Saturday, 14 March 2015

The Chinese have put out billboard ads announcing the renminbi as the new world currency


When I arrived to Bangkok the other day, coming down the motorway from the airport I saw a huge billboard—and it floored me.

The billboard was from the Bank of China. It said: “RMB: New Choice; The World Currency”

Given that the Bank of China is more than 70% owned by the government of the People’s Republic of China, I find this very significant.

It means that China is literally advertising its currency overseas, and it’s making sure that everyone landing at one of the world’s busiest airports sees it. They know that the future belongs to them and they’re flaunting it.

And it’s true. The renminbi’s importance in global trade and as a reserve currency is increasing exponentially, with renminbi trading hubs popping up all over the world, from Singapore to London to Luxembourg to Frankfurt to Toronto.

Multinational companies such as McDonald’s are now issuing bonds in renminbi, and even sovereign governments are issuing debt denominated in renminbi, including the UK.

Almost every major global player out there, be it governments or major multinationals, is positioning itself for the renminbi to become the dominant reserve currency.

But here’s the thing. Nothing goes up and down in a straight line. And China is in deep trouble right now. The economy is slowing down and the enormous debt bubble is starting to burst.

A lot of people, including the richest man in Asia, are starting to move their money out of the country.

So while the long-term trend is pretty clear – China becoming the dominant economic and financial superpower – the short-term is going to look incredibly rocky.

- Source, Sovereign Man

Sunday, 8 March 2015

ECB Will Cut Rates To Minus 3%: JP Morgan

A running theme here over the past several weeks has been that the ECB’s €1.1 trillion foray into quantitative easing will be severely hindered by a laundry list of constraints (some of which were unwittingly self-imposed). Another topic we’ve covered exhaustively is the idea that the world’s central banks will likely all, in relatively short order, run up against thenatural limits of accommodative monetary policy (indeed, even some Japanese policy makers are starting to agree on this).

Thinking about these two things in conjunction raises an interesting question for the ECB: if a tail event comes rearing its ugly head and the global central bank race to the bottom accelerates, will Mario Draghi, effectively fighting with one hand tied behind his back by virtue of Q€’s limitations, be able to fend off an outright collapse?

Here’s FT with more:
...the ECB is now close to running out of ammunition. The true constraints on further ECB intervention lie in the 25 per cent issue limit and 33 per cent issuer limit on its sovereign bond purchases.

Except for Greek debt, the 25 per cent and 33 per cent caps should not prove binding in a scenario where the ECB keeps its monthly asset purchase pace of €60bn.However, the limits could be reached in worst-case scenarios where the ECB would have to boost the size of its QE programme or implement OMTs targeted on specific sovereigns.

The first type of worst-case scenario would be a new global deflationary shock. It might be triggered by faltering US growth or a sharper-than-expected slowdown in China. The consequence would be fiercer currency wars with balance sheet expansion races among central banks.

In this competition, the ECB would be handicapped: it would not have much room to significantly increase the size of its bond purchase programme. For instance, if monthly purchases had to be raised to €100bn, the 25 per cent issue limit would be reached after only eight months in the case of German government debt.

Given the narrow size of the eurozone corporate bond market, any substantial further expansion of the asset purchase programme would then have to include equities. But this could prove controversial within the ECB governing council.

- Source, Zero Hedge, read more here

Thursday, 5 March 2015

Euro Slides, Futures Flat Ahead Of Mario Draghi's Press Conference And Q€ Cheat Sheet

It has been a while since we have seen the USDJPY rampathon push US equities higher, so in a day dominated by central banks (first the BOE momentarily), and then the ECB's much anticipated announcement of the actual QE launch at the Draghi press conference at 1:30pm CET (taking place, ironically enough, in the place that was the blueprint for the Eurozone's capital controls, Cyprus), it only makes sense that after weeks of stage fright, the USDJPY algos reminded the world they are alive and well, and proceeded to ramp the key FX pair above 120, even though the currency that everyone will be talking about today is the Euro, hugging 1.10 as of this moment, but the real question is what happens after Draghi gives the asset buying green light: has all of Q€ been priced in already in FX, and will the EURUSD resume its surge higher, or is parity next stop?

- Source, Zero Hedge, read more here

Monday, 9 February 2015

We Ignore Unintended Consequences At Our Peril


I see a lot of similar unintended consequences in the strategies that the Federal Reserve and its central banking brethren have been pursuing over much of the past decade.

The global financial system wants to correct via natural market forces, due to slower economic growth and excessive debt levels around the world. But the central banks have decided to thwart nature by intervening to prop up insolvent institutions and reduce the cost of debt, all in hopes of buying enough time for the system to grow out of its woes.

But nearly 7 years after the 2008 crisis and $Trillions upon $Trillions in stimulus, where are we? With moribund economic growth and an ever bigger wealth gap than ever before, as this recent video explains.

- Source, Peak Prosperity

Saturday, 20 December 2014

James Turk On Gold And Silver Manipulation And The Dollar


James Turk of GoldMoney.com says, “COMEX is just a side show. It’s just a paper market. The action is taking place over here in London. You are seeing this huge backwardation. If you want to put a big order in, say $50 million for physical metal, you can’t get that metal tomorrow. You are going to have to wait for a while before you can get that metal. That’s sign to me that gold is cheap. The same thing is happening in silver. As a result of that, you are going to see much higher prices as we move to the end of the year.” Turk goes on to add, “We’ve seen the slow burn in the dollar. You have these blips up and down and, right now, we are having this momentary blip of dollar strength, but eventually, it will go over the edge of the cliff. That is, ultimately, what happens when a currency collapses. Eventually, people realize the currency no longer makes sense.”

- Source, USA Watchdog

Wednesday, 17 December 2014

Max Interviews Alasdair Macleod About Gold, China, QE And The Economy


In this episode of the Keiser Report, Max Keiser and Stacy Herbert discuss precious metals manipulation in Switzerland and the costs of the never-ending banking fraud - from the ‘suffering and life long risks’ to children in Europe and beyond to the rising cost of food hitting lower income consumers. In the second half Max interviews Alasdair Macleod about gold, China, QE and the economy.

Sunday, 14 December 2014

US Dollar Money System Failing In Spades


What does the extreme precious metals demand say about the global financial system? Kirby thinks, “What the western world is trying to hide from the rest of the world is the U.S. dollar centric money system is failing, and it’s failing in spades. The only reason it hasn’t failed yet is extraordinary levels of corruption and fraud have been used and employed to keep kicking the can down the road. They are also trying to keep officiating and hiding from the general public how broken the system really is. That’s been done basically by payoffs, bribes and ownership of the media; payoffs, bribes and ownership of the political apparatus; and payoffs, bribes and ownership of the biggest financial institutions. It gives things the appearance of being under control, but beneath the surface, things really aren’t under control.”

- Source, USA Watchdog



Wednesday, 10 December 2014

Is Gold About To Turn Around?


Nick Santiago thinks we're about to see a turn around. Based upon this Friday and last, something's about to happen. The miners might be about to make a turn around too. The world is going crazy and the financial system is on the skids, where else can you put your money? Precious metals is going to be the place to be. Be patient.

Sunday, 7 December 2014

Thursday, 4 December 2014

Central Banks Suppressing Gold Price To Rig Currencies


Central Banks around the world are suppressing the gold price in order to defend their currencies, according to Chris Powell, secretary of the Gold Antitrust Action Committee.


Wednesday, 26 November 2014

Ron Paul Says: Watch the Petrodollar

By Nick Giambruno, Senior Editor, InternationalMan.com


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.—Ron Paul

Dr. Paul is referring to the petrodollar system, one of the main pillars that’s been holding up the US dollar’s status as the world’s premier reserve currency since the breakdown of Bretton Woods.

Want to know when the fiat US dollar will collapse? Watch the petrodollar system and the factors affecting it. This is critically important, because once the dollar loses its coveted reserve status, the consequences will be dire for Americans.

At that moment, I believe Washington will become sufficiently desperate to enforce the radical measures that governments throughout world history have always implemented when their currencies were threatened—overt capital controls, wealth confiscation, people controls, price and wage controls, pension nationalizations, etc.

And there’s more. The destruction of the dollar will wipe out most people’s wealth, leading to political and social consequences that will likely be worse than the financial consequences.

From Bretton Woods to the Petrodollar


The dollar’s role as the world’s reserve currency was first established in 1944, with the Bretton Woods international monetary system. The US—victorious in WWII, and possessing the overwhelmingly largest gold reserves in the world (around 717 million ounces)—could reconstruct the global monetary system with the dollar at its center.

The Bretton Woods arrangement linked another country’s currency to the US dollar at a fixed exchange rate, and the US dollar was tied to gold, also at a fixed exchange rate. Countries accumulated dollars in their reserves to engage in international trade or to exchange them with the US government for gold at $35 an ounce.

By the late 1960s, exuberant spending from welfare and warfare—combined with the Federal Reserve monetizing the deficits—drastically increased the number of dollars in circulation in relation to the gold backing it.

This monetary inflation caused nervous countries to accelerate their exchange of dollars for gold at $35. The result was a serious drain on the US gold supply (from 20,000 tonnes to around 290 million ounces by 1971, an amount it supposedly still holds).

With gold reserves shrinking rapidly, President Nixon officially ended convertibility of the dollar to gold, thus ending the Bretton Woods system on August 15, 1971. It was a default, and it took with it the main reason countries primarily held their reserves in dollars. The buck’s preeminent value in international trade was gone. Demand for dollars by foreign nations was sure to fall, along with its purchasing power.

That hurt OPEC, whose members were the world’s leading suppliers of a commodity even more valuable than gold: oil. OPEC countries needed a way to retain the real value of their earnings in the face of a declining currency, without having to jack the price of oil sky high.

If the dollar was to remain strong, it had to reinvent its status as the world’s reserve currency, and that required a new world financial arrangement, one which would give foreign nations an ironclad reason to hold and use dollars. Nixon dispatched his National Security Advisor Henry Kissinger to Saudi Arabia.

The Petrodollar System


Between 1972 and 1974, the US and Saudi governments created the petrodollar system.

Saudi Arabia was chosen because of its vast petroleum reserves, its dominant influence in OPEC, and the (correct) perception that the Saudi royal family was corruptible.

Under the new petrodollar system, the US guaranteed the survival of the House of Saud by providing a total commitment to its political and military security. In return, Saudi Arabia agreed to:

  • Use its dominant influence in OPEC to ensure that all global oil transactions would be conducted only in US dollars.

  • Invest a large amount of its oil revenue in US Treasury securities and use the interest income from those securities to pay US companies to modernize the infrastructure of Saudi Arabia.

  • Guarantee the price of oil within limits acceptable to the US and act to prevent another oil embargo by other OPEC members.

No dollars, no access to the world’s most important commodity. It’s a very compelling reason to hold your reserves in dollars.

For example, if Italy wants to buy oil from Kuwait, it has to first purchase US dollars on the foreign exchange market to pay for the oil, thus creating an artificial demand for US dollars that wouldn’t exist if Italy could pay in euros.

The US is just a toll collector in a transaction that has nothing to do with a product or service. But that translates into increased purchasing power and a deeper, more liquid market for the dollar and Treasuries.

Additionally, the US has the unique privilege of using its own currency—which it can print at will—to purchase its imports, including oil.

The benefits of the petrodollar system to the US are impossible to overstate.

What to Watch For


Today, the geopolitical sands of the Middle East are rapidly shifting.

The faltering strategic regional position of Saudi Arabia, the rise of Iran (which is not part of the petrodollar system), failed US interventions, Russia’s increasing power as an energy giant, and the emergence of the BRICS nations (which offer the potential of future alternative economic/security arrangements) all affect the sustainability of the petrodollar system.

My colleague Marin Katusa’s mentioned in his book; The Colder War, you need to be aware of what Vladimir Putin is doing. Putin would like nothing more than to sabotage the petrodollar, and he’s forging alliances across the planet that he hopes will help him achieve his goal.

At the same time, 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 end 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 its regional rivals Syria and Iran by now. And they may feel they are no longer obliged to uphold their part of the deal, namely selling their oil only in US dollars.

They’re already heavily involved with China and could also tilt toward Russia. Oil traded in rubles or yuan could be the future result—a death knell for the petrodollar.

Conclusion


It was evident long before Nixon closed the gold window and ended the Bretton Woods system in 1971 that a paradigm shift in the global monetary system was inevitable.

Now another shift also seems inevitable. Ron Paul’s words alert us as to when a dollar collapse is imminent.

“We will know that day is approaching when oil-producing countries demand gold, or its equivalent, for their oil rather than dollars or euros.”

Someday, perhaps soon, Americans will wake up to a new reality, like they did on August 15, 1971.

To learn more about the coming death of the petrodollar and how it will directly affect you, I recommend you read Marin’s new book, The Colder War.

Dr. Ron Paul has fully endorsed it and inside, you’ll discover the web alliances and deals Putin has forged to break the monopoly of the dollar in the global energy trade and what a flight from the dollar will look like.

Before Putin makes another move against America, get the full story by clicking here to get your copy of this eye-opening book.

The article Ron Paul Says: Watch the Petrodollar was originally published at caseyresearch.com.
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