Ilargi wrote: What will bring down the Chinese and Saudi pegs, along with a long list of other pegs, is, how appropriately, the very same markets they’ve been relying on to NOT function. The bets against Hong Kong’s ability to maintain its USD peg have already started, and China is next, along with the House of Saud (the latter two just take more fire-power). Which of course is exactly why they speak their soothing ‘confident’ words. Words that are today interpreted as the very sign of weakness they’re meant to circumvent.
What worked for George Soros in his bet vs the Bank of England and the pound sterling in 1992, will work again unless these countries are ahead of the game and swallow their pride and -ultimately- smaller losses.
Granted, so much will have to be recalibrated if the yuan devalues by 50% or so, and the riyal does something similar (it’s very hard to see either not happening), that it will take some serious time before everyone knows where they -and others- stand. And since volatility tends to feed on itself once there’s enough of it, it seems to make sense that governments would seek control. But that doesn’t mean they -can- actually have any.
The point being argued here is that many currencies that have been pegged to the greenback will have to ultimately go onto a free floating status. This would require wholesale currency devaluations - which has already occurred in China, which has also been dumping US Treasuries in vast amounts recently.
Another country that has been surreptitiously dumping US Treasuries has been Saudi Arabia. It has been prosecuting a costly and highly probably illegal war in Yemen, supporting the Jihadist thugs in Syria and has been hard hit by the collapse in the price of oil. Which is why Saudi holding of US Debt is suddenly a big deal
A common mistake that people make when trying to design something completely foolproof is to underestimate the ingenuity of complete fools - Douglas Adams.
A common mistake that people make when trying to design something completely foolproof is to underestimate the ingenuity of complete fools - Douglas Adams.
emordnilap wrote:When Russia and China go the whole hog we'll see some fun.
Considering that the USA imports 8.5 million barrels per day second only to the European Union's 11.6 mbd I don't think anybody will ever sell oil in some other currency or barter from Vodka to Tibetan Yak wool pajamas without being fully aware of what a refiner would be willing to pay for the same oil in the US for dollars or in Europe for Euros and the exchange rate between them.
Washington may have one last joker up its sleeve – reintroducing the ‘gold standard’, the very gold standard that Nixon abandoned in 1971. The US have also been accumulating huge amounts of gold over the past 25 years. A new US dollar gold standard would most likely be set at a ratio that would wipe out all US debt, including future ‘unmet obligations’ (GAO – General Accounting Office) of about US$ 125 trillion. It would attempt to keep the western industrialized world in Washington’s orbit, but might lose most of the developing world owning natural resources coveted by the west. These countries oppressed and colonized for centuries are likely to gravitate to the new China-Russia alliance – leaving the outsourced and outwitted west alone without workforce – and with a massive but outdated military power.
A common mistake that people make when trying to design something completely foolproof is to underestimate the ingenuity of complete fools - Douglas Adams.
Alasdair MacLeod wrote: Before the failure of the gold pool in the late sixties, and the subsequent abandonment of the dollar-gold standard in 1971, oil, in common with all other commodities, was effectively priced in gold, the dollar being merely the settlement medium. Since 1971, the oil price measured in gold has varied in a 350% range, while in dollars the range has been many magnitudes greater. If the dollar is to be undermined, the dollar-oil price may rise, but the dollar’s purchasing power eliminates any benefit. Russia will almost certainly want to revert to the pre-1971 regime, of oil priced in gold, allowing her to accumulate monetary reserves that retain their value.
So, we can begin to understand the importance of Sergey Glazyev sharing China’s geo-strategic view. It confirms, that sufficiently provoked, the Shanghai Cooperation Organization’s plan to operate without the US dollar, might have to be brought forward. The SCO’s economic stability cannot be guaranteed by replacing one fiat currency in its death throes with another. Some form of gold convertibility will be essential, so those plans will be brought forward as well.
Perhaps China and Russia no longer have the luxury of time. America’s increased military belligerence in Trump’s first hundred days might force their hand. Perhaps America, knowing her demise is becoming increasingly inevitable, has some dramatic plan under wraps to seize the financial initiative, as dramatic perhaps as the Nixon shock, when America abandoned the post-war gold standard. The instability brought into the geopolitical equation by the Trump presidency, and the early signs the US economy is grinding to a halt under the sheer weight of consumer and government debt, are increasingly likely to prompt China and Russia into firm financial action, if only to protect themselves in an unstable financial and monetary environment.
A common mistake that people make when trying to design something completely foolproof is to underestimate the ingenuity of complete fools - Douglas Adams.
China’s plans for the replacement of the dollar and the positioning of their own currency are very like Libya’s.
We all know what happens when countries start trading in other than dollars.
In the previous few years China’s trade with Qatar had tripled. And now, guess what? Qatar has been declared by the US to be a sponsor of terrorism and US allies in the gulf have begun to blockade Qatar’s trade. Hmm. Any pattern emerging?
I experience pleasure and pains, and pursue goals in service of them, so I cannot reasonably deny the right of other sentient agents to do the same - Steven Pinker
As I've posted elsewhere" As long as the US imports 7.5 million barrels a day which is 20 percent of all the oil exported around the world and pays for it in dollars that can be used to buy planes, weapon systems and other USA made products the dollar will do alright. The Chinese or Russians might talk some seller to take payments in other currencies or gold but one side or the other will always be comparing the price against what they could get for the same amount of oil priced in dollars.
vtsnowedin wrote:As I've posted elsewhere" As long as the US imports 7.5 million barrels a day which is 20 percent of all the oil exported around the world and pays for it in dollars that can be used to buy planes, weapon systems and other USA made products the dollar will do alright.
It's not far off the day when that amount of high-quality oil is simply unavailable. Yes, not today or tomorrow - but a minuscule amount of time in empire terms.
There'll be time to adjust to the decline, which is what China and Russia are doing with these moves.
I experience pleasure and pains, and pursue goals in service of them, so I cannot reasonably deny the right of other sentient agents to do the same - Steven Pinker
pretty much the price of any commodity is an indirect energy price tracker
e.g.
cheese - made from cows - made from grass and other cereal based feeds that are sown, fertilized and harvested via the use of hydrocarbon derived energy
On Monday the trading of oil futures priced in Yuan goes live. An insightful commentary as to what this means, in the context of the on-going US - China trade spat:
Frontier Insights US China financial war escalates
One of the more peaceful ways US leaders can try to escape this trap should it drag the US into deeper debt, is to try and ‘pass the baton’ of reserve currency status to China. However, China will be extremely careful to weigh up its options. I doubt China would want to assume this unenviable role any time soon. What we could see instead is greater competition between ‘reserve currencies’ (starting with the Yuan oil futures), the rise of cryptocurrencies as new, alternative reserve currency assets or some other multilateral frameworks based on the SDR. What this trajectory does suggest is that the world is slowly but surely moving towards a new financial order, one that could be defined by a growing multi-polar world, with greater roles for developing nations. Lets hope that the developed Western world won’t fall into the Thucydides Trap in the meanwhile, as war still remains a real possibility.
A common mistake that people make when trying to design something completely foolproof is to underestimate the ingenuity of complete fools - Douglas Adams.
Little John wrote:pretty much the price of any commodity is an indirect energy price tracker
e.g.
cheese - made from cows - made from grass and other cereal based feeds that are sown, fertilized and harvested via the use of hydrocarbon derived energy
The price of cheese is an energy price tracker
Cheese is also made from solar grown grasses and grains watered by the water cycle and fertilized by the ruminants that provide the milk. There was cheese long before their was fossil fuel.
Little John wrote:pretty much the price of any commodity is an indirect energy price tracker
e.g.
cheese - made from cows - made from grass and other cereal based feeds that are sown, fertilized and harvested via the use of hydrocarbon derived energy
The price of cheese is an energy price tracker
Cheese is also made from solar grown grasses and grains watered by the water cycle and fertilized by the ruminants that provide the milk. There was cheese long before their was fossil fuel.
