Russia to trade oil in rubles - a new threat to the dollar

And I just found this Arab News article:

William Clark writing in the Energy Bulleting says, “What we are witnessing is a battle for oil currency supremacy. If Iran’s oil bourse becomes a successful alternative for international oil trades, it would challenge the hegemony currently enjoyed by the financial centers in both London (IPE) and New York (NYMEX)...”

At the same time, nations in this region have been exchanging percentages of their dollar reserves for other currencies.

In March, following the Dubai Ports World debacle, the UAE Central Bank said it was considering converting 10 percent of its dollar reserves to euros. Kuwait and Qatar have hinted that they might do the same.

The Commercial Bank of Syria has exchanged all its dollar devise for euros following a call from Washington urging US banks to cease acting as correspondents for Syrian financial institutions, ostensibly because of money-laundering concerns.

Last month, Sweden cut the dollar share of its $21 billion foreign reserves from 37 percent down to 20 percent, causing the dollar to tumble almost two percent in one week.

Sweden’s central bank said the switch to Euros was an effort to stabilize its foreign currency reserves and reduce volatile currencies.

Originally posted by rich23
Dr Strangecraft -

you're talking about the banks creating money, creating debt: the scenario you outline is that of a classic "bubble" that always, sooner or later, has to burst.

Agreed. But only because of the inherent inflationary qualities of any fiat currency. That is the core of the world's financial problems, not who counts their goodies in dollars or yuan or whatever.

If it weren't so important for the US dollar to have been the oil currency, why did the US work so hard to ensure that oil was traded in only one currency, its own?

Well, it did matter, back at "Bretton Woods" in 1943. But with the rise of free-floating, free markets in world currencies, Bretton Woods has gone by the boards.

A free-floating currency matrix is the real drain on the dollar, and every other currency. It means that national banks can no longer dictate interest rates, economic momentum, or all the other cogs in the apparatus of their bureaucratic machine.

I'm no monetarist, either. There have been periods in American history (every nation, actually) where the government printed as much money as they could (1950's), and never saw inflation. At other times, (1980-1982), the government actually destroyed currency, and still had rampant inflation.

The single best book on this topic is:

"The Great Wave: Price Revolutions and the Rythm of History" by David Hackett Fisher.

I think you'd find this work particularly poignant, since he begins by focusing on how societies deal with civilization-ending events. The first case study in the book is the "Black Death" of the 14th century. He also covers the French Revolution and a few other "hinges of history" to show how there is a repeating cycle in the rate of inflation, etc.

One of the 10 most important books I've ever read. Not only does it hammer the final nail in the coffin of Milton Friedman's monetarist arguments, it also shows the futility of the Fed's inflation targets.

I'm not particularly interested in convincing anyone here of the value of my views. But I do have a question: if you believe this, what are you doing about it? What steps are you taking to protect yourself financially?

.

[edit on 25-5-2006 by dr_strangecraft]

Originally posted by forestlady

Russia has one of the world's largest oil reserves in the world. The problem until recently has been that they didn't have enough money to drill for it and now it's really starting to grow as an industry in Russia. In 2004, they had 7% growth, more than any other G8 country. I think this is a brilliant move on Putin's part. They will be exporting LOTS of oil now and in the future; demanding rubles certainly would strengthen their currency. Russia may become a force to be reckoned with again.

The problem is russia has never had a major export, other than weapons and military equipment.

This is crap....no one in the right mind will trade in roubbles....their currency isnt worth jack.

the rouble(per unit) at my last quote I found was worth about 3-4 american cents.

now the euro is far more of a threat as it is actually worth 27 cents more (per unit) than the US dollar. Not a big difference, but it would seem logical the euro would be the most likely competitor as an exchange medium.



[edit on 25-5-2006 by XphilesPhan]

Xphiles has an important point.

The ruble's value has fluctuated so dramatically in the past decade that I suspect institutional oil traders will be pretty nervous holding large amounts, even for the short time they do business with a Russian Bourse. I expect they will be heavily hedged, and that means hedged on the NYMEX, which of course uses dollars.

One of the questions will be volume. Even people who are convinced that a ruble or dinar denominated bourse will somehow hurt the dollar are first going to have to argue 1) that any such auction will be large enough to matter, and 2) that the players on said exchange will suddenly stop at least hedging in USD.

Since America will STILL be a primary producer, trader, and importer, I suspect that the dollar will be heavily involved in the exchange of oil for a long time.

Originally posted by rich23
The dollar is looking precarious, as Forbes' article about the OECD suggests:

The OECD said in its world economic outlook that the depreciation faced by the dollar could be 'of the order of one-third to one-half.'

The adjustment in the deficit would 'need to induce a sharp slowdown in US domestic demand and that this would have adverse spill-over effects on other economies both through the trade and asset revaluation channels,' it said.

The rebalancing may be accompanied by an increase in risk premiums and a reversal of private capital flows, it added.

Countries with current account surpluses have been accumulating dollar reserves and 'their willingness to hold dollar assets on their balance sheets may diminish,' the OECD warned.

Gee let's see the part of the article you DIDN"T POST

However, the OECD said that it is not immediately obvious what would trigger a rebalancing and when it would occur.

And, a case can be made that a correction of the US current account deficit, once it occurs, could be 'orderly and gradual',it added.

Firstly, as the bulk of US international financial liabilities are denominated in dollars, their burden to the US economy does not rise with a depreciation in the currency. At the same time, US external assets are largely denominated in foreign currency, which means that they benefit from positive valuation adjustments if the dollar depreciates.

Additionally, the central banks which have piled on dollar reserves may prove to be reluctant sellers.

And, the US currency does not appear to be overvalued in purchasing power parity terms. Its position as an international reserve currency as well as the attractiveness of the comparatively liquid US asset markets also make it less vulnerable to confidence crises.

Despite these factors, however, the risk of a 'costly unwinding remains,' the OECD cautioned.

If you know about, you can bet the professionals have allready priced it in.

FYI American Q1 06 GDP was REVISED UP today to 5.3%!

If you look at this site it will tell you what the current US debt is. Is every citizen really good for $28k?

We'll see how it shakes out, but I suspect the overvaluation of the dollar will have to be dealt with within a year.

Originally posted by rich23
If you look at this site it will tell you what the current US debt is. Is every citizen really good for $28k?

We'll see how it shakes out, but I suspect the overvaluation of the dollar will have to be dealt with within a year.

But you fail to mention (ignorance? intentionally?) that America's per capita GDP is $42K.

Actually why the hell should other countries have to buy dollars to pay for oil that came from a country that isnt amercia? LMFAO

no f-ing wonder we have people flying planes into buildings!

good for the Russians, If it gets too bad over here, I like to fish anyways!

[edit on 25-5-2006 by Mailman]

Pretty figures and graphs. Don't you find it a little odd that in 35 years the US "GDP" has increased eightfold, and debt has not lagged far behind? The point is to do with inflation, an over-valuing of the US dollar. We'll get to why that took off around 1970 in a while.

I think that this article sums up the situation rather well:

The imperial ability to tax has always rested on a better and stronger economy, and as a consequence, a better and stronger military. One part of the subject taxes went to improve the living standards of the empire; the other part went to strengthen the military dominance necessary to enforce the collection of those taxes.

Historically, taxing the subject state has been in various forms—usually gold and silver, where those were considered money, but also slaves, soldiers, crops, cattle, or other agricultural and natural resources, whatever economic goods the empire demanded and the subject-state could deliver. Historically, imperial taxation has always been direct: the subject state handed over the economic goods directly to the empire.

For the first time in history, in the twentieth century, America was able to tax the world indirectly, through inflation. It did not enforce the direct payment of taxes like all of its predecessor empires did, but distributed instead its own fiat currency, the U.S. Dollar, to other nations in exchange for goods with the intended consequence of inflating and devaluing those dollars and paying back later each dollar with less economic goods—the difference capturing the U.S. imperial tax. Here is how this happened.

This article also notes that

When in 1970-1971 foreigners demanded payment for their dollars in gold, The U.S. Government defaulted on its payment on August 15, 1971. While the popular spin told the story of “severing the link between the dollar and gold”, in reality the denial to pay back in gold was an act of bankruptcy by the U.S. Government. Essentially, the U.S. declared itself an Empire. It had extracted an enormous amount of economic goods from the rest of the world, with no intention or ability to return those goods, and the world was powerless to respond— the world was taxed and it could not do anything about it.

Well, that's the whole point of what is going on now.... the world, or at least some parts of it, has woken up to the problem and is trying to do something about it. Have you noticed that the soaring "value" of the US economy in your nice graph kicks in at precisely this point?

From that point on, to sustain the American Empire and to continue to tax the rest of the world, the United States had to force the world to continue to accept ever-depreciating dollars in exchange for economic goods and to have the world hold more and more of those depreciating dollars. It had to give the world an economic reason to hold them, and that reason was oil.

In 1971, as it became clearer and clearer that the U.S Government would not be able to buy back its dollars in gold, it made in 1972-73 an iron-clad arrangement with Saudi Arabia to support the power of the House of Saud in exchange for accepting only U.S. dollars for its oil. The rest of OPEC was to follow suit and also accept only dollars. Because the world had to buy oil from the Arab oil countries, it had the reason to hold dollars as payment for oil. Because the world needed ever increasing quantities of oil at ever increasing oil prices, the world’s demand for dollars could only increase. Even though dollars could no longer be exchanged for gold, they were now exchangeable for oil.

If this relationship decouples, no-one has such a pressing reason to buy dollars.

Recently, the US stopped publishing figures for M3, one of the primary indicators of economic strength. As one bank manager remarked, generally, only failing economies keep their financial indicators secret.

There's a really good ATS thread on this, with plenty of good links and articles.

Originally posted by rich23

The point is to do with inflation, an over-valuing of the US dollar.

Do you want to stick with definition?

Inflation is where a dollar is worth less, right? So how is that an over-valuation?

Do you see why it might seem to others like your basically just flailing around, using any argument you can find, in order to predict doom?

Originally posted by rich23
Pretty figures and graphs. Don't you find it a little odd that in 35 years the US "GDP" has increased eightfold, and debt has not lagged far behind?

"Pretty figures and graphs"?

Is that supposed to be an argument?

I've conclusively show that America has more growth and a lower debt burden than any of her competitors. Additionally, I've show the America's present debt burden is rather low by historical standard, especially during time of war.

So the dollar is going to be replaced by currencies from countries with 1/3rd the growth, twice the unemployment, lower purchase power, lower per capita GDP, lower productivity, shrinking population and a larger debt burden?

Sure, whatever.

You don't have the tiniest clue what your are talking about. Further replies will only server to embarrass you more.

[edit on 25-5-2006 by El Tiante]

[edit on 25-5-2006 by El Tiante]

Let's keep the ad hominem's out of this shall we?

Those graphs conveniently leave out the fastest and largest growing economies in the world. China, India and Russia are not present. It makes perfect sense for the powers that be to move their money from economies that are stagnating to economies that are growing.

I know some people don't follow and read links but here goes anyway:

Picture Summary of 5 Core Threats (ugly website but good summarized information)

Inflation: The Invisible Tax The real definition of inflation is increased money supply causing devaluation of the currency, or conversly, increased prices with too many dollars chasing too few goods.

If inflation is under control then explain the rise in oil prices (and hence all products affected by it), the rise in commodities like gold, silver and industrial metals and the rise in interest rates. All in a world of stangnant or falling wages due to globalisation.

Yeah... everything is just peachy.
Infinite growth and prosperity is here! Yay!
.

[edit on 5/25/2006 by Gools]

Originally posted by dr_strangecraft

Originally posted by rich23

The point is to do with inflation, an over-valuing of the US dollar.

Do you want to stick with definition?

Inflation is where a dollar is worth less, right? So how is that an over-valuation?

Do you see why it might seem to others like your basically just flailing around, using any argument you can find, in order to predict doom?

If the dollar were under-valued, its true worth would be more.
Over-valued, its true worth is less than the value given it by markets which are being manipulated. As soon as that manipulation ceases to have an effect, the over-valuation ceases.

I shan't get drawn into a tit for tat trading of insults, tempting though it might be.

And thanks, Gools. I got a lot from reading your threads.

Originally posted by El Tiante

Originally posted by rich23
Pretty figures and graphs. Don't you find it a little odd that in 35 years the US "GDP" has increased eightfold, and debt has not lagged far behind?

"Pretty figures and graphs"?

Is that supposed to be an argument?

I've conclusively show that America has more growth and a lower debt burden than any of her competitors.

As Gools has pointed out, you've missed out the fastest-growing competitors.

And you obviously missed the argument, so I'll put it, briefly, again.

The reason the GDP shoots up in that graph is not because of an explosion of real productivity, it's because in 1971 the US defaulted on its international debts and is just printing dollars and exporting them like there's no tomorrow. Which might well be the case.

And it's an argument you have not addressed.

Originally posted by rich23


The reason the GDP shoots up in that graph is not because of an explosion of real productivity . . .

???

So, basically, all the efforts in the last 30 years towards increased productivity have been unproductive?

Computers, fuel economy, automated assembly lines, out-sourcing of labor, digitization . . . .

NONE of those have impacted the GDP???

And one event, 30 years ago is STILL producing GDP gains?????

If all that is true, then it was a GOOD MOVE on behalf of the illuminatti, since it has given the USA unprecedented wealth and 'productivity!'

Dude. You're just spinning in circles now.

.

Originally posted by Gools
Let's keep the ad hominem's out of this shall we?

Those graphs conveniently leave out the fastest and largest growing economies in the world. China, India and Russia are not present. It makes perfect sense for the powers that be to move their money from economies that are stagnating to economies that are growing.

[edit on 5/25/2006 by Gools]

Your comparison of growth rates between industrial and non industrial economies is clear and unequivocal evidence that you have no idea what you art talking about. Most people in China an India (and to a lesser extent Russia) are buying their first refrigerator, car or television. SO OF COURSE THEY’LL HAVE HIGH GROWTH. In America everybody already has all of those things and only get new one when they need replacement.

As of Q1 2006, America has the best performing industrial economy ON EARTH.


[edit on 26-5-2006 by El Tiante]

Some of you have just re-enforced the fact that public schools & colleges are falling.

Take some courses in gobal economics, you will discover that the dollar is not going away or being devalued.

Now the gobal markets are intertwined, if the dollar was to disappear there would be a total gobal econmic depression.

I hit quote instead of edit, MODS please delete.

[edit on 26-5-2006 by El Tiante]

Originally posted by DodgeG1
This Russian site says it will start trading in rubles from June 8th 2006.

They must of been planning this for some time

Link to Russian Site

This has been planned for at least 50 years. Another member, Phoenix, and myself have been posting for over 2 years now some facts which back then quite a few people were laughing about and not believing. We described how Russia would make a military agreement with China, people laughed, then it happened. We described and gave the statements from Russian military defectors who told us about this plan, most people didn't believ it, even when we posted several links, one of the links I gave was from a professor who is an expert in Russian studies, and he is from somewhere in Europe, I forget where now.

If you would have noticed, Russia is not the only one doing this, China has threatened to dump billions of dollars, Iran has also said the same thing, (and the crazy Iranian president alongside some other people such as Chavez and Castro have said the United States will be in ruins in the future, the Iranian president claimed in about 2-3 years) and even one of our supposed allies, Japan, are talking about getting rid of the dollar. I think Japan is doing this to save their own skin, but this plan by Russia, China and other nations who have always called themselves enemies of the United States had this planned for decades.

All that has happened with Iraq, and now with Iran has been mainly because countries such as Russia, and China, and even France, have been selling the most weapons, including wmd to such countries. These countries are the ones who Saddam owed the most money to in the world, and it wasn't because Saddam bought milk and honey from them.

All of this is not because of the war in Iraq or Afghanistan, as some would claim, this has been their plan for a very long time, and they have worked hard on changing the minds of many countries in the world, such as India.

BTW, if any of you are interested, do a search on how long and in what quantities have the countries I mentioned above been buying gold at an unprecedented level.

[edit on 26-5-2006 by Muaddib]

Originally posted by Muaddib
This has been planned for at least 50 years. ...

We described how Russia would make a military agreement with China, people laughed, then it happened.

... most people didn't believ it, ...

[I know the feeling]

... I think Japan is doing this to save their own skin, but this plan by Russia, China and other nations who have always called themselves enemies of the United States had this planned for decades.

...this has been their plan for a very long time, and they have worked hard on changing the minds of many countries in the world, such as India.

BTW, if any of you are interested, do a search on how long and in what quantities have the countries I mentioned above been buying gold at an unprecedented level.

No doubt this has been a goal for a long time. I'm not sure about planning it all along, just waiting for the right conditions to present themselves and wait for age-old fundamentals to kick in.

It takes time for a strategy to come together. Russia was bankrupted to lose the cold war by lowering oil and gold prices (Russia's two main sources of fiscal security). Chalk one up for the 'good guys" I guess.

Out of chaos ...order.

I don't look at China and Russia an a mortal enemies, they're just two more big dogs playing in the yard to this Canadian. I don't recall China calling itself an "enemy" of the United States and the Russians played cold war as well as we did.

The rallying point for the bipolar world now emerging is energy security.

It's always fundamentally about resources but they use ideology to pull us along. The world production of oil has been relatively stagnant at 85 Mbd since the beginning of the year with demand growing. China's economy grew by double digits this past quarter alone. If only 20% of Chinese society were to live the consumer way of life then we have another European or US sized economy establishing itself in the world.

The Russians are strategic energy suppliers to both Europe and China. Sitting on top of all that oil and gas with two hungry world class customers needing what you have is a good motivator for making allies and flexing some muscle in the face of it's long time nemesis.

I have noticed who is buying gold, who is dumping or threatening to dump dollars, and who is making noise around energy issues. Did you notice who is selling the gold? There is a major wealth transfer of historic proportions underway. You have England (not a Euro country) and the US on one side, and you have China and Russia leading Asia (minus Japan) on the other, and both have their eyes on Iran.

China and Russia have negotiated deals with the Iranians. The US has chosen to rattle nuclear sabres.

I've been saying for over a year that Iran and the Middle East are not the end game. China is, and Russia is just playing a supporting role.

May you live in interesting times.
.

[edit on 5/27/2006 by Gools]