Thursday, 10 April 2014

The petrodollar

The Demise of the U.S. Dollar and the Law of Unintended Consequences collide
Kevin Hester



April 9, 2014 at 1:10pm


More on my series on the demise of the U.S. Petro Dollar and the Political and hopefully not military consequences.


The only thing that has kept the U.S. Dollar afloat has been the position it has traditionally held as the Global Currency where Oil, the most expensive and widely traded of all commodities has and is traded, exclusively in U.S. Dollars.

Those days my friends are soon to be over.

Previously, Libya and Iraq began to trade oil in Euros and we know what happened to them! Both countries were bombed back in to the dark ages and Saddam, formerly an ally of the U.S. was hanged by Yankee puppets and Muammar Gadaffi died with a bayonet in his rectum and a body riddled with bullets.

Iran proposed trading it's oil in Euros and has been demonised ever since even though it is a bastion of Democracy in a region sadly lacking any semblance of democratic ideals.

Now we move on to Russia and China. As trade expands between the 'BRICS' nations, (Brazil, Russia, India, China and South Africa) and their near neighbours, why would you buy and sell these commodities in a 'foreign' currency?

Once a suitable framework is agreed, the need for the U.S. Dollar disappears somewhat like a fiat currency made profligate.

Parallel to these developments on the Petrodollar front has been the nefarious U.S. involvement in the Putsch that overthrew the, here it is again " democratically- elected" government of Ukraine leading to the referendum in Crimea and the decision to cede from it's amalgamation with Ukraine in 1954,  imposed  by Nikita Khrushchev. 

I suspect the U.S decision to fund this Putsch will come back to haunt Russia, Ukraine, the U.S. and all of Europe. I sincerely hope I am wrong.

To dispel any doubts that the U.S. was behind the sponsorship of the neo-Nazi -led opposition to the elected government that had little more than a year in it's term to run;

The straw that broke the camel's back was the unbridled and reckless coup against the elected president of Ukraine by US and NATO, orchestrated by the US State Department and led by the war-monger Victoria Nuland, who openly admitted on CNN that the US had disbursed through such organisations as the National Endowment for Democracy (NED) over US$ 5 Billion to facilitate the coup with the support of the oil giant Chevron."

This was an unprecedented treachery, as a few weeks before the bloody coup, the relevant stakeholders had entered an agreement to preserve the sovereignty and territorial integrity of Ukraine, brokered by Russia and endorsed by the EU.

Victoria Nuland could not and would not accept the checkmate and so she launched the bloody coup giving no choice to Russia but  to support the self-determination of Crimea, where the majority of the citizens were Russians and where Russia’s Black Sea fleet was located."

The US blatantly threatened Russia in her own backyard. 

The rest as they say is history.

We teeter on the edge of two catastrophes.
The first is the possible outbreak of a hot war between the U.S. and a soon-to-be- surrounded Russia, led by Vladimir Putin who has been schooled in exactly this worst case scenario and has no doubt been planning and preparing for these times since he served his long apprenticeship in the K.G.B. in the heady days of the Soviet Union.



The demise of international currency status for the U.S. Dollar with the attendant consequences for a national economy that has survived on the life support afforded by quantitative easing, which as we all know, has historically seen the demise of all fiat currency's in history. 

For pity's sake! - they had to invent a new term for printing money as the old one was so unpalatable! 

The world we live in faces enormous challenges from run away climate change and now is the hour we need to be working together for the common goal of saving this world and all the species that live upon it.

Yet here we are squabbling over the very fossil fuels we simply cannot burn without incinerating our very own planet, the only one we have. 

History will judge humans very badly, assuming we leave any planet to judge.

The U.S. has started provoking Russia at a level I have never witnessed in my lifetime, why the push now? Is it because they know that collapse is imminent? 

Gloom Boom & Doom Report publisher Marc Faber warns Federal Reserve monetary bubble will burst in three years in a radio interview and discusses the fragile state of the US and the global financial system: how rising inflation will affect the average America; how soon the bubble will burst; and why gold and silver will triumph.

Faber gives it three years till the economy collapses.

I think he is being overly generous.

Here are a few highlights from the interview:

The US is a country that likes to create trouble, but they don’t like to clean up things.”

We’ve now been five years into the bull market and the US economy bottomed out in June 2009. We already had a crack-up boom—not in the economy of the typical household, but in the economy of the super-well-to-do people, whose asset prices rose dramatically and as a result created a huge wealth inequality.”

My view would be that we have already printed so much money, and to accelerate it will be bringing about numerous other problems, so my time frame is that the [bubble], maximum, will burst in three years’ time.”

Once the collapse happens, the power of central banks will be curtailed greatly because people will realise who brought along first the Nasdaq bubble in 1999: The Federal Reserve. Who brought about the housing bubble between 2001 and 2007? The Federal Reserve. And who is bringing now along another great credit bubble and asset bubble? The Federal Reserve.”

I don’t think that anything is very cheap, but if I have to compare different asset prices, say real estate, stocks, bonds, commodities, gold, art, and so forth—and old cars—then I think that gold and silver [are] relatively inexpensive because they have had big corrections already, and you should not forget that the global bond market now is over $100 trillion.”

There is some odious misogynist ideas in the discussion that this writer deplores -   but we cannot throw out the dirty bathwater without losing the message, 

My apologies for that.


The renewed animosity of the U.S. towards Iran in the last 15 years stems partially from Iran's consideration of trading oil in Euros. 

Doing so would be the next chink in the unravelling of the Dollar position as the world Currency. 

"Iran and Russia have made progress towards an oil-for-goods deal sources said would be worth up to $20 billion, which would enable Tehran to boost vital energy exports in defiance of Western sanctions," people familiar with the negotiations told Reuters."

"In January Reuters reported Moscow and Tehran were discussing a barter deal that would see Moscow buy up to 500,000 barrels a day of Iranian oil in exchange for Russian equipment and goods.

Once the U.S. dollar hegemony is broken or even called into question a new paradigm evolves. 

The life support that has been " quantitative easing" is immediately called into question once the dollar dependency is broken and alternative currencies are available. 

Who would need to buy faux U.S. treasury notes when they could trade oil and other commodities in euros, roubles, yuan or BRICS- zone Pesos? 

One way or another the fiat currency known as the dollar is doomed.

The batteries on the life support machine are running flat and when the U.S. orders more from the Chinese they will want paying in GOLD. 

"US monetary policy considers that the dollar is here to stay forever, and that gold is no longer – and never again will be – the world’s ultimate money."

"The governments of several nations around the world do not share the same conviction with regard to the permanence of the dollar. China invented irredeemable paper money – which is what the whole world uses today – some one thousand years ago, and several dynasties of Chinese emperors learned to their cost that paper money always degenerates into simple trash."

"The Chinese government knows that the dollar will not be around forever. China is purchasing enormous amounts of gold to add to their huge pile of US Bonds in the reserves of the Bank of China; the government of China is more enlightened than the government of the US, because it is encouraging the Chinese to purchase gold and silver."

"The US government tells the world that it possesses some 8,000 tonnes of gold; the fact that it cannot deliver physical gold held for Germany’s account belies the assurances regarding the physical gold stock of the US."

"The situation for the US – and for the world – is dangerous: the US is like a ship with no lifeboats, because it is presumed to be unsinkable."

"The US and its allies are allowing the Chinese and Asia in general, to take possession of huge amounts of gold every year, while the US, the UK and Europe are drained of gold by shipments to the East."

See - The US Is like a ship With no lifeboats (full of suicidal bankers! _

U.S. dollar hegemony depends on the Major Global Economies continuing to trade fossil fuels and to a lesser degree gold and commodities using the until now omnipotent U.S.petrodollar.

It makes all the sense in the world for Russia and China to wean themselves from their dependence on the currency of the nation they appear to have the most philosophical conflict with.

The German Bundesbank announced that it had signed a memorandum of understanding to create a clearing and settlement center for yuan payments in Frankfurt, giving China even more influence on the European trade.

Germany is the biggest trade partner of China in Europe with a yearly turnover of more than 140 billion euros.

As the U.S. Federal Reserve continues inexorably down the road of quantitative easing, sooner rather than later, no one is going to want to be left holding that paper when they can see the value of those bonds unravelling before their eyes.

The batteries on the life support machine are running flat and when the U.S. orders more from the Chinese they will want to be paid in gold. "US monetary policy considers that the dollar is here to stay forever, and that gold is no longer – and never again will be – the world’s ultimate money."

The governments of several nations around the world do not share the same conviction with regard to the permanence of the dollar. China invented irredeemable paper money – which is what the whole world uses today – some one thousand years ago, and several dynasties of Chinese emperors learned to their cost that paper money always degenerates into simple trash."


"The Chinese government knows that the dollar will not be around forever. China is purchasing enormous amounts of gold to add to their huge pile of US Bonds in the reserves of the Bank of China; the government of China is more enlightened than the government of the US, because it is encouraging the Chinese to purchase gold and silver."

"The US government tells the world that it possesses some 8,000 tonnes of gold; the fact that it cannot deliver physical gold held for Germany’s account belies the assurances regarding the physical gold stock of the US."

"The situation for the US – and for the world – is dangerous: the US is like a ship with no lifeboats, because it is presumed to be unsinkable."

"The US and its allies are allowing the Chinese and Asia in general, to take possession of huge amounts of gold every year, while the US, the UK and Europe are drained of gold by shipments to the East."



There is something very weird about this development. The Prime Minister of NZ, John Key is a former Wall St Banker and Completely in the Pocket of the U.S. and he has made this agreement with China..... There will be something completely nefarious about this development as there always is with John Key and his Trade agreements.

I'm surprised and suspicious about this decision by the Prime Minister of New Zealand

The P.M. John Key formerly worked for Meryl Lynch in New York and was sent back to NZ to privatise all state assets and sell them to his cohorts.

And then this happens on his watch?!

When Iran decided to set up a Oil Exchange in the Tehran trading Oil in Euros, the real acid came down on their country. 

Is this the precursor for a move on NZ?

......

Kevin Hester is a New Zealand based anti-imperialist activists with 30 yrs involvement in the anti-apartheid struggle, the successful Anti-Nuclear Movement in New Zealand and the Pacific and anti-Imperialism generally

He has completed 16 Ocean Passages on yachts in the Pacific Ocean and has worked as a Delivery Skipper of Yachts in the Mediterranean and the Pacific.
He has worked extensively in Gt Britain, Europe and Africa.

His interest in politics was influenced from his youth, Born a member of the Irish diaspora to a family of Irish Republicans whose history was steeped in the overwhelming influence of British Imperialism in Ireland and the British Colonies


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