De-Escalation Algo Pushes Futures To Overnight Highs

It is unclear exactly why stock futures, bonds – with European peripheral yields hitting new record lows for the second day in a row – gold, oil and pretty much everything else is up this morning but it is safe to say the central banks are behind it, as is the “de-escalation” algo as a meeting between Russia and Ukraine begins today in Belarus’ capital Minsk. Belarusian and Kazakhstani leaders will also be at the summit. Hopes of a significant progress on the peace talks were dampened following Merkel’s visit to Kiev over the weekend. The German Chancellor said that a big breakthrough is unlikely at today’s meeting. Russian FM Lavrov said that the discussion will focus on economic ties, the humanitarian crisis and prospects for a political resolution. On that note Lavrov also told reporters yesterday that Russia hopes to send a second humanitarian aid convoy to Ukraine this week. What he didn’t say is that he would also send a cohort of Russian troops which supposedly were captured by overnight by the Ukraine army (more shortly).
Asian equity markets haven’t really followed suit the US/European rally with bourses in Japan, Hong Kong, and China down 0.6%, 0.4% and 1%. The Dollar is softer against the Yen which perhaps added some pressure on Japanese equities. There isn’t much Asian headlines this morning and we suspect parts of the market (HK/China) are still busy with the ongoing earnings season. Asian credits are doing better in relative terms led by sovereigns. Indonesia’s USD bonds continued its march higher (helped by Treasuries) whilst its 5yr CDS spreads are marked 4bps tighter overnight. Asian stocks fall with the Kospi outperforming and the Shanghai Composite underperforming. MSCI Asia Pacific down 0.2% to 148.4. Nikkei 225 down 0.6%, Hang Seng down 0.4%, Kospi up 0.3%, Shanghai Composite down 1%, ASX up 0%, Sensex up 0%. 2 out of 10 sectors rise with health care, energy outperforming and utilities, telcos underperforming

This post was published at Zero Hedge on 08/26/2014.

India Imports 2559 MT Silver In 5 Months

While silver has been widely used as money in history, at the beginning of the 19th century gold became the dominant metal in trade. At the end of the 19th century central banks erupted around the world and began holding gold in reserve to back their currencies, the international monetary system in this period is known as the classic gold standard. When the last remnants of the gold standard were officially left behind n 1974, and the world was on a fiat standard, central banks held on to their gold. This can only be explained as insurance in case the fiat standard wouldn’t succeed, concomitant admitting there is a reasonable chance fiat money will fail.
Nowadays central bankers sporadically tell us about the true function of gold in the international monetary system. This is only logic if one realizes they (/the US) preferred to minimize the role of gold, in the hopes the fiat standard would provide them maximum flexibility to manage the monetary system. Jelle Zijlstra, president of the central bank of the Netherlands from 1967 to 1982, wrote in his autobiography of 1992:
Gold as the monetary cosmos’ sun.
To analyze gold’s gravity in its ultimate role as the sun in our monetary system I try to be acquainted with all the planets in orbit, black holes nearby and comets crossing the solar system. For example: foreign exchange markets, inflation, quantitative easing, too big to fail banks, derivatives, oil, geo-politics, the media, technical analysis, commodities and silver. I certainly do not pretend to be an expert in all fields (the cosmos), but to make a long story short; while always attributing more importance to gold I recently decided to pay more attention to the global silver market. Few events happen in isolation these days and I did some interesting findings with regard to the silver market worth digging into. In this post we’ll be examining some data from India.
Silver Because of the pressure on the current account deficit the Central Board of Excise and Customs of the Indian Government, raised the gold import duty in January 2013 from 4% to 6 %, in June to 8 % and in August to 10 %. The silver import duty was raised in January 2012 from 1,500 Rs/Kg to 6 % of the silver price and in August 2013 to 10 %. Since the import duties, or tariffs, were raised, the price of gold in India developed a higher premium (excluding the import duty) than silver, as can be seen in the charts below.

This post was published at Bullion Star on 21-08-2014

The Energy Non-Crisis


The Energy NonCrisis by Lindsey WilliamsLindsey Williams published this book in 1980, after spending two and a half years as a chaplain for the crews working on the Trans-Alaskan Oil Pipeline. As a Christian pastor, Lindsey’s first priority was to give spiritual guidance to the souls working on the mufti-billion dollar pipeline project.  But as he gained acceptance among all the members of the workforce, including those in high executive positions, he began to realize that a major scandal was being executed by the US and state governments at the expense of the American public.

Pastor Lindsey Williams became close with an Atlantic Richfield (ARCO) executive, whom Lindsey refers to as “Mr. X.” (Note: Mr. X is now deceased and Lindsey has identified him as Kendall T. From.)  As Lindsey began to learn from Mr. X and understand more about what was happening on the North Slope of Alaska, he invited former state senator of Colorado, Hugh Chance to come for a visit and bear witness to the situation. And it was while Mr. Chance was touring the area and interviewing the people there that Mr. X divulged that the ‘story’ of the energy crisis that the government and the media were pushing on the public was misleading.  Mr. X postulated at that time that the purpose of distracting the American public was to control the price of oil and to regulate the privately owned oil companies to the point where they could be taken over (nationalized) by the government.

Mr X had shown Lindsey and Senator Chance all around the area of the Prudhoe Bay oil fields on the North Slope.  Senator Chance was apparently surprised at the vast oil wealth of the area, because he and other public officials had been told by the federal government that there was an energy crisis.  But the oil available in just the state-approved, 100-square mile area at Prudhoe Bay was estimated to provide 2 million barrels per day for 20 years into the future.  This meant there was no energy crisis.  Furthermore, Lindsey would go on to learn that the oil on the northern perimeter of the ‘governmental 100-square mile boundary’ would have even more oil.  That was proven in a test drill on Gull Island.  But the government stepped in and forced the company to cap the Gull Island well and to leave it alone, citing environmental concerns.  Mr X had estimated that there’s as much oil, or more, under the state of Alaska than there is in Saudi Arabia!

Furthermore, the natural gas that exists there would be enough to supply the US with all its needs for the next 200 years!  And it would have been relatively easy to tap into this resource, given that much of it comes up already with the oil.  But again, government regulations are forcing the oil companies to re-inject that gas back into the ground at an exorbitant cost.  Building a separate pipeline along the same route as the existing oil line would be relatively simple as well.  But instead, as Lindsey describes, the natural gas project would be buried in politics, due to an alternate route proposed through Canada.

During the entire project, Lindsey noted that the federal and state governments were stepping in and regulating the Alyeska Pipeline Service Company (at the time, made up of 9 major oil companies) at every turn. Strict standards needed to be adhered to regarding all aspects of the drilling and pipeline work.  Special out-houses (portable toilets) had to be built at $10,000 a piece.  All vehicle traffic had to stay on the specially built road and not veer one inch off into the frozen ice-covered tundra, lest a hefty fine be levied.  Federal and state government watchdogs were on the prowl at all times waiting to cite any transgressions against any regulation.  And shooting/hunting bears was anathema. (Except, of course when the state employees did it.)  Regulations were even changed mid-way through the project and permits were withdrawn.  Re-permitting meant more delays.

But the project pushed on, and nearing the end it was reaching a successful conclusion. Then came, what Lindsey describes as the government’s last effort to halt or slow the flow of oil from the North Slope.  A propaganda campaign was launched against the quality of the welds in the pipe joints along the pipeline.  It threatened that each of the welds would potentially need to be re-worked.  And worse, many miles of the pipe were underground.  This would have been a killer, but in the end, the welds were proven to be satisfactory.

The initial estimated cost of the pipeline project was $600 million in 1971.  But with all the added regulation, delays and fines, the cost approached $12 billion in 1976. And this is where Lindsey estimates that the government was successful.  Because in order to actually finish the project, ARCO had to borrow ‘the net worth’ of the company. This will not only limit future profits, but further serve to regulate the Alyeska Pipeline Service Company through financial as well as environmental means.

Finally, as the oil flowed successfully, yet another campaign against the Alaskan oil deposit was launched.  Rumors had been initiated that the quality of the oil was unsatisfactory and that US refineries could not ‘crack’ the crude.  Specifically, it was said that the oil coming from Prudhoe Bay had too much sulfur content to be properly refined by US refineries.  But when Lindsey asked his friend, Mr. X about these claims, Mr. X simply laughed and said the quality of the Alaskan oil was as good or even better than the oil currently being imported from other countries.  Lindsey was shown chemical analysis data showing the Alaskan oil had only 0.9% sulfur content.  (And here’s a 1975 report from the US Department of the Interior that shows the differences between the sulfur content of oil found in different regions of the world.  Alaskan oil is shown to be of even better quality than that of Saudi Arabia.)


So why was the state and federal governments stepping in to delay or stop the private oil companies’ progress?  Was it indeed done with the conspiracy to nationalize the oil companies?

If there’s that much oil under the North Slope, wouldn’t that be a good thing for America?  Oil prices would fall and the price at the pump would be dramatically lower.    Perhaps this is what the government was trying to avoid?

Let’s remember what had occurred just prior to the pipeline project. In 1971, Nixon had removed the US dollar’s tie to gold.  Nations around the world began to abandon the dollar as their reserve currency of choice. Secretary of State, Henry Kissinger went to the OPEC nations to ensure that their oil was traded only in US dollars in order to reestablish the US dollar hegemony, thus creating the concept of the petrodollar.  Any privatized company outside this oil conspiracy would interfere with their ability to control the price of oil.  And failing to control the price of oil would directly impact the status of the petrodollar system, thus threatening the US dollar’s status as the world’s reserve currency.

Secondary Note: Lindsey also makes a special point about the frozen tundra.  It was witnessed by Lindsey and the pipeline crews that underneath the ice at Prudhoe Bay, there exists a ‘tropical forest’ at a depth of approximately 1,500 feet.  While drilling, there were several occurrences of the teams bringing back to the surface such foliage as palm and pine trees.  This foliage was in a frozen state and was not petrified.  It reminds one of the book by Immanuel Velikovski, Worlds in Collision. where the climates of the various geographies of the earth were dramatically altered as the axis was suddenly spun by as much as 90 degrees.  Velikovski cites examples of healthy organisms being instantly frozen, thus incapable of decaying normally.  There was even mention of a wooly mammoth found completely intact, even with undigested vegetation in its mouth.

The Fed is Possibly Even More Sinister Than We Think

There’s been much discussion on the Fed’s newest monetary easing policy. The markets received their much anticipated stimulus and are reacting positively (for now).  But as previous posts have indicated, the Fed’s stated objectives and motives are questionable at best.  For a few steps further down the rabbit hole, here’s a must-see video from CrisisHQ

“If you want to understand what’s happening in the Mideast, particularly in Libya, Syria and Iran, you must first understand the main driving force behind U.S. foreign policy. Contrary to mainstream media propaganda, it is not our desire to spread democracy or to prevent tyrannical despots from murdering their own citizens. The real agenda is to protect the Petrodollar system, because it is the only thing that is currently preventing the total collapse of our fiat currency.

For more information on the Petro-Dollar, please see our research article: Root Cause: The Petro Dollar.

Root Cause: The Petro Dollar

April 4, 2012

There’s a popular theory among the world population that the U.S. launched wars in the middle east in order to control its oil reserves. On the surface, this seems entirely logical, but the truth of the matter may be much more sinister, and one should look a little deeper into the situation. It’s not the oil reserves the U.S. is after, although oil does play its part in this charade. The main concern of the U.S. in these wars is more likely the maintenance of its hegemony with U.S dollar as the world’s reserve currency.

The U.S. dollar became the de facto world reserve currency after World War II, when delegates from around the world met and together agreed to what became known as the Bretton Woods System.  Under this system, the U.S. dollar would be linked to gold at $35/ounce. All other nations would tie their currencies not directly to gold, but indirectly through the U.S. dollar. This meant that those nations would hold dollars in their foreign reserves to support their local currencies.  In order to obtain dollars, those countries had to either borrow them from the U.S. Federal Reserve or earn them with a trade surplus. The U.S. got a sweet deal here – perhaps justified due to the fact that after the war the U.S. was indeed the strongest, most productive nation on the planet, along with a huge stash of physical gold.

This system worked well for the world and especially for the U.S. during the prosperous years of the 1950’s and 60’s. But with the U.S. printing its own dollars to cover its increasing debts, including the vast expeditures on the Vietnam War, the world became concerned. Suspicious that the U.S. gold reserves would not cover the existing issue of paper dollars, countries began to trade in their reserve dollars for gold at the U.S. treasury using the pegged value of $35/ounce. The U.S. gold stash was steadily declining.

In order to prevent the total depletion of U.S. gold supplies, in 1971 the Nixon administration closed the gold window – nations were no longer allowed to exchange their reserve dollars for gold.  It was the end of the Bretton Woods System, but not quite the end of the U.S. dollar hegemony in world reserve currency status.

One must then ask the obvious question: Why would a nation now hold a seemingly valueless paper dollar as a reserve currency, especially since its tie to gold has been cut?

The answer: The Petro Dollar.

After Nixon closed the gold exchange window, the dollar was a free floating fiat currency, competing with other currencies around the globe. Inflation started to escalate since there was no tie to gold anymore. In fact, in 1975 the average price of gold was $160 – more than 350% increase in just 4 years since abandoning the gold window.  Additionally, OPEC nations had been using the dominant dollar as a preferred payment method for their oil exports, but now they were starting to lose money as the dollar lost its value. In 1973, OPEC launched an oil embargo, raised prices and started internal discussions on the logistics for trading oil for other currencies including gold. Steps had to be taken by the U.S. if it was to re-secure the dollar as the strong world reserve currency.

The first step was taken in 1974 when Secretary of State Henry Kissinger launched the U.S.-Saudi Arabian Joint Commission on Economic Cooperation. Kissinger used the term “petrodollar recycling” to refer to the overall plan, which was to allow Saudi Arabia to purchase U.S. assets and services with the dollars it was receiving for its oil sales. A beneficial result for the U.S. was that the Saudi Arabian central bank (SAMA) could now use its dollar proceeds to buy U.S. debt (Treasury bills, bonds, etc.).

But the most beneficial outcome for the U.S. was that Saudi Arabia, the most dominant member of OPEC, would agree to continue to accept only U.S. dollars in exchange for its oil sales and would convince the other members of the cartel to do the same.  By 1975, all OPEC member nations restricted their oil trade to dollar transactions. To this day, as long as these key oil states play along, their leaders are showered in luxury and are quite secure in that they’re guaranteed the defense by the U.S. military and its industrial complex.

Meanwhile, countries around the globe must accumulate dollars in their own foreign reserves in order to import the most vital energy component – oil.  Nations have to aquire those dollars the hard way – by borrowing from the U.S. Federal Reserve or earning them by trading resources, goods and services to other nations for dollars.  But the U.S. enjoys the outrageous advantage of being able to print as much of the world’s reserve currency as it wants. Not only has it been able to use these dollars to purchase its own oil on the cheap, it has been able to continually out-do itself in annual deficit spending, now in the trillions of dollars, because it has had captive buyers for its debt.

One would think someone would cry “Foul!”  Well, someone did. The first nation to step away from this rigged system was Iraq.  In November of the year 2000, Saddam Hussein declared that Iraq would no longer accept the dollar for trade in the Oil for Food program.  Instead, the oil would be priced in and exchanged for Euros. Many said this would be a bad investment for Iraq at the time, but the move was actually beneficial because the dollar declined 17% against the Euro until the U.S. attacked and accomplished its mission in May of 2003.  Of course, now that the country was “stabilized” the Iraqi oil trade was repriced in the dollar market again and things went back to “normal” for a while.

The system would be challenged a second time, this time by Libya. In February of 2009, Muammar Gaddafi was elected the chairman of the African Union and would continue the effort to create the United States of Africa, which among other things, would include a unified currency, a dinar based on gold.  Gaddafi went so far as to suggest that the African nations’ oil trade would be switched from the dollar to this new gold currency. Here’s a segment from Russia Today:

Furthermore, it’s quite interesting to note that prior to the Libyan Revolution in February of 2011, Libya didn’t have a central bank linked with its western counterparts. It’s strange that before the “rebels” even had concluded battle, before they had even established a new government, they created a central bank.

And now the petro dollar has a third challenger – Iran.

The western powers are terribly concerned with Iran’s pursuit of nuclear technology. Mahmoud Ahmadinejad has publicly stated his intent to “destroy Israel” and of course this is not something to be taken lightly. Additionally, one must wonder why Iran would even need nuclear power when they’re sitting on one of the world’s largest oil and natural gas deposits.

However, attention should be given to recent events. Early in 2008, Iran launched a new commodity exchange known as the Iranian Oil Bourse. The intent was to allow for Iranian oil to be priced and traded with multiple currencies. As the system was ramped up, initially the exchange limited its trade to secondary petroleum products, with crude oil to be added “when the system was ready.” Iran recently announced it would be ready on March 20, 2012This was a declaration of war on the petro dollar!

The U.S. along with the EU then implemented a defense. Just prior to the expansion of the Iranian exchange, on March 17, the EU carried out orders to expand sanctions against Iran by removing Iranian banks from the international bank-wire transfer system known as SWIFT.  Furthermore, any banks caught doing business with Iran would be sanctioned as well.  It seems Iran’s entire international commerce engine has been halted and its oil industry crushed.

Japan, China, India and Turkey are among the countries who’ve been dependent on Iranian oil to some degree.  Various discussions have been taking place between Iran and its trading partners on the possibility to enlist trade for other commodities such as gold or grain. Unless someone caves in here, another war – perhaps a big one – seems to be on the horizon.

This article was researched and published by JonK.

Update: September 15, 2012: Must see video from CrisisHQ.

“If you want to understand what’s happening in the Mideast, particularly in Libya, Syria and Iran, you must first understand the main driving force behind U.S. foreign policy. Contrary to mainstream media propaganda, it is not our desire to spread democracy or to prevent tyrannical despots from murdering their own citizens. The real agenda is to protect the Petrodollar system, because it is the only thing that is currently preventing the total collapse of our fiat currency.”

Here’s a video from Alt Investors with a discussion on the petro dollar:

Part 1

Part 2

Source material from books (available at Amazon) on the petro dollar:

Here are links to further reading on OPEC’s petro dollar recycling: