I believe that people should exchange
perspectives on international politics
so that we can understand the bullshit
the oligarchs' media feeds us.
The media will tell us far too late,
often through documentaries, decades
later, how our leaders screwed us out
of our own future.
They'll say "you wuz robbed,"
but that is of course too late. There
will be continuous attempts to rob
us, not to mention wars that we'll
have to clean up.
We need to know in real time what is
going on.
This is one reason for this article.
Basic point: the US controls a system
of exchange in oil that helps them
control most of the world. But part
of it depends on others playing along,
as with all suit-and-tie mafia agreements.
That is known as the petro-dollar. This
keeps the U$D strong and makes money
for the US that is otherwise hugely in
debt with a bad balance of trade. and
help keep its sick banks afloat.
Russia and China have finally decided
that despite the fact the US owes China
a ton of money, the US (if world keeps
supporting the petro dollar) will use it
to print money and use it to control
Russia and China.
So, Russia and China pulled out of
the petro-dollar system. That means
that they will not buy oil in U$D.
It's as simple as that.
and yet world-changing. They have
upset the post-communist apple cart.
Of course the Russkies have their own
Oil and Gas show
That means that the US will have to
face off against both of them until
they return to the petro-dollar. They
will try to keep them on the edge of
war: Ukraine/Crimea, MH17.
Syria is just one such place:
Russia and China are instead buying
gold and dumping US Treasury debt.
These things will make the US
debt mountain more vulnerable.
I don't know what will stop this
banking nightmare that we are
living in, where saving serious money
is impossible with zero interest.
Certainly it will be a black swan,
something which will have been
unforeseeable to the US.
checkit: Zerohedge
Russia
Just Pulled Itself Out Of The Petrodollar
By
Tyler Durden's
January
15, 2015 "ICH" - "Zero Hedge" - - Back in November, before most grasped just
how serious the collapse in crude was (and would become, as well as its massive
implications), we wrote "How The Petrodollar Quietly Died, And Nobody
Noticed", because for the first time in almost two decades,
energy-exporting countries would pull their "petrodollars" out of
world markets in 2015.
This
empirical death of Petrodollar followed years of windfalls for oil exporters
such as Russia, Angola, Saudi Arabia and Nigeria. Much of that money found its
way into financial markets, helping to boost asset prices and keep the cost of
borrowing down, through so-called petrodollar recycling.
We
added that in 2014 "the oil producers will effectively import capital
amounting to $7.6 billion. By comparison, they exported $60 billion in 2013 and
$248 billion in 2012, according to the following graphic based on BNP Paribas
calculations."
The problem
was compounded by its own positive feedback loop: as the last few weeks vividly
demonstrated, plunging oil would lead to a further liquidation in foreign reserves for the oil exporters who rushed to
preserve their currencies, leading to even greater drops in oil as the viable
producers rushed to pump out as much crude out of the ground as possible in a
scramble to put the weakest producers out of business, and to crush marginal
production. Call it Game Theory gone mad and on steroids.
Ironically,
when the price of crude started its self-reinforcing plunge, such a death would
happen whether the petrodollar participants wanted it, or, as the case may be,
were dragged into the abattoir kicking and screaming.
It is
the latter that seems to have taken place with the one country that many though
initially would do everything in its power to have an amicable departure from
the Petrodollar and yet whose divorce from the USD has quickly become a very
messy affair, with lots of screaming and the occasional artillery shell.
As
Bloomberg reports Russia "may unseal its $88 billion Reserve Fund and
convert some of its foreign-currency holdings into rubles, the latest
government effort to prop up an economy veering into its worst slump since
2009."
These
are dollars which Russia would have otherwise recycled into US denominated
assets. Instead, Russia will purchase even more Rubles and use the proceeds for
FX and economic stabilization purposes.
"Together
with the central bank, we are selling a part of our foreign-currency reserves,”
Finance Minister Anton Siluanov said in Moscow today. “We’ll get rubles and
place them in deposits for banks, giving liquidity to the economy."
Call
it less than amicable divorce, call it what you will: what it is, is Russia
violently leaving the ranks of countries that exchange crude for US paper.
More:
Russia may convert as much as 500 billion
rubles from one of the government’s two sovereign wealth funds to support the
national currency, Siluanov said, calling the ruble “undervalued.” The Finance
Ministry last month started selling foreign currency remaining on the
Treasury’s accounts.
The entire 500 billion rubles or part of
the amount will be converted in January-February through the central bank,
according to Deputy Finance Minister Alexey Moiseev. The Bank of Russia will
determine the timing and method of the operation.
The ruble, the world’s second-worst
performing currency last year, weakened for a fourth day, losing 1.3 percent to
66.0775 against the dollar by 3:21 p.m. in Moscow. It trimmed a drop of as much
as 2 percent after Siluanov’s comments. The ruble’s continued slump this year
underscores the fragility of coordinated measures by Russia’s government and
central bank that steered the ruble’s rebound from a record-low intraday level
of 80.10 on Dec. 16. OAO Gazprom and four other state-controlled exporters were
ordered last month to cut foreign-currency holdings by March 1 to levels no
higher than they were on Oct. 1. The central bank sought to make it easier for
banks to access dollars and euros while raising its key rate to 17 percent, the
emergency level it introduced last month to arrest the ruble collapse.
Today’s announcement “looks
ruble-supportive, as together with state-driven selling from exporters it would
support FX supply on the market,” Dmitry Polevoy, chief economist for Russia
and the Commonwealth of Independent States at ING Groep NV in Moscow, said by
e-mail. “Also, it will be helpful for banks, while there might be some negative
effects related to extra money supply and risks of using some of the money on
the FX market for short-term speculations.
Bloomberg's
dready summary of the US economy is generally spot on, and is to be expected
when any nation finally leaves, voluntarily or otherwise, the stranglehold of a
global reserve currency. What Bloomberg failed to account for is what happens
to the remainder of the Petrodollar world. Here is what we said last time:
Outside from the domestic economic impact
within EMs due to the downward oil price shock, we believe that the
implications for financial market liquidity via the reduced recycling of
petrodollars should not be underestimated. Because energy exporters do not
fully invest their export receipts and effectively ‘save’ a considerable portion
of their income, these surplus funds find their way back into bank deposits
(fuelling the loan market) as well as into financial markets and other assets.
This capital has helped fund debt among importers, helping to boost overall
growth as well as other financial markets liquidity conditions.
[T]his year, we expect that incremental
liquidity typically provided by such recycled flows will be markedly reduced,
estimating that direct and other capital outflows from energy exporters will
have declined by USD253bn YoY. Of course, these economies also receive inward
capital, so on a net basis, the additional capital provided externally is much
lower. This year, we expect that net capital flows will be negative for EM,
representing the first net inflow of capital (USD8bn) for the first time in
eighteen years. This compares with USD60bn last year, which itself was down
from USD248bn in 2012. At its peak, recycled EM petro dollars amounted to
USD511bn back in 2006. The declines seen since 2006 not only reflect the
changed global environment, but also the propensity of underlying exporters to
begin investing the money domestically rather than save. The implications for
financial markets liquidity - not to mention related downward pressure on US
Treasury yields – is negative.
Considering
the wildly violent moves we have seen so far in the market confirming just how
little liquidity is left in the market, and of course, the absolutely collapse
in Treasury yields, with the 30 Year just hitting a record low, this prediction
has been borne out precisely as expected.
And
now, we await to see which other country will follow Russia out of the
Petrodollar next, and what impact that will have not only on the world's
reserve currency, on US Treasury rates, and on the most financialized commodity
as this chart demonstrates...
...
but on what is most important to developed world central planners everywhere:
asset prices levels, and specifically what happens when the sellers emerge into
what is rapidly shaping up as the most illiquid market in history.
