions of new dollars and new bonds to stimulate the US economy, the Federal Reserve chief is now boxed into a corner battling two separate monsters that could devour the economy -- ravenous inflation on one hand, and a perilous recession on the other.

"He's in a crisis worse than the meltdown ever was," said Peter Schiff, president of Euro Pacific Capital. "I fear that he could be the Fed chairman who brought down the whole thing."

Investors and central banks are snubbing dollars because the greenback is kept too weak by zero interest rates and a flood of greenbacks in the global economy.

They grumble that they've loaned the US record amounts to cover its mounting debt, but are getting paid back by a currency that's worth 10 percent less in the past three months alone. In a decade, it's down nearly one-third.

Yesterday, the dollar had a mixed performance, falling slightly against the British pound to $1.5801 from $1.5846 Friday, but rising against the euro to $1.4779 from $1.4709 and against the yen to 89.85 yen from 89.78.

Economists believe the market rebellion against the dollar will spread until Bernanke starts raising interest rates from around zero to the high single digits, and pulls back the flood of currency spewed from US printing presses.

"That's a cure, but it's also going to stifle any US economic growth," said Schiff. "The economy is addicted to the cheap interest and liquidity."

Economists warn that a jump in rates will clobber stocks and cripple the already stalled housing market.

"Bernanke's other choice is to keep rates at zero, print even more money and sell more debt, but we'll see triple-digit inflation that could collapse the economy as we know it.

"The stimulus is what's toxic -- we're poisoning ourselves and the global economy with it."

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Dollar to Hit 50 Yen, Cease as Reserve, Sumitomo Says

By Shigeki Nozawa

Oct. 15 (Bloomberg) -- The dollar may drop to 50 yen next year and eventually lose its role as the global reserve currency, Sumitomo Mitsui Banking Corp.’s chief strategist said, citing trading patterns and a likely double dip in the U.S. economy.

“The U.S. economy will deteriorate into 2011 as the effects of excess consumption and the financial bubble linger,” said Daisuke Uno at Sumitomo Mitsui, a unit of Japan’s third- biggest bank. “The dollar’s fall won’t stop until there’s a change to the global currency system.”

The dollar last week dropped to the lowest in almost a year against the yen as record U.S. government borrowings and interest rates near zero sapped demand for the U.S. currency. The Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners, has fallen 15 percent from its peak this year to as low as 75.211 today, the lowest since August 2008.

The gauge is about five points away from its record low in March 2008, and the dollar is 2.5 percent away from a 14-year low against the yen.

“We can no longer stop the big wave of dollar weakness,” said Uno, who correctly predicted the dollar would fall under 100 yen and the Dow Jones Industrial Average would sink below 7,000 after the bankruptcy of Lehman Brothers Holdings Inc. last year. If the U.S. currency breaks through record levels, “there will be no downside limit, and even coordinated intervention won’t work,” he said.

China, India, Brazil and Russia this year called for a replacement to the dollar as the main reserve currency. Hossein Ghazavi, Iran’s deputy central bank chief, said on Sept. 13 the euro has overtaken the dollar as the main currency of Iran’s foreign reserves.

Elliott Wave

The greenback is heading for the trough of a super-cycle that started in August 1971, Uno said, referring to the Elliot Wave theory, which holds that market swings follow a predictable five-stage pattern of three steps forward, two steps back.

The dollar is now at wave five of the 40-year cycle, Uno said. It dropped to 92 yen during wave one that ended in March 1973. The dollar will target 50 yen during the current wave, based on multiplying 92 with 0.764, a number in the Fibonacci sequence, and subtracting from the 123.17 yen level seen in the second quarter of 2007, according to Uno.

The Elliot Wave was developed by accountant Ralph Nelson Elliott during the Great Depression. Wave sizes are often related by a series of numbers known as the Fibonacci sequence, pioneered by 13th century mathematician Leonardo Pisano, who discerned them from proportions found in nature.

Uno said after the dollar loses its reserve currency status, the U.S., Europe and Asia will form separate economic blocs. The International Monetary Fund’s special drawing rights may be used as a temporary measure, and global currency trading will shrink in the long run, he said.

Last Updated: October 15, 2009 03:34 EDT

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End of US$ Global Reserve Currency

Jim Willie CB October 15, 2009
home: Golden Jackass website
subscribe: Hat Trick Letter
Jim Willie CB is the editor of the "HAT TRICK LETTER"

Use the above link to subscribe to the paid research reports, which include coverage of several smallcap companies positioned to rise during the ongoing panicky attempt to sustain an unsustainable system burdened by numerous imbalances aggravated by global village forces. An historically unprecedented mess has been created by compromised central bankers and inept economic advisors, whose interference has irreversibly altered and damaged the world financial system, urgently pushed after the removed anchor of money to gold. Analysis features Gold, Crude Oil, USDollar, Treasury bonds, and inter-market dynamics with the US Economy and US Federal Reserve monetary policy.

The heralded end to the Petro-Dollar defacto standard completes the loop, the vicious cycle that will work to destroy the USDollar. In a sense, the US$ had to face an end, its sunset guaranteed when Nixon defaulted on its redemption value. The United States served as custodian for the global reserve currency. Naturally, the most damage will be to the US as a consequence of its twilight, especially after the recent era of fraud & counterfeit. Few look back to that date in 1971 as prophetic for declaring the USDollar's days as limited and finite. The world will continue to trade the US$ in future years, but it must stand on its own value, based upon its own merit, the result of balancing its supply & demand, from the integrity of its fundamentals. Some climax events have come, or at least are previewed on an unfortunate path.

Never in my memory has USGovt leadership been so disrespected. Never has Wall Street been so culpable for financial ruin, yet still in power running the USGovt finance ministries. The global revolt against the United States has many sides, but the financial aspect is most profound. It is hardly even covered in the US press. The US citizens have little comprehension of the enormity of a lost global reserve currency, with all its privileges, abused for constructing financial engineering towers and funding foreign wars. The direct effects will be felt in higher costs and assured supply, including credit.

No need to enter details, but the nation with each passing year resembles even more a very large Third World nation. Empty foreclosed homes, empty shopping malls, millions of jobless, discouraged business formation, nationalized failed firms, vanishing Middle Class, trillion$ federal deficits, monetized debt, reduced liberties, selective elite law enforcement, syndicate stronghold, huge prison population, controlled press networks, distrust of leaders, aggressive military, these are the characteristics that most people agree are unsavory. But when one takes them as a cornucopeia table display, they are described as Third World. This article will be shorter than most, since the more complete analysis is provided for Hat Trick Letter members. We are not fooled by the banter, the propaganda. We have been preparing for the surge in gold & silver, the powerful erosion in the USDollar, the ruin of the banks, the universal bust in bonds, the insolvency of the homeowners, and the army of jobless. Personal fortunes have by and large not been ruined. Some have thrived.

COMPLETED LOOP: FINANCIAL & COMMERCIAL
The swirling motion of the above loop is powerful. With the crude oil sales no longer taking US$ payments, the loop is completed. The financial engine in the Dollar Carry Trade now will have a commercial engine to further its momentum, to add power to the cycle, and force powerful lethal feedback reactions. Only when the financial and commercial sides fit like two giant interlocking pieces does the power take hold. The Fisk report on a 2018 timeframe for the phase out of US$ petro sales is more politically massaged information. The timetable will be just a couple years, doubtful more. The reactions from systems will force the timing to be much sooner, out of desire, out of necessity, due to broken systems that accelerate the breakdown process due to the announcement itself in feedback loops. By the way, the swirling motion in the vicious loop might remind people of a toilet being flushed.

REDUCED US$ DEMAND IN FOREIGN BANKS
Entire foreign banking systems have been constructed with USTreasury Bonds serving as important assets in their foundations. The requirement was clear by virtue of payment for crude oil for Saudi and other OPEC nation crude oil. The Petro-Dollar standard required nations to prepare for payment in US$ terms, and thus build systems to make those payments. The banks act like giant ATM machines to dispense USDollars for oil payments. Many did so reluctantly. The purchase of crude oil is without doubt the largest and most important economic commodity purchased, next to food supply. The demand for USDollars will be sharply reduced in the future. Payment for crude oil in IMF basket terms will reduce the need for holding all those USTreasurys. Banking systems will change their structural makeup. They will adapt to other non-US$ swap facilities that aid in trade. One should be on the lookout for outright refusal to accept USDollars, the next step. The toxic bonds could easily lead to perception of USTBonds being toxic as well.

FOREIGN RESERVES DIVERSIFICATION
Nations have been struggling to diversify their FOREX reserves for the last few years. They react to the fundamental problems of the USEconomy, the USGovt deficits, the US Bank insolvency, the US Home insolvency, the dismissal of US Industry, and the trend toward nationalization. The foreign managers of finance suddenly awakened in 2005 to find they had accumulated a surfeit of bonds in the form of USTBonds, USAgency Mortgage Bonds, and US Bank Corporate Bonds, with no semblance of balance in their portfolios. Add to their reserves the Sovereign Wealth Funds, and the magnitude of the problem was deemed unreasonable, unwise, and unacceptable, in need of change. So foreign finance accounts have been buying more EuroBonds, even Chinese Govt Bonds, more Gold, more commodity stockpiles, and more foreign assets that assure commodity supply.

China leads the way in setting the standard in diversification practices.

USFED STUCK AT 0%
The USFed does the most talking about an end to its free money, also known as monetary easing. But the United States will be the last to raise interest rates, stuck without an Exit Strategy. Australia did not talk about it at all, but recently raised its rates by 25 basis points. Generally speaking, those who do too much speaking do too little doing.

The crippled nature of the conditions in the United States dictate continued 0% easy money. The powerful players in the Dollar Carry Trade will ensure that the free money parade does not stop. It is self-sustaining. They will even influence the USFed not to hike rates. Furthermore, the next round of bank losses from commercial mortgages and prime Option ARMortgages will deliver big blows. Some astute analysts are already estimating the magnitude of the next round of bank losses. Any hike in interest rates would not only add costs to borrowers across the USEconomy, but add costs to the USGovt. They are, by the way, producing trillion$ deficits.

GROWING USGOVT DEFICITS
The endless series of stimulus for a moribund USEconomy, reduced payroll taxes collected as federal revenue, nationalized Black Hole costs (Fannie Mae, AIG, GM), current health care costs (Medicare), hidden banker welfare (TARP funds), sacred military budget, and senseless pork projects will continue to churn out gigantic mind-numbing federal deficits. The only reduction seen is in forecasts by official agencies, which bear little reflection to reality. The permanence of trillion$ deficits will be clear in another year. Removed stimulus, removed props, removed monthly special programs, these steps will cause a return to deteriorated conditions.

USTBOND MONETIZATION
The USTreasury auctions are the biggest congame since the Wall Street mortgage bond sales, whose monetization eclipses the Weimar machine. The primary bond dealers are required to bid on USTreasurys that come to auction. They are reimbursed in Permanent Open Market Operations by the USFed within a week or so. The US press does not notice or does not report or is told to look the other way. The foreign central banks turn in their USAgency Mortgage Bond to the USFed, which with newly printed money buys the USTreasurys offered. These central banks use the sale proceeds and additional funds drawn from the Dollar Swap Facility to bid on USTreasurys that come to auction. The US press does not notice or does not report or is told to look the other way. The USGovt continually promises the foreign creditors that no monetization of debt will take place. They lie. The true victims are confidence and trust, essential to any fiat currency.

LOST CONFIDENCE IN USDOLLAR
Confidence is lost, never to return. It takes years to build confidence and trust, but only a few moments or days to lose it. Actions and developments in the last several years have contributed to a powerful and deep loss of confidence. In my view the mortgage bond fraud export combined with the Iraq & Afghan Wars to shatter respect, trust, and confidence. Nowadays, monetization worsens the lost faith as a crowning blow. Aggressive tactics by the US & UK for years added constant strain, producing resentment. The result is less support for the USDollar, and almost no cooperation for US$ and USTBond support programs outside the central bank franchise system.

A KEY IS THE JAPANESE YEN
As the Yen Carry Trade enters its final phase in wind-down, the Dollar Carry Trade will accelerate. Imagine, the global reserve currency in the US$ is used to fund a carry trade, from a Japanese handoff !!!Their trade surplus endured for 30 years. In the last year it vanished. Yet the Japanese Yen is rising versus the USDollar. The carry trade is seeing a grand handoff. The Dollar Carry Trade is a bond-driven phenomenon once again. Its power might be best seen in the Yen currency valuation, in its surprising rise. The Yen is analyzed in the October Hat Trick Letter report. The bond arbitrage has much more.

The Japanese finance firms receive little attention. They are experts at running and exploiting the carry trades. They are switching programs. If you believe all is well in Japan and Tokyo support will continue, then you miss the 'Lost Lackey Effect' from the last year. The Saudis will not carry the US bags any longer. The Arab squires will carry bags with Kremlin markings. The Japanese will not carry the US bags any longer. The Toyko squires will carry bags with Beijing markings. The chief strategist at a major Japanese bank Sumitomo today warned that the US$ might fall to 50 yen this year. That would be a 45% decline. Daisuke Uno at Sumitomo expects the USEconomy to suffer a second sudden recession.

He said, "The US economy will deteriorate into 2011 as the effects of excess consumption and the financial bubble linger. The dollar's fall will not stop until there is change to the global currency system." The strong warnings reflect the growing rift between Japan and the USA. The outcome of recent elections in Japan changed the entire bilateral landscape. The pro-American LDP party was ousted, a major new piece to the ongoing Paradigm Shift.

The world has been turned upside down in its financial axis. No doubt about it. We live in a bond-driven world. National finances matter little compared to the interest rate yield offered to financial speculators, whose efforts are amplified by leverage. Take the Japanese, for example.

JUST THE BEGINNING FOR GOLD & SILVER
Gold reached 1060 this week, and silver touched 18. This is just the beginning. The pullbacks like today should be exploited to purchase more at discount. Purchases of gold at the London exchanges are being interfered with, due to basic problems of not having sufficient gold bullion to satisfy delivery demand, otherwise known as DEFAULT.

Reports arrived privately cite the LBMA officials offering 25% more than contract value if high volume gold futures contracts are settled in cash. Two different central banks are scrambling to locate gold for the contracts, but much of it is substandard bullion with under 90% purity. Sounds like a default is right around the corner, and some members have their nether parts caught in a vise. CLEAR EVIDENCE SCREAMS OF GOLD HAVING A $1300 CURRENT PRICE.

• The next target for gold is 1130, with a midterm target of 1300.
• The next target for silver is 19 with a midterm target of 26.

The Bank of England news today was comical. The central bank is the most disrespected on the planet, for inconsistency, wavering, desperation, and cluelessness. Their table pounding in desperate confusion caused a big 200-pt rally in the Pound Sterling versus the Euro. The chief loser currencies in the current phase will be the USDollar and British Pound Sterling. They are both yesterday's strong currencies.

A FINAL NOTE: See the King World News series on "Systemic Failure" in its four parts (CLICK HERE), where the Jackass is interviewed in a logical comprehensive argument. The fourth and final segment is to be posted before this weekend of October 17th. The King World News has had a stream of stellar guests from the highest tiers, that recently included Jim Sinclair, Gerald Celente, and Chris Whalen. See their front page for numerous interviews (CLICK HERE).

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Fed Spokesman said there is NO support coming for the Dollar

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Russia and Iran Now OFFICIALLY Talking of Dumping Dollar for International Trade

October 18, 2009
by Washington's Blog



After the Independent reported that Middle Eastern oil producers, plus China, Japan and France have all agreed to start trading oil using a basket of currencies - instead of the dollar - starting in 9 years, spokesmen for those governments denied it.

The Independent's reporter explained why the governments were denying the rumor.

But now the governments themselves are starting to admit that they are switching out of the dollar.

For example, Russian Prime Minister Vladimir Putin said Wednesday that Russia is ready to consider using the Russian and Chinese national currencies instead of the dollar in bilateral oil and gas dealings. As Russia's newspaper RIA Novosti writes:

Russia is ready to consider using the Russian and Chinese national currencies instead of the dollar in bilateral oil and gas dealings, Prime Minister Vladimir Putin said on Wednesday.

The premier, currently on a visit to Beijing, said a final decision on the issue can only be made after a thorough expert analysis.

"Yesterday, energy companies, in particular Gazprom, raised the question of using the national currency. We are ready to examine the possibility of selling energy resources for rubles, but our Chinese partners need rubles for that. We are also ready to sell for yuans," Putin said.

And Iran's Press TV reports that Iran wants to completely drop the dollar from its foreign exchange:

Since October 2007, Iran has received 85 percent of its oil revenues in currencies other than the US dollar and Tehran is determined to find a substitute for the US dollar for the rest of its 15 percent of oil revenues, the report added.

This story is confirmed by the Tehran Times, which notes:

In line with this plan, Iran has informed Japan that it should use the yen instead of dollars to pay for the oil it buys from the Islamic Republic.

In addition, Iran has decided to open a bourse for oil and gas transactions in currencies other than the U.S. dollar, especially the euro.

As I have repeatedly noted, many countries have been moving out of the dollar for years. The process is simply accelerating.

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Weak dollar raises talk of alternative world currency

Posted 6h 22m ago
By David J. Lynch, USA TODAY

Just about every day seems to bring more bad news for the dollar.

Recent months have witnessed a steady erosion in the greenback's value, down 16% since March against the currencies of the top U.S. trading partners. On Wednesday, the euro broke through the symbolically important $1.50 barrier for the first time in 14 months.

Depending on whom you believe, a dollar hovering near its 52-week low represents either the market's devastating verdict on the Obama administration's profligacy or a salutary rediscovery of risk by newly emboldened investors.

Maybe it's a bit of both. But the downbeat drumbeat bangs on. Chinese officials openly worry about taking a bath on their enormous U.S. Treasury holdings. Foreign bankers talk of promoting an alternative global currency, such as the euro, yuan or a new synthetic medium of exchange cooked up by the International Monetary Fund.

In the U.S., some voices on the right, such as Rep. Michele Bachmann, R-Minn., detect an anti-American conspiracy to scuttle the dollar. But the roster of those opining on the dollar's woes includes establishmentarians such as Robert Zoellick, president of the World Bank and a former top official in Republican administrations. "Looking forward, there will increasingly be other options to the dollar," he warned last month.

As the U.S. tries to repair its crisis-battered economy, is the end of dollar supremacy about to make a tough job even tougher?

Not any time soon. There are "lots of reasons to be concerned about the dollar. … (But) a weaker dollar is a fantastic boost for the United States, and it's a problem for the rest of the world," says Kenneth Rogoff, former IMF chief economist.

A natural monopoly

Since supplanting the British pound more than 60 years ago, the dollar has reigned supreme in global markets. As of the end of June, the most recent data available, 62.8% of foreign exchange reserves worldwide were held in the form of U.S. dollars. An additional 27.5% were stockpiled in euros, according to the IMF.

The dollar's position has eroded in the past five years. In mid-2004, it made up 67.9% of world reserves. "A lot of people get excited about this. But in the 1970s and 1980s, there was even bigger volatility in the dollar share of reserves," says Stephen Jen, managing director of BlueGold Capital Management, a London-based hedge fund.

In March, Chinese Central Bank chief Zhou Xiaochuan proposed shifting global finance to a reliance on a new international reserve currency rather than the dollar or any other national unit. The aim would be to avoid the periodic crises that have characterized recent decades. But Zhou acknowledged that any such change would take "a long time."

The instability of a world economy so dependent on any single national currency is prompting even some leading American figures to argue for a gradual move away from the dollar. Fred Bergsten, former assistant Treasury secretary in the Carter administration, says a major cause of the current crisis was the destabilizing linkage between the U.S. trade deficit, enormous capital flows from abroad that financed it and the global dominance of the U.S. dollar. He argues in a new Foreign Affairs article that, to avoid a repeat episode, the U.S. should promote a move to a "multi-currency system" involving the euro and the yuan.

For now, the dollar's fundamental standing remains what it's been for decades: a convenient medium of exchange for buyers and sellers around the world. Just as Chinese merchants speak the global language of English when trading with Saudi oil barons, they use the global currency to buy the oil. "The reserve currency is a natural monopoly. It's so convenient to list prices in a single currency," says Harvard University's Rogoff, co-author of This Time Is Different, a study of financial crises.

The U.S. benefits from the dollar's unique role, enjoying what French President Valery Giscard d'Estaing memorably labeled the "exorbitant privilege" of being able to borrow abroad in its own currency. That insulates Americans from the danger of seeing their debts skyrocket in response to a sharp decline in the dollar's value.

The dollar doesn't owe its global role to international affection for Americans. Investors relying on the cold logic of the marketplace are drawn to the greenback by specific advantages that make the rise of a dollar rival inherently difficult. "There's no equally attractive alternative," says economist Barry Eichengreen of the University of California-Berkeley.

In the short run, the only currency that could challenge the dollar is the euro. It, too, has a continental-size economy behind it, and a decade after its introduction, the European currency has established itself as a fully convertible, stable store of value.

But for all its attractions, the euro lacks some essential attributes. Although the European Union has a central bank, comparable to the Federal Reserve, there is no European treasury. Instead, there are 27 European treasuries. Investors can't easily track or influence fiscal policy on the continent.

The dollar is also buoyed by the existence of a massive government bond market. There's roughly $4 trillion worth of U.S. Treasuries floating around, and almost $100 billion changes hands each day, according to investment management firm Pimco. Trading that's carried on almost 24 hours a day, rolling east to west from Tokyo to London to New York, makes it easy to move into and out of dollar positions in a hurry.

Europe, by contrast, has no analogue to the U.S. Treasury market. Instead there is a fragmented scene with individual sovereign debt from Germany, Italy, France and other EU members. No individual market enjoys anything like Treasuries' liquidity and size.

There's another potential dollar rival on the horizon, though its day likely lies a decade or more in the future. Just as the United States overtook the British empire, China's economy one day is likely to pass the U.S.'s. When it does, the yuan would be in position to fill the dollar's global role.

But before it does, China will have to thoroughly overhaul its existing financial system. Today, the yuan isn't freely convertible into other currencies, and there are strict limits on the cross-border movement of the Chinese currency. Chinese officials publicly have committed themselves to freeing the yuan to float alongside the dollar, euro, yen and other major currencies. That change, however, won't happen overnight.

Even if foreign investors have concerns about having so much of their national wealth tied up in dollars, there is a limit to what they can do about it in the short run. The Chinese, for example, have little choice but to keep recycling into Treasury purchases their dollar surpluses from trading with the United States. Beijing wants to prevent the yuan from appreciating against the dollar, to protect employment in its export sector. Even as it worries about the long-term prospects for its dollar-denominated investments, it has to keep buying dollars to do so.

"There's a gap between what's feasible and what central banks would like to do," said Steven Englander, chief foreign exchange strategist for Barclays Capital in New York.

Further to fall

The dollar's long-run prognosis is negative. In the wake of the crisis, a retrenchment in cross-border financial flows will mean less demand for dollar-denominated assets. And with Uncle Sam's printing press running overtime to cover the government's trillion-dollar budget deficits, the currency is expected to be further cheapened, says Eichengreen.

The decline in the dollar's value in the past seven months largely reflects an unwinding of the "flight to quality" that occurred during the most panicked crisis phase. Amid unprecedented levels of uncertainty late last year, investors flocked to assets denominated in the largest, most liquid currency. That drove the dollar's value against the euro, for example, up about 13% over the three months ended in March.

Since then, the euro has regained the lost ground and then some. A euro, which settled at $1.50 Wednesday, was at $1.43 in December.

In the political realm, the dollar's weakness is interpreted as a referendum on American decline. But its steady slippage this year is in line with economic fundamentals — that is, near-zero U.S. interest rates.

That said, neither the euro nor Japanese yen have had anything to celebrate. The biggest beneficiaries of the move out of dollars since March have been currencies of countries that heavily export raw materials, such as the Australian dollar (up 33% against the greenback) and the Canadian loonie (up 21%).

U.S. officials historically repeat mantra-like that they favor a "strong dollar." That really should be interpreted as a fancy way of saying "no comment."

So far, the dollar has only retreated back to the level it was at before the Lehman Bros. bankruptcy filing in September 2008 turned an economic downturn into a global financial panic. A weak dollar would be a problem if it contributed to inflation by increasing the cost of imports, or if it got so low so fast that the Fed felt compelled to raise interest rates to attract foreign investors. Neither is the case today.

The shrinking dollar also carries important economic benefits for the U.S. economy as it tries to climb out of recession. By making U.S. goods less expensive overseas, a weaker dollar provides a welcome boost for exports. The Obama administration has said it wants to rebuild the U.S. economy to rely more on making goods here to sell to people in other countries instead of depending on buying more and more stuff made elsewhere.

"The U.S., in the new normal, is going to have to export more because U.S. households will be saving," said Eichengreen.

For that to happen, the dollar likely has further to fall.

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Russia and China Dump Dollar as Democrats put America up for Sale

Posted by private_citizen (Profile) Wednesday, October 21st at 9:21AM EDT
4 CommentsRecommenders: Xasteius, toni100


Confirming an earlier report that foreign countries are looking to withdraw from the US dollar, Russia and China are considering a bilateral oil and gas deal using the ruble and yuan.

Russia is ready to consider using the Russian and Chinese national currencies instead of the dollar in bilateral oil and gas dealings, Prime Minister Vladimir Putin said on Wednesday…
The Russian prime minister said the issue would be addressed among others at a meeting of Shanghai Cooperation Organization (SCO) finance ministers, who are to convene before the end of the year in Kazakhstan.
Britain’s Independent newspaper reported last Tuesday that Russian officials had held “secret meetings” with Arab states, China and France on ending the use of the U.S. dollar in international oil trade.

The move was not the first by a foreign industrialized country to discuss ditching the dollar. In March, the governor of China’s central bank, Zhou Xiaochuan, suggested using the International Monetary Fund’s Special Drawing Rights to supplant the greenback.

China’s central bank governor has issued a bold proposal to overhaul the global monetary system and one day replace the dollar as the world’s main reserve currency with the International Monetary Fund’s (IMF) Special Drawing Rights.
Zhou Xiaochuan, governor of the People’s Bank of China, argued that what he called a super-sovereign reserve currency would not only eliminate the risks inherent in currencies such as the dollar, which are backed only by the credit of the issuing country and not by gold or silver, but would also make it possible to manage global liquidity.

Shockingly, US Treasury Secretary Tim Geithner expressed support for the proposal.

Geithner, at the Council on Foreign Relations, said the U.S. is “open” to a headline-grabbing proposal by the governor of the China’s central bank, which was widely reported as being a call for a new global currency to replace the dollar…
[Zhou Xiaochuan is] a very thoughtful, very careful distinguished central banker. I generally find him sensible on every issue,” Geithner said, saying that however his interpretation of the proposal was to increase the use of International Monetary Fund’s special drawing rights…
The continued use of the dollar as a reserve currency, he added, “depends… on how effective we are in the United States.”

The statement alone sent the value of the dollar tumbling.

The U.S. dollar fell against major currencies after U.S. Treasury Secretary Timothy Geithner said he was open to expanding the use of the International Monetary Fund’s special drawing rights.
Investors initially interpreted his remarks as an endorsement of China’s proposal on Monday to eventually replace the dollar as the world’s reserve currency by the IMF’s SDRs.

Liberal Democrats have made backroom deals pledging hundreds of billions in US taxpayer dollars to prop up the International Monetary Fund as our own currency nosedives. $100 billion for the fund was slipped into a defense spending bill earlier this year, after Geithner promised at the April G-20 meeting in London to provide up to half a trillion dollars.

Geithner welcomed contributions made so far but stressed that “significant progress (on getting the additional 500 billion US dollars) … must be an important outcome of these meetings.”
President Barack Obama’s administration, he said, has made a commitment to seek Congressional approval for 100 billion US dollars and he urged other member states “to consider substantial additional contributions.”

The US and other developed countries also pledged at the G-20 summit to sell hundreds of tons of gold, which had been used to support national currencies, to raise funds for poorer nations.

Leaders from the Group of 20 nations Thursday endorsed the International Monetary Fund’s plan to sell 403 tons of gold to raise funds to support the world’s poorest countries…
Most of the IMF’s gold holdings come from the fund’s member countries, which are required to commit 25% of their quota in gold.

Worse still, the US is appeasing foreign marxist nations such as Brazil and China by handing over an increasing share of voting rights and the power to conduct a ‘peer review’ over the American economy.

The Group of 20 nations is close to an agreement that would require members to subject their economic policies to a type of “peer review,” according to several senior G-20 officials, in a shift that would expose the U.S. and China to broad scrutiny of the way they run their economies…
The initiative was pressed by U.S. President Barack Obama, but it satisfied the demands on Brazil, China, India and other large developing countries.

Author Jerome Corsi believes that the dealmaking is a deliberate effort to usurp economic control from the US and redistribute our wealth to the world’s poor in a ‘global new deal’.

We had a new deal under Franklin Roosevelt, which was redistribution of wealth in the United States, creating all these massive social welfare programs. Now it’s internationally going on where groups like the U.N., other groups, the World Bank, the International Monetary Fund. They want to redistribute U.S. wealth to the world…
And the whole issue is that if the International Monetary Fund is going to — or the United Nations or the World Bank say we’ve got to have more voting control from the third world. We’ve got to level the U.S. economy. We’ve got to make sure the U.S. plays by these international rules when — every time the president goes to these G-20 meetings…
And this attack is going on. Now even the Obama administration has endorsed the plan to use the International Monetary Funds special drawing rights as an alternative to the dollar in international trade.
China has advanced this plan. Russia has advanced it. And President Obama at the G-20 meeting in London in April signed the agreements that we are going to put $250 billions into the special drawing rights of the International Monetary Fund.

Hannity – Jerome Corsi interview on ‘America for Sale’
part one


part two

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Marc Faber On The Death Of Fiat Money - "Dollar Will Go To A Value Of Exactly Zero"

Submitted by Tyler Durden on 10/26/2009 10:27 -0500