[inquiry]

http://www.rense.com/general74/report.htm

Chinese tell visiting Bush administration officials they will not sit back
and lose their shirts as U.S. Dollar collapses; they are getting out fast and large. 12-15-6

Is this Rense article for real ??

[Bas]

$this->bbcode_second_pass_quote('', 'C')hina has decided to implement an aggressive sell-off of U.S. Dollars before the rest of the world does so. China told the US delegation; "we are the largest holder of U.S. Currency and if the rest of the world unloads theirs before we unload ours, we will lose our shirts." Fed Chairman Bernanke left the meeting "pale and in a cold sweat"

[dukey]

the dollar lost 11% of its value against the euro this year. It's not too much of a stretch to think that the chinese might want to dump a depreciating dollar. If the US economy is going into recession anyway .. what's stopping them.

[evilgenius]

First of all, the Chinese are only threatening to dump. What they really want are higher rates on the treasuries they will buy from here on out. That can only happen if the demand for US dollars goes down and thus the demand for US treasuries. Since the world must buy oil with dollars that won't happen unless the price of oil goes down.

So, what does Bush and co. have up their sleeve to lower oil prices. They are planning on settling Iraq, of course. Now that Saddam is dead they will be counting on their Saudi buddies to line up the Sunnis in Iraq to accept US help. The US will install the Sunnis and thus the Saudis in Iraq. That will make the Saudis a much more potent swing producer. They will be able to overproduce and drive the price down like during the cold war.

He who can establish the lowest cost to produce in any industry rules that industry.

Here's where it will all go wrong. The Russians are putting together their own energy block. Their side is counting on the euro. They will flood Iraq with weapons and fighters through their proxy, Iran, in order to stop the US plan. If the Russians can succeed in sustaining the fight for Iraq long enough they might be able to force the Saudis, because of depletion worries, to accept a partition of Iraq rather than sole possession. That would work out okay for the Saudis but terribly for the US.

If you see this even start to be the case buy gold and stock in any oil company with reserves outside of the ME and not under the control of the Russian block.

[tugboat]

Here's a great link:

http://immobilienblasen.blogspot.com/

[MrBill]

Thanks for the PIMCO link. Much appreciated. I can confirm that 'some' of Russia's resource receipts, not just oil exports, are being channelled into Cyprus real-estate prices here. Ouch!

Some Russians are buying 4 or 5 apartments or houses at a time just to park the money some where as investments. Make housing inflation here quite bad. Wait a week and see the house you're bidding on gone. The next one will be another couple of thousand pounds more expensive. Hey, haven't they heard oil prices are falling now? ; - )

[pogoliamo]

Very good blog indeed, here's a Bloomberg title to support what has been already said

$this->bbcode_second_pass_quote('', '
')OPEC Dumps Treasuries at Fastest Pace Since 2003 on Oil Slide

By Bo Nielsen and Daniel Kruger

Jan. 22 (Bloomberg) -- OPEC nations are unloading Treasuries at the fastest pace in more than three years as crude oil prices tumble, sending bond yields higher.

Exporters including Indonesia, Saudi Arabia and Venezuela, sold 9.4 percent, or $10.1 billion, of their U.S. government debt securities in the three months ended in November, according to Treasury Department data. Members of the Organization of Petroleum Exporting Countries last sold Treasuries for three straight months in June 2003.

[Petrodollar]

tugboat,
Thanks, I found the "immobilienblasen" article very informative, and along with the Bloomberg article, confirm the dramatic effects of the dollar's monopoloy role in oil pricing and transactions, and how the system funds almost half of the the US current account deficit. "immobilienblasen" noted this critical factor:

$this->bbcode_second_pass_quote('', '[')b]Decisions that oil exporting countries make about where to channel these funds affect not only the prices of key financial assets, but also by extension such variables as economic growth around the world, the ability of the U.S. to finance its current account deficit,.....

[Euric]

$this->bbcode_second_pass_quote('Petrodollar', '
')
Yes, the Chiense were buying about $15 billion in US Tresuries per month in 2005, so this is producing a big hole in the US current account deficit.

Indeed, its not just OPEC that is moving away from the US dollar. The monetary trends in the East Asian countries shows that they are also preparing themselves to be less reliant on the US dollar in an effort to mitigate the economic effects that will occur if and when the dollar loses it reserve currency status. One of the more candid analyses of the Chinese position on the US dollar conundrum was provided by Marshall Auerback, a global financial strategist and contributor to the Japan Policy Research Institute (JPRI). In October 2006, Auerback surmised:

[MOCKBA]

$this->bbcode_second_pass_quote('Euric', 'I')f the fleeing of the dollar is creating a "hole" in the deficits, what happens if the hole doesn't get filled?

[MrBill]

$this->bbcode_second_pass_quote('', 'Q')uestion:

If the fleeing of the dollar is creating a "hole" in the deficits, what happens if the hole doesn't get filled? The US needs those petrodollars to secure its debts, but if it can't get the funds, how can it continue to spend? Where will this all lead to? What is the future of the US economy?

[Petrodollar]

Euric asked:
$this->bbcode_second_pass_quote('', 'T')he US needs those petrodollars to secure its debts, but if it can't get the funds, how can it continue to spend? Where will this all lead to? What is the future of the US economy?

[MrBill]

China is likely to allow its own citizens more freedom to invest directly in foreign stocks and bonds. I think that much is clear. A new investment agency of some sorts like operate in some Gulf States will also alter China's investment mix as well.

Of course, in the Gulf itself, a weaker dollar against the euro along with lower oil export receipts will squeeze their spending and investment plans somewhat in 2007.
$this->bbcode_second_pass_quote('', 'C')hina and the GCC states both peg to the dollar. And, interestingly enough, they both probably have roughly a trillion dollars in foreign assets. We know China has that much -- a bit more actually, as China's official reserves don't count the $60b that the PBoC shifted to Central Huijin, the holding company that manages the PBoC's stake in the three big state commercial banks. And the Gulf states presumable have at least that much. Abu Dhabi's investment authority (ADIA) is rumored to have around $500-600b (or more), Saudi Arabia's Monetary Agency has over $200b in foreign assets, Saudi pension funds have a bit more and both Kuwait and Qatar's investment authorities are not poor. Throw in Dubai's various investment vehicles and the private fortunes of various princelings, and the total easily tops a trillion.

And in some sense, China and the GCC states collectively have a fairly similar portfolio. Both have relatively little official money on deposit in the international banking system (here, the GCC states differ from Russia, Algeria, Libya and Nigeria). And both have relatively small amounts of direct investment abroad: Dubai's various acquisitions and the investments of China's state oil companies have attracted a lot of attention, but the actual flows are pretty small.

[Petrodollar]

...speaking of GCC countries and their US dollar pegs, it appears that others may follow Kuwait's (& China's) lead by moving away from the dollar. (Note: this article is from a gold/bullion website which sometimes show certain bias towards gold, but I found this article interesting nonetheless...)

http://www.kitco.com/ind/AuthenticMoney/jan232007.html

$this->bbcode_second_pass_quote('', '[')b]Will the U.S.$ peg continue in the Middle East?
January 22, 20007
Gold Forecast - Global Watch

Oil is priced in the U.S. $, which makes it one of the vital interests of the U.S. Without this backing to the $ we have no doubt the path of the $ to the global reserve currency would have been impaired and be undergoing a major attack by now. The thought of oil being priced in currencies other than the $ poses a threat to the credibility of the U.S.$ of major proportions. Any talk of a switch to pricing in other currencies [let alone an actual switch] poses a threat to the U.S. $ in its reserve currency role. This threat is now a real one and poses a considerable danger to the $ in time. But it is unlikely to come from the up-coming Gulf Cooperation Council meeting shortly to take place.

It appears the Gulf Arab oil producers are to review the currency pegs to the U.S.$ of their currencies and may change their pricing of oil to other currencies. This could happen as early as March according to the United Arab Emirates central bank. The Governors of the six Gulf central banks will meet in March in Saudi Arabia and may agree to switch to another currency or currency basket, Governor Sultan Nasser al-Suweidi said. But then again, they may decide leave the pegs as they are with any new changes requiring the approval of the Gulf Arab rulers.

[Euric]

$this->bbcode_second_pass_quote('Petrodollar', '
')
...this suggests that the March 2007 meeting could become important...Its unclear how much longer we should expect the Gulf countries to peg to the dollar given that over 50% of their imports are sourced from the EU, and most of the their oil exports also go to the EU...only time will tell.

[grabby]

I think it is unlikely a great country would ever threaten anyone, Geat countries are noted for their fair and always upfront business dealings, great countries are the shining example to the world. Maybe they all decided they just like the dollar better than a basket of money because it is easier to count when you limit it to one kind.

[DantesPeak]

Petrodollar and Mr. Bill – those were fine summaries of the dollar’s situation.

As implied above, even with the US running $900 billion per year current account deficits, they have managed to be financed by foreigners – so far. And yes, this is creating a highly inflationary world business climate. In general, most are happy with the inflationary cycle because, at least on paper, they appear richer.

The misallocation of world investment into the US is not questioned. The typical US homeowner doesn’t realize that their home’s value is being pushed up in value by complex petrodollar recycling. Foreigners earn higher yields than elsewhere and don’t complain.

As I have stated long before, the end of the US dollar will probably not be due to the willingness (or unwillingness) of foreigners to support it, but rather foreigners will lack the resources to finance it. This will probably come about in one of two ways – either the price of resources (such as oil) the US needs becomes so high that the current account deficit is pushed to $1 trillion or beyond, or for other reasons, a world recession is precipitated and net foreign savings begins to drop.

In the long run the US dollar is doomed. The only question is – how will that decline manifest itself – a lower dollar, higher prices, both, or more drastic debt repudiation or seizure of foreign assets.

[MrBill]

Dante. The US dollar is perhaps doomed, but the casualties will be far & wide. I do not envision the world ducking a bullet and continuing on as before ex-the USA. That ain't going to happen. It is not just economics - the current surplus = the current deficit or the one trade surplus = another trade deficit - although that is certainly part of it.

I did read an article today about "the world needs more NATOs" in that there are more and more hotspots in the world that require timely intervention and not enough quick reaction forces.

Also, a civil war in the ME between Shi'ites and Sunis amoung other players that knows no borders and has no real ideology.

An another article about why ASEAN is not likely to develop into anything resembling the EU trade zone and EMU due to differing political models and economic development in the region and no underlying agreement about common goals for such mundane things such as human rights and other basic criteria.

In other words, simple analysis is simply wrong. My feeling is that global imbalances have multiplied in part because the alternatives were worse not because the players, if I can call them that, did not explore the alternatives.

There must be a reason why central banks and oil exporting countries reserves are still overwhelming invested in dollar assets either directly or indirectly? They all WANT to diversify for economic or political reasons, but where is the hard data that they have? Nyada.

I diverge from my colleagues when they forecast a robust new world order without the USA. That is to say in my opinion unrealistic. Over time who can tell? The decline of the British Empire type parallels. But peak oil dot commers think there is not enough oil reserves to last that long. In the meantime a new world order is highly unlikely to emerge.

Sorry to disappoint everyone who is waiting with baited breathe for the world to implode on schedule. For that you may have to wait for a dirty suit case bomb, a severe terrorist attack on SA or a closing of the Straits of Hormuz. It will not be the product of incrementalism.

[threadbear]

$this->bbcode_second_pass_quote('MrBill', 'D')ante. The US dollar is perhaps doomed, but the casualties will be far & wide. I do not envision the world ducking a bullet and continuing on as before ex-the USA. That ain't going to happen. It is not just economics - the current surplus = the current deficit or the one trade surplus = another trade deficit - although that is certainly part of it.

I did read an article today about "the world needs more NATOs" in that there are more and more hotspots in the world that require timely intervention and not enough quick reaction forces.

Also, a civil war in the ME between Shi'ites and Sunis amoung other players that knows no borders and has no real ideology.

An another article about why ASEAN is not likely to develop into anything resembling the EU trade zone and EMU due to differing political models and economic development in the region and no underlying agreement about common goals for such mundane things such as human rights and other basic criteria.

In other words, simple analysis is simply wrong. My feeling is that global imbalances have multiplied in part because the alternatives were worse not because the players, if I can call them that, did not explore the alternatives.

There must be a reason why central banks and oil exporting countries reserves are still overwhelming invested in dollar assets either directly or indirectly? They all WANT to diversify for economic or political reasons, but where is the hard data that they have? Nyada.

I diverge from my colleagues when they forecast a robust new world order without the USA. That is to say in my opinion unrealistic. Over time who can tell? The decline of the British Empire type parallels. But peak oil dot commers think there is not enough oil reserves to last that long. In the meantime a new world order is highly unlikely to emerge.

Sorry to disappoint everyone who is waiting with baited breathe for the world to implode on schedule. For that you may have to wait for a dirty suit case bomb, a severe terrorist attack on SA or a closing of the Straits of Hormuz. It will not be the product of incrementalism.

[MrBill]

threadbear wrote:
$this->bbcode_second_pass_quote('', 'Y')ou don't see a new world order emerging, and that's a good thing. The New World Order of American dominated globalization is dead, and there won't be any one order to replace it, thank god. There will be trading blocks, like the European union, the Asean block, South America, whose citizens, largely poor, will stand a better chance of fair handed treatment at the hands of those in power. I welcome the day.