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Attempts to Bypass the Dollar

Posted by mb50

The US has dominated trade for nearly a century. That is coming to an end as its manufacturing sector continues to shrink. Yet the dollar continues to be the world currency, providing numerous advantages for the US that other countries resent.

The US is looked at as a declining power, hopelessly in debt. It is able, through the dollar, to export inflation to other countries.

The world views the US as fiscally and monetarily out of control and unwilling to make the proper, hard economic decisions. There is fear that continuance with the dollar risks massive inflation throughout the world and/or a collapse of the world’s only international currency.

Fortunately for the US, there is no other fiat currency capable of replacing the dollar — at least now. The Euro was a hope for awhile, but now it is apparent that the Euro will not survive much longer. The motives for finding an alternative to dollars is strong because the risks (and advantages) are so great.

One approach would be to create an international currency consisting of a basket of other currencies and/or commodities. How likely it is that one could be developed is moot. Suffice to say that there is strong motives on the part of many other countries to come up with such an alternative.

An important article on stirrings in the anti-US dollar and perhaps the beginnings to displace the dollar by Chris Blasi is presented below:

Sovereigns Declare War on U.S. Dollar

BY CHRIS BLASI01/24/2012

Profoundly significant news came out of the Middle East on Monday January 23, 2012. The headline via DEBKAfile* reads:

India to Pay Gold Instead of Dollars for Iranian Oil. Oil and Gold Markets Stunned

Within the body of the report were gleaned these crucial items:

India has become the first buyer of Iranian oil to agree to settle purchases in gold.

China is expected to follow India’s move.

Approximately 40% of Iran’s total oil exports are consumed by India and China.

Settling oil transactions in gold enables Tehran to circumvent the EU’s upcoming freeze on Iran’s Central Bank assets and the oil embargo announced Monday January 23rd.

Due to the magnitude of the transactions proposed, the price of gold is expected to rise and the Dollar’s value depressed on world markets.

The EU currently accounts for approximately 20% of Iran’s oil exports.

The transactions are to be facilitated via two Indian state owned banks and a Turkish state owned bank.

Financial mechanisms have also been implemented between Iran and Russia for the settlement of oil purchases in currencies other than the US Dollar.

Iranian Crisis Evolving into Dollar Hegemony and Western Power Challenge

At this point in time it is unnecessary to rehash the dismal state of fiscal and monetary affairs that plague the US. Excluding the willfully delusional, it is clear to any honest analyst that the gargantuan debts of the US can never be paid in full with dollars retaining current purchasing power. Further, with the insatiable need to issue exponentially growing volumes of debt to keep the welfare/warfare state hobbling along, who would willingly continue to finance such a debacle? All that’s left to supports this failing fiat experiment is an entrenched, yet deteriorating, reserve currency system to which there has not been a functioning alternative to date.

It is because of this macroeconomic environment, and the policies that gutted a previously productive goods producing economy, that the only tool left for the US to maintain the status quo is to defend at all costs the Dollar’s reserve currency status….and its foundational component the Petro Dollar. This is most likely the motive behind the quickening drumbeat to go to war with Iran. If keeping the world safe from rogue states with nuclear capabilities were the sole motive, than why have North Korea and Pakistan been given a pass?

Unlike the invasion of Iraq, whereby that oil rich nation had no allies come to its aid or at least none with the wherewithal to dare protest in a meaningful way, the Iranian crisis is developing into a far more serious geopolitical happening. Just as most wars are a smokescreen for behind the scenes power plays between the various ruling class, the events unfolding in the Persian Gulf look to be such in spades. What will shock the world when the actions reported above are fully digested is the choosing of sides and the clandestine development of alternative financial mechanisms by those nations previously believed not ready or unable to challenge the Western elites.

Following years of speculation as to the fate of the US Dollar and the lengths to which Western bankers would go to defend the system that serves them so well, could today’s headlines be the proverbial ringing bell? Unfortunately, the actions of most bankrupt and overextended empires is to march its people into a calamitous war. As with all historically recorded futile endeavors in defending the indefensible (i.e. a debt based paper monetary system), the most likely financial survivor will again be gold.

Source

Iran to Sell Crude Oil for Gold (adask.wordpress.com)
Gold for Oil: India and Iran Ditch Dollar (the2012scenario.com)
Sanctions dodge: India to pay gold for Iran oil, China may follow – RT (tribuneofthepeople.com)
Despite Sanctions by EU & US, Irani Black Gold Turns into 24K Gold (jafrianews.com)
Asia Continues to Dump the Dollar (radocracy.com)

Posted in Fiat Currency

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Tags: China, debkafile, European Union, Fiat Currency, gold markets, India, international currency, Iran, Iranian Oil, Middle East, Persian Gulf, United States, US Dollar, World Currency

Draft U.N. climate accord emerges, debate turns ugly

Dec 10

Posted by mb50

By Jon Herskovitz and Nina Chestney

DURBAN | Sat Dec 10, 2011 6:11pm EST

(Reuters) – The chairwoman of U.N. climate talks urged delegates to approve a compromise deal on fighting global warming in the interests of the planet, but an accord remained elusive on Sunday and rich and poor states traded barbs over the limited scope of the package.

South African Foreign Minister Maite Nkoana-Mashabane said the four separate texts represented a good outcome after two weeks of sometimes angry debates in the port city of Durban.

“I think we all realize they are not perfect. But we should not let the perfect become the enemy of the good and the possible,” she told the conference.

Much of the discussion has focused on an EU plan designed to push major polluters — from developed and fast-growing emerging economies like China and India — to accept legally binding cuts in their greenhouse gas emissions.

EU negotiators had accepted “legal instrument” in one draft as a phrase implying a more binding commitment. But the latest version spoke of a “protocol, another legal instrument or a legal outcome,” the sort of weak phrasing that almost collapsed the talks on Friday.

Asked if the latest language was acceptable, Karl Hood, who represents an alliance of 43 small island states, said: “No it’s not. Never was and never will be. It’s too broad a statement.”

His alliance colleague MJ Mace, added: “You need a legally binding instrument. You have legal outcomes all the time. A decision is an outcome. You need something treaty like.”

“BLACKMAIL”

The discussions took an increasingly bitter turn as they headed into Sunday, a second extra day that made the negotiations the longest in two decades of U.N. climate talks.

Venezuela’s climate envoy Claudia Salerno said she had received threats because of her objections to the draft texts.

“In the corridor, I have received two threats. One, that if Venezuela do not adopt the text, they will not give us the second commitment period,” she said, referring to an extension of the Kyoto Protocol, the only global pact enforcing carbon cuts.

“The most pathetic and the most lowest threat… we are not going to have the Green Climate Fund,” which is designed to help poor nations tackle global warming and nudge them towards a new global effort to fight climate change.

She did not say who had made the threat and delegates heard her allegation in silence.

Among the sticking points holding up a deal were an extension of the Kyoto Protocol. The draft text says the second Kyoto phase should end in 2017, but that clashes with the EU’s own binding goal to cut carbon emissions by 20 percent by 2020.

U.S. VS CHINA AND INDIA

But behind the back and forth over language and technical details, the talks have boiled down to a tussle between the United States, which wants all polluters to be held to the same legal standard on emissions cuts, and China and India who want to ensure their fast growing economies are not shackled.

The fractious late night exchanges punctured the earlier mood of cautious optimism which had suggested agreement on the four separate accord in the package was possible.

Should the talks collapse on Sunday, that would represent a major setback for host South Africa and raise the prospect that the Kyoto Protocol could expire at the end of 2012 with no successor treaty in place.

Scientists warn that time is running out to close the gap between current pledges on cutting greenhouse gases and avoiding a catastrophic rise in average global temperatures.

U.N. reports released in the last month warned delays on a global agreement to cut greenhouse gas emissions will make it harder to keep the average temperature rise to within 2 Celsius over the next century.

A warming planet has already intensified droughts and floods, increased crop failures and sea levels could rise to levels that would submerge several small island nations, who are holding out for more ambitious targets in emissions cuts.

(Reporting by Nina Chestney, Barbara Lewis, Agnieszka Flak, Andrew Allan, Michael Szabo and Stian Reklev; editing by Jon Boyle)

Source

UN climate talk delegates urged to approve draft accords (news.nationalpost.com)
States imperiled by warming rebel at climate talks – Reuters (reuters.com)
As Durban Deadline Draws Near, the Big Carbon Emitters Should Cut a Deal (thinkprogress.org)
UN Envoys Debate Climate Pact Amid Divisions on Legal Outcome (businessweek.com)
U.N. climate talks near collapse over gulf between rich and poor nations (news.nationalpost.com)
Climate talks near end as draft deal printed (cbc.ca)
Durban climate conference stalemate pushes talks into extra time (guardian.co.uk)
Climate deal up for approval at U.N. conference (seattletimes.nwsource.com)
UN Climate Conference In Overtime On Future Of Talks – Huffington Post (huffingtonpost.com)

Posted in China, Energy, Fiat Currency, Fraud & Corruption, Modern Monetary Theory, Money Game, Political economy, South Africa, Tax Payer's Dime, Terrorism, United States, Venezuela

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Tags: China, Durban, European Union, Fiat Currency, Karl Hood, Kyoto Protocol, Maite Nkoana-Mashabane, Modern Monetary Theory, Money Game, Political economy, Reuters, South Africa, Tax Payer's Dime, United States, United States, Venezuela

We Have Entered The First Of Four Phases That Will Bring The End Of Fiat Money

Nov 11

Posted by mb50

John Browne, EuroPac

Last week, the G-20 meetings did not produce an expanded bailout fund for the eurozone. While this may bode well for the long-term solvency of the member-states (moral hazard and all), it has also triggered a market reaction that I expect to help destabilize the common currency. Wednesday’s market moves suggested that this development is good for the dollar and bad for gold. Allow me to step back from the stampeding herd to evaluate whether they are, in fact, moving in the right direction.

The argument for the dollar and against gold is simplistic, and I will evaluate it against the four-stage collapse I see ahead for the Western currencies.

Arguing that gold is a hedge only against inflation, and taking current inflation figures at face value, mainstream analysts have concluded that gold is grossly overvalued – that it may, in fact, be the latest asset bubble to arise. However, these analysts fail to account for why gold is a hedge against inflation: it is ultimately an insurance policy against runaway currency collapse. In other words, it’s intended as a longer-term, wealth-preserving purchase. Yes, some pit traders may be trying to make a quick buck shorting gold and going long on dollars, but for individual investors, following suit would leave them vulnerable to what may prove to be ahead. That is, a phased destabilization of the euro, leading to a possible collapse of the US dollar. In such circumstances, even today’s volatile prices for gold and silver would look attractive.

Phase One of the threatened catastrophe is sovereign debt crisis, which is effectively camouflaging a currency crisis. The Greek default is significant as the first crack in the dam. But Greece is a relatively small problem. The bigger threat is Italy, with its $2.4 trillion of debt and a 10-year bond yield having just surpassed the critical 7 percent level. This is the ruinous milestone at which the cost of new debt money surpasses the economic growth rate plus inflation. Italy faces massive debt refunding, falling buyer interest, and no hope of a bailout. If Italy were to default, it could threaten rapid contagion to Portugal, Ireland, Spain, and other larger eurozone countries, including perhaps France. In such an event, most international banks and institutional investors, including those in the US, could suffer severe, possibly total, losses on their holding of certain sovereign bonds. MFGlobal is but one speculative example of a looming secular trend. Worse still, the writers of credit default swap (CDS) derivatives, including many German Landesbanks (state-level banks) and major US banks, could suffer crippling losses.

This would lead to Phase Two of the collapse: a renewed and far larger banking crisis. This, in turn, could bring stock markets tumbling and threaten major institutional investors, including politically sensitive pension and insurance companies. In addition, banks would become extremely wary of lending to each other. Likely, the interbank market would freeze, but far more severely than in 2008. It could result in curtailed lending and even the recall of short-term corporate funding and call-loans. This could cause a dramatic spike in US bank failures. Unwary depositors who have failed to watch their banks closely could find their insured funds frozen, perhaps for months, as the FDIC reorganizes the problem banks – and perhaps even waits for its own bailout. This would add further downward pressure to economic growth.

Meanwhile, the cascading banking crisis would likely push Europe into a severe recession, even a depression. As the EU accounts for some 22 percent of world trade, a European depression would no doubt drag down the US even further. In response, the price of precious metals may face severe selling pressure as liquidity becomes paramount.

This would present an opportunity for long-term gold and silver investors.

Phase Three would be a restructuring or dissolution of the euro and possibly a stampede into the US dollar, sending its price and US Treasuries temporarily upwards. With a far stronger dollar, the price of most commodities, including precious metals, may fall temporarily in dollar terms. We are seeing a preview of this dynamic with today’s news on Italy.

However, to reallocate one’s portfolio in reaction to such a move could put an investor in jeopardy. That is because Phase Four, the most alarming, would be investors’ realization that the US dollar lies at the root of the international currency collapse and is itself vulnerable. Likely, this panic flight from the dollar would develop suddenly, and perhaps in undreamed of volumes. Doubtless, the speed and size of a stampede out of paper currencies and into precious metals will take many investors by surprise – just as the Credit Crunch in 2008 did. As the realization of currency catastrophe spreads, the price of silver may start to rise faster than even gold.

There’s an old saying that “the higher you fly, the harder you fall.” The US government is, by any measure, the luckiest government in centuries. It has risen to unforeseen heights of monetary excess – and has been rewarded for doing so. But it looks like lower flying planes are starting to stall out, and one can only imagine – from this height – how fast and how far the US may fall.

My humble advice is not to try to time it, but rather to use your golden parachute before it’s too late.

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