"Yurp" :rotflmbo:
Welcome to the PMBug forums - a watering hole for folks interested in gold, silver, precious metals, sound money, investing, market and economic news, central bank monetary policies, politics and more. You can visit the forum page to see the list of forum nodes (categories/rooms) for topics.
Why not register an account and join the discussions? When you register an account and log in, you may enjoy additional benefits including no Google ads, market data/charts, access to trade/barter with the community and much more. Registering an account is free - you have nothing to lose!
...you might want to ask yourself, how many more years you need to keep it in your IRA, Fusor, before withdrawing it without penalties? You might consider, if it is plausible that the whole circus will be still on the road, at that date. It might be better to take a hit today, and recoup at least part of your life savings, rather than counting on the whole thing NOT collapsing, if the required time frame is say 10 years or so.
Being younger myself, I am contributing $0.00 personally to any of my officially-recognized pension vehicles - only compulsory (living in socialist Yurp...) contributions, and paltry 2%, that my employer is paying anyway (and I couldn't cash it). I know there's precisely zero chance that I will receive anything meaningful back from it, when the time of my retirement comes.
Dennis Gartman said:...
First of all, let's understand that gold is nothing but another currency. Yen is a currency. The dollar is a currency. The euro is a currency. ...
...
Stay tuned for more interesting topics in part 2 of this interview next week, when Ms. Hudes reveals that certain elements of the US military are now revolting against banker-driven wars and against the politicians that lobby for these unnecessary wars. Furthermore, in part 2, Ms. Hudes discusses what Germany has done to retaliate against the US for the Central Bankers' refusal to return Germany's 300 tonnes of gold. ...
...
“Less and less,” is the Federal Reserve’s announced goal. Under Chairman Ben Bernanke (with the full support of the presumptive chairman-to-be, Janet Yellen), the central bank has redefined price “stability” to mean a rate of inflation of 2 percent per annum. Any smaller rate of depreciation is an unsatisfactory showing to be met with a faster gait of money-printing, policymakers say.
In other words, the value of money has become an instrument of public policy, not an honest weight or measure. In such a setting, an old-time “default” is impossible. How can a creditor cry foul when the government to which he is lending has repeatedly said that the value of the money he lent will shrink?
The post-1971 dollar derives its value from the stamp of the government that issues it. Across the seas, this imprimatur is starting to look a little tenuous. Lend us your dollars for 10 years, the Treasury proposes. We will pay you the lordly interest rate of 2.7 percent per annum. And at the end of those 10 years, we will hand you back your principal, which will almost certainly buy less than the money you lent.
This is the unsustainable conceit of the world’s superpower-cum-super debtor. By deed, if not audible word, we Americans say: “The greenback is the world’s great monetary brand. You have no choice but to use it. Like it or lump it.” But the historical record of paper currencies is clear: Governments always over-issue it. The people finally do lump it.
What to do? Let us face facts: We have defaulted in the past. Let us confront the implied message of the Federal Reserve’s pro-inflation policy: We will default in the future, though no lawyer will call it “default.” And let us preempt the world’s flight from our intangible money by taking steps to fashion a 21st-century improvement. We have the gold and the brains to find the solution.
...
It’s all enough to put us in mind of a new kind of grand bargain. Instead of a budget deal, America could step up to monetary reform. It could stop all the pretense that there’ll be a default. What’s needed is recognition that the default already happened. It happened in 1971. It happened again in the past decade. The value of the dollar, once regulated by the Congress by law at a 35th of an ounce of gold, has see-sawed wildly, eventually plunging to below a 1,900th of an ounce of gold. It is, at the moment, lurking under a 1,250th of an ounce of gold. The troubles we’ve been going through, in other words, are not the forerunner of default. They are the consequences of default. When that becomes clear, the road ahead will become clear, and America will be spared the hectoring of the IMF that it created.
Two good pieces on America's "potential" default:
http://www.washingtonpost.com/opini...51d416-302c-11e3-bbed-a8a60c601153_story.html
http://www.nysun.com/editorials/lagarde-lectures-her-owner/88451/
The Dead Body That Claims It Isn't: I'm not dead.
The Dead Collector: What?
Large Man with Dead Body: Nothing. There's your ninepence.
The Dead Body That Claims It Isn't: I'm not dead.
The Dead Collector: 'Ere, he says he's not dead.
Large Man with Dead Body: Yes he is.
The Dead Body That Claims It Isn't: I'm not.
The Dead Collector: He isn't.
Large Man with Dead Body: Well, he will be soon, he's very ill.
U.S. fiscal failure warrants a de-Americanized world
BEIJING, Oct. 13 (Xinhua) -- As U.S. politicians of both political parties are still shuffling back and forth between the White House and the Capitol Hill without striking a viable deal to bring normality to the body politic they brag about, it is perhaps a good time for the befuddled world to start considering building a de-Americanized world.
Emerging from the bloodshed of the Second World War as the world's most powerful nation, the United States has since then been trying to build a global empire by imposing a postwar world order, fueling recovery in Europe, and encouraging regime-change in nations that it deems hardly Washington-friendly.
With its seemingly unrivaled economic and military might, the United States has declared that it has vital national interests to protect in nearly every corner of the globe, and been habituated to meddling in the business of other countries and regions far away from its shores.
Meanwhile, the U.S. government has gone to all lengths to appear before the world as the one that claims the moral high ground, yet covertly doing things that are as audacious as torturing prisoners of war, slaying civilians in drone attacks, and spying on world leaders.
Under what is known as the Pax-Americana, we fail to see a world where the United States is helping to defuse violence and conflicts, reduce poor and displaced population, and bring about real, lasting peace.
Moreover, instead of honoring its duties as a responsible leading power, a self-serving Washington has abused its superpower status and introduced even more chaos into the world by shifting financial risks overseas, instigating regional tensions amid territorial disputes, and fighting unwarranted wars under the cover of outright lies.
As a result, the world is still crawling its way out of an economic disaster thanks to the voracious Wall Street elites, while bombings and killings have become virtually daily routines in Iraq years after Washington claimed it has liberated its people from tyrannical rule.
Most recently, the cyclical stagnation in Washington for a viable bipartisan solution over a federal budget and an approval for raising debt ceiling has again left many nations' tremendous dollar assets in jeopardy and the international community highly agonized.
Such alarming days when the destinies of others are in the hands of a hypocritical nation have to be terminated, and a new world order should be put in place, according to which all nations, big or small, poor or rich, can have their key interests respected and protected on an equal footing.
To that end, several corner stones should be laid to underpin a de-Americanized world.
For starters, all nations need to hew to the basic principles of the international law, including respect for sovereignty, and keeping hands off domestic affairs of others.
Furthermore, the authority of the United Nations in handling global hotspot issues has to be recognized. That means no one has the right to wage any form of military action against others without a UN mandate.
Apart from that, the world's financial system also has to embrace some substantial reforms.
The developing and emerging market economies need to have more say in major international financial institutions including the World Bank and the International Monetary Fund, so that they could better reflect the transformations of the global economic and political landscape.
What may also be included as a key part of an effective reform is the introduction of a new international reserve currency that is to be created to replace the dominant U.S. dollar, so that the international community could permanently stay away from the spillover of the intensifying domestic political turmoil in the United States.
...
China not letting US government crisis go to waste - uses bombastic rhetoric to shore up support for their plans:
http://news.xinhuanet.com/english/indepth/2013-10/13/c_132794246.htm
I found this information to be very reassuring because it means we have already defaulted. All this hand wringing and negativity from some of the posters, and you know who you are (PMBug, Anacona, Jay?) was completely unnecessary. You are too late. We defaulted and everything is fine. Rome didn't burn. Nothing much happened. EBT cards are still working great and the shopping spree at Walmart was a nice bonus for those who needed help because their flat screen TV was only 32" and those 60" ones are way better. So you guys need to chill and start thanking the government and get more positive about things. The glass is half full not half empty.
Europe and China have agreed a currency swap deal to boost trade and investment between the regions.
Under the terms of the deal between the European Central Bank and the People's Bank of China, the swap facility could total as much as 350 billion yuan and €45 billion.
The agreement is one of the largest currency deals between China and a non-Asian trading partner and will last for three years.
Europe and China trade roughly €480 billion in goods and services each year, and the European Union is China's biggest export market.
China is pushing to internationalize the yuan, and the currency is being used to conduct a growing number of transactions on international markets.
For years Beijing has kept tight control of the yuan, pegging the currency to the U.S. dollar as a way of promoting manufacturing in its export-driven economy, though it has slowly been loosening its hold recently.
The swap deal will allow more trade and investment between the regions to be conducted in euros and yuan, without having to convert into another currency such as the U.S. dollar first, said Kathleen Brooks, a research director at FOREX.com.
...
The Bank of England and its Chinese counterpart have signed a deal likely to boost trade between the UK and China in the yuan.
The Bank and the People's Bank of China have signed a three-year currency swap arrangement worth 200bn yuan (£21bn, $33bn), the UK central bank confirmed.
The UK is looking to become a centre for the Chinese currency, also known as the renminbi.
British banks hold 35bn yuan worth of deposits in the Chinese currency.
Currency-swap agreements allow central banks to swap currencies and can be used by firms to settle trade in local currencies rather than in US dollars, as happens now, since China's currency is not fully convertible to other currencies.
...
A Chinese ratings agency downgraded its US sovereign credit rating Thursday despite Washington's resolution of the debt ceiling deadlock, warning that fundamentals for a potential default remained "unchanged".
<redacted - see forum guidelines on epithets>ng lowered its ratings for US local and foreign currency credit from A to A-, maintaining a negative outlook, the agency said in a statement.
...
"The fundamental situation that the debt growth rate significantly outpaces that of fiscal income and gross domestic product remains unchanged," <redacted - see forum guidelines on epithets>ng said in the statement, adding Washington's solvency was vulnerable as old debts were still repaid through raising new debts.
"Hence the government is still approaching the verge of default crisis, a situation that cannot be substantially alleviated in the foreseeable future," it said.
...
China has overtaken the US as the world’s largest oil importer and goods trading nation. Over the next five years, it will surpass the rest of the world combined in its consumption of base metals.
Given the scale of the country’s consumption of fossil fuels and raw materials, it is only a matter of time before the renminbi replaces the dollar as the primary currency for trading commodities and resources such as crude oil and iron ore.
The debt ceiling farce in Washington and China’s growing reluctance to continue underwriting the US economy by buying up its bonds and adding to America’s near $17 trillion (£10.5 trillion) debt mountain suggests that this tectonic shift in the global trade system could be just around the corner.
Chinese state media are already calling for a “de-Americanised world”. Some experts say that China is plotting to usurp the greenback’s place in global commodities trade. Beijing’s strategy hinges on quietly encouraging traders to bypass New York through the creation of a network of interlinked commodity markets based in the global financial hubs of Hong Kong and London.
“There can be little doubt from these actions that China is preparing herself for the demise of the dollar, at least as the world’s reserve currency,” writes Alastair Macleod, head of research at GoldMoney. A further signal that policymakers are beginning to warm to the renminbi playing a greater role in the global economy came last week when Chancellor George Osborne unveiled a historic deal to allow British investors direct access to China’s markets and allow Chinese banks to expand operations in the UK.
The historic pact will also place the City, already the centre for global metals and foreign exchange trading, at the forefront of the race to capture more business denominated in the yuan.
In the world’s major mining hubs such as Australia, resource companies are already taking advantage of new legislation that allows invoicing and trade settlement directly in renminbi, a process which completely cuts the US dollar out of the equation.
HSBC predicts that the Chinese currency will be the third-largest unit used for trade by 2015 and fully convertible within the next five years as the People’s Bank of China gradually liberalises policy.
“The flow of transactions conducted in RMB [renminbi] will only continue to grow,” said Frederic Vilsboe, head of commodity and structures trade finance for Europe, Middle East and Africa at HSBC in London.
Among the Organisation of Petroleum Exporting Countries, which controls a third of the world’s supply of crude, members such as Iran – constrained by sanctions – are already agitating for a shift away from pricing in US dollars. China’s oil imports set a record last month, with official figures showing that 6.47m barrels a day of crude flowed into the country.
The scale of China’s existing and forecast demand for resources almost makes any attempt by the US to maintain the dollar’s status as the world’s primary trading currency for resources entirely nugatory. Wood Mackenzie estimates that China will account for 52pc of base metals demand by 2017, compared with 46pc of the 96m-tonne global market this year.
...
Upset at President Barack Obama's policies on Iran and Syria, members of Saudi Arabia's ruling family are threatening a rift with the United States that could take the alliance between Washington and the kingdom to its lowest point in years.
Saudi Arabia's intelligence chief is vowing that the kingdom will make a "major shift" in relations with the United States to protest perceived American inaction over Syria's civil war as well as recent U.S. overtures to Iran, a source close to Saudi policy said on Tuesday.
Prince Bandar bin Sultan told European diplomats that the United States had failed to act effectively against Syrian President Bashar al-Assad and the Israeli-Palestinian conflict, was growing closer to Tehran, and had failed to back Saudi support for Bahrain when it crushed an anti-government revolt in 2011, the source said.
"The shift away from the U.S. is a major one," the source close to Saudi policy said. "Saudi doesn't want to find itself any longer in a situation where it is dependent."
It was not immediately clear whether the reported statements by Prince Bandar, who was the Saudi ambassador to Washington for 22 years, had the full backing of King Abdullah.
...
Mentioning this for posterity here. Somewhere down the line, this could be very significant if Saudi Arabia decides to stop selling oil in dollars:
http://ca.news.yahoo.com/saudi-spy-chief-says-riyadh-shift-away-u-122105436.html
...
*If we ended the petrodllar AND adopted a free market/hard money system, slashed spending, paid off the debt, brought the troops home, deregulated, reinstitued property rights and the bill of rights, and got back to producing things other than debt and lawsuits...we just might be able to get out of this. No problem.:flail:
*If we ended the petrodllar AND adopted a free market/hard money system, slashed spending, paid off the debt, brought the troops home, deregulated, reinstitued property rights and the bill of rights, and got back to producing things other than debt and lawsuits...we just might be able to get out of this. No problem.:flail:
Mentioning this for posterity here. Somewhere down the line, this could be very significant if Saudi Arabia decides to stop selling oil in dollars:
...
... In fact, the Saudis are so upset at the Obama administration that "all options" are reportedly "on the table". If it gets to the point where the Saudis decide to make a major move away from the petrodollar monopoly, it will be absolutely catastrophic for the U.S. economy.
...
...
It is unlikely that diplomatic or political threats will impress or scare the Obama administration. However, the Saudis do have some economic leverage and some options to cripple the US finances. Fresh statements from the House of Saud indicate that the future of the "petrodollars" is uncertain. Reuters reports that "Saudi Arabia, the world's biggest oil exporter, ploughs much of its earnings back into U.S. assets. Most of the Saudi central bank's net foreign assets of $690 billion are thought to be denominated in dollars, much of them in U.S. Treasury bonds. All options are on the table now, and for sure there will be some impact," the Saudi source said". In theory, Saudi Arabia can crash the US bond market through a "fire sale" of its bond portfolio. The impact on the US economy will be devastating, but House of Saud will have to pay a steep price for the crash. The value of its currency reserves will be wiped out and its main military ally will turn hostile. It is unlikely that the Saudis will take such risks. A more likely scenario is that the Saudis will start a slow diversification of their currency reserves and will invest more in Chinese and European assets. Such a move will not produce an instant crash but will surely damage the dollar over the long term. If the "petrodollars" disappear from the world oil trade, the dollar is likely to lose its status of the world's main currency.
Should the Sultanate drop rial peg to dollar?
...
Many critics say that sticking to the dollar peg is as good as devaluing the rial since the US currency is losing its strength consistently against major currencies of the world. Oman and its neighbours are big buyers of the dollar dominated assets and the need to diversify its portfolio away from the US currency is very pressing.
Problem of inflation
But intense foreign trade competition from Asian countries, especially China, has changed everything for the United States. Because of that, the dollar peg is forcing Oman and the other four GCC states to import US monetary policies, something that has been contributing to chronic inflation for many years now as well as soaring property prices.
... Many financial experts are now convinced that the dollar is no longer the force it once was and the probability that it may regain its former glory is very unlikely. Inflation in Oman would not get any better as the dollar keeps losing both its elasticity and global respect as the world's key currency.
Another factor that makes sense for dropping the dollar is the fact that Oman has already diverted away from the United States and is increasing turning towards the Asian countries as its major trading partners. Oman is exporting the bulk of its oil to the Far East, and China, the world's second richest country, is the biggest crude importer.
Pegging
The Sultanate has already asked to be ruled out in the planned single currency the GCC nations have been considering to form. The idea has not yet been implemented. The idea was to stabilise trade with their international partners without having to worry about the volatility of the US currency. But Oman can follow the example of both Kuwait and Singapore who are now pegging their currencies to an international basket.
If Muscat follows suit, the rial would not suffer the fluctuations in value it now suffers under the greenback regime. It would make sense since its oil exports are well diversified among at least six countries which could be paying in their own currencies. But oil export to the Asian giants is not the only positive part. Oman, in the last ten years, has been increasingly awarding major contracts to Japanese, Koreans and Chinese companies in the petrochemical industries making these countries its key trading partners.
...
The constructive side of trade with the Asian economic giants like China, Japan, Korea and India, is that these countries will be responsible for the inevitable fall of the United States as the biggest economy in the world.
Saudi Arabia has secretly offered Russia a sweeping deal to control the global oil market and safeguard Russia’s gas contracts, if the Kremlin backs away from the Assad regime in Syria.
...
The historic 15-minute phone call between President Barack Obama and Iranian counterpart Hassan Rouhani may have cost the U.S. one of its key friends in the Middle East.
...
“The most important thing between allies is that they strategize together before declaring any decisions,” the source told NBC News. “The Kerry-Lavrov agreement has clearly shown that the Americans want to reshape the Middle East without consulting us. You can’t just forego strategic alliances like that and claim to be allies without any form of consultation.”
...
...
Every step forward for the yuan/renminbi is a step backwards for the US Dollar.
Another Milestone For Chinese Offshore Bonds
by Louis Gave
On Friday the three-year-old Chinese offshore renminbi bond market marked a new milestone: the first AAA issue by a foreign government. The Canadian province of British Columbia issued a one-year, RMB2.5bn (a little over US$400mn) bond yielding 2.25%. This is big news, for many different reasons.
The first is that this BC bond issue illustrates the growing ties between China and Canada, ties we have discussed frequently in the past. Indeed, for two decades now, Canada has been selling Chinese people what they need (whether fertilizer, wood, oil, quality education, real estate in non-polluted cities, passports, etc.). As such, a tight relationship has emerged between the Hong Kong stock market and that of the Canadian dollar. Basically, when Chinese investors make money on Hong Kong equities they tend to recycle their profits into Canadian hard assets. With this bond issue, British Columbia is going straight to the source of Chinese capital and cutting out the middle-men!
...
Which brings us to the more interesting question, namely why would the British Columbia government issue debt at a higher price than could be achieved in US dollars? One obvious answer is that the resource-rich province is diversifying its investor pool so that, should there ever be another freeze in the US dollar bond markets (as there was after the Lehman bankruptcy, and as was threatened just a few weeks ago), BC will have another pool of investors to call upon. Which brings us to the most notable feature of the renminbi bond market: its complete lack of volatility. Indeed, over the past 18 months, Chinese offshore bonds (as measured by the HSBC index) have delivered total returns of some 6%, with a volatility of around 2%. That is much better, and much less volatile than what long-dated US treasuries have delivered.
...
Jim Rickards said:...
There’s nothing the Fed can do to solve the depression or to change the structural problems in the U.S. economy.
I may be a critic and I may be able to point out why they’re wrong, why their models are wrong and why this says “No Good Exit,” but they think they’re right and they’re gonna keep going and kinda drive the bus over the cliff.
Now, at that point, when the crisis emerges, they may have to go to a gold standard. They don’t want to, but they may have to, to restore confidence.
...
...
The memo is a continuation of the US thinking on the issue of the then brand new SDR, the fate of paper currencies, and the preservation of US control over reserve currency status. Most importantly, it addresses several approaches to dominating gold as well as the US' interest of banning gold from monetary system and capping the free market price, contrasted by the opposing demands of various European deficit countries (sound familiar?) on what the fate of gold should be at a time when the common European currency did not exist, and some European countries were willing to fund their deficits with gold: something the US naturally was not happy about.
...
...Ron Paul said:"The chaos that one day will ensue from our 35-year experiment with worldwide fiat money will require a return to money of real value. We will know that day is approaching when oil-producing countries demand gold, or its equivalent, for their oil rather than dollars or euros. The sooner the better." (emphasis mine)
The geopolitical sands of the Middle East have been rapidly shifting.
The faltering strategic regional position of Saudi Arabia, the rise of Iran (which is notably not part of the petrodollar system), failed US interventions, and the emergence of the BRICS countries providing potential future alternative economic/security arrangements all affect the sustainability of the petrodollar system.
In particular, you should watch the relationship between the US and Saudi Arabia, which has been deteriorating.
The Saudis are furious at what they perceive to be the US not holding up its part of the petrodollar deal. They believe that as part of the US commitment to keep the region safe for the monarchy, the US should have attacked their regional rivals, Syria and Iran, by now.
This would suggest that they may feel that they are no longer obliged to uphold their part of the deal, namely selling their oil only in US dollars.
The Saudis have even gone so far as to suggest a "major shift" is underway in their relations with the US. To date, though, they have yet to match actions to their words, which suggests it may just be a temper tantrum or a bluff. In any case, it is truly unprecedented language and merits further watching.
A turning point may really be reached when you start hearing US officials expounding on the need to transform the monarchy in Saudi Arabia into a "democracy." But don't count on that happening as long as their oil is flowing only for US dollars.
...
The Shanghai Futures Exchange (SHFE) may price its crude oil futures contract in yuan and use medium sour crude as its benchmark, its chairman said on Thursday, adding that the bourse is speeding up preparatory work to secure regulatory approvals.
China, which overtook the United States as the world's top oil importer in September, hopes the contract will become a benchmark in Asia and has said it would allow foreign investors to trade in the contract without setting up a local subsidiary.
"China is the only country in the world that is a major crude producer, consumer and a big importer. It has all the necessary conditions to establish a successful crude oil futures contract," Yang Maijun, SHFE chairman, said at an industry conference.
...
Industry participants with direct knowledge of the plan have said the contract would be priced in the yuan, otherwise known as the renminbi, and the U.S. dollar. Yang would not say whether yuan pricing was only for Chinese investors.
"The yuan has become more international and more recognised by the financial market," Chen Bo, Chinese trading firm Unipec's executive general manager, told Reuters.
"I don't think it would be unacceptable for the world to use the renminbi for commodities trading."
...
China’s central bank has said it no longer sees any benefit in increasing its $3.66 trillion foreign currency reserves – already the world's largest. China will cap its purchases of US dollars in an effort to limit the depreciation of the yuan.
“It’s no longer in China’s favor to accumulate foreign-exchange reserves,” Bloomberg quoted Yi Gang, a deputy governor at the central bank as saying Tuesday.
Decreasing the influence of the dollar and other currencies is a step closer to reaching China’s 2015 goal to “float” its currency ...
...
Once the yuan is set to free float, international transactions will be carried out in the Chinese currency, and it will become common in global trade, in league with the euro and dollar.
The Chinese yuan currently is the 13th most-used currency in the world for international payments.
The yuan has been dubbed a “hermit currency”, isolating itself from foreign investment and setting its own rules, but is now slowly entering world currency markets.
Slowly but surely the Chinese currency is catching up to the world's reserve and moments ago, according to SWIFT, the Yuan just surpassed the Euro in trade (remember trade: that's how countries once upon a time would generate capital flows in a time when central banks weren't there to literally print domestic funding needs) finance usage leaving just the USD in front.More from Bloomberg:
- YUAN OVERTAKES EURO IN TRADE FINANCE USAGE: SWIFT
- YUAN IS SECOND MOST-USED CURRENCY IN TRADE FINANCE: SWIFT
...
- Chinese currency had 8.66% share in letters of credit and collections, or trade finance, in Oct., Society for Worldwide Interbank Financial Telecommunications says in statement today.
- Euro’s shr in trade finance was 6.64% in Oct.
- Top 5 countries using yuan for trade finance in Oct. were China, Hong Kong, Singapore, Germany and Australia
We use cookies and similar technologies for the following purposes:
Do you accept cookies and these technologies?
We use cookies and similar technologies for the following purposes:
Do you accept cookies and these technologies?