MCViewPoint

Opinion from a Libertarian ViewPoint

Posts Tagged ‘petro dollar’

The End is Nearing: A World Slowly/Openly Turning Away from the USD

Posted by M. C. on August 29, 2022

By Matthew Piepenburg
Gold Switzerland

As more nations turn away from the West (and the USD) and closer to the East (i.e., Russia) to meet their energy needs, how will they find the Rubles or Yuan to buy their oil, gas and other commodities? After all, in the new, post-sanction, multi-FX importing model described above, Turkey can’t just buy Russian oil in Lira; it needs to first settle the trade in Rubles.

So, again, what currency will Turkey use?

With the USD losing influence, it would be the understatement of the year to say that we live in interesting times, for we certainly do.

But despite the inevitable attacks of appearing sensational, un-American or just plain cynical, I feel a more appropriate phrase boils down to this:

“We live in dishonest times.”

Below, I bluntly address the “Fed pivot debate,” the “inflation debate” and the USD’s slow global decline in the setting of a now multi-FX new normal in which gold’s historical bull market has yet to even begin.

These views are not based on biased politics, but honest economics, which for some odd reason, ought to still matter.

Let’s dig in.

The New Normal: Open Dishonesty

I recently authored a report showcasing a string cite of empirically open lies which now pass for reality on everything from the CPI inflation scale to the Cleveland Fed’s +1 real interest rate myth, or from official unemployment data to the now comical (revised) definition of a recession.

But a more recent lie from on high comes directly from the highest of all, U.S. President Joe Biden.

Earlier this month, Biden waddled to his podium and prompt-read to the world that the US just saw 0% inflation for the month of July.

Oh dear…

It’s sad when our national leadership lacks basic economic, math or even ethical skills, but then again, and in all fairness to a President in open (and in fact sad) cognitive decline, Biden is by no means the first President, red or blue, to just plain fib for a living.

A History of Fibbing

We all remember Clinton’s promise that allowing China into the WTO would be good for working class Americans, despite millions of them seeing their jobs off-shored to Asia seconds thereafter.

And let us not forget that little war in Iraq and those invisible weapons of mass destruction.

Nor should we ignore both Bush and Obama’s (as well as Geithner’s, Bernanke’s and Paulson’s) assurance that a multi-billion-dollar bailout (quasi-nationalization) of the TBTF banks and years of printing inflationary money (Wall St. socialism) out of thin air was, “a sacrifice of free market principles” needed to “save the free market economy.”

In reality, however, we haven’t seen a single minute of free market price discovery since QE1.

See the rest here

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Luongo: Breaking The Empire Means Breaking With The Saudis | ZeroHedge

Posted by M. C. on September 5, 2021

The Saudis, however, for their part have learned the lessons well what happens when you get into a price war with Russia. You lose. So, instead of fighting Russia for market share, they’ve decided to coordinate production for the big win-win for everyone while the U.S. continues to grapple with the reality that its empire is not only crumbling, but being actively dismantled from within.

https://www.zerohedge.com/geopolitical/luongo-breaking-empire-means-breaking-saudis

Tyler Durden's Photoby Tyler Durden

Authored by Tom Luongo via Gold, Goats, ‘n Guns blog,

For more than fifty years the Saudis have helped prop up U.S. foreign policy by exporting their oil to the world and taking only dollars in return.

Their currency, the Riyal, has been pegged to the U.S. dollar since then Secretary of State under President Nixon, Henry Kissinger, brokered that deal that built the so-called petrodollar system.

Now, in the intervening decades the petrodollar has been a buzzword thrown around by many, including myself, to explain the architecture of the U.S.’s imperial ambitions. In many ways, it has served a crucial part of that, at times. But, it was most needed during the early years of the dollar reserve standard, helping to legitimize this new currency regime and provide a market for U.S. debt around the world to replace gold.

After that it was just one aspect of a much bigger game built on the ever-expanding Ponzi scheme of fake funny money. In reality, the eurodollar shadow banking system is just a lot bigger than the petrodollar.

That said, I don’t discount it completely, as I understand this is real money changing hands for real goods, rather than the vast quantities of dollars out there supporting an increasingly creaky financialized system. Real trade matters and what currency that trade occurs in, also matters.

The U.S. closely defended the petrodollar famously going to war with any country that dared to offer oil on international markets in any currency other than the dollar, c.f. Iraq under Saddam Hussein. But, times change and so do the structure of capital markets.

So, when evaluating the health of the petrodollar system and its importance today it’s important to realize that the oil market is far more fragmented in payment terms than its been since the early 1970’s.

As a system, the petrodollar was always going to die a death of a thousand cuts. To my reckoning the first inklings of this began in late 2012 after President Obama finally used the financial nuclear weapon, expulsion from the SWIFT payment system, on Iran for pretty much no reason.

Earlier this year I wrote a piece describing why in negotiations you never go nuclear and how Obama made the biggest strategic blunder, possibly in U.S. history, by first threatening the Swiss over bank secrecy and then Iran.

The fact that the Obama administration politicized SWIFT when it did ended an era of international finance. The world financial system ended any illusions it had over who was in charge and who dictated what terms.

The problem with that is once you go there, there’s no going back, which was {Jim} Sinclair’s point over a decade ago.

Threatening Switzerland with SWIFT expulsion wasn’t a sign of strength, however, it was a sign of weakness. Only weak people bully their friends into submission. It showed that the U.S. had no leverage over than the Swiss other than SWIFT, a clear sign of desperation.

And that’s what the U.S. did when it pushed the big red ‘history eraser’ button.

The Swiss knuckled under. Its vaunted banking privacy is now a part of history.

Iran, however, in 2012, facing a similar threat from Obama, didn’t knuckle under and forced Obama to make good on his threat. Once you uncork the nuclear weapon you can’t threaten with lesser weapons, they have no sway. This is a lesson Donald Trump would learn the hard way since 2018.

Iran bucked the petrodollar to sell its oil by making a goods-for-oil swap arrangement with India. Iran was laughed at by U.S. foreign policy wonks at the time. Then we found out that Turkey was laundering oil sales for Iran through its banks using gold.

Its currency, the Rial, since then has been under constant attack by the U.S., most viciously under President Trump who sought to do what Obama couldn’t do, drive Iran’s oil exports to zero. The goal was regime change.

I chronicled this in detail, over these past four years, saying explicitly that the strategy was stupid and short-sighted. It didn’t work. It couldn’t work.

Iran’s resistance to Trump’s bullying only further entrenched the existing power structures there and hardened the Iranian people to become more disagreeable, more disdainful of America and, likely, Americans.

All it did was force Iran to develop alternate plans and find new markets. Those alternatives meant courting better relations with China, Russia and Turkey, which the U.S. tried hard to sabotage. As long as Iran was as good as its word, supplying oil and acting as a reliable partner in diplomacy, eventually deals would come to them.

See the rest here

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EconomicPolicyJournal.com: Trump’s Signals He May Start Going After Bitcoin

Posted by M. C. on July 12, 2019

The “Crypto” in cryptocurrency once meant privacy from government snooping in our spending habits.

That ship is long gone. Anyone who thinks the government would let that happen better get their prescription changed.

Today’s alternative currencies are much closer to commodities as they are not based on a standard like gold.

Today’s alternative currencies, such as Zuck’s ‘Libra’ are meant to be anything but private. Zuck’s and the government’s goal is to know more about your finances than you do.

The government is becoming ultra protective of the dollar now that Russia, China, Iran, Venezuela and others are looking to purchase oil in something besides the US petro-dollar. Note the similarity to the countries named and the countries with which the US wants to go to war.

https://www.economicpolicyjournal.com/2019/07/trumps-signals-he-may-start-going-after.html

The below seemingly came out of the blue, but really not surprising.

Trump’s controls do not want paper currency competition.

The regulations are coming.

RW

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War and the Paper Standard – LewRockwell

Posted by M. C. on May 11, 2019

Is it all about the (petro) dollar?

https://www.lewrockwell.com/2019/05/l-reichard-white/war-and-the-paper-standard/

By

Maybe you’ve noticed the frenzied U.S. Government attempt to replace Venezuela’s duly elected hood-ornament — PresideNT Nicolas Maduro — with Juan Guaido, a nearly unknown U.S. prepped Venezuelan politician?

Why are they trying to do that?…

So, what about this persistent two-decade attack on Venezuela? Whim, whimsey, hobby, madness, or is there more to the story?

Consider this headline from September 2017, only a few months before Venezuela’s current problems started – – –

Venezuela Plans to Drop US Dollar in Gas, Oil Trade

And this before the U.S. supported and/or instigated temporary coup against super-popular and certified by Jimmy Carter Mr. Chavez – – –

…it must be noted that Iraq is attempting to switch to the euro as its currency for settling oil exports, and that Venezuela is reportedly planning to follow suit. –The Japan Times: November 20, 2000

So,” you may be thinking, “What’s the big deal with that?”

Well, because of a 1974 agreement cobbled together by the Nixon administration between the U.S. and Saudis, nearly all oil trade in the world ended up requiring U.S. dollars.

Not coincidentally, this was just three years after Nixon, attempting to finish replacing the gold standard with the U.S. paper-dollar standard, closed the gold window and thus threatened to throw the world economy into chaos. This explains a lot more than most folks realize.

Remember the “petro dollar?” Well, thanks to the Saudi/U.S. established oil-for-dollars tradition, the Brits, Germans, Japanese — in fact just about everyone — had to keep dollars on hand to pay for their oil imports.

And the oil sellers also ended up with a lot of dollars. And so did the countries they bought stuff from. And the dollar tradition spread to trade in other commodities as well. That meant that a large aggregate of U.S. dollars stayed overseas and didn’t return to the U.S.

In fact, The Federal Reserve estimates that the majority of the cash in circulation today is outside the United States.

Experts estimate that “majority of cash … outside the United States” is as much as 80% of the U.S. dollars in circulation. All that money overseas has a lot to do with the fact that everyone has to pay for oil, etc., with dollars.

As Case Sprenkle of the University of Illinois puts it, “Insofar as the money remains abroad and is not used to purchase goods or services from the country that printed it, it serves as an interest-free loan from poor countries to the rich.”

That’s mostly how Uncle Sam is able to run-up such huge budget deficits without causing inflation. So far.

But what happens if people overseas stop using the dollar — and discover the only place they can spend it now is back here in the good ole’ U.S. of A.?

What would happen if the Saudi Arabians said they didn’t want to be paid [for oil] in dollars anymore, but wanted instead, to be paid, say in yen. There would be inflation that would make the 15 to 20 percent inflation in the early 80’s look good. Sen. Pete Domenici, R-NEW MEXICO, C-SPAN II, 18 May 1995 ~12:33:55 PM

Unfortunately, selling oil for something other than U.S. dollars isn’t the only thing threatening the paper-standard. It’s also become the norm for governments and central banks to stockpile U.S. Treasuries to support their own currencies.

So, if a country reduces its stock-pile of U.S. Treasuries, either by selling them off or no longer rolling them over when they reach maturity — and replaces them with something else, as in the past, gold perhaps — this also threatens the U.S. dollar paper-standard.

The problem is, the paper-standard is mostly psychological. It’s literally a con — that is, confidence — game and when the confidence evaporates, game over.

And it’s very difficult to enforce confidence, no matter how many aircraft carriers, etc. you deploy. Or to predict when the confidence will implode.

As former FED Chair Alan Greenspan confessed,

We can readily describe this process, but, to date, economists have been unable to anticipate sharp reversals in confidence. Collapsing confidence is generally described as a bursting bubble, an event incontrovertibly evident only in retrospect. –Alan Greenspan, “New challenges for monetary policy

And these days, instead of cash paper money, most of those Treasury bonds and dollars are now nothing more than electronic zeros and ones, just accounting entries in computer memories that circle the globe at about the speed of light — and can pretty much land anywhere instantly. Ah-oh!

So now we know the likely basis of this frenzied attempt to replace Venzuela’s current hood-ornament. Before he replaces the dollar. AND why Uncle was almost as desperate to replace the previous hood decoration, Mr. Chavez.

Perhaps you also noticed from that Nov. 2000 Japan Times article above that at the turn of the century, “Iraq [was] attempting to switch to the euro as its currency for settling oil exports” too?

Attempting” because as a result of the settlement ending the first U.S./Iraq so-called “War,” waged by Bush Sr., and otherwise known as “Desert Storm,” Iraq had to get U.N. permission. Yes, in case you don’t remember, there were two so-called Iraq “Wars.”

And, a little more substantial, Saddam Turns His Back on Greenbacks

In due course, the U.N. bureaucrats ruled that Iraq could indeed sell it’s oil for any currency it chose. In due course, Iraqi Food for Oil was paid for in euros rather than in dollars. Ah-oh!

Subsequently, seizing on the 911 attacks as the illegitimate and completely bogus excuse, George Bush Jr. and his cronies told at least 935 documented and recorded falsehoods to get “us” to attack the men, women and children of Iraq for the second time.

Here’s the timeline:

March 2000, Iraq announces it’s intention to change Oil for Food to euros and, according to the Oct. 12, 2000 Oil & Gas News, as of Sunday, Oct. 8, the Iraq central bank announced it had begun to buy European currencies.

Twelve months later in the aftermath of the Sept. 11, 2001 “911” attacks — and using them as an illegitimate excuse — Bush Jr., Dick Cheney & Company start their bogus anti-Iraq propaganda campaign.

March 19, 2003, 18 months after 911, based on his 935+ lies, U.S. strongman Bush Jr., following in his fathers footsteps, again attacks the men, women and children of Iraq.

And, emphatically punctuating that paper-standard connection, one of the first executive orders Herr Bush Jr. signed after declaring victory on May 2, 2003 “switched trading on Iraq’s oil back to the dollar.”

So perhaps not all U.S. meddlings, assassinations, coups, invasions, regime changes, “wars,” and sanctions are done purely on whim or whimsey, although given the sheer volume of them — and with Operation Just Cause as an example — we can’t rule-out hobby and/or madness.

And there’s a missing piece. Ever since The Church Committee hearings uncovered it, we know the U.S. MSM (Main Stream Media) has been in cahoots with C.I.A./U.S. plots, lies, and scams. Bush Jr.’s Iraq war-crime with his minimum of 935 falsehoods is a good example. And unfortunately, little has changed.

In fact, it’s gotten worse. The one-sided coverage of Mr. Maduro proves nearly complete control in the U.S. Further, C.I.A. media meddling and control have expanded world-wide. Britain is particularly well controlled. German journalist Udo Ulfkotte explains the big picture this way — “We All Lie for the CIA.”

Because of this wide-spread CIA influence, there’s a marker for a standard U.S. Government tactic we can look for as a harbinger of interventions: Demonization – – –

“Well Jim, it is very important in a democracy that you have the support of the people. One of the reasons why [U.S. President] George [Herbert Walker] Bush had to demonize [Iraq’s President] Saddam Hussein was to get the support of the people, and [U.S. President] Bill Clinton has done the same thing, Vice President Gore has done the same thing with respect to [Serbian President] Milosevic.” Raymond Tanter, Fmr. Natl. Security Council Staffer, WATCH IT!, MSNBC, 2 Apr 1999, ~11:56:45 AM EST

However, demonization has a long pedigree.

Read the rest of this entry »

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