• Tag Archives Petro Dollar
  • The Death Of Petrodollars & The Coming Renaissance Of Macro Investing

    The petrodollar system is being undermined by exponential growth in technology and shifting geopolitics. What comes next is a paradigm shift…
    ***
    In the summer of 1974, Treasury Secretary William Simon traveled to Saudi Arabia and secretly struck a momentous deal with the kingdom. The U. S. agreed to purchase oil from Saudi Arabia, provide weapons, and in essence guarantee the preservation of Saudi oil wells, the monarchy, and the sovereignty of the kingdom. In return, the kingdom agreed to invest the dollar proceeds of its oil sales in U. S. Treasuries, basically financing America’s future federal expenditures.
    Soon, other members of the Organization of Petroleum Exporting Countries followed suit, and the U. S. dollar became the standard by which oil was to be traded internationally. For Saudi Arabia, the deal made perfect sense, not only by protecting the regime but also by providing a safe, liquid market in which to invest its enormous oil-sale proceeds, known as petrodollars. The U. S. benefited, as well, by neutralizing oil as an economic weapon. The agreement enabled the U. S. to print dollars with little adverse effect on interest rates, thereby facilitating consistent U. S. economic growth over the subsequent decades.

    This post was published at Zero Hedge on Oct 14, 2017.


  • DOLLAR BLOW: China Launches New ‘Yuan-Ruble’ Payment Mechanism

    The US received a major blow to its global hegemony, and one which is sure to trigger more fighting talk from hawks in Washington.
    This week it was announced that China has established a ‘payment versus payment’ (PVP) system to clear Chinese yuan and Russian ruble transactions. The aim, we’re told, is to to ‘reduce risks and improve the efficiency’ of its foreign exchange system.
    The new mechanism, which could rival the long-held monopoly of the US SWIFT inter-bank payment system (allowing for simultaneous settlement of transactions in two different currencies) was launched on Monday after receiving approval from China’s central bank, according to a statement by the country’s foreign exchange trading system.
    However, financial oligarchs in Wall Street will view this move as an act of aggression in challenging the preeminence of the US dollar as the planet’s global reserve currency – which is inextricably tied and nearly completely dependent on the US ‘Petrodollar’ to prop-up the value of the US fiat currency. Georgetown University scholars note here:
    Since petrodollars and petrodollar surpluses are by definition denominated in U. S. dollars, then purchasing power is dependent on the U. S. rate of inflation and the rate at which the U. S. dollar is exchanged (whenever there is need for convertibility) by other currencies in international money markets. It follows that whenever economic or other factors affect the U. S. dollar, petrodollars will be affected to the same magnitude. The link, therefore, between the U. S. dollar and petrodollar surpluses, in particular, has significant economic, political, and other implications.

    This post was published at 21st Century Wire on OCTOBER 13, 2017.


  • Turning Point Nations On The Stage

    Many are the turning points with individual nations, once firmly in the Western alliance camp, but no longer. They are flipping eastward or in the case of China cutting the major cords. The Shanghai developments are by far the most important in the financial setting. The Petro-Dollar is seeing its last months after a 43-year reign as defacto standard. Its retirement will begin in the East, then spread to the decaying loyal Western nations. The entire geopolitical chessboard is becoming more aligned with the Eurasian Trade Zone, one nation after another. Its cornerstones are Russia, China, and increasingly Iran. It has gathered some Eastern European countries like Turkey, and will gather more. It has pursued the Middle East oil monarchies, and will succeed in lassoing them into the zone corral. Whether they deploy financial connections, or trade ties, or security links, these nations no longer see the United States and British (who walk the American dog with a monetary leash) as the leading global players any longer. The leaders are China with its financial and industrial might and Russia with its energy and commodity strength.
    As the global structure shifts in alignment, many nations will be involved in the shifts directly. It can be perceived as chess pieces in movement. The many bilateral connections are being altered, so as to fit within the new forces. The power center is moving from West to East, although certainly very slowly. Some call it a giant ship changing course, but the Jackass thinks of it more as a very large baby being formed with numerous umbilical cords, which requires a very long gestation period like that for an elephant. The Eastern centers must remove the vestiges of old colonial power links. It is a very slow process, whereby the East must accept losses from the uprooted stanchions. The Eastern leaders measure their risks, make the changes, and consider the losses as part of a reorganization much like done with the better observed structural changes done by IBM or Chrysler.

    This post was published at GoldSeek


  • Maduro Visits Putin, Proposes Global Oil Trade In Rubles, Yuan

    Three weeks after the US imposed financial sanctions on Venezuela in an effort to cripple its economy and choke the Maduro regime, which in turn prompted Caracas to announce it would no longer receive or send payments in dollars, and that those who wished to trade Venezuelan crude would have to do so in Chinese Yuan, today during an energy summit held in Moscow, Venezuela’s president Nicolas Maduro proposed to expand his own personal blockade of the US, by proposing that all oil producing countries discuss creating a currency basket for trading crude and refined products. One which is no longer reliant on the (petro)dollar.
    ‘Developing a new mechanism of controlling the oil market is necessary,’ Maduro said on Wednesday at the Russian Energy Forum, being held in Moscow this week.
    Quoted by RT, Maduro also blamed trade in crude oil paper futures as having an adverse impact on the oil market, which has undermined attempts by OPEC to stabilize prices. To counteract such “speculation”, Maduro proposed an alternative currency basket, one which is based not on the world’s reserve currency but includes the yuan, ruble, and other currencies, and which will mitigate the alleged adverse impact of futures trading.

    This post was published at Zero Hedge on Oct 4, 2017.


  • Another Potential Game Changer for Gold Supply: Chinese Oil Imports Convertible to Gold

    There are clear supply pressures coming to the gold market, so the last thing it needed was a new source of demand. But that’s exactly what it’s about to get, and as you’ll see, it could potentially push supply into a strained predicament. If this new development catches on it could lead to some fireworks in the gold market.
    This source of demand comes from China’s announcement that oil exporters to China will accept yuan as payment. This is normally done in dollars (hence known as the petrodollar system). The yuan is not well established internationally yet, so as an incentive, China will offer its exporters the option to convert their yuan into gold. This will essentially result in a new source of gold demand, one not currently present in the market.
    So how much gold are we talking about? Let’s run the numbers…
    China’s imports in 2017 have averaged 8.55 million barrels of oil per day. This is already 14% more than last year, and has made them the world’s largest crude oil importer. Every report I’ve read says imports will continue to grow by double digits. A launch date for the program hasn’t been finalized, but let’s assume 9 million barrels per day starting next year.
    The one-year forecast for a barrel of crude oil is $60 (it’s $59 as I write). That equates to $540,000,000 per day. At a $1,300 gold price, that means 415,384.6 ounces of gold per day could potentially be converted. That’s a whopping 151,615,384 ounces per year.
    Not all of that would be converted, of course. But consider that many of the countries that export oil to China aren’t exactly friends of the US, and some are outright enemies, so the conversion rate would probably be greater than if it were all coming from Canada or Norway, or countries that already have a lot of gold. Further, conversions would almost certainly rise in a crisis, especially if Mike is right about the coming monetary shift.

    This post was published at GoldSeek on Friday, 29 September 2017.


  • The World Is Creeping Toward De-Dollarization

    The issue of when a global reserve currency begins or ends is not an exact science. There are no press releases announcing it, and neither are there big international conferences that end with the signing of treaties and a photo shoot. Nevertheless we can say with confidence that the reign of every world reserve currency has to come to and end at some point in time. During a changeover from one global currency to another, gold (and to a lesser extent silver) has always played a decisive role. Central banks and governments have long been aware that the dollar has a sell-by date as a reserve currency. But it has taken until now for the subject to be discussed openly. The fact that the issue has been on the radar of a powerful bank like JP Morgan for at least five years, should give one pause. Questions regarding the global reserve currency are not exactly discussed on CNBC every day. Most mainstream economists avoid the topic like the plague. The issue is too politically charged. However, that doesn’t make it any less important for investors to look for answers. On the contrary. The following questions need to be asked: What indications are there that the world is turning its back on the US dollar? And what are the clues that gold’s role could be strengthened in a new system?
    The mechanism underlying today’s ‘dollar standard’ is widely known and the term ‘petrodollar’ describes it well. This system is based on an informal agreement the US and Saudi Arabia arrived at in the mid-1970s. The result of this deal: Oil, and consequently all other important commodities, is traded in US dollars – and only in US dollars. Oil producers then ‘recycle’ these ‘petrodollars’ into US treasuries. This circular flow of dollars has enabled the US to pile up a towering mountain of debt of nearly $20 trillion – without having to worry about its own financial stability. At least, until now.

    This post was published at Ludwig von Mises Institute on September 20, 2017.


  • Venezuela Has Officially Abandoned The Petrodollar – Does This Make War With Venezuela More Likely?

    Venezuela is the 11th largest oil producing country in the entire world, and it has just announced that it is going to stop using the petrodollar. Most Americans don’t even know what the petrodollar is, but for those of you that do understand what I am talking about, this should send a chill up your spine. The petrodollar is one of the key pillars of the global financial system, and it allows us to live a far higher standard of living than we actually deserve. The dominance of the petrodollar has been very jealously guarded by our government in the past, and that is why many are now concerned that this move by Venezuela could potentially lead us to war.
    I don’t know why this isn’t headline news all over the country, but it should be. One of the few major media outlets that is reporting on this is the Wall Street Journal…
    The government of this oil-rich but struggling country, looking for ways to circumvent U. S. sanctions, is telling oil traders that it will no longer receive or send payments in dollars, people familiar with the new policy have told The Wall Street Journal.
    Before we go any further, we should discuss what we mean by the ‘petrodollar’ for those that are not familiar with the concept. The following comes from an excellent article by Christopher Doran…

    This post was published at The Economic Collapse Blog on September 14th, 2017.


  • Gold-Backed, Yuan-Denominated Oil Futures Could Dethrone US Petrodollar

    A recent move by China could take a big step toward dethroning the US petrodollar.
    The Chinese have announced the launch of a gold-backed, yuan-denominated oil futures contract. The move potentially creates a way for oil exporters to circumvent US dollar denominated benchmarks by trading in yuan. The contracts will be priced in yuan, but convertible to gold. An article in the Nikki Asian Review explains the significance of the move.
    The contract could become the most important Asia-based crude oil benchmark, given that China is the world’s biggest oil importer. Crude oil is usually priced in relation to Brent or West Texas Intermediate futures, both denominated in US dollars. China’s move will allow exporters such as Russia and Iran to circumvent US sanctions by trading in yuan. To further entice trade, China says the yuan will be fully convertible into gold on exchanges in Shanghai and Hong Kong.’
    The stability of gold is the key to China’s drive to dethrone the petrodollar

    This post was published at Schiffgold on SEPTEMBER 11, 2017.


  • THE U.S. PETRO DOLLAR BREAKDOWN CONTINUES: Big Moves In Gold & Silver Ahead

    The four-decade long monopoly of the U. S. Petro-Dollar as the world’s reserve currency is coming to an end. Unfortunately, most Americans have no clue that when the Dollar loses its reserve currency status, life will get a lot tougher living in the U. S. of A. Let’s say, Americans will finally receive ‘Precious metals religion.’
    The U. S. Dollar Index fell considerably yesterday and is now down below a key support level. In early morning trading yesterday, the U. S. Dollar Index fell to 91.46, down 73 basis points:

    This post was published at SRSrocco Report on SEPTEMBER 8, 2017.


  • NEW EASTERN ENERGY CARTEL: Replacement to the Dead Petro-Dollar

    The Petro-Dollar is dead. It had served so well for over 40 years in maintaining the USDollar as global currency reserve, while keeping tight the controls on geopolitical power. The link between crude oil and the USDollar has been broken, painfully evident since 2016 with a harsh price decline that cannot rise about the $50 level. It remains stuck below that level despite heavy collusion in a demonstration that OPEC is dead defunct also. A void has been created in the energy sector, a most important sector. Enter Russia & China to fill the void. Both the crude oil market and the natural gas market have new alliances which feature nations acting in a cooperative manner. The common element is Russia on the production side, complete with pipeline arrays. The common other element is China on the demand side with large customer needs and financial influence. This article describes the two emerging organizations, which the Jackass calls the Oil Consortium and the NatGas Cartel. It will serve the Eurasian Trade Zone. It will function outside the USD payment system. It is ripe for Gold payment structure in the near future. In no way do these qualify as coffin nails for the Petro-Dollar. The funeral for the corrupted abused hegemon USDollar might have taken place with the Trump charade in Saudi Arabia a month ago. The emerging energy organizations signal the new dawn after the funeral without eulogy.
    GLOBAL DOMINANCE CAST ASIDE
    The USDollar is integrally related to the global dominance that the United States has fostered for global benefit, then later distorted into a credit abuse dynamic but hardly for benefit, then finally abused beyond legitimate basis for global aggression and financial extortion. The dominance is unraveling within the Global Paradigm Shift. It is indeed late in the game for the shift, whereby no reversal to repair the USDollar is possible. The Eastern energy cartel has a firm foundation, leaving the West with no possible response. The consequences are vast, extending to the USMilitary. Its reliance upon free oil is ending. The over-stretched military presence will repeat the end of the road that the British Military faced several decades ago. Both the British and the Americans have lost their cherished global reserve currency, and along with it, lost power and prestige. In recent months, the US has proved it has very few friends even among its list of allies.

    This post was published at GoldSeek on 24 August 2017.


  • Chinese Leverage to Kill Petro-dollar

    The Chinese Govt is greatly irritated by the requirement to use USDollars in payment for crude oil in the global market. The Beijing officials finally have some leverage in arranging for a major deal to pay for crude oil in RMB currency, their Yuan. The negotiations have been in progress for a couple months. The development is not covered well in the financial press, not even in the alternative media. It will happen, just a matter of time. Its effect will be far reaching and likely devastating.
    The global currency reserve status for the USDollar is at severe heightened risk. It will not be deposed via financial markets, like with a bond market failure or a COMEX gold market default with bust. Such is folly to imagine as likely to occur. The Western bankers are expert at rigging the financial markets, one and all. Their central bank bond support has extended to stock market support, soon to corporate bond wide support also. The USGovt is hanging onto its power base in increased isolation. The assaults are on many flanks and platforms.
    ESSENCE OF PETRO-DOLLAR
    Its essence is the sale of crude oil universally in USDollar terms. Typically the payment form is the USTreasury Bill. The OPEC crew typically sock their surplus petro dollars in USTreasury Bonds. The sale proceeds never exit the USD form. The deal was struck in 1973 by the Rockefeller agent named Heinz Kissinger. It came in the wake of the abrogated Bretton Woods Gold Standard, which Nixon violated with force and audacity. In fact, the arrangement was suggested by the US side of the table. Nevermind that it was Rockefeller who hatched the idea of a tripled oil price, the exact opposite of what has been inscribed in the historical annals. The other little item in the Petro-Dollar defacto standard treaty is that the Saudis, along with the Gulf Arab neighbors, would buy USMilitary hardware exclusively. The USGovt would provide them with plenty of regional conflict. Over the four decades since, the Arabs have accumulated a few cool $trillion in USTBonds. The TIC Report on foreign bond assets is a gigantic fabrication. Most Saudi bond holdings have been hijacked and stolen, used as the core to the USDept Treasury’s vaunted Exchange Stabilization Fund. They will never see at least $3 trillion in sequestered bonds. A joke here, since the ESFund is the most secretive multi-$trillion fund in human history.

    This post was published at GoldSeek on July 30, 2017.


  • Asian Metals Market Update: July-18-2017

    Lack of news resulted in a weaker US dollar and the continued rise in metals and energies. Trump and his never ending controversies implies stalemate among US lawmakers to pass new legislation. Only war legislations have been passed by republicans. Global safe haven demand has been on the rise. The internet is filled with speculation that the Russia-China energy deal will result in an end to the petrodollar. Tensions in the South China Sea and a NATO expansion in eastern Europe will increase in all kinds of trade between Russia and China. We might see a new cold war3 with Russia-China on one side and NATO and its allies on the other. NATO has used trade sanctions first to alienate a nation and if trade sanctions did not work, then use force or create an armed rebellion in that nation. NATO’s tried and tested ways to rule will not work with the Russia-China axis. Russian and Chinese governments have been continuously increasing their gold reserves. One needs to closely watch NATO’s tactics with the Russia-China axis. The Taliban, the Islamic state, the mujahedeen’s, one can call by whatever name are all termites created by NATO for an opposing nation. Philippines great leader Duterte opposed NATO and the Islamic state terror has been unleashed to him. No one is invincible. I believe that the controlling power of NATO will fall over the coming years. Physical gold is still not a bad very long term investment.

    This post was published at GoldSeek on 18 July 2017.


  • Enter The NatGas Cartel

    The King Dollar is mortally wounded. Many notice but the masses seem largely unaware. Since 1971, the Gold Standard has been removed from its anchor position. But since 1973, the Petro-Dollar has taken its place. It has called for crude oil sales led by the Saudis and OPEC to be transacted in USDollar terms, for oil surpluses to be stored in USTreasury Bonds, and for some kickbacks from the Saudis to the USMilitary complex for weapons purchases. Of course, the US is ready willing and able to create strife and to foment wars whereby the Arab oil monarchs will need more weapons. Since 2014, many events have pointed to the crippled condition of the important link between the USDollar and crude oil. The price has plunged by 50% of more, and not recovered. It is currently lurching in the nether bounds near the $45 level. Anything less than $65 to $70 per barrel is very dangerous for keeping the oil sovereigns afloat and for keeping the US energy sector solvent. Witness the Wall Street banks having tremendous problems with impaired bonds and toxic energy portfolios. They seem not resolvable. They cannot keep the oil price over $50, a sign of their impotence.
    Not enough financial analysts connect the new normal of a much lower crude oil price with the eventual vanishing act of the Petro-Dollar. The Wall Street banks are deeply exposed on their entire energy portfolios, which include both bonds and commercial loans. Tens of $billions will have to be written off as loss, beyond the $billions already declared as losses. These corrupt banks have worked their magic to lift the oil price above the $50 level, but failed. They worked the task for over a year, but failed. They need an oil price over $60, but failed. The Saudis did not help the cause, by their ongoing extra output to finance their filthy Yemen War. The Saudis earned the anger of their OPEC partners, especially the Gulf Arab allies. The Wall Street banks deeply resent the Saudis for this deed, but the USMilitary complex loves the Saudis. The other Arab oil producers also harbor consider rancor toward the Saudis, who really have no friends in the entire Persian Gulf region. They are so worthy of a palace coup, which would bring clamors of rejoicing in many corners of the West if it were to occur. The day might be close.

    This post was published at GoldSeek on July 5, 2017.


  • Jackass’ Red Glare Upon The Petrodollar

    For your holiday listening pleasure, Jim Willie returns for a comprehensive discussion of the petrodollar and how current events around the Arabian Peninsula are a sign of great distress for this monetary scheme.
    Again, what is the “petrodollar”. The idea was championed by Henry Kissinger in 1973 as a way to create ongoing demand for US dollars by maintaining the pricing of crude oil in dollars only. The effects of this were two-fold:
    To create constant demand for dollars…dollars which were now completely unhinged from any gold backing…and this demand would soak up any excess supply of new currency being printed in the US for military and social purposes. To force oil-exporting nations to keep their foreign currency reserves in dollars, thus creating an ongoing demand for US treasury bonds. This constant demand for bonds would help to keep interest rates…and thus the US debt service cost…unnaturally low.

    This post was published at TF Metals Report By Turd Ferguson /July 3, 2017.


  • PetroDollar System In Trouble As Saudi Arabia Continues To Liquidate Foreign Exchange Reserves

    The U. S. PetroDollar system is in serious trouble as the Middle East’s largest oil producer continues to suffer as extremely low oil price devastates its financial bottom line. Saudi Arabia, the key player in the PetroDollar system, continues to liquidate its foreign exchange reserves as the current price of oil is not covering the cost to produce oil as well as finance its national budget.
    The PetroDollar system was started in the early 1970’s, after Nixon dropped the Gold-Dollar peg, by exchanging Saudi Oil for U. S. Dollars. The agreement was for the Saudi’s only to take U. S. Dollars for their oil and reinvest the surpluses in U. S. Treasuries. Thus, this allowed the U. S. Empire to continue for another 46 years, as it ran up its ENERGY CREDIT CARD.
    And run up its Energy Credit Card it did. According to the most recent statistics, the total cumulative U. S. Trade Deficit since 1971, is approximately $10.5 trillion. Now, considering the amount of U. S. net oil imports since 1971, I calculated that a little less than half of that $10.5 trillion cumulative trade deficit was for oil. So, that is one heck of a large ENERGY CREDIT CARD BALANCE.

    This post was published at SRSrocco Report on JUNE 16, 2017.


  • China’s Next Step to Destroy the Dollar — Byron King

    Saudi’s share of Chinese imports has dropped from over 25% in 2008, to under 15% now. Meanwhile, Saudi competitors Russia, Iran, Iraq and Oman are selling more oil to China.
    Saudi would like to reverse this declining trend of oil-trade with China. However, these kind of major oil flows don’t just happen in a vacuum.
    There’s a good reason why Russian oil sales to China are increasing. As you’ll see in Nomi’s article, trade and financial services are often closely linked. Over the past few years, China has deepened its trading roots with Russia – now, China pays for Russian oil in yuan. Russia, in turn, uses yuan to buy goods from China.
    Beyond trade in goods, within the past six months Russia has set up a branch of the Bank of Russia in Beijing. From there, Russia can use its Chinese yuan to buy gold on the Shanghai Exchange. In a sense, Chinese-Russian oil trade is now backed-up by a ‘gold standard.’
    Looking ahead, Saudi Arabia will find itself more and more locked-out of the Chinese oil market if it won’t sell oil for yuan. But to do this, the Saudis must move away from U.S. dollars – and from petrodollars – if Saudi wants to maintain and increase access to China’s oil market.

    This post was published at Daily Reckoning


  • The Gnome Underpants Gold Model – Precious Metals Supply and Demand

    How to Earn Money that Will Soon be Worthless Real Quick There is a often-promoted plan to grow your wealth. Here’s the background. The dollar is going to be worthless. Soon! The reason is because [their peeps in high places tell them / the Chinese / end of the petrodollar / historical fiat currencies / Rothschild Jekyll Island Master Plan Private Fed / Fed printing] will cause the dollar to collapse and gold will rocket to $50,000.
    ***
    In fact, it’s a miracle that the price is a mere $1,253 and it hasn’t exploded already. It will, once people discover this One Weird Secret that They Don’t Want You to Know that we have been reiterating every day for decades (by the way, Monetary Metals is about to publish the data to finally shine the full sunlight of disinfectant on this – stay tuned).
    The plan has three phases.
    Phase 1: You gotta buy gold. Now. In fact, call 1-800-BUY-GOLD now! That number, again, is one eight hundred bee yoo wye gee oh ell dee Phase 2: Price goes up Phase 3: Profit!

    This post was published at Acting-Man on May 22, 2017.


  • Gold Trade Note Sighted

    The Gold Trade Note is gradually coming into view, its form within structured contracts is taking shape as components. the Petro-Dollar has almost completely vanished. The Petro-Yuan is essentially here in its infancy, in rudimentary form. the leap to the Gold Trade Note will be easy, once the pieces are aligned and in place. This new note for usage in secure trade settlement is in the inception process. It will be structured within existing trading vehicles and platforms. The Russians and Chinese appear to be forming the basis for the payment vehicle within the oil trade. Consider it as a formal reflection of the Iran-India gold for oil trade.
    Bilateral Oil for RMB Sale Shanghai Gold Exchange = Gold Trade Note
    This triangle is precisely what China and Russia are doing now. Russian oil & gas is being sold for Chinese Yuan, and then Yuan is traded for Gold at the Shanghai Gold Exchange. The trade is not complex at all. Oil for RMB for Gold, creating a transaction payment in gold terms. The part unclear is posted margin to confirm and seal the transaction. The immediate implication is that the Chinese RMB will have a quasi-gold link. The original model used might have been the Iranian oil sales to India, with payment completed using Turkish gold. Such gold for oil trade appears to have been commonly executed from 2006 to 2010, and likely beyond that date. The Jackass has been expecting that the Gold Trade Note would be structured in a clever way, using swap contracts in major global commerce. It might be taking form in the triangle cited as the working template. Oil is the biggest commercial trade item. Soon comes the RMB-based contract for crude oil, traded in Shanghai. It will surely cause big waves, a major disruptive event.

    This post was published at GoldSeek on Thursday, 16 February 2017.