Petrodollar Warfare: Dollars, Euros and the Upcoming Iranian Oil Bourse

The world is all about the paper, the paper that when a government offical puts their name on it is ok to accept even though the money don't really exist, just like a personal check except we cannot go over what we have in the bank. Sure the dollar will fall as all other currency on paper, if Iran really wanted a good oil bourse they would go to gold instead of the Euro because like the dollar the Euro to is just as bad.
Think Germany in the 1920s' when they were printing happy just after the first world war. They had to introduce a new currency or 1948 the Reich Mark and with a stroke of a pen they cancelled their old system and started all over again.
Smile everyone because none of the governments will fall to this those of you who read this will be the ones affected, everyones government has power over the people and all you can do is suffer. Bush will still fly to his ranch in Texas, Putin will still kick back at his sea retreat, Castro will smile at the sun that still shines his day, China, UK, Japan, all of these governments will be just fine while we suffer.
You want to make a difference start a bank that is backed by gold instead of the dollars, hope that your government won't shut you down.
Tomorrow we will wake up to our dollars and bank deposits are worthless.

A humourous, yet very scary rant from Richard Daughty aka The Mogambo Guru (general partner and COO of the Smith Consultant Group)

The Mogambo Guru Caves In Under The Weight Of Public Debt

But on the other side of the coin, foreigners continue to soak up tons and tons of our debt, which they will probably spell "tonnes and tonnes of debt of the world's biggest idiots who think that they can make an economy out of borrowing and spending money for imported consumer items and having their governments borrow more and more money to spend more and more money on more and more people!", and last week the official holdings of these foreigners at the Federal Reserve exploded by another $16 billion. In one week! I don't know if this is a new weekly record or not, and I don't care, because if I did care, then I would have to do actual work to answer the question, but you know how I feel about work, and if you don't, then ask me to do some and see what happens. The only thing that matters is that it is a lot of money, and the humongous sum total of American government they have stashed at the Fed IS a new record, $1.572 trillion!

If I looked it up correctly, in 1995 the banks' reserves were about $60 billion, insuring against $206 billion in loans and leases, and $87 billion in savings. M3 was $4.3 trillion.
Now, in 2006, notice the amazing difference! Today, required reserves are only a measly $41 billion (down almost 33%!) as a cushion against a whopping $5,540 billion in loans and leases (2,700 percent bigger than in 1995) and an astonishing $5,150 billion in savings (5,900 percent bigger)! M3 is now $10.3 trillion.

And this is an article on how it's better to invest in tangible value (gold, silver, oil) than stocks or bonds in the near future.

Investing: Assets That Are Lifeboats in a Shaky Future-- Robert Kiyosaki

As of 2004, Social Security was a $10 trillion off-balance-sheet liability. Medicare is a $64 trillion liability. The Social Security fund will begin to run in the red around 2015. The Medicare fund is already operating in the red, a situation that started in 1992. The combined $74 trillion off-balance sheet IOU to Americans is more money than is available in all the stock and bond markets of the world. This means life or death will be determined by your wallet, not your doctor.

I would advise all ATS members to read these two links and other similar articles and blogs. And to reread the Ron Paul speech given on Feb 15th, and the European world economic crisis report that also came out last month.

Related ATS threads:

www.abovetopsecret.com...

www.abovetopsecret.com...

Here's an opposing view point in regards to Iran's oil bourse. Article concludes with the mention of Norway becoming a Pentagon target of wrath.



Author fails to address the possibility of the US overextending itself, which would lead to currency volatility and instability. Which leads to another unaddressed economic facet: what would a good old fashioned depression do to Uncle Buck's hegemony?

The fact still remains that oil prices will go up , the economy relies on cheap energy to maintain growth, and countries will look for all options to cut costs.


[edit on 9-3-2006 by Regenmacher]

Originally posted by Regenmacher

The thesis is simply wrong for many reasons, not least that war on Iran has been in planning since the 1990s as an integral part of the United States' Greater Middle East strategy.

www.atimes.com...]

- That's a strange conclusion.

I mean, people have been talking about US $ debt and the obvious reliance on it's oil backing since the 1980's and the deficits went nuts back then.

Seeing the writing on the wall (and as you referred to being informed by the experience of others previously) and then formulating the PNAC strategy (itself a warm-over of the old 1950's stuff about Imperial America) some time back hardly excludes the reasoning from the current 'strategy'.

That's a strange piece of writting period.

Mr. Engdahl seems to be confusing cause and effect as well as shooting his own hypothesis in the foot. It looks to me like he is arguing that the "petrodollar" does not exists (he states it several times) but then goes on to explain how it works by reversing cause and effect and basically saying that the mechanism is due to a happy historical coincidence.

His point about it being defended with F-16's directly supports the oil bourse being a casus belli stating that only another military power could challenge the dollar and that no one would dare because... well just because the US is so strong.

I remember a quote, forget by whom and these may not be te exact words, but it goes something like this: "The Empire never appears as strong and invincible as it does the day before it's fall."

Notice how he also accepts that printing as much fiat currency as needed to keep the game going is the way out? That the FED just "discovered" this after Nixon closed the gold window (an event where the US renegged on it's foreign monetray obligations and has yet to face any consequences for)? He fails to realise that every sovereign who has ever tried that in the history of the world has eventually failed.

Look, I hope people are not expecting that on the morning of the 21st that there will be a stock market crash and the dollar will sudenlly be worthless overnight because of the oil bourse. It won't happen that fast. So all the people waiting for the "I told you so" moment (and I know you are out there ) will have to wait up to I'm guessing a year or two to see how all this plays out. The attack on Iran (notice I didn't say invasion/occupation) will come soon enough or the sanctions will be designed is such a way as to try and neutralise the oil bourse.

Like I said before in this thread, the mere existance of the bourse is enough for Iran to be targeted so that the bourse does not take root and erode confidence in the US dollar eventually leading to financial crisis. Is the bourse the only cause for this attack? Of course not. There are many other factors at play. The bourse is itself both an effect and a cause in a long history of cause and effect in the region, but the timing of events currently making headlines is definitely influenced by it's establishment.

The existance of the bourse will set many interrelated things in motion which are much too complexe to go into here. You could write a thesis on any one of the issues touched by this event.

Besides, Iran is not the endgame for the US it's China.

Because in the lender/borrower relationship the lender is always the master. The US is the world's beyatch to the tune of over $2 billion per day, her citizens just don't realise it yet. The powers that be know it, don't care and are "gettin theirs while the gettin's good". They will be fine. It is you and I that will pay the price for "The Great Game".
.

The Shareef he don’t like it, crashin’ the casbah!




Petrodollars worthless? Then try our nukebucks backed by ICBMs!






The empire says,"Give us oil or your head on a skillet!"






If you can't join or pillage them, blow them all up!






[edit on 14-3-2006 by Regenmacher]

Precursors to Wall Street implosion?



Iceland crash looking like a meltdown now. Markets of nations and their affiliates that said they would set up oil bourses are tanking, which would indicate they are bailing out of U.S. assets, taking their loses now, and dumping the dollar.







[edit on 15-3-2006 by Regenmacher]

Thanks Regenmacher, do keep us up to date on this.

The Arabic stock crashes are something to keep a close eye on. Dubai's stock market has lost 40% in one quater!

so what will be the consiquences once iran switches? will it just be a massive melt down or a slow decrease of the dollar? will a massive collapse require a trigger of nations that drop the dollar? i mean i know something will happen im just not sure of what.

An oil bourse is simply a meeting place (usually on the internet) where those who have oil/gas to sell meet those who have oil/gas to buy.

Like all markets it will take time to establish itself, and trust will need to build up in the systems and buyer/sellers before much movement will be seen on it.

The Iranian oil bourse is also hampered by the fact that there is currently no oil marker in Eurodollars.

The oil marker is the price quoted (usually in barrels for oil), and is based on the previously traded prices. Iraq went some way to provide historical data when it switched its sales to Euros in 2003, but there is still not enough data to confidently sell at a Euro.

This means that for the present time oil will be at the same price whether purchased in Dollars or Euros, as the Euro price will be the dollar price times the conversion rate. This means they will effectively be the same price, just in different currencies.
As most countries still hold large USDollar reserves there is little to gain from switching to Eurodollars for oil/gas purchases.

The result of the Iranian Oil Bourse IS NOT quite the problem the doomsayers make it out to be.

China and Russia have no interest in damaging the US economy or the value of the USDollar, as this will impact the global economy or in turn their own economy.

There is however some danger signs to look for. Iran does prefer to trade oil/gas through private deals, as opposed to open markets, and we may see China entering into contracts which will exclude other countries, as Iran had 15% of the world’s oil and a large portion of its gas the rest of the world may be excluded from these deals.

A bigger danger would be for Brent/Norway Crude to move its oil supplies to a Eurodollar marker (maybe through a Norwegian oil bourse) as this will allow trading inside the Euro Zone and remove the last barrier for large scale switches to oil/gas Eurodollar trades.

The only unknown in this is are the United Arab Emirates (UAE) they do have the power to seriously devalue the USDollar and could, in reaction to say the collapsed US port deals, damage the USDollar by dumping large reserves.

A world recession does benifit the Arab oil producing states, as the would not need to increase production any further. Saudi production is currently flat out, and any further increases could expose the dwindling supplies.
(For further information on why that is a problem see the Peak Oil discussion forum).

[edit on 17-3-2006 by Expositor]

[edit on 17-3-2006 by Expositor]

[edit on 17-3-2006 by Expositor]

yes but could iran be trying to do it purposely? there may be no real big benefit other then to weaken the US. i mean it makes sense, they use their best weapon against a force they cannot beat by physical means.

Launch of Iranian oil trading hits wall
Oil exchange unlikely to begin till at least midyear

Despite repeated reports over the past 18 months or so that the planned bourse would finally open for business on March 20, 2006 -- and go head to head with the New York Mercantile Exchange and the ICE Futures Exchange in London -- the start date has been postponed by at least several months and maybe more than a year.

"In the middle of 2006, we are able to start the bourse," Mohammad Asemipur, special adviser on the project to Iran's Oil Minister, said when reached in Tehran. The plan is to trade petrochemical products first, with a crude oil contract coming last, a rollout that likely will take three years, he said.

"Oh, crikey, it's at a much earlier stage than people would think," said British consultant Chris Cook, who claims credit for coming up with the idea for the exchange in the first place and is a member of the consortium headed by the Tehran Stock Exchange that is charged with bringing the project to life.

"You can rest assured, there will not be a crude oil contract, Gulf-based, in my opinion, within a year -- and that would be really pushing it," Mr. Cook, a former director of ICE's predecessor, the International Petroleum Exchange, said when reached in Scotland.

Read the rest here: www.theglobeandmail.com...

I also remember reading somewhere quoting the chairman of Iran's parliamentary Energy Commission as saying that the oil bourse will be launched in 2-3 months (he promised), and that was back in late february, 06.

2 more months to go, I guess, not too bad.

KEEP IT REAL

I've only read through page two, so forgive me if this has been mentioned:

What if the Scandinavian countries left the Kronor and took up Euros? They are much wealthier. If that were to happen, do you think the Euro would sky rocket? And if so...since Norway has a relatively large yield in oil, what that raise the euro even more? Would Iran's conversion to the Euro even be that big of a change compared to the kronor going euro? What would happen if Japan and China joined in as well?

I'm horrible at economics, just throwin' this out there. If anyone could answer this, I'd be very intrested (and thankful). :-P

Proprog thanks a bunch for that article!

First, this is the Globe and Mail, you can't get more mainstream in Canada and they admit this is not being discussed much in the mainstream.

Second, I've just lost a bunch of respect for this paper because of how they are portraying the issue.

I'm quoting other portions of this before it disappears behind the paywall:

As the nuclear standoff pitting Iran against the West continues, some conspiracy theorists are more focused on another plan that the Middle Eastern nation is pursuing.

But they are jumping the gun if they still figure Iran is within days of launching a new international oil exchange that would sell its own and other Middle Eastern oil producers' black gold in euros rather than U.S. dollars -- and which, the theory goes, could ultimately torpedo the greenback and the U.S. economy.

The electronic exchange is to be located on Kish Island in the Persian Gulf, an Iranian duty- and tax-free zone.

There has been far less talk about the planned bourse in the mainstream media than on the Internet, particularly on websites aimed at gold bugs and other economic conspiracy theorists.

The theory is that all trades through the new bourse would be made in euros, not the U.S. dollar, which for decades has been the world's primary reserve currency, as well as the one in which oil and most other commodities have been priced. As a result, European nations and other countries, especially Middle East oil producers, tired of having to buy billions of now weakening greenbacks to pay for their energy purchases, would no longer have to do so.

This, the conspiracy theorists contend, would knock the stuffing out of the U.S. currency and hasten the decline and fall of the American Empire, all the while allowing Iran to stick it to the Great Satan.

But, the theory continues, Washington will pre-empt all this by using Iran's nuclear ambitions as a pretext for attacking the country.

Kamal Daneshyar, chairman of Iran's Majlis [parliamentary] Energy Commission reportedly told the Iranian Students News Agency in December that the exchange would at first operate in both dollars and euros, but gradually move to the European currency exclusively. He was also quoted as saying that this would enable Iran to get even with the U.S. for the economic damages it has inflicted on the Islamic republic.

Dr. Asemipur, meanwhile, was noncommittal on the currency question, saying market participants, not the Iranian government, would make the decision. He also denied the planned bourse could harm the U.S. economy.

Mr. Cook dismissed the idea that Iran's goal is to use the bourse to sabotage the greenback. "I have a technical term for that," he said. "Bollocks!"

As for trading oil in euros, he said the Iranians likely would find it very difficult, at least in the next several years. "Basically, there aren't enough euros in circulation, and nor are there likely to be," he said.

Mr. Cook cited a recent article on Hong Kong-based Asia Times Online by William Engdahl, who specializes in the geopolitics of oil.

"For the euro to begin to challenge the reserve role of the U.S. dollar, a virtual revolution in policy would have to take place in Euroland," Mr. Engdahl wrote. "First the European Central Bank . . . would have to surrender power to elected legislators. It would then have to turn on the printing presses and print euros like there was no tomorrow."

A full challenge to the U.S. dollar as the world central bank reserve currency, Mr. Engdahl added later, would entail a "de facto declaration of war on the 'full-spectrum dominance' of the United States today," and that is something no country or group of countries is yet willing to launch.

Is it me or is the Globe and Mail making fun of us?

Forget what the "conspiray theorist contend" does it make any sense? Are all economic commentators with this viewpoint now suddenly tin-foil-hat-wearing nutjobs?

It doesn't take a rocket scientist to understand the principles discussed in this thread. We have Cook and Engdahl (again and both discussed above) trying to dismiss any fears that a Euro based bourse would do any damage. Engdahl even does this while at the same time admitting that the petrodollar is part of "full spectrum dominance" for the US! So in essence a Euro based bourse is a challenge even if it's not a "full challenge". Does this guy understand irony or hypocrisy?

As for the point about the ECB needing to print Euros, they, just like the US FED have been cranking out the money supply! Not enough Euros in circulation? They (like the US) can print them to their heart's content!

I don't know why the delay on the part of the Iranians (there's been so many meetings and discussion who's to say what goes on behind the scenes we never hear about) but just because there is a delay does not mean that the "conspiracy theory" is flawed.

If and when the oil bourse comes into being it will be a challenge to dollar hegemony no matter what these paid "experts" say. Oh... and why is it that these particular two are getting so much mainstream press coverage? Something to think about...
.

Greenback hit seven-week euro low, two-week yen low -MarketWatch
Oil Trades Near Two-Week High After U.S. Starts Attack in Iraq -Bloomberg

Precious metals and oil markets are not responding to any news about Iran tension easing and/or oil bourse being put off. Pro-US Arab nations are damn near in full panic mode and the Federal Reserve's M3 reporting is still going offline on March 23rd.

So we might presume Iran is now going to play wait and see,
considering the Wall Street/EU house of cards could fall on its own.



Sure is a lot of economic shucking and jiving if nothing big is coming up.

Staying ahead of the game?
Commodities Bull Portfolio Design

[edit on 18-3-2006 by Regenmacher]

The tinfoil hats are getting cookier.

1) As has been repeated many times, the Iranian oil bourse will not have a fly's genitalia impact on global economy.

Trading oil in dollars versus euros is entirely equivalent and can be arranged with a euro/dollar forward.

2) note that in technical finance jargon, "eurodollars" are not the european single currency. "eurodollars" are deposits, denominated, held and paying interest in US Dollars, in non-US Banks. Originally this was European but now extends further.

3) The Saudi stock market declined significantly, yes. But it it was after an enormous 600%+ bull market previously due to huge profits from oil as well as large scale bubble-speculation. Perhaps it was time for a decline.

4) All those things happening around the world in currencies? Answer is simple: US Federal reserve has been raising interest rates and recently appears to be raising further than previously assumed, and so is the European Central bank. Consequence: money comes out of emerging markets back to dollars and euros to take advantage of higher rates. This is the classic pattern.

Guess what: despite the doom and gloom US dollar has stayed pretty strong since about March 2005. This is because interest rates are going up.

Interest rates rule global currency markets far more than any other factor.

Hi guys,

36 Trillion Dollars of debt - not too good!

Middle East conflict - money sapping!

Global Domination? - Impossible!!

George Houdini act? - Highly likely!

US Dominance - Priceless!!!!

J

Graphic inspired by mbkennel!

Here's your prize, so start studying:
ZNet: Global Economics Crisis

We Were Warned - Tomorrow's Oil Crisis CNN Special

Here's a report from the Council of Foreign Relations that emphasizes our precarious position.

Getting Serious about the Twin Deficits

Twenty years ago, the United States was the world’s largest creditor nation, unsurpassed in its ownership of assets outside of its borders, even after deducting what foreigners owned inside its borders. Yet over the past two decades, America has been transformed into the world’s largest debtor nation.

“A striking cautionary note regarding America ’s current path is provided by Britain ’s loss of military and political primacy in the twentieth century; that development followed a shift from creditor to debtor status. Similarly, a prolonged decline in the dollar’s value and increasing indebtedness will erode America ’s dominance in political and security spheres. These trends threaten the dollar’s role as the global currency that facilitates international trade and finance, something the United States has gained immeasurably from over the years. A weaker dollar also reduces American leverage in international financial institutions such as the World Bank and International Monetary Fund (IMF). Finally, a diminished U.S. currency means that each dollar’s worth of military and development assistance has less impact at precisely the time when the nation faces the greatest challenges. Those threats we ignore at our own peril.”

Here's an interview with Brussee with several audio formats available at the link,
so have a listen while you surf

The Second Great Depression: Starting 2007, Ending 2020
Warren Brussee, Author

The Second Great Depression is a frightening book. It shows how massive consumer debt will trigger the next depression, starting about the year 2007. Most of the logic used to support this premise is based on the government's own published data.

With interest rates increasing, savings rates near zero, and debt at its maximum; many people will be pushed over their debt limit, having homes foreclosed by the banks or going into bankruptcy. Others will heed the warnings and reduce spending, causing a dramatic slowing of the economy.

In this depression, the United States will be brought to its knees. But not unlike the mythical bird Phoenix that dies in flames and is then reborn out of its own ashes, the United States will also be reborn. However, it will be a poorer and less arrogant country that emerges from its own ashes.

This March 19th story says Iran's oil bourse still set to go:



This author says petrodollar fueling collapses in Arab markets. Guess that's what happens when you start flooding the market with helicopter money, ehh Bernanke?



Millions of Britons struggle to pay sizzling fuel bills -AFP

Market is currently in 100% bull mode and a lot of it is automatic program trading. Beware the escalation in consumer debt as volume dries up, since there's still no free lunch.

The old saying goes when the investment hype convinces the last bears that it's time to go long, that's when the market corrects to the downside.

Got gas? Mogambo suggests some Mexican food.


Commodities and A Crunchy Taco 03/20/2006

Originally posted by mbkennel

Trading oil in dollars versus euros is entirely equivalent and can be arranged with a euro/dollar forward.

Actually, it costs money to covert, and it even costs money (and assumes risk) to arrange a forward, which is why many oil-importing nations which held dollars will find less reason to hold onto them. Your point about reserve rates is well taken, but you shouldn't completely discount the importance of keeping dollar reserves for dollar purchases, or the effect increased Euro activity would have on the dollar even, and particularly, if that activity is preceded by dollar/Euro conversion.

Speaking generally, I am curious why M3 figures are no longer being reported by the federal reserve as of March, for the first time since the 50's.

[edit on 20-3-2006 by koji_K]