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

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ASIAN COMMUNITY: It’s time to act on currency plan

2009/10/27

S.M. MOHAMED IDRIS for Consumers Association of Penang

MALAYSIANS have a vague idea that the global economic slowdown started in the United States and spread to other countries. Since we trade with the US, this has affected our economy.

Business has suffered, companies have closed down and Malaysians have lost their jobs. The problem continues to be aggravated.

The root cause of the recession is the US monetary system and if the world were not so dependent on the US dollar, the scenario today could have turned out differently.

That is why the call by new Japanese Prime Minister Yukio Hatoyama for an East Asian Economic Community (or Asian Community) to be set up with own currency should be welcomed by Malaysia.

The suggestion for an Asian currency to replace the use of the US dollar is nothing new. Former prime minister Tun Dr Mahathir Mohamad suggested it in 1990s.

Abig flaw of the US dollar is that it is not backed by anything (though it was backed by gold until August 1971).

Not being backed by anything means that there is no limit to the amount that may be printed and injected into the economy.

However, the US Federal Reserve is not the only body with the “p owe r ” to create money out of thin air; the banking institutions too can “c r e at e ” mon - ey on their own.

Banks create money by giving out loans. Compounding interest causes money and debt to grow exponentially, way beyond the level that can be achieved by the real economy.

Prior to it becoming fiat money (not backed by gold), the US dollar could be redeemed at a set price of US$35 per ounce. But without any asset backing it, the US dollar derives its value based only on whatever it is perceived to beworth and that iswhy the value of the US dollar is subject to fluctuations.

This can be a great disadvantage for countries using the US dollar in international trade.

The US dollar’s days as the key global currency are numbered, as it should rightly be.

Even the UN Conference on Trade and Development has said that the world needs a new global monetary system to prevent speculation and to avoid large trade imbalances.

For us in Asia, having our own currency unit is a move in the right direction.

Asia is a force to be reckoned with. Former Indian central bank governor Y.V. Reddy pointed out that Asia has 67 per cent of the world’s currency reserves, 55 per cent of the wo r l d ’s population and a significant share of the world’s gross national product.

The proposed Asian currency should be based on real money so that it will be stable, as this is needed for economic development. It should preferably be backed by gold, as previously suggested by Dr Mahathir.

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China Simply Stealing Jobs While the Dollar stays a float

Wednesday, October 28, 2009 8:21 AM
By: Gene J. Koprowski

China’s asset-buying binge inflated the U.S. housing sector, setting the stage for the global financial crisis, but the Chinese policy of keeping the yuan-dollar rate fixed may be causing an even more harmful economic bubble, says Nobel Prize winner Paul Krugman.

“China has been keeping its currency pegged to the dollar — which means that a country with a huge trade surplus and a rapidly recovering economy, a country whose currency should be rising in value, is in effect engineering a large devaluation instead,” writes Krugman in The New York Times.

China is creating a bubble for its own economy. Krugman says this policy is particularly precarious during a period when the world economy remains deeply depressed due to dampened demand.

“By pursuing a weak-currency policy, China is siphoning some of that inadequate demand away from other nations, which is hurting growth almost everywhere,” writes Krugman.

“The biggest victims, by the way, are probably workers in other poor countries. In normal times, I’d be among the first to reject claims that China is stealing other peoples’ jobs, but right now it’s the simple truth.”
The U.S. government has been excessively tepid in addressing this issue.

Last week, the Treasury Department testified in a required report to Congress that China is not manipulating its currency.

“They’re kidding, right?” writes Krugman. “The thing is, right now this caution makes little sense.”

Others in the business press are noticing China’s policy too.

Bloomberg News is reporting that the People’s Bank of China has kept the yuan at about 6.83 per dollar since July 2008, after a 21 percent gain during the previous three years.

© 2009 Newsmax. All rights reserved.

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Saudis drop WTI oil contract

By Javier Blas in London

Published: October 28 2009 20:27 | Last updated: October 28 2009 20:27

Saudi Arabia on Wednesday decided to drop the widely used West Texas Intermediate oil contract as the benchmark for pricing its oil, dealing a serious blow to the New York Mercantile Exchange.

The decision by the world’s biggest oil exporter could encourage other producers to abandon the benchmark and threatens the dominance of the world’s most heavily traded oil futures contract. It is the main contract traded on Nymex.

The move reveals the growing discontent of Riyadh and its US refinery customers with WTI after the price of the price of the benchmark became separatedfrom the global oil market this year.

The surge in oil inventories in Cushing, Oklahoma, where WTI is delivered into America’s pipeline system, depressed the value of the WTI against other global benchmarks, throwing the global oil market into disarray.

In January, WTI, which usually trades at a premium of $1-$2 a barrel to Brent, fell sharply, leaving it at a discount of almost $12 – a record gap. This dislocation in the market continued well into the summer.

From January, Saudi Arabia will base the price of oil for its US customers on a new index developed by Argus, the London-based oil pricing company.

The Argus Sour Crude Index will track the price in the physical market of a basket of US Gulf Coast crudes, including Mars, Poseidon and Southern Green Canyon.

Argus said the change in policy reflected the “increased importance of the US Gulf coast sour crude market, in which both production and trading activity was rising sharply”.

Paul Horsnell, head of commodities research at Barclays Capital in London, said Saudi Arabia’s decision was likely to reflect a “wider discontent” from its customers in the US about WTI performance.

ExxonMobil, Marathon and Valero are among the US’s biggest buyers of Saudi crude oil.

Edward Morse, chief economist at LCM Commodities in New York, said: “It is a recognition by large players that WTI sometimes does not reflect the true value of crude oil in the waterborne market.”

Saudi Arabia has priced its oil using WTI since 1994.

The price was based on quotes from the physical market which were compiled by Platt’s, a unit of McGraw-Hill.

Oil companies then covered their exposure to WTI using the futures market on Nymex.

Bob Levin, managing director of market research at the CME Group-owned Nymex, said the exchange was ready to move with the market.

“We plan to introduce a cash-settled futures contract tracking the new Argus index,” he said.

Mike Vinciquerra, equity research analyst at BMO Capital Markets, said the new Argus index would not replace WTI. “It’s more a supplement,” he said.

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EUROPE, JAPAN FEAR FALLOUT
Declining value aids U.S. economic recovery



Washington Post Foreign Service
Thursday, October 29, 2009

LONDON -- The dramatic decline of the U.S. dollar is aiding the American economic recovery but setting off alarm bells overseas, with corporate executives, politicians and pundits calling it among the biggest threats to the rebounds underway in Europe and Japan.

Mounting concern abroad over the shrinking dollar underscores how exchange rates have emerged as a growing source of friction, with many countries jockeying for the weakest currency to boost exports and protect their markets from foreign competition.

The U.S. dollar has taken a steep tumble -- down 18 percent against the euro in the past 12 months, and more than 40 percent against the South African rand and Australian dollar -- as U.S. officials have effectively diluted its value, printing money and adopting near-zero interest rates, to jump-start the economy.

The moves have sharply improved the U.S. trade deficit, as everything from American-made cellular phones to furniture suddenly become more competitive both at home and overseas while giving foreign manufacturers more incentives to create jobs in the United States. Analysts say the severity of the downturn in the United States as well as the unemployment rate would be markedly worse without the weak dollar.

Yet it has had just the opposite effect on German washing machines and Japanese cars, making them less price competitive in the world's largest market -- the United States. Moreover, those same Japanese cars and German washing machines are also less competitive in the world's fastest growing market -- China. That's because the Chinese yuan, still closely pegged to the value of the U.S. currency, has fallen just as much as the dollar on world markets, serving up a double whammy to countries with fast-appreciating currencies like the euro. It also means that China, the country that enjoys the single biggest trade surplus with the United States, has actually seen that surplus grow during the recession.

Developing countries
Other developing countries whose currencies are not pegged to the dollar, such as Brazil, have grown so concerned about the soaring values that they have recently enacted new investment controls to stem the U.S. dollar's fall. European companies including Nestle, based in Switzerland where the franc has appreciated 13 percent against the dollar in the past 12 months, cite exchange rates as a bigger factor in recent revenue declines than weak global demand.

"We're losing competitiveness globally because of this," complained Jose Manuel Rodriguez Bordillo, director general of Spain's Agrosevilla, one of the world's largest olive exporters. "There's no way this can continue; we're losing 15 percent [in revenue] this year just because of the exchange rate."

The weak dollar is becoming a source of international tension, particularly in U.S.-European relations. Officials in the 16 countries that use the euro warn a continued slide of the dollar may pose long-term structural problems for Europe, forcing down wages and hurting employment in the months and years ahead. This week, a top aide to French President Nicolas Sarkozy called the value of the dollar "a disaster" for Europe, warning of dire consequences to the global economy if it remains at its current levels. In some circles, the dollar's decline is seen as a protectionist move by the United States -- something U.S. officials have strongly denied.

"If the dollar is going down this way, it is because that is what the Americans want," economic commentator Yves de Kerdrel wrote in the French newspaper Le Figaro this week. "In a globalized economy where national egoisms persist but where customs barriers have almost disappeared, the best protection consists in playing on exchange rates."

Yet analysts say the fall of the dollar reflects a basic economic truth: the U.S. financial situation is no longer as solid as it once was. Rather than being undervalued, many argue that the dollar has room to fall further.

"The dollar is weaker not so much because people are buying yen because they think Japan is suddenly going to be the next hot thing again," said Stephen King, chief economist at HSBC in London. "Instead, there is a sense that in some very defined and critical way, the dollar and the U.S. have lost their way. The U.S. has borrowed so much from foreigners.

They've got a rising budget deficit and few ways to bring it under control that investors see as viable. Those are things that affect the value of a currency."

Investor confidence
The dollar has also fallen because investors are feeling more confident about the global economy. During the height of the crisis, the greenback was viewed as the safest port in the storm. As the storm subsides, investors are charting a course again for emerging markets which, given the poor fiscal position and fragile recovery in the United States, no longer seem quite as risky as they once did.

It has generated a mild snowball effect. As the dollar weakens, it becomes less attractive to hold, so investors increasingly are dumping the currency and moving into oil, gold and stocks. That, in turn, has helped fuel a strong recovery in commodity prices and recent stock market surges.

The risk remains of a full-blown run on the dollar that could force the Federal Reserve to suddenly raise interest rates, dealing a potentially severe blow to the U.S. recovery. That could happen if major holders of dollars, such as China and Japan, begin to sell off their holdings. China in particular has made statements on the need to move away from the dollar as a reserve currency, though analysts say they have so far backed up those calls with only minor moves to divest their holdings. There are also rising concerns that the U.S. policy of flooding the economy with cheap money could drive up inflation, as it has already begun to do in Britain, a country where the once-mighty pound has been humbled, tumbling against the euro as well as the dollar.

But for now, the weak dollar is one problem the United States loves to have.

"Right now, you're getting an economic bump from it," said C. Fred Bergsten, director of the Peterson Institute for International Economics in Washington. "Our conclusion is that the dollar's value is just about right where it should be."

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Turkey to use national currencies in trade with Iran, China

ANKARA, October 28 (RIA Novosti) - Turkey is switching to national currencies in trade with Iran and China, ending dependence on the U.S. dollar and the euro for about 20% of its commodity turnover, local media reported on Wednesday.

Turkey has already switched to settlements in national currencies with Russia amid weakening confidence in the greenback as the world's major reserve currency. The move was initiated by Turkish President Abdullah Gul during his visit to Moscow in February.

Turkey's decision to make settlements with Iran and China in national currencies was announced during a visit to Iran by Turkish Prime Minister Recep Tayyip Erdogan. The Turkish premier told a Turkish-Iranian business forum on Tuesday that the countries had prepared a legal framework for transition to settlements in national currencies.

"We have adopted a necessary legislative act and are prepared for the transition," the Turkish newspaper Milliyet quoted Erdogan as saying.

According to the paper, Turkey's trade with Russia, Iran and China exceeds $65 billion a year. Russia is Turkey's largest trade partner, with $37.8 billion commodity turnover registered last year.

Russian Prime Minister Vladimir Putin said on October 14 that Russia was ready to consider using the Russian and Chinese national currencies instead of the dollar in bilateral oil and gas dealings.

"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.

Britain's Independent newspaper reported in early October 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 countries are reportedly seeking to switch from the dollar to a basket of currencies including the euro, Japanese yen, Chinese yuan, gold, and a new unified currency of leading Arab oil producing countries.

The Independent said the meetings have been confirmed by Chinese and Arab banking sources, although Russian officials said they had no knowledge of the talks.

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Dollar Danger: Iranian Oil Bourse

Posted on 10/30/09 at 6:53am

As Obamacare dominates the American lamestream media, the fundamentallly most important news for oil and the dollar was to be found first in the Tehran News on October 27. The Iranian Oil Bourse was finally inaugurated last Monday, after such a statement was already made in February 2008, leaving room for confusion.

According to the Tehran Times "The Iranian Oil Bourse was inaugurated on Monday in the Persian Gulf island of Kish as a venue to export oil and petrochemical products.

National Petrochemical Company's Managing Director Adel Nejad-Salim said in the opening ceremony that all petrochemical products will be gradually offered on the market, IRNA news agency reported.
The oil bourse is intended as an exchange market for petroleum, gas, and petrochemicals in various currencies, primarily the euro and Iranian rial, and a basket of other major currencies.

On February 4, 2008 the Iranian Cabinet approved the creation of the oil bourse in two stages - first for crude and second for oil byproducts transactions.

Iran, having the world’s second largest gas reserves and third largest oil reserves, is trying to play a more active role in oil and petrochemical transactions in international markets."These reports show that Iran is far slower progressing in its strategy to shift its oil trade from Federal Reserve Notes (FRN) to other currencies, predominantly the Euro. Iran has been selling oil in long term contracts to European buyers in Euros.

Read this report from April 2006 on the Iranian Oil Bourse here that described a much more dynamic timeline.

OPEC members are required to settle oil trades in FRNs but most member states recognize the vulnewrable position of FRNs as the world's reserve currency. Any decrease in demand for FRNs will hurt the whole world - and there will be no painless way out of the current mega-giga-mess.

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IMF Sells Gold to India, First Sale in Nine Years

By Sandrine Rastello and Kim Kyoungwha

Nov. 3 (Bloomberg) -- The International Monetary Fund sold 200 metric tons of gold to the Reserve Bank of India for about $6.7 billion, its first such sale in nine years.

The transaction, equivalent to 8 percent of global annual mine production, involved daily sales from Oct. 19-30 at market prices and is in the process of being settled, the IMF said in a statement yesterday.

The average price to India, the biggest consumer, was about $1,045 an ounce, an IMF official said on a conference call. Gold for immediate delivery gained 0.2 percent.

“The fall in the U.S. dollar seems to be pushing all the central banks to strengthen their portfolio with gold,” said N.R. Bhanumurthy, professor at the National Institute of Public Finance and Policy in New Delhi. “Gold is a safe store of value compared to the U.S. dollar.”

The IMF sale accounts for almost half the 403.3 tons that the Washington-based lender in September agreed to sell as part of a plan to shore up its finances and lend at reduced rates to low-income countries. Asian nations, which have amassed stockpiles of foreign currency reserves since the 1998 financial crisis, have shown increased interest in diversifying out of U.S. assets as the dollar loses value against other currencies.

Gold for immediate delivery gained to $1,061.60 an ounce at 3:42 p.m. in Singapore and was about $9 below its record $1,070.80 an ounce reached Oct. 14.

Concession Lending
“The most important thing is that people want gold even at these prices,” said Ghee Peh, head of mining research, with UBS AG in Hong Kong. “There’s good support for prices for now” from the IMF’s disposal of bullion, he said.

Proceeds from the sales and other IMF resources as well as individual contributors would help pay for discounted interest rates on loans to low-income countries, the IMF said in July. It plans to grant as much as $17 billion in extra loans to poor nations through 2014. The 403.3 tons the IMF agreed to sell amount to one-eighth of its stockpile.

“This transaction is an important step toward achieving the objectives of the IMF’s limited gold sales program, which are to help put the fund’s finances on a sound long-term footing and enable us to step up much-needed concession lending to the poorest countries,” IMF Managing Director Dominique Strauss- Kahn said in an e-mailed statement.

Reserve Management
The gold purchase was done as part of Reserve Bank’s foreign exchange reserves management operations, the central bank said in a statement on its Web site today.

India’s foreign-exchange reserves advanced $684 million to $285.5 billion in the week ended Oct. 23, the central bank said Oct. 30. That included foreign-currency assets of $268.3 billion, gold reserves of $10.3 billion and the special drawing rights with the IMF.

“There seems to be consensus among the central banks that it’s better to cut down on currency holdings and diversify into assets like gold, which has upside potential,” Krishna Reddy, a precious metal analyst at Way2Wealth Commodities Pvt. said in Mumbai. “The Reserve Bank of India gold purchase is a clear reflection of this belief.”

China, the world’s biggest gold producer, has increased reserves of the metal by 76 percent to 1,054 tons since 2003 and has the fifth-biggest holdings by country, Hu Xiaolian, head of the State Administration of Foreign Exchange, said in April.

The nation may purchase some of the 403.3 tons of gold being offered by the IMF, Market News International reported in September, citing two unidentified government officials.

More Sales
The lender has said it is ready to sell directly to central banks and later make transactions on the open market if necessary. The IMF official declined to say yesterday whether other central banks have expressed interest in purchases.

The IMF, which helped shore up economies from Pakistan to Iceland over the past year, has sold gold on several occasions. The last transaction was authorized in December 1999 and took place off-market between then and April 2000.

“Gold production has been declining for the past seven years, while demand, particularly the investment demand has been growing steadily,” Way2Wealth’s Reddy said. “Central banks and even ordinary investors want to own more gold.”

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Gold is going up

G-20 Meeting in Scotland this Week about Dumping U.S. Dollar

Best-selling author Daniel Estulin states that the key issue to be discussed this week at the G20 Finance Ministers and Central Bank Governors Meeting, being held in St. Andrews, Scotland, is how to bring down the present world financial system through dumping the US dollar.

(Vocus/PRWEB ) November 3, 2009 -- Best-selling author Daniel Estulin bring down the present world financial system through dumping the US dollar. Estulin first reported on this initiative as being deliberated at the most recent Bilderberg meeting held in Greece in May 2009. Estulin says that the success or failure of this callous plan hinges on the ability of the US and UK representatives to convince the Russian, the Chinese and other national governments to go along with their scheme.

Estulin maintains that if the co-conspirators succeed, such sudden devaluation of the US dollar would result in the sinking of the world economy through a chain-reaction collapse of the entire world’s financial system. As discussed during the Bilderberg Group’s super-secret conclave back in May, this breakdown would then be used as an excuse to launch a new world monetary system. G20 leaders are aware states that the key issue to be discussed this week at the G20 Finance Ministers and Central Bank Governors Meeting, being held in St. Andrews, Scotland, is how to that those who run the monetary markets, the monetary system, control the world. That is why today, the world is run through a dominant one-currency monetary system and not by national credit systems.

A severe breakdown crisis would affect every corner of the world and be a prelude to instability, wars and general hostility along financial, geographical and geopolitical lines, affecting not only particular countries but also societies, cultures and whole continents. Such a breakdown could result in a consolidation of the world’s monetary system.

Estulin declares that the creation of the new world currency is the true meaning of globalization, which is nothing but an empire. It is the elimination of the nation-state, the degradation of individual national liberties and the depredation of civil rights.

Collapsing the US dollar, first of all, is an assault on the structure of the United States economy toward the creation of a “World Company.” This concept, Estulin states, was initially discussed at the April 1968 Bilderberg Group meeting, held in Canada at Mont Trembland, by George Ball, a senior Lehman Brothers banker and former undersecretary for economic affairs for Presidents John Kennedy and Lyndon Johnson.

The aim of this World Company, as explained by Ball was “to eliminate the archaic political structure of nation-state” in favor of the more “modern” corporate structure. Ball also called for further political integration in Europe, and then the rest of the world, as a precondition for expanding the power of a World Company, thus putting the financiers on the same levels as governments.

This initiative, the moving away from the US dollar as a world currency, is the true intention of the G20 meeting November 6-7 at St. Andrews in Scotland, the site of the 1998 Bilderberg conference, Estulin asserts.

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INTERNATIONAL
The ultimate demise of dollar reserve status

November 3, 2009

By Joseph Edozien

On continued thought, it seems increasingly difficult to avoid the murky conclusion that the ultimate demise of dollar reserve status is the implicit monetary policy of the United States of America.

Both the rhetorical and policy responses from the monetary authorities in the United States to the not so veiled undermining of confidence in the global currency reserve status of the dollar from other monetary authorities, notably from China and Russia, have been remarkably tepid and timid. This diffidence is not normal from America and is therefore thought-provoking.

This of course raises the quite awkward question of why and how patriotic monetary authorities in the United States could possibly see merit in implicitly colluding in the debasement of the perceived value of its own sovereign currency.

Does such implicit collusion make any sense?

It does.

New Currency Possible

The eroding fundamentals of the dollar may necessitate its ultimate demise in any case.

One expects that such a death process will be orderly and gradual if there is indeed such a process in the further evolution of global financial events.

But there is a non-ignorable risk that such a death process, if there is such, could spiral out of control of the monetary authorities and become disorderly and sudden after an accelerated period of decline which erodes confidence rapidly, leading to a herd-like stampede from the dollar, thereby entailing catastrophic consequences in the real economic world of you and me.

Ever since the end of World War II, the dollar has been the de facto coin of the globe in international transactions. It has been the world’s de facto unit of pricing account and primary medium of global exchange.

The dollar, clearly, cannot adequately continue these functions in an era of its own debasement.

But why is the dollar being debased?

The process of monetary creation in the United States is conceptually not that difficult to understand.

Roughly and approximately: the United States Government, through its Treasury, issues IOUs of various sorts.

The United States Federal Reserve System, largely a consortium of private banks, monetizes these IOUs by crediting the US government’s bank accounts in its systems. This monetization of the government’s IOUs is created as public debts loaned at interest.

These debts become the assets of the banking system and the liabilities of the American people for several generations going forward since it is loaned on the full faith and credit of the people’s government as secured by its taxing and tax enforcement powers.

In other words, people pay taxes to pay the interest on their government’s debt. Furthermore, this monetization of the government’s debt largely forms the monetary base upon which the banking system then creates more loans of roughly around ten times their magnitude and more. In sum, the United States borrows its money at interest and then the people pay taxes to finance the interest on these loans.

It remains, of course, a ponderable conundrum why any people’s government, let alone that of the United States, would borrow money from largely private parties who create the money they loan out of nothing and then charge an interest for this service. But that odd mystery is a story for another day.

The basic problem facing the United States today is that America is factually bankrupt.

America’s current unfunded obligations, and its total debt, currently exceed the current measurable annual income generating output of the country by many orders of magnitude.

This is sobering indeed. It must furrow the brows of America’s monetary authorities who are charged with doing something about it.

Given that measurable annual income generating output cannot be increased sufficiently fast to a sufficient magnitude, especially if the liability to eventually pay is growing faster than any practically possible increase in that output, it would appear as if there is an intractable problem of threatening dimensions.

But if the currency is debased by inflating its issuance at a sufficiently fast rate, independent of a commensurate increase in output, perhaps there may be a solution even if that solution is unseemly.

This appears from a distance to be the thinking informing the inner sanctums of monetary policymaking in the United States right now. Dilute the debt by inflating the currency! In the end, there may have to be a new currency. Surprise! Surprise! We did not see this coming.

I personally do think we will see a new currency in the United States in our lifetimes, most likely amalgamated with other currencies in some sort of monetary union for a larger internal market.

We should all prepare now for this possibility because it probably is a probability.

What would be the ultimate effect of the demise of the global currency reserve status of the US Dollar, a process which seems now already underway?

Centralized Economy

Global monetary authority will become centralised and concentrated in global financial institutions practically unaccountable to any sovereign states, even if partially held so accountable by formal mandate.

This centripetal movement of global financial power and de facto global financial governance would further weaken state sovereignty and increase the global power of global financial technocrats whose masters will become even less clear and apparent.

This will mean further loss of effective control of states over their national economies thereby casting the Westphalian state system further into the dustbin of history.

We will then have not a multilateral international system of distributed governance but an increasingly unilateral global system of de facto centralised governance.

The concentration and centralization of global monetary policy in global financial institutions will complete the process of financial globalization thereby completing the process of economic and eventually political globalization.

While I will not take a position here as to whether or not this centralization and concentration of global power is ultimately a good thing or a bad thing, I will here take the position that this historic transition should not pass unnoticed or unencumbered with the most vigourous global debate, with the most observant scrutiny from world citizenry.

We should not hand over our financial and economic, and eventually political, destinies to practically unaccountable global technocrats whose real masters we do not know without fully understanding what that really means for us and what it might lead to for our progeny.

Joseph Edozien is Chairman of the South African New Economics Network.

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Why India bought 200 tonnes of gold from IMF

2009-11-03 15:15:00

MUMBAI (Commodity Online): Gold prices in the Indian bullion market zoomed on Tuesday on the big news that the International Monetary Fund (IMF) has sold 200 tonnes of gold to the Reserve Bank of India (RBI) for $US6.7 billion.

Why did India buy the IMF gold? Does India want to catch up with China in mopping up gold reserves by buying the IMF gold?

In April this year, IMF decided to sell 403.3 tons of gold as part of a plan to shore up its finances and lend at reduced rates to low- income countries. In the last few months, there have been reports that China and India could be the suitors to purchase the IMF gold. Now, India has jumped into the fray by buying almost half of the IMF gold at about $1,045 an ounce.

Dubai-based bullion analyst Mark Robison says everyone expected China to buy the IMF gold in the first phase. “It is a surprise that India has jumped in the first place to purchase the IMF gold. India is the largest marketplace for gold in the world. I think by buying IMF gold, India has shown increased interest in diversifying out of US assets as the dollar loses value against other currencies,” Robison told Commodity Online.

China is the world’s biggest gold producer. In April, China increased reserves of gold by 76 percent to 1,054 tons since 2003.

In fact, IMF has kick-started the gold selling plan by selling the first tranche of the yellow metal to India, the largest consumer of gold in the world. The gold sales were conducted daily over a two-week period from Oct. 19-30, to "give some protection to short-term fluctuations in the market".

The sale is part of an agreement struck in September among IMF member countries to sell 403.3 tonnes of the fund's gold stocks to diversify its sources of income and to increase low-cost lending to poor countries.

"I strongly welcome this transaction with the Reserve Bank of India," the IMF's managing director, Dominique Strauss-Kahn, said in a statement.

"This transaction is an important step toward achieving the objectives of the IMF's limited gold sales programme, which are to help put the fund's finances on a sound long-term footing and enable us to step up much-needed concessional lending to the poorest countries"

India's RBI paid on average about $US1,045 ($NZ1481) an ounce for the gold and the transaction would be paid in hard currency and not in IMF Special Drawing Rights, the IMF's internal unit of account.

On Tuesday, gold prices advanced near another record in Asian trade mainly on reports of IMF’s 200 metric tone gold sale to India. Spot gold was seen trading at $1,064.99 an ounce at 11:15 a.m. in Singapore while December-delivery gold was at $1,065.50 an ounce on the New York Mercantile Exchange’s Comex division.

IMF has declined to say whether other central banks have expressed interest in buying the remaining 203.3 tonnes of gold on tap for sale. He said if no other central banks came forward, the IMF would proceed as planned to sell the gold in the market.

But bullion analysts in India said the country’s decision to buy the IMF gold is a plan from the RBI to shore up its bullion reserves. "India is keen to acquire more gold reserves after news came out that China is frantically trying to shore up its gold reserves. Also, falling rupee value must have prompted the RBI to buy the IMF gold," said Sukhdev Sharma, a Mumbai-based bullion analyst.

On the IMF gold sale to India, IMF Managing Director Dominique Strauss- Kahn said.“This transaction is an important step toward achieving the objectives of the IMF’s limited gold sales program, which are to help put the fund’s finances on a sound long-term footing and enable us to step up much-needed concession lending to the poorest countries.”

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Gold hits record above $1,095/oz

Wed Nov 4, 2009 4:10pm GMT











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More Business & Investing News...

By Jan Harvey

LONDON (Reuters) - Gold hit a record high above $1,095 an ounce on Wednesday as dollar weakness added to momentum triggered by India's purchase of 200 tonnes of gold from the IMF.

Gold is now poised to target the psychological $1,100 an ounce level, dealers said.

Spot gold struck a high of $1,095.40 an ounce and was bid at $1,094.10 an ounce at 3:52 p.m., against $1,084.50 late in New York on Tuesday.

The IMF said on Tuesday it had sold 200 tonnes of gold to the Reserve Bank of India, half of a long-planned bullion sale that had threatened to slow gold's ascent.

"India has (prompted) new speculation of pent-up demand for gold diversification by central banks," said Michael Lewis, head of commodities research at Deutsche Bank.

"There is a long list of central banks which have very low gold reserve ratios, and in aggregate central banks should be net buyers of gold over the next year for the first time in 20 years."

Market watchers are now speculating over the destination of the remaining 403 tonnes of gold the IMF has to sell.

Weakness in the dollar has added to this momentum, dealers said. The dollar index retreated from a one-month high on Wednesday as traders braced for a policy decision from the Federal Reserve.

It extended losses against the euro as stock markets added to gains following U.S. ISM services data, which dampened the U.S. currency's safe-haven appeal.

Gold typically moves in the opposite direction to the dollar. Strength in the U.S. unit makes gold, like all dollar-priced commodities, more expensive for holders of other currencies, and cuts its appeal as an alternative asset.

RECORD HIGHS
U.S. gold futures on the COMEX division of the New York Mercantile Exchange also hit record highs at $1,096.50 an ounce.

Spot gold prices also rose to an 8-month peak in euro terms of 741.77 euros, and hit their highest since early June when denominated in Australian dollars, at A$1,206.74.

Demand for physical gold showed some signs of life, with holdings of the largest bullion exchange-traded fund, New York's SPDR Gold Trust, rising nearly 5 tonnes.

However, gold buying in India, the world's biggest bullion consumer last year, was weak as India gold futures also hit record highs, while dealers reported a rise in scrap sales as consumers took advantage of higher prices.

Among other precious metals, spot silver rose more than 2 percent to a peak of $17.59, tracking gains in gold, against $17.20. Platinum was at $1,370 an ounce against $1,355.50.

Palladium rose 2 percent to a peak of $331.50 after stronger than expected U.S. car sales numbers late on Tuesday, before retreating to $330 against $324.50.

The metal is benefiting from expectations industrial demand for the autocatalyst material may pick up as car buying recovers in the United States and China, dealers said.

"We continue to see good demand all over for palladium - this is evident in export patterns out of Switzerland," said Standard Bank analyst Walter De Wet. "China is the main destination."

(Editing by Sue Thomas)

© Thomson Reuters 2009 All rights reserved.

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Gold seen as a hedge against greenback

Alia McMullen, Financial Post Published: Tuesday, November 03, 2009


Handout/ Agnico-Eagle Mines Gold soared to a record high Tuesday after India surprised the market with the biggest single purchase of the commodity by a central bank in the past 30 years.

Gold soared to a record high Tuesday after India surprised the market with the biggest single purchase of the commodity by a central bank in the past 30 years -- a signal governments around the world are becoming increasingly uncomfortable about the sliding value of the U.S. dollar.

"It's certainly indicative that the monetary authorities in India are not overwhelmingly upbeat about the outlook for the U.S. dollar," said Erik Nilsson, senior international economist at Scotia Capital. "Bear in mind too that we're talking about a jurisdiction that has had a long standing love affair with gold."

Mr. Nilsson said India had increased its gold reserves to hedge against its U.S.-dollar holdings, which total about US$268.4-billion.

He said the increasing demand for gold as a hedge against the greenback was helping to set the stage for an alternative reserve currency or asset to the U.S. dollar, a proposal that has been trumpeted by countries such as China, France, India and Russia.

However, any such change would not come quickly, Mr. Nilsson said.

The cost of an ounce of gold rose US$30.90 Tuesday to hit a record US$1,084.90 after it was announced the Reserve Bank of India had purchased 200 tonnes of the precious metal from the International Monetary Fund.

The IMF said the purchases were made in installments between Oct. 19 and Oct. 30 for a total value of US$6.7-billion.

Timothy Green, author of The Ages of Gold, said it was "the biggest single central-bank purchase that we know about for at least 30 years."

Indeed, the purchase amounts to almost half of the 403.3 tonnes that the IMF approved for sale in September to diversify its sources of funding. The IMF owns more than 3,000 tonnes of gold.

Bart Melek, global commodities analyst at BMO Capital Markets, said the Reserve Bank of India's gold purchase pushed the country's gold reserves up to 7.1% of its total reserve assets. He said other countries, including China and Russia, have also been buying more gold, a trend that would likely continue while the U.S. economy remained volatile. On average, countries hold about 12.6% of their reserves in gold, up from 9.9% a year ago. Some of this represents an increase in gold holdings, but another driver of the increased proportion is the rise in the value of gold.

The price of gold has surged 52% since bottoming on Nov. 12 last year.

"Historically, gold has been a hedge against instability, has been a hedge against inflation, has been known to behave counter cyclically to equity markets," Mr. Melek said. "Gold has reasserted its historic role of being a hedge, basically insurance against bad stuff, against everything from geopolitical problems to inflation to dollar issues."

He said in the bullish case, gold could continue to push higher to average US$1,300 on an annual basis by the end of 2010 or early 2011.

Brian Christie, analyst at Desjardins Securities, said central-bank demand would be an important driver of the gold price, with India's purchase adding to the positive momentum for the commodity.

"China is rumoured to be interested in some or all of the remaining IMF bullion; however, it is likely very sensitive to price," Mr. Christie said. "Since the transaction with India was done at fair market value, the Chinese could be waiting for a pullback in the gold spot before pursuing this purchase further."

With holdings of US$2.3-trillion, China is the largest holder of U.S.-dollar reserves and has been actively looking to diversify its portfolio.

Financial Post,
-- with files from Bloomberg News
amcmullen@nationalpost.com

Read more: http://www.financialpost.com/most-po...#ixzz0VvZ0iLJm
The New Financial Post Stock Market Challenge starts in October. You could WIN your share of $60,000 in prizing. Register NOW

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Coordinated, premeditated Shanghai Axis cooperation in Economic Warfare.

Not sure?

Add the story below with these two dots here and here.

Sri Lanka follows Indian move to buy gold

By Joe Leahy in Mumbai , Financial Times, 5 Nov 2009

The Sri Lankan central bank is buying gold to diversify its reserves and smooth out periods of dollar volatility, Ajith Nivard Cabraal, central bank governor, said.

The move, which follows India's gold purchase, is part of a policy change on the part of the bank.

"We did experience this huge currency volatility during the time of the crisis that gave us the feeling that we need to save in something more solid," Mr Cabraal told the Financial Times. "Naturally gold crops up as the more logical item."

He did not reveal the size of the purchases, which analysts said were about five tonnes, far below India's 200-tonne purchase.

Mr Cabraal described the buying as "fairly substantial...We have not stopped accumulating it".

Jonathan Spall, a director at Barclays Capital, said: that, while Sri Lanka might be a minnow in terms of the gold it may buy, it was another argument "in the case being built for gold".

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Gold "Targets $1100" as Beijing Insider Says China "Can't Buy Enough Gold"

By: Adrian Ash, BullionVault

-- Posted Thursday, 5 November 2009 | Digg This Article | Share this article | Source: GoldSeek.com

London Gold Market Report
THE PRICE OF GOLD in wholesale 400-ounce form held steady Thursday morning in London as world stock markets slipped.

Trading near $1090 and €735 an ounce for US and Eurozone investors, gold was up 4.3% and 3.5% respectively for the week so far.

Crude oil crept back above $80 per barrel. The US Dollar slipped on the forex market as the European Central Bank and Bank of England kept their key interest rate on hold at record lows.

The Bank of England also expanded its quantitative easing "asset purchase program" by £25 billion, but only half as much as City forecasters guessed.

"The Fed signaled conditions under which they will raise rates," notes Walter de Wet at Standard Bank of Wednesday's no-change decision from Washington, "[but] these factors remain favorable to low rates for some time to come.

"This should benefit precious metals...Despite current resistance [in gold], we see the downside well protected and dips should still be bought."

Aiming to "boost asset prices and improve access to capital markets" with its extra quantitative easing, the Bank of England has already bought UK gilts equal to this year's new government debt – a record peacetime deficit worth 12% of GDP.

The British Pound leapt more than 1¢ on today's 14% extension of the scheme, however, hitting a 10-session high above $1.66.

Long-dated government gilts slipped, pulling market yields higher on Euro and US government debt.

The gold price in Sterling held within its tight 1% range of the last 48 hours, higher by 3.6% from Monday's start.

"The question now is who buys the rest of the IMF gold?" asks Bart Melek at the $375 billion BMO Capital Markets in a note to clients.

Following India's surprise 200-tonne purchase announced on Tuesday, "We suspect it may be China, other Asian countries, Russia or even India again," says Melek.

"They hold relatively little gold relative to their very large foreign exchange reserves, and may want to diversify away from US Dollars."

"China's gold is much cheaper" than IMF gold, however, notes Li Yang, a former member of the Chinese central bank's monetary policy committee, and now a senior researcher at the Chinese Academy of Social Sciences, speaking to Reuters.

The world No.1 producer since 2008, China is now also the world No.1 private gold consumer market.

"It's cheaper for us to buy gold from the Chinese market," agreed an un-named People's Bank official, "but it doesn't help diversify our huge foreign exchange reserves."

"Even if China bought half the world's annual gold supply, it would only cost a few tens of billions of dollars, which is tiny compared to China's huge reserves.

"Even if it's sold at a market price, we should still buy," counters Xia Bin, head of a key Beijing think tank advising the State Council cabinet, making plain that his was a personal view.

"India's okay with it, why shouldn't we be? What's the use for so many dollars, whose purchasing power is weakening anyway? With so many foreign reserves in hand, I think China should buy, without doubt."

Back in the London gold market today, "The metal has come straight up from 1043 over the last three days," notes market-maker Scotia Mocatta.

"As we are reaching fresh record highs in price there is no historical price resistance."

Spying what it calls "fund related buying and some good option buying, propping up the market," Swiss refiners and dealers MKS says that "[gold] investors are already beginning to price in the fears of inflation that have been hovering around the market for a while.

"With talk shifting to how to deal with the long-term repercussions of quantitative easing, it seems gold is gathering momentum to eventually move higher past the $1100 mark."

(c) BullionVault 2009

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Dollar Will be "Utterly Destroyed": Strategist

Published: Friday, 6 Nov 2009 | 3:09 AM ET

By: CNBC.com

Video: CNBC - Dollar Will be Utterly Destroyed, Global Currency, New World Order

The dollar will get "utterly destroyed" and become "virtually worthless", said Damon Vickers, chief investment officer of Nine Points Capital Partners.

"We don't have resources. Neither does a lot of Asia to be quite frank,"

Vickers said on CNBC's Asia Squawk Box. "Countries that have resources -- the Brazils, the Canadas, Australia -- their currencies are doing well."

Vickers noted that their stock markets have done the best year-to-date.

"They have stuff. They've got resources. They export real things. The United States exports 'promises' and 'pretty paper'," he added.

Australia's S&P/ASX 200 [AU;XJO 4674.9 80.90 (+1.76%) ] has risen 23% this year alone compared to a 14% gain in the Dow Jones Industrial Average [.DJIA 10208.65 185.23 (+1.85%) ].

Due to the huge wage disparities between the United States and emerging markets like China, Vickers said that may resolve itself in some type of a global currency crisis.

"If the global currency crisis unfolds, then inevitably you get an alignment of a global world government. A new global currency and a new world order, so we may be moving towards that," he said.

Vickers added that this is the time where investors should be making money when the trend is developing.

"Oil looks higher, gold looks higher, currencies look weaker."
© 2009 CNBC.com

[American Patriot]

So - are people deliberately attempting to destroy the US dollar and the US in general then? Along with the rest of the world?

Break it down and start over?

Good idea. Let's throw out every law and treaty, EXCEPT the Constitution and start over then.

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So - are people deliberately attempting to destroy the US dollar and the US in general then? Along with the rest of the world?

Break it down and start over?

Good idea. Let's throw out every law and treaty, EXCEPT the Constitution and start over then.

A simple reboot at default settings as the Constitution and Bill of Rights in safe mode would be great.

However the bios on this Republic may not look the same after a serious reboot under a government in socialism.

Historically, when Marxists break down free societies liberty is destroyed followed by severe bloodshed.

Meanwhile the Axis patiently waits; growing stronger in members, economically and militarily. Stalking America for over half a century like a pack of wolves now separating her from the herd. Watching her grow weaker as she is wearing down from within.

They collectively prepare for the moment when she becomes most vulnerable to bring her down in one clenched fist.

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Gold Bars Selling Like Hotcakes At Harrods

Henry Blodget|Nov. 8, 2009, 9:49 AM | 6,243 |30

Gold smashed through an all-time high of $1,100 an ounce on Friday, bringing some solace to gold bugs who have been losing money on the metal since the 1980s.

Gold still hasn't come anywhere near its late-1980's peak on an inflation-adjusted basis ($1,800 or so), belying the general theory that it's a great inflation hedge. As the world gold frenzy really takes hold, however, $2,000-an-ounce predictions are coming fast and furious, so there's always hope.

The NYT surveys the gold landscape, checking in on the ultimate symbol of the rush--the bars on sale at the counters of Harrods:

[L]ast month, Harrods, the 160-year-old London department store, began selling coins as well as gold bullion ranging from tiny 1-gram ingots to the hefty, 12.5-kilogram, 400-Troy-ounce bricks that are so often featured in movies and stocked inside the vaults of Fort Knox.

Harrods’s lower ground floor, where the gold is peddled, has been packed with interested shoppers.

“The response has been astounding,” said Chris Hall, head of Harrods Gold Bullion. “Bars are definitely more popular than coins. The 100-gram is the most popular.”...

THE Harrods gold line is made by PAMP, a rival Swiss refiner down the road here from Argor-Heraeus, in the nearby town of Castel San Pietro.

And demand for bars weighing 100 ounces or less for individual investors is up 80 percent, said Marwan Shakarchi, the chairman of MKS Finance, a Geneva company that owns PAMP. Read the whole thing >
One reason people are buying gold? You can hide it from tax authorities.

Just buy a few 400-ounce bars from Harrods and store them in your Harrods safe-deposit box (230 pounds a year), and the bastards won't be knocking on your door demanding capital gains taxes. (Unless they get you when you sell the bars back to Harrods for cash).

Courtesy of the NYT, here's a peak at gold's inflation adjusted performance over the years.

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Imminent Warning from Jim Sinclair-Dollar Downward Drop

In The News Today

Posted: Nov 09 2009 By: Jim Sinclair Post Edited: November 9, 2009 at 10:50 pm

Filed under: In The News

Dear CIGAs,

My friend, former partner, respected colleague and ace floor trader Yra Harris today said:

"Oh the birds are singing, the hills are alive with the sounds of music and the carry trade is in full swing. Today was the paradigm of the easy funding for the world for if you were an asset class that could not rally you must have been tied to causing the existence of flesh eating bacteria.

With the G20 shown to be a paper tiger, the IMF giving its seal of approval to the debased dollar carry trade – the animal spirits ran wild.

The dollar was down against everything but the yen for the yen is the second favorite funding currency with similar fundamentals to the dollar."

My comment is simple.

The floors of the dollar’s downward elevator are about to open up wide.

The freefall is near. Armstrong’s few days are just around the corner.

The Winter is going to be very cold for the US dollar Be advised. Take precautions immediately if you have not already.

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Gold rises towards $1,120/oz on strong sentiment

Wed Nov 11, 2009 3:38pm EST

By Frank Tang and Jan Harvey

NEW YORK/LONDON (Reuters) - Gold hit record highs near $1,120 an ounce Wednesday, stirred by renewed buying interest by central banks, and bullion should benefit from expectations that an erratic economic recovery will keep U.S. interest rates low.

The metal is now poised for more gains, analysts said, with the weak dollar helping gold build on a rally that began last week after the IMF sold 200 tons of bullion to India's central bank, raising the prospect of more official sector buying.

Joseph Foster, manager of Van Eck International Investors Gold Fund, said that the gold market is currently being driven by worries about paper currency depreciation and potential inflation.

"Firming commodities prices and the liquidity being created by current monetary policies could eventually bring much higher levels of inflation," said Foster, who manages more than $800 million mutual fund assets.
Spot gold hit a high of $1,118.35 an ounce earlier in the session. Bullion was at $1,116.95 an ounce at 2:29 p.m. EST (1929 GMT), versus $1,105.30 late on Tuesday.

U.S. December gold settled up $12.10, or 1.1 percent, at $1,114.60 an ounce on the COMEX division of the NYMEX.

The dollar index initially fell a quarter of a percent to a 15-month low and the euro rose to a two-week peak within sight of last month's 2009 high of just over $1.5060.

Gold held gains in spite of the dollar's bounce in the late sessions.
Analysts said the dollar was smarting after Fed officials said on Tuesday that high unemployment and sluggish consumer spending were risks to recovery in the U.S. economy, which may keep the Fed funds rate low.

Weakness in the unit boosts gold's appeal as an alternative asset and makes dollar-priced commodities cheaper for holders of other currencies.

Gold prices also rose in nondollar terms. Euro-denominated gold reached its highest level since March at 746.37 euros.

BARRICK SEES RECORD MARGINS

Barrick Gold Corp (ABX.TO), the world's biggest gold producer, told Reuters it sees the potential for record margins in the fourth quarter as gold prices hit new peaks and costs are stable or lower.

In major gold producer South Africa, the country's biggest union said it had received the go-ahead from authorities for its workers to strike at Gold Fields (GFIJ.J) over a disputed recruitment assessment method.

Vietnam's central bank said it will allow imports of gold -- banned since May of last year -- after bullion prices rose sharply in recent days, potentially opening up a new source of demand.

But with the prospect of persistent dollar weakness boosting fund interest in gold and further central bank purchases seen as a distinct possibility, the outlook for gold prices is positive.

U.S. investment bank Goldman Sachs said on Tuesday gold could rise to record highs in a range from $1,150 to $1,200 an ounce, driven by falling real interest rates and renewed buying interest by central banks.

Among other precious metals, spot silver was at $17.54 an ounce against the previous session's late quote of $17.32 in New York, tracking gold higher, while platinum was at $1,363.50 an ounce against $1,349.50.

Palladium was at $342.00 against a late Tuesday New York quote of $331.50. Earlier it touched $346.75 an ounce, the highest level since August 2008, on fund buying and strong Chinese car sales data.

(Additional reporting by Pratima Desai and Humeyra Pamuk in London; editing by Jim Marshall)



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Forecasts see $1,300 Gold by year's end

Spot gold prices are at a record high $1,100 troy ounce this week due to renewed investor interest, news that the International Monetary Fund has sold 200 metric tons of the metal to India's central bank and word that the G-20 nations plan to continue economic stimulus efforts. Now, there are forecasts of $1,300 gold before year's end.

The gold price has increased as the value of the dollar has declined because the Federal Reserve has committed to keep federal fund rate borrowing costs between zero and 0.25%. A weak dollar boosts gold's appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies.

MF Global analyst Tom Pawlicki tells Bloomberg that gold prices will continue to increase until the U.S. government stops accumulating debt. "Until Washington stops exploding the deficit, the dollar will continue to weaken and gold is going higher," he says.

Writing for Mineweb.com, veteran gold analyst David Levenstein also says gold prices can reach $1,300. "While my experience has taught me that it is very difficult to predict future prices, all the empirical evidence tends to indicate that we can expect much higher prices for gold," he writes.

Kaname Gokon, deputy general manager at a Japanese commodity brokerage Okato Shoji's research section, tells Reuters that "gold will keep looking northwards" because borrowing costs for the dollar at near zero will keep encouraging investors to buy higher yielding assets, including gold. And that will mean an extended period of U.S. dollar weakness and inflated gold prices.

Actually, the U.S. dollar has displayed long-run cycles of rising and falling that can persist for extended periods of time, says analyst Michael Lewis, Deutsche Bank's global head of commodities research in London. He says that the current U.S. dollar's down cycle is now in its eighth year and, therefore, is becoming increasingly long in the tooth. So, if history repeats itself, the U.S. dollar won't hit rock bottom until September 2011.