Petrodollar and WWIII

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Decent summary of how the petrodollar system is driving world events:
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The petrodollar paradigm is saving the dollar from crashing by accomplishing two things. First, it creates a mandatory international demand for the Federal Reserve paper, preventing dollar inflation from going into hyperinflation. Second, the oil profits from OPEC pay for a portion of our ever expanding national debt, helping perpetuate a giant Ponzi scheme in the U.S. treasury market. Those who control the United States understand that even if only a few countries begin to sell their oil in another currency it will set off a chain reaction and the dollar will collapse. They understand that there’s absolutely nothing else holding up the value of the dollar at this point, and so does the rest of the world.

But rather than accepting the fact that the dollar is nearing the end of its lifespan, the powers that be have made a calculated gambit. They have decided to use the brute force of the U.S. military to crush each and every resistant state in the Middle East and Africa.

That, in and of itself, would be bad enough. But what you need to understand is that this is not going to end with Iran. China and Russia have stated publicly and in no uncertain terms that they will not tolerate an attack on Iran or Syria. Iran is one of their key allies, one of the last in independent oil producers in the region. And they understand that if Iran falls, then they will have no way to escape the dollar without going to war. And yet, the United States is pushing forward despite the warnings.

What we’re witnessing here is a trajectory that leads straight to the unthinkable. It’s a trajectory that was mapped out years ago, in full awareness of the human consequences.
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More: http://www.crisishq.com/why-prepare/world-war-3-preserving-petrodollar/
 
man, that video has gone viral. Got it thirty different ways in the last couple of days. (Good video, BTW).
 
lol... I didn't even see/watch the video.
 
PMBug said:
Decent summary of how the petrodollar system is driving world events:

More: http://www.crisishq.com/why-prepare/world-war-3-preserving-petrodollar/
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I was actually discussing this with some Finance PHDs the other day. It is already a commonly held belief that the only viable way out of debt for the U.S. is inflation. On top of that, if the dollar stops being the global reserve currency it will have lower demand. Like any other commodity, if it has less demand it will lose value.
 
...have they put some hard numbers behind how big that inflation would need to be, to cover the mountains of monopoly money created by financial industry?? That would be interesting to read. Considering that derivatives market is believed to be one to two orders of magnitude bigger than "physical" world economy, does it mean, that we need that level of inflation, to get to the point when every "empty" dollar could be covered with something tangible?

I agree, as for the principle, there is NO WAY, that politicians/central bankers would allow other solution than inflation, to deal with the current levels of debt. Question remains, will it be enough, and more importantly, can they print fast enough, to cover for all the shams going on in the financial industry? It is better to weather-proof people's roofs, instead of installing pumps in their houses, if you want to keep the rain water out, so to speak. Unless, you are pump manufacturer, of course ;)
 
Anonymous sources cited, so take with a grain of salt:
Sources inside the Mexican government refuse to confirm that the Mexico government has been in secret negotiations with China over possible crude oil sales to China without using the US dollar.

China officials claim meetings held with the Mexican government and Petróleos Mexicanos (or Pemex) are for investment and economic growth inside Mexico. Crude oil purchases fall under this heading however officials on both sides in the past have stopped short of publicly discussing crude oil or any talks related to any special agreements relating to crude oil purchases.

Sources inside Mexico claim this week that China has in fact brokered a secret deal with Pemex to purchase crude oil using currency means other than the US Dollar. The details of this agreement are still unknown at this time but China is expected to make a public announcement within the next few days.
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http://www.indymedia.co.uk/en/2012/09/500358.html
 
What's funny is all the banks awhile back saying "no net exposure" on all those derivatives. If that were true, why not just look at one another and say "good-good?", and drop the entire mess. It's just paper.
 
DCFusor said:
What's funny is all the banks awhile back saying "no net exposure" on all those derivatives. If that were true, why not just look at one another and say "good-good?", and drop the entire mess. It's just paper.
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First of all, if they are net-zero, why have them at all :) (I call BS on that), secondly even assuming it is net-zero, it still multiplies the risks, not reduces them - in the event, that starts unwinding some of them big time - there will be interconnected cascade of exposures, bankrupting different actors with different timing - all that stuff will not cancel each other simultaneously. Thus there will be chain of blow-outs, rather than single "cancel-all" event, IMHO
 
In recent months there has been a lot of incorrect speculation that because Iran has been shut off from the petrodollar, SWIFT-mediated regime, its economy will implode as the country has no access to the all important greenback and can thus not conduct international trade - the driving factor behind the international sanctions that seek to topple the local government as Iran dies an economic death. And while there have been bouts of substantial inflation, which so far the local government appears to have managed to put a lid on by curbing gray market speculation, Iran continues to more or less operate on its merry ways with international trade most certainly taking place, especially with China, Russia and India as main trading partners. "How is this possible" those who support the Western-led embargo of all Iranian trade will ask? Simple - gold. Because while Iran may have no access to dollars, it has ample access to gold. This in itself is not new - we have reported in the past that Iran has imported substantial amounts of gold from Turkey, despite the Turkish government's stern denials. Today, courtesy of Reuters, we learn precisely what the 21st century equivalent of the Great Silk Road looks like, and just how effective Iran has been as a lab rat in escaping the great petrodollar experiment, from which conventional wisdom tells us there is no escape. Presenting: petrogold.
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More: http://www.zerohedge.com/news/2012-...blocakde-turkey-dubai-iran-petrogold-triangle
 
..me wonders - how much Iranian oil buys one OZ of gold? I would take a guess, that it will be much MORE oil, than if it would be paid in equivalent of petrodollars. Any thoughts? If I was Iran, and was shut off the main markets, and some nice Chinese, Indians or Russian people show up with crates of the yellow stuff, I'd be more than happy to pay them a handsome premium in oil, for their gold.

which, in turn,would only undermine petrodollar further - why, no doubt whomever buys the oil, would surely like to convert his plunging dollars into gold, pay for the oil in gold, and get more oil for the same money. I think it is quite possible scenario.
 
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Washington and Ankara are on a collision course over Turkey's surging sales of gold to Iran, as the U.S. Congress and Treasury focus on cutting off a trade they believe is emerging as one of Tehran's primary conduits to export natural gas and evade Western sanctions.

The Senate on Friday approved a measure that would tighten sanctions against Iran, targeting suppliers of materials that could be used to build ships and taking further aim at the country's port and energy businesses. Among other provisions, the new legislation would ban the transfer of precious metals to Iran, including gold. The sanctions are expected to be approved by the House quickly.

The Senate's move comes after President Barack Obama quietly empowered the Treasury over the summer to sanction any foreign individual or firm that helps Tehran acquire U.S. dollars or precious metals, according to U.S. officials.

"At the end of July, the president issued an order that authorizes Treasury to impose sanctions on anyone who helps the government of Iran acquire U.S. dollars or precious metals, including gold," said John Sullivan, a Treasury spokesman. "We can't comment on any investigations that may be ongoing."
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http://online.wsj.com/article/SB10001424127887323751104578150803540506358.html
 
...does anyone notice, how "acquire U.S. dollars or precious metals" is suddenly being mentioned in one sentence? So, what is it, again, a "tradition", or maybe.... money?! Mr. Bernanke, care to elaborate more?? :pffftt:
 
Turkey will not be swayed by U.S. sanctions pressure to halt gold exports to Iran but Tehran's demand for the metal may fall this year, Economy Minister Zafer Caglayan said today.

U.S. officials are concerned that Turkey's gold sales, which allow Iran to export natural gas, provides a financial lifeline to Tehran, which is largely frozen out of the global banking system by Western sanctions imposed over its nuclear programme.

Trade in Turkish gold bars to Iran via Dubai is drying up as banks and dealers increasingly refuse to buy the bullion to avoid sanctions risks associated with the trade.

Turkey has a six-month U.S. waiver exempting it from financial sanctions against Iran, which is due to expire in July.

"We will continue to make our gold exports this year to whoever seeks them. We have no restrictions and are not bound by restrictions imposed by others," the Turkish minister told reporters.

"There may be a decline in demand for gold exports. This is nothing to do with sanctions. We are not subject to these sanctions until July anyway, but there may be a decline in demand from Iran," he said.
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More: http://www.reuters.com/article/2013/02/07/turkey-gold-idUSL5N0B776O20130207
 
Looks like this issue may be heating up again soon:
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With Iran's currency already hit hard by European and Asian participation in the U.S.-led embargo of Iranian crude, Mr. Cohen asserted that his staff is broadening its efforts to include blocking the movement of pure gold into the Islamic republic.

"I can assure you that we are looking very, very carefully at any evidence that anyone outside Iran is selling gold to Iran," he said.

The remark came after Rep. Edward R. Royce, California Republican and the Foreign Affairs Committee's chairman, asked whether the administration was aware of recent reports indicating an uptick in the flow of gold into Iran.

"With its currency now in free fall, the Iranians desperately need gold," said Mr. Royce, who noted that a U.S. law authorizing the Obama administration to sanction anyone selling gold to citizens inside Iran does not take effect until July 1.
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http://www.zerohedge.com/news/2013-05-16/petrodollar-petrogold-us-now-trying-cut-irans-access-gold
 
So, what if they stop the flow of gold to Iran, then what? Maybe the diamond trade will heat up as smuggling diamonds is a whole lot easier than smuggling gold, especially through metal detectors. And diamonds have a another advantage, higher concentration of value, meaning far fewer potential interceptions enroute for the same value.
 
mmerlinn said:
So, what if they stop the flow of gold to Iran, then what? Maybe the diamond trade will heat up as smuggling diamonds is a whole lot easier than smuggling gold, especially through metal detectors. And diamonds have a another advantage, higher concentration of value, meaning far fewer potential interceptions enroute for the same value.
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Iran exports 1.5 million barrels per day. That's a lot of diamonds in your socks.
 
I occasionally read Ben Fulfords stuff and while I do not take it seriously, I link his latest stuff because of the way he explains the observable facts regarding shipping and oil and Chinese banks not giving out US $ to anyone -


https://kauilapele.wordpress.com/20...umping-20-oil-attacks-on-gold-mines-and-more/


Theres a lot more but heres a snip -

....Perhaps the most dramatic, and under-reported, new aspect of this ongoing struggle has been the freeze on global shipping. To confirm reports on the internet of a shipping freeze, this writer called NYK lines, a major international shipping firm, and was told “we cannot speak for the whole world but, as far as our company is concerned, with current shipping prices we will lose money every time we send a ship so we have stopped.” Chinese government sources told this newsletter shipping companies are now demanding to be paid in Chinese yuan and not dollars and that is a major reason for the freeze in shipping worldwide. If this continues, it will lead to empty super-market shelves and social unrest, especially in the US. The announcement last week by Walmart that it is closing 269 stores is just the beginning.

Another major dimension to this hybrid war has been the attack on the oil cartel and control of the petro-dollar. It is this attack, and not oversupply, that is the real reason for oil prices plunging to the $20 per barrel level, and in the case of bitumen, the lowest grade Canadian oil, $8 a barrel level. What is happening is that China is insisting on paying with Yuan for its oil. Furthermore, now that sanctions against Iran have ended, Iran, which has some of the lowest production costs in the world, will be flooding the market with an extra million barrels of oil per day. China is helping both Iran and Russia deal with low oil prices by sending them Chinese goods at cheap prices in exchange for their oil. India is also avoiding the petrodollar when it buys Iranian and Russian oil .......
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Food for thought:
... Relations between Saudi Arabia and the U.S. have deteriorated sharply over the course of the Obama administration. The primary cause was the Iran-U.S. nuclear negotiations and what amounts to the U.S. recognizing Iran as the leading regional power.

In the past months, the U.S. ended the secrecy surrounding Saudi ownership of U.S. Treasury securities (in place since 1975). The U.S. also released a formerly top secret 28-page section of the 9/11 Commission Report that clearly reveals links between members of the Saudi royal family and the 9/11 hijackers and Al Qaeda.

The Saudis have threatened to dump their U.S. Treasury securities in response to the release of the secret report, but so far that threat has not materialized.

Saudi Arabia is dealing from a position of weakness in relation to the U.S. Saudi Arabia is now running a fiscal deficit rather than a surplus, so the issue of where to invest reserves is moot. In fact, Saudi has been selling its reserves, mainly U.S. Treasuries, to cover its fiscal deficit.

The U.S. is no longer dependent on Saudi Arabia for energy supplies. It has become a net exporter of energy and has the largest oil reserves in the world. All of the conditions that gave rise to the petrodollar now stand in the exact opposite position of where they were in 1975.

Neither the U.S. nor Saudi Arabia have much leverage over the other, in contrast to 1975 when each side held powerful trump cards.

This does not mean that oil will be priced in a currency other than dollars tomorrow. It does mean that a new pricing mechanism is possible and no one should be surprised if it happens.

Saudi Arabia could easily price oil in yuan, then swap the yuan for Swiss francs or SDRs, and use the proceeds to add to its reserves or buy gold. Saudi Arabia could also price oil in SDRs or gold and hold those assets or swap them for other hard currencies to diversify away from dollars.

The possibilities are numerous. The conversion of oil prices away from dollars to some alternative is just a matter of time.
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More: http://dailyreckoning.com/petro-sdr-world-money/
 
PMBug said:
Food for thought:

"The U.S. is no longer dependent on Saudi Arabia for energy supplies. It has become a net exporter of energy and has the largest oil reserves in the world."
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N.D. says you're welcome! :pffftt: We've got energy coming out our ass. We've got hydro power with Garrison dam, we've got coal plants, we've got a ton of the big windmills (we're the saudi arabia of wind!) and more going up, now they are adding a huge solar array near the N.D./S.D. border, that's all in addition to the oil and nat. gas we've been shipping out in huge quantities. It's not as busy as it was, but still producing ~ 1mil barrels of oil/day. Thats with the rig count WAY down. :flushed:
 
Decent summary of the petrodollar system and the various variables at play:

... Today, however, this immense growth in debt levels makes the US regime more sensitive to changes in demand for US debt, and this has made the US regime ever more reliant on foreign demand for both US debt and US dollars. That is, in order to avoid a crisis, the US must ensure that interest rates remain low and that foreigners want to acquire both US dollars and US debt.

Were petrodollars and petrodollar recycling to disappear, it would have a twofold effect on US government finances: a sizable decline in petrodollar recycling would put significant upward pressure on interest rates. The result would be a budget crisis for the US government, as it would have to devote ever-larger amounts of the federal budget to payments on the debt. (The other option would be to have the US central bank monetize the debt by purchasing ever-larger amounts of it to make up for a lack of foreign demand. This would lead to growing price inflation.)

Further, if participants began to exit the petrodollar system (and, say, sell oil in euros instead) demand for dollars would drop, exacerbating any scenarios in which the central bank is monetizing the debt. This would also generally contribute to greater price inflation, as fewer dollars will be sucked out of the US by foreign holders.

The result could be ongoing declines in government spending on services, and growing price inflation. The US regime's ability to finance its debt would decline significantly, and the US would need to pull back on military commitments, pensions, and more. Either that, or keep spending at the same rate and face an inflationary spiral.
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https://mises.org/wire/huge-debt-got-us-hooked-petrodollars-—-and-saudi-arabia

Two points:
  1. The Fed is already (indirectly) monetizing the debt.
  2. The author didn't consider another possible consequence of financial distress - war.
 
OPEC+ has fallen apart. The Saudis and Russia are in a full on oil price war - ramping up production and selling oil well below production cost.

What does that mean for the petrodollar? Less international demand for dollars. Less international demand for US Treasuries ... to support the oil trade anyway. There is an increase in safe haven demand as financial markets are crashing, but that should reach an equilibrium at some point, shouldn't it?

... the key question is just how long can the world's three biggest producers - shale, Russia and Saudi Arabia...

... sustain a scorched-earth price war that keep oil prices around $30 (or even lower).

While we hope to get an answer on both Saudi and US shale longevity shortly, ... moments ago we got the answer as far as Russia is concerned, when its Finance Ministry said on Monday that the country could weather oil prices of $25 to 30$ per barrel for between six and 10 years.

The ministry said it could tap into the country’s National Wealth Fund to ensure macroeconomic stability if low oil prices linger. As of March 1, the fund held more than $150 billion or 9.2% of Russia’s growth domestic product. ...
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https://www.zerohedge.com/energy/russia-says-it-can-weather-25-oil-10-years
 
Saudi Arabia said on Tuesday it would boost its oil supplies to a record high in April, raising the stakes in a standoff with Russia and effectively rebuffing Moscow’s suggestion for new talks.
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Moscow said Russian oil companies might boost output by up to 300,000 bpd and could increase it by as much as 500,000 bpd, sending the Russian rouble and stocks plunging.
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Saudi Arabia needs an oil price of around $80 to balance its budget, but has cash reserves and the ability to borrow to deal with a price plunge for now. Russia needs about $42 to balance its books and also has hefty cash reserves it can draw on.

Iraq and some other OPEC nations, with more meager financial resources to cope with a dramatic drop in oil revenues, called for action to shore up prices.

Ratings agency Fitch said a sustained sharp drop in oil prices would hit the sovereign ratings of those exporting countries with weaker finances, particularly those with exchange rates pegged to the dollar.

But even Saudi Arabia, with its hefty financial reserves and sovereign wealth fund, did not have “infinite leeway” to support its A (stable) rating, Fitch analyst Jan Friederich said.
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https://www.reuters.com/article/us-oil-opec-saudi-idUSKBN20X13Q
 
Abu Dhabi National Oil Co. will boost crude supply to more than 4 million barrels a day next month as the United Arab Emirates joins a battle for market share triggered by Saudi Arabia and Russia.

To pump this amount, Adnoc would need to add more than 1 million barrels a day to the quantity that the U.A.E. produced in February, according to data compiled by Bloomberg. While the target for April is higher than what the International Energy Agency estimates the country has the capacity to produce, Energy Minister Suhail Al Mazrouei said his country can achieve it.
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Abu Dhabi holds most of the oil deposits in the U.A.E., which ranks as the third-largest producer in the Organization of Petroleum Exporting Countries after Saudi Arabia and Iraq.

Government-runAdnoc can also draw on reserves it stores in the emirates of Abu Dhabi and Fujairah as well as outside the U.A.E. It has around 8.2 million barrels of oil storage capacity at Kiire in Japan and 5.9 million barrels of capacity in Mangalore, India.
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https://www.msn.com/en-us/money/new...utput-boost-to-join-the-price-war/ar-BB112clb

Oil is going to be dirt cheap for a while it seems.
 
Unfortunately, time to bump this old thread...
Saudi and Chinese officials are in talks to price some of the Gulf nation’s oil sales in yuan rather than dollars or euros, The Wall Street Journal reported Tuesday, citing people familiar with the matter.

The two nations have intermittently discussed the matter for six years, but talks have reportedly stepped up in 2022, with Riyadh disgruntled over the United States' nuclear negotiations with Iran and its lack of backing for Saudi Arabia's military operation in neighboring Yemen.
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thehill.com

Saudi Arabia reportedly considering accepting yuan instead of dollar for oil sales

Saudi and Chinese officials are in talks to price some of the Gulf nation’s oil sales in yuan rather than dollars or euros, The Wall Street Journal reported Tuesday, citing people familiar wit…
thehill.com thehill.com
 
The war around oil and other resources has been running in the background for at least 100 years

you don’t need oil
eerr our renewables don’t seem to quite cut it
heh then you need our surplus light sweet shale oil / LNG

but we can buy that locally from Norway and we need some heavy sour to blend it with to make the fuels we actually need
and eerrr we do seem to need a lot of gas ……

and now Russia has chosen its hill to die on and it will not go alone
 
Russia is offering to buy gold below the current market price. I'm struggling to understand why that incentivises anyone to actually sell gold to them.
 
I guess if you are unable to transact in forbidden currencies and need to convert your gold to make a payment, you have the guaranteed Central bank price .....
I guess if the Rouble is being underwritten /backed by gold then the reverse process should be an option ?
I am equally confused and would have thought that rather than fixing the amount of gold per rouble, it should float to match daily market prices ?
 
Best I can figure, it's a gambit to get buyers of Russian oil/gas to sell their gold to Russia to get Rubles so they can buy the gas/oil. I think most of Europe is going to balk. There might be some short term compliance, but I don't believe this will be sustainable over even the medium term.
 
Those who have aligned with 'the west' and agreed to apply sanctions to Russia will not be easily or quickly forgiven.
If Russia can realign to the east, like many commentators say is now is inevitable, then 'the west' has to find its energy to a much greater extent, from its own area

Putie has been planning this operation for a long time and likely so has the seeeyeay- pentagon.
We will see who 'wins' but know it will not be europe or ukraine nor the billions of regular folk around the world.
 
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