In an Attempt to Ditch the Dollar, Turkey Will Take Back All Its Gold From the US

(ZHE) After Venezuela, Germany, Austria and the Netherlands prudently repatriated a substantial portion (if not all) of their physical gold held at the NY Fed or other western central banks in recent years, this morning Turkey also announced that it has decided to repatriate all its gold stored in the US Federal Reserve and deliver it to the Istanbul Stock Exchange, according to reports […]

Unprecedented: China to Pay for Oil Imports With Yuan in Major Blow to Dollar

(ZHE) Just days after Beijing officially launched  Yuan-denominated crude oil futures (with a bang, as shown in the chart below, surpassing Brent trading volume) which are expected to quickly become the third global price benchmark along Brent and WTI, China took the next major step in the challenging the Dollar’s supremacy as global reserve currency (and internationalizing the […]

China Moves to Destroy US Dollar As They Launch the Gold-backed Petro-Yuan

China has just launched the petro-yuan, a gold-backed currency directly challenging the US dollar signaling the beginning of the end of the American greenback.

The post China Moves to Destroy US Dollar As They Launch the Gold-backed Petro-Yuan appeared first on The Free Thought Project.

China Is One Signature Away From Dealing The Dollar A Death Blow

This report was originally published by Brandon Smith at Alt-Market.com

If you leave your sliding glass door open, you might let in a stray cat, raccoon, or bugs without knowing it.

Some intruders are worse than others. All can be annoying. But let in a thief, who robs your home… and it only takes that one time to change your life forever.

The U.S. has essentially left their “sliding glass door” open, and on March 26 China is set to become the intruder that may very well deal a death blow to the dollar.

China Prepares Death Blow to the Dollar

On March 26 China will finally launch a yuan-dominated oil futures contract. Over the last decade there have been a number of “false-starts,” but this time the contract has gotten approval from China’s State Council.

With that approval, the “petroyuan” will become real and China will set out to challenge the “petrodollar” for dominance. Adam Levinson, managing partner and chief investment officer at hedge fund manager Graticule Asset Management Asia (GAMA), already warned last year that China launching a yuan-denominated oil futures contract will shock those investors who have not been paying attention.

This could be a death blow for an already weakening U.S. dollar, and the rise of the yuan as the dominant world currency.

But this isn’t just some slow, news day “fad” that will fizzle in a few days.

A Warning for Investors Since 2015

Back in 2015, the first of a number of strikes against the petrodollar was dealt by China. Gazprom Neft, the third-largest oil producer in Russia, decided to move away from the dollar and towards the yuan and other Asian currencies.

Iran followed suit the same year, using the yuan with a host of other foreign currencies in trade, including Iranian oil.

During the same year China also developed its Silk Road, while the yuan was beginning to establish more dominance in the European markets.

But the U.S. petrodollar still had a fighting chance in 2015 because China’s oil imports were all over the place. Back then, Nick Cunningham of OilPrice.com wrote…

Despite accounting for much of the world’s growth in demand in the 21st Century, China’s oil imports have been all over the map in recent months. In April, China imported 7.4 million barrels per day, a record high and enough to make it the world’s largest oil importer. But a month later, imports plummeted to just 5.5 million barrels per day.

That problem has since gone away, signaling China’s rise to oil dominance…

The Slippery Slope to the Petroyuan Begins Here

The petrodollar is backed by Treasuries, so it can help fuel U.S. deficit spending. Take that away, and the U.S. is in trouble.

It looks like that time has come…

A death blow that began in 2015 hit again in 2017 when China became the world’s largest consumer of imported crude…

Now that China is the world’s leading consumer of oil, Beijing can exert some real leverage over Saudi Arabia to pay for crude in yuan. It’s suspected that this is what’s motivating Chinese officials to make a full-fledged effort to renegotiate their trade deal.

So fast-forward to now, and the final blow to the petrodollar could happen starting on March 26. We hinted at this possibility back in September 2017…

With major oil exporters finally having a viable way to circumvent the petrodollar system, the U.S. economy could soon encounter severely troubled waters.

First of all, the dollar’s value depends massively on its use as an oil trade vehicle. When that goes away, we will likely see a strong and steady decline in the dollar’s value.

Once the oil markets are upended, the yuan has an opportunity to become the dominant world currency overall. This will further weaken the dollar.

The Petrodollar’s Downfall Could be a Lift for Gold

Amongst all the trouble ahead for the dollar, there are some good news too. The U.S. might have ditched the gold standard in the 1970’s, but with gold making a return to world headlines… we could see a resurgence.

For the first time since our nation abandoned the gold standard decades ago, physical gold is being reintroduced to the global monetary system in a major way. That alone is incredibly good news for gold owners.

A reintroduction of gold to the global economy could result in a notable rise in gold prices. It’s safe to assume exporters are more likely to choose a gold-backed financial instrument over one created out of thin air any day of the week.

Soon after, we could see more and more nations jump on the bandwagon, resulting in a substantial rise in gold prices.

After 8 long years of ultra-loose monetary policy from the Federal Reserve, it’s no secret that inflation is primed to soar. If your IRA or 401(k) is exposed to this threat, it’s critical to act now! That’s why thousands of Americans are moving their retirement into a Gold IRA. Learn how you can too with a free info kit on gold from Birch Gold Group. It reveals the little-known IRS Tax Law to move your IRA or 401(k) into gold. Click here to get your free Info Kit on Gold.

Global Crisis Events: The Weird Keeps Getting Weirder

This report was originally published by Brandon Smith at Alt-Market.com

While the mainstream media and general public tend to assume that every new day is bringing us closer to a better future, many alternative analysts focus on the underlying weirdness of our world and all of the crisis factors that average people don’t want to think about. I have to say, in my view the “weirdness” has been escalating rather swiftly lately, and I don’t think that very many analysts, alternative or mainstream, appreciate the potential consequences.

The most important issue of course has always been the global economy. With nearly every sector of our system resting on massively inflated financial bubbles driven by central bank fiat printing and artificially low interest rates, there is only one question that really needs to be asked: How long before a geopolitical or economic shock event takes down the entire house of cards?

The mainstream philosophy seems to be that the economy is now impervious to such events. As the media now argues often, stock markets in particular do not appear to care whenever international threats present themselves. I would argue that this is because nothing substantial has actually happened quite yet. We have had a steady build-up of domestic and global political tensions, but the markets have so far been presented with a world that is comfortably predictable. It is a dangerous world with numerous potential pitfalls, but still predictable nonetheless.

And this is the very odd position we find ourselves in. A system which grows progressively more unstable year by year, and a society that has grown ignorantly used to it. To wake people up to the threats ahead would require a surprise, a slap to the face, something entirely unexpected. Here are a few developing powder kegs around the world that may present such a shock.

U.S. Debt Ceiling And The Government Shutdown Battle

I think a lot of people are missing some major points on the government shutdown situation. First, consider this — every new deal to keep the federal government funded offers a shorter stopgap than the last. The latest deal would only keep funding in place for three more weeks, then the same conflict over budget and spending initiatives happens all over again. It is not outlandish to expect that one day soon we will be faced with weekly or bi-weekly funding battles in D.C., while the greater problem of the U.S. debt ceiling is generally ignored.

You see, the “fight” within the federal government is not so much over whether or not more debt is a “bad thing.” In fact, both sides support more debt and bigger government. Instead, the fight is over the allocation of funds (debt) to certain projects and away from others. Who gets the money? And how can a government shutdown be used as leverage to gain the upper hand politically?

The thing is, this is all theater. There are no “sides” to the debate in Washington, and there is no battle. This is all designed to condition the American public into believing that the two parties are separate and opposed when they are in fact not. Beyond that, the shutdown battle also achieves a certain stress factor for the economy that many people are not aware of.

Among alternative analysts, cynicism runs rampant over a government shutdown. “Who cares?!” many of them will say, “Let it shut down!” But there are some concerns here, primarily the concern of full faith in U.S. debt issuance.

While I am all for the notion of the federal government going the way of the Dodo bird, I do not think many alternative analysts are considering the trade-off required when the system does in fact “reset.” For example, while the U.S. Treasury is supposed to remain functional during a government shutdown and certainly remains functional during stop gaps and debates over funding, this internal conflict though theatrical in nature can still produce a lack of faith in Treasury bonds and the dollar internationally. And frankly, faith is all that our economy has left to sustain itself.

If the funding battle continues with ever shorter stop gaps or with an extended period of government shutdown, there is a possibility that the largest foreign investors in U.S. debt and the dollar will begin dumping their holdings. When this is done, it will be done quietly and will be fully denied if questions arise. If China, for example, begins decoupling from U.S. debt, we will not find out until it is far too late. The Chinese would seek to be the first to dump their holding in order to avoid a vast international rush for the exits. They would want to be the first to sell, not the last.

Again, if the funding fight continues to become more aggressive and more absurd, eventually we will see a foreign dump of U.S. debt, and with it an unprecedented crisis. Whether or not this “needs” to happen is not what I am debating here, only that when it does happen, there will be consequences for us all, and being prepared for them is essential.

Syria Back On The Table

So, if you thought the Syrian situation could not get any weirder, the past week might have been a surprise.

The last major development was Vladimir Putin’s orders to pull a large percentage of standing Russian troops from the region, leaving the Assad government particularly vulnerable. This move did not surprise me in the least. In fact, I predicted that Russia would step aside in Syria in interviews last year. I also wrote about the possible problems this would cause in my article ‘A Review Of The Most Disturbing Events Of 2017’. One of these problems would be Putin leaving the door wide open for a foreign force to invade Syria, drawing in other nations like Iran or Lebanon into the fight and expanding the war tenfold.

What did surprise me, though, was the brazen launch of forces into the region by Turkey in particular. Erdogen has been pecking away at Kurdish tribes in Syria for quite some time, but his latest measures are something entirely new. Keep in mind that Turkey is still technically a NATO member and an ally of the U.S., despite Erdogen’s anti-NATO rhetoric and threats to leave the multi-nation defense pact. Also keep in mind that the U.S. government is giving monetary and weapons support to the Kurds. So, to clarify, a U.S. ally is ignoring the tense situation in Syria and the possibility of triggering a wider regional war to hunt and destroy another U.S. ally, all while Saudi Arabia, Iran, Israel, Lebanon, Russia, etc., hover on the periphery waiting to jump into the fray.

This is not a recipe for diplomatic discourse. This is a recipe for disaster. Will Syria lead to WWIII as some people suggest? Probably not in the way most of them imagine. War takes many forms, including sporadic region by region conflicts, as well as economic conflicts. Global nuclear war is unlikely considering such an event would virtually vaporize decades of investment by the elitist establishment in control grids around the world. But, constant regional combat and financial disasters? THAT is a strategy that benefits them greatly.

North Korea And The Olympic-Sized Target

First let me say that the very fact that South Korea and the Olympic committee feels compelled to continue the games in the region at a time of such heightened tensions is extremely odd to me. The notion may simply be that the games will “heal” divisions in the Korean peninsula. I am not so sure about that…

I recently wrote about the North Korean war scenario and the potential false flag event during the Olympics in my article ‘Olympic Games In South Korea – Perfect Opportunity For A False Flag Attack?’. I would add to my analysis another interesting development; the negative response by South Koreans to the North’s participation in the Olympic games.

I have continually had to remind people that a war in North Korea would be the most effective trigger event for economic downturn and global distraction, though some skeptics seem to think the situation is going nowhere. Yet, all the elements are now present, including an array of naval forces ready for kinetic response, the escalation of North Korea’s missile technology to include ICBMs capable of striking the U.S. mainland, the war rhetoric grows on both sides, with the Department of Defense being the most aggressive, and now even the South Korean citizenry seems to be shunning diplomacy as they burn photos of Kim Jong Un during Olympic processions and demand a stop to cooperation with the North during the games.

This is a rather sharp break from the mainstream narrative in the U.S., which has told us that South Koreans are seeking generally passive and diplomatic relations with the North, and that the US involvement is universally unwanted. That is to say, the desire for conflict is not limited to U.S. warhawks and North Korean “fanatics,” it is also a large portion of the South Korean population that appears to prefer less-than peaceful solutions.

Add to this the latest CIA claims that North Korea’s nuclear weapons technology will be a full threat to the U.S. in a matter of months, and the news that North Korea’s armies are confiscating food stores from the citizenry at a greater rate than usual, and anyone with any sense can see what is developing here. CIA director Mike Pompeo has asserted that the Trump Administration will act to prevent North Korea from developing an arsenal of ICBMs capable of striking the U.S.

I’ve said it before and I’ll say it again: This is going to end in war. There is no way around it.

The U.S. Dollar Continues Its Rapid Decline

I outlined this interesting development a couple weeks ago in my article ‘The Strange Case Of The Falling Dollar – And What It Means For Gold’, and so far it seems that the downward spiral of the dollar is continuing, now falling at a speed not seen since 2003.

This trend is very strange for a number of reasons – the most prominent being the fact that the dollar index is ignoring policy moves by the Federal Reserve to hike interest rates and reduce its balance sheet. Under normal economic conditions, this should trigger a dollar spike, not a dollar collapse. I predict that the Fed, under “new leadership” through Jerome Powell, will pursue highly aggressive fiscal tightening measures in 2018, including expanded interest rate hikes in the name of tempering the dollar’s decline.

If this takes place, the insane stock market bubble now in full steroid mode will feel a sudden swift kick to the nether regions. However, such a move may still not stop the dollar’s decline. This could be the first stage of the stagflationary crisis I and a few other alternative analysts have been warning about for years.

Growing Accustomed To The Weird

I think if you asked most people if they would have believed the developments of today were possible five to 10 years ago, they would say no. The danger is that when a society becomes too accustomed to instability and conflict, they become complacent in terms of their own security and their own freedoms. They might not even notice until it is too late that both necessities have been stolen away from them.

That great global slap in the face is coming, make no mistake, but the question is, can we prepare enough people for it in time to make a difference in the outcome? Reporting on these issues is often compared to “doom and gloom,” but really, it is an act of optimism. I and many other analysts are operating on the assumption that we can tip the balance by informing the public and creating a shield against calamity. Maybe this is a foolish assumption, maybe not. We shall see in due course.

***

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You can contact Brandon Smith at: brandon@alt-market.com

After 8 long years of ultra-loose monetary policy from the Federal Reserve, it’s no secret that inflation is primed to soar. If your IRA or 401(k) is exposed to this threat, it’s critical to act now! That’s why thousands of Americans are moving their retirement into a Gold IRA. Learn how you can too with a free info kit on gold from Birch Gold Group. It reveals the little-known IRS Tax Law to move your IRA or 401(k) into gold. Click here to get your free Info Kit on Gold.

Senior Intel Corp. Scientist Predicted Bitcoin In Cryptography Manifesto—In 1994

Bitcoin is one of the "sophisticated financial alternatives to the dollar" that was predicted in a 1994 manifesto from a senior Intel Corporation scientist.

China’s Plan to End the Petrodollar

(ANTIMEDIA) — Financial analysts are increasingly pointing out that China has some very grand plans when it comes to petroleum markets, and that if those plans succeed, the U.S. could see the dollar threatened as the top global currency. From CNBC on Tuesday:

“China is looking to make a major move against the dollar’s global dominance, and it may come as early as this year.

“The new strategy is to enlist the energy markets’ help: Beijing may introduce a new way to price oil in coming months — but unlike the contracts based on the U.S. dollar that currently dominate global markets, this benchmark would use China’s own currency.”

While analysts agree that China faces an uphill battle in dethroning the petrodollar — currently used to price two-thirds of the world’s marketed oil — widespread adoption of the “petroyuan” would, as CNBC wrote, “mark a step toward challenging the greenback’s status as the world’s most powerful currency.”

China’s plan is to peg oil to the yuan through crude oil futures contracts — agreements to sell a specific commodity at a specific price and date. The country says its petroyuan, which some are predicting will launch before the end of the year, will be fully convertible into gold on Shanghai and Hong Kong exchanges.

The establishment of the petroyuan will allow countries seeking to limit their dependency on the dollar — as well as circumvent U.S. sanctions — to buy and sell oil through an alternative means. This is no small thing, says Gal Luft, co-director of the Institute for the Analysis of Global Security.

“Game changer it is not — at least not yet,” Luft told CNBC. “But it is another indicator of the beginning of the glacial, and I emphasize the word glacial, decline of the dollar.”

Challenges to the petroyuan’s success are many, including the fact that markets have been trading in dollars for over four decades. Another, says John Driscoll, director of JTD Energy Services in Singapore, is the Chinese government itself.

“My biggest reservations are the role of the Chinese central government, potential state intervention and favoritism toward Chinese companies,” Driscoll told CNBC. “China may be world’s fastest growing and most formidable energy consumer, but its central government plays a dominant role in the energy sector.”

But as the world’s largest importer of crude oil, some analysts say China is in a position to make demands. This is precisely what it will do with Saudi Arabia, predicts Carl Weinberg, chief economist and managing director at High Frequency Economics. He also says this will have a domino effect in global markets.

“I believe that yuan pricing of oil is coming and as soon as the Saudis move to accept it — as the Chinese will compel them to do — then the rest of the oil market will move along with them,” he told CNBC in early October.

Adam Levinson, a hedge fund manager at Graticule Asset Management Asia, appears to agree. He told Bloomberg Tuesday that the launch of the petroyuan will be a “wake up call” for any investors who haven’t been paying attention to China’s plans.

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US Petrodollar Threatened by Chinese-Saudi Oil Deals

(ANTIMEDIA) — Saudi Arabia’s king, Salman bin Abdulaziz Al Saud, recently met with Russian President Vladimir Putin in what amounts to more than just a symbolic blow to the United States. While the two discussed a number of issues, including Syria and Iran, according to CNN it was oil that dominated most of the discourse.

Something geopolitically relevant — though it fails to garner widespread attention in the mainstream media — is the fact that Saudi Arabia and Russia “are engaged in an intense battle over who will be the top supplier to China, a major energy importer with an insatiable appetite for crude,” as CNN explained.

But what would make China side with Saudi Arabia’s oil over that of their longtime strategic ally Russia? Or, to phrase that question differently, what would make China consider Saudi oil at all, given it can always turn to Russia and Iran for its oil needs?

According to Carl Weinberg, chief economist and managing director at High-Frequency Economics, China will “compel” Saudi Arabia to trade oil in Chinese yuan instead of U.S. dollars. Now that China has surpassed the U.S. as the “biggest oil importer on the planet,” these direct attacks on the U.S. dollar will have huge implications for the dollar’s current world reserve status.

“I believe that yuan pricing of oil is coming and as soon as the Saudis move to accept it — as the Chinese will compel them to do — then the rest of the oil market will move along with them,” Weinberg stated, as quoted by CNBC.

Iran is already trading oil with China in return for Chinese yuan, and Qatar has conducted billions of dollars’ worth of transactions in yuan, as well. Just recently, the Times of Israel reported that a Chinese state-owned investment firm has provided a $10 billion credit line to Iranian banks, which will specifically use yuan and euros to bypass U.S.-led sanctions.

The implication is that if a country like Saudi Arabia were also to begin conducting these transactions in yuan, the rest of the world would be days away from following suit.

For example, Venezuela, a country that sits on the world’s largest oil reserves, also recently announced it had abandoned the U.S. dollar in response to American-imposed sanctions. It has now begun publishing its oil prices in yuan, instead.

Weinberg explained further.

“Moving oil trade out of dollars into yuan will take right now between $600 billion and $800 billion worth of transactions out of the dollar… (That) means a stronger demand for things in China, whether it’s securities or whether it’s goods and services. It is a growth plus for China and that’s why they want this to happen.”

Russia is more than likely already on board with these proposals, as China and Russia have been chipping away at the dollar for some time now. Earlier this year, the two nuclear giants signed a 68 billion yuan ($10 billion) investment fund to ease ruble-yuan settlements.

Further, China is set to launch a crude oil futures contract priced in Chinese yuan that will be completely convertible into gold. As reported by the Nikkei Asian Review, analysts have called this move a “game-changer” for the oil industry. Whether or not Saudi Arabia will be on board remains to be seen, but it will definitely be in the cards for the near future as the global tectonic plates begin to shift out of Washington’s favor.

As Anti-Media has previously explained, Saudi Arabia is integral to what is known as the petrodollar system. Saudi Arabia may be a crucial American ally and has relied upon American military support for decades, but if they want to continue exporting as much oil as possible to maintain their status as a regional power, then they may not have any choice but to succumb to China’s wishes. The alternative, of course, is that it will lose out on a very lucrative oil market and watch as Iran and Russia reap all the rewards. The Saudis also just recently learned that should the U.S. snub the Islamic Kingdom, they may be able to rely on Russian military support, instead.

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US Threatens to ‘Cut China Off’ from Dollar if it Does Not Uphold Sanctions Against N. Korea

(RT) The US could impose economic sanctions on China if it does not implement the new sanctions regime against North Korea, the US Treasury Secretary has warned. Steven Mnuchin said the restrictions could involve cutting off Beijing’s access to the US financial system.

“North Korea economic warfare works,” Mnuchin said Tuesday at the Delivering Alpha Conference in New York City. “We sent a message that anybody who wanted to trade with North Korea – we would consider them not trading with us.”

The Treasury Secretary echoed the words of the US envoy to the UN, Nikki Haley, by calling the fresh round of sanctions against Pyongyang “historic.” Mnuchin added “if China doesn’t follow these sanctions, we will put additional sanctions on them and prevent them from accessing the US and international dollar system.”

Washington has, so far, been reluctant to impose economic sanctions on China over concerns of possible retaliatory measures from Beijing and the potentially catastrophic consequences for the global economy.

Washington runs a $350 billion annual trade deficit with Beijing. China also holds $1 trillion in US debt, which amounts to 28 percent of US Treasury bills, notes and bonds held by a foreign government.

US lawmakers, however, seemed to be more inclined to exert pressure on Beijing and other countries striking deals with Pyongyang as they demand a “supercharged” response to North Korea’s nuclear tests, including imposing sanctions on companies from China and any other country doing business in North Korea.

“I believe the response from the United States and our allies should be supercharged,” said Ed Royce, chairman of the House of Representatives Foreign Affairs Committee during a hearing Tuesday.

“We need to use every ounce of leverage… to put maximum pressure on this rogue regime,” he said, adding that “time is running out.” Royce also called on Washington to target major Chinese banks, including the Agricultural Bank of China and the China Merchants Bank for dealing with Pyongyang.

He also said China was apparently reluctant to follow through on the sanctions adopted by the UN Security Council (UNSC) against the North. “It’s been a long, long time of waiting for China to comply with the sanctions that we pass and, frankly, with the sanctions that the United Nations passed,” he said.

The committee chair went on to say the US could give Chinese banks and companies “a choice between doing business with North Korea or the United States.” He added that the US should also “go after banks and companies in other countries that do business with North Korea the same way.”

Committee members also expressed unease over the fact that the sanctions imposed on North Korea have so far been ineffective in preventing Pyongyang from developing its nuclear and missile programs.

“We’ve been played by the Kims for years,” Republican Representative Ted Poe said, referring to North Korean leader Kim Jong-un and his predecessors, as reported by Reuters.

President Donald Trump also downplayed the role of the newly adopted sanctions later Tuesday. ”We think it’s just another very small step, not a big deal. I don’t know if it has any impact,” he told reporters at the start of a meeting with Malaysian Prime Minister Najib Razak.

Trump also said he already discussed the issue with his State Secretary of State Rex Tillerson. He ominously added that “those sanctions are nothing compared to what ultimately will have to happen” without specifying what he meant by that.

The UNSC unanimously approved a new resolution on sanctions against Pyongyang on September 11. Following a series of behind-the-scenes negotiations Sunday, diplomats agreed not to ban oil exports into North Korea. Instead, the ninth set of restrictive sanctions against Pyongyang authorized an annual cap of 2 million barrels of refined petroleum products to North Korea.

It also banned the North’s textile exports – the second-biggest export for the country, which totals $752 million – according to data from the Korea Trade-Investment Promotion Agency. Chinese and Russian negotiators managed to persuade the US delegation not to impose a travel ban or asset freeze on North Korea’s leader Kim Jong-un.

On Tuesday, the North Korean ambassador to Moscow said sanctions will not make his country change its policies. Pyongyang’s nuclear program helps it to deter the “hostile policy of the US,” Kim Yong-jae added.

Venezuela Has Officially Abandoned The Petrodollar – Does This Make War With Venezuela More Likely?

This report was originally published by Michael Snyder at The Economic Collapse

Venezuela is the 11th largest oil producing country in the entire world, and it has just announced that it is going to stop using the petrodollar. Most Americans don’t even know what the petrodollar is, but for those of you that do understand what I am talking about, this should send a chill up your spine. The petrodollar is one of the key pillars of the global financial system, and it allows us to live a far higher standard of living than we actually deserve. The dominance of the petrodollar has been very jealously guarded by our government in the past, and that is why many are now concerned that this move by Venezuela could potentially lead us to war.

I don’t know why this isn’t headline news all over the country, but it should be. One of the few major media outlets that is reporting on this is the Wall Street Journal…

The government of this oil-rich but struggling country, looking for ways to circumvent U.S. sanctions, is telling oil traders that it will no longer receive or send payments in dollars, people familiar with the new policy have told The Wall Street Journal.

Before we go any further, we should discuss what we mean by the “petrodollar” for those that are not familiar with the concept. The following comes from an excellent article by Christopher Doran…

In a nutshell, any country that wants to purchase oil from an oil producing country has to do so in U.S. dollars. This is a long standing agreement within all oil exporting nations, aka OPEC, the Organization of Petroleum Exporting Countries. The UK for example, cannot simply buy oil from Saudi Arabia by exchanging British pounds. Instead, the UK must exchange its pounds for U.S. dollars. The major exception at present is, of course, Iran.

This means that every country in the world that imports oil—which is the vast majority of the world’s nations—has to have immense quantities of dollars in reserve.

As will be explained below, the fact that virtually everyone around the world has to use our currency to buy oil is a massive advantage for us. Venezuela knows this, and so in response to new sanctions being imposed upon them, they are hitting us where it hurts…

Oil traders who export Venezuelan crude or import oil products into the country have begun converting their invoices to euros.

The state oil company Petróleos de Venezuela SA, known as PdVSA, has told its private joint venture partners to open accounts in euros and to convert existing cash holdings into Europe’s main currency, said one project partner.

The new payment policy hasn’t been publicly announced, but Vice President Tareck El Aissami, who has been blacklisted by the U.S., said Friday, “To fight against the economic blockade there will be a basket of currencies to liberate us from the dollar.”

If more nations start to follow suit, it would be absolutely disastrous for the United States.

In other articles, I have detailed why the petrodollar is so incredibly important to our economy and our financial system.  The following is an extended excerpt from one of those previous articles…

So why is the petrodollar so important?

Well, it creates a tremendous amount of demand for the U.S. dollar all over the globe.  Since everyone has needed it to trade with one another, that has created an endless global appetite for the currency.  That has kept the value of the dollar artificially high, and it has enabled us to import trillions of dollars of super cheap products from other countries.  If other nations stopped using the dollar to trade with one another, the value of the dollar would plummet dramatically and we would have to pay much, much more for the trinkets that we buy at the dollar store and Wal-Mart.

In addition, since the U.S. dollar is essentially the de facto global currency, this has also increased demand for our debt.  Major exporting nations such as China and Saudi Arabia end up with giant piles of our dollars.  Instead of just letting them sit there and do nothing, those nations often reinvest their dollars into securities that can rapidly be changed back into dollars if needed.  One of the most popular ways to do this has been to invest those dollars in U.S. Treasuries.  This has driven down interest rates on U.S. debt over the years and has enabled the U.S. government to borrow trillions upon trillions of dollars for next to nothing.

But if the rest of the world starts moving away from the U.S. dollar, all of this could change.

History has shown that when the status of the petrodollar is threatened, the U.S. is swift to take action.

And it is very interesting to note that President Trump will be meeting with Latin American leaders next week, and the main topic for discussion will be “the Venezuela crisis”…

U.S. President Donald Trump has invited three Latin American leaders to dine with him next week in New York as he seeks to address the Venezuela crisis and build bridges with the region after an acrimonious start with neighbor Mexico.

The political and economic turmoil in Venezuela, source of 10 percent of the oil consumed by the United States, will almost certainly top the agenda when he receives the center-right presidents of Peru, Colombia and Brazil at Trump Tower on Monday evening, diplomats said.

Could this latest move by Venezuela be enough to potentially spark a military conflict?

The guys over at Zero Hedge seem to think so…

Having threatened China today with exclusion from SWIFT, we suspect Washington is rapidly running out of any great ally to sustain the petrodollar-driven hegemony (and implicitly its war machine). Cue the calls for a Venezuelan invasion in 3…2..1…!

It would be absolutely no surprise at all if John McCain and Lindsey Graham start appearing on the major news networks calling for war with Venezuela, but hopefully President Trump will not listen to such nonsense.

No matter how important the petrodollar is, there is absolutely no reason to go to war to protect it.

And if war talk does begin, the American people need to make their voices heard very, very loudly. We have been in useless wars before, and we certainly do not need another one.

Allies Worry as Trump Accuses Germany, Japan of Purposely Devaluing Currencies

February 2, 2017   |   James Holbrooks

(ANTIMEDIA) Following recent comments from President Donald Trump suggesting the U.S. is being forced to “sit there like a bunch of dummies” as it’s taken advantage of by the economic policies of China, Japan, and Germany, leaders from those countries responded this week with comments of their own.

On Tuesday, Donald Trump, along with one of his top economic advisors, unleashed what Reuters described as a “barrage of criticism” over what the two men perceive as the three key U.S. trading partners’ deliberate devaluing of their currencies — to the detriment of the American consumer.

“Every other country lives on devaluation,” the president said in a White House meeting with executives from the pharmaceutical industry. “You look at what China’s doing, you look at what Japan has done over the years. They — they play the money market, they play the devaluation market and we sit there like a bunch of dummies.”

As he did with the auto industry, Trump is pressuring pharmaceutical companies to relocate production facilities to the United States. Complaining of red tape, Trump claimed “other countries take advantage of us with their money and their money supply and devaluation.”

Prior to the president’s meeting at the White House, the head of his newly created National Trade Council, Peter Navarro, had told the Financial Times the European Union’s euro was the equivalent of an “implicit Deutshe Mark” that gave Germany an edge over the United States on trade.

Defending her country’s practices while in Stockholm, Sweden, German Chancellor Angela Merkel stated Tuesday:

“We don’t exercise any influence over the European Central Bank, so I can’t and I don’t want to change the situation as it is now. We strive to trade on the global market with competitive products in fair trade with all others.”

Japanese Prime Minister Shinzo Abe didn’t take the jab lying down, either. He, along with the governor of the Bank of Japan (BOJ) and Japan’s chief cabinet security, all denied Trump’s allegations.

On Wednesday, Prime Minister Abe stated before parliament that “Criticism that the BOJ’s policy is trying to devalue the yen is wrong.”

Hours before, BOJ Governor Haruhiko Kuroda said Japan’s monetary policy is designed “solely for the purpose of achieving our price target at the earliest date possible,” and that Japan does not “directly target currency rates in guiding monetary policy.”

Chief Cabinet Secretary Yoshihide Suga stated simply that Trump’s allegations were “completely baseless.”

Such back and forth verbal sparring between the still-forming Trump administration and an increasing number of countries — including U.S. allies — on the issue of international trade has many concerned over the future of global markets.

While the fact that the brash Trump would initiate such bouts with his unpredictable comments should, at this point, surprise no one, the fact that the president is making these specific comments has some analysts thinking there may be real cause for concern.

“Those comments, talking about somebody else’s currency, talking about valuation, almost seem like they’re criticizing the construction of the euro zone which is a whole other issue,” Greg Anderson of BMO Capital Markets in New York, told Reuters. “I’m sure a lot of people have those thoughts. In the gentleman’s agreement, as an official you don’t mention those thoughts.”

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This article (Allies Worry as Trump Accuses Germany, Japan of Purposely Devaluing Currencies) is free and open source. You have permission to republish this article under a Creative Commons license with attribution to James Holbrooks and theAntiMedia.org. Anti-Media Radio airs weeknights at 11 pm Eastern/8 pm Pacific. If you spot a typo, please email the error and name of the article to edits@theantimedia.org.

As Iran Dumps Dollar, Congress Quietly Slips in Bill for ‘Use of Force Against Iran’

On March 21, The Islamic Republic of Iran will cease using the U.S. dollar in all of its financial reporting. The decision to stop using the dollar as a reference has been in the works for some time but was expedited after the Trump administration decided to include Iran as one of the seven countries banned from entering the United States.

Iranian PressTV reported, “Valiollah Seif, the governor of the Central Bank of Iran, was quoted by domestic media as saying that Iran would either replace the US dollar with a new common foreign currency or use a basket of currencies in all official financial and foreign exchange reports.”

Seif reportedly stated the country of Iran needs a much more stable foreign currency, that the dollar is insignificantly found in exchange houses throughout the country, and Iran would be better-suited trading in European Union Euros, Chinese Yen, or in United Arab Emirates Dirham.

Following Trump’s plan, Iran, Iraq, Libya, Somalia, Sudan, Syria, and Yemen have all been banned from entering the US for a period of at least 90 days. The decision has angered globalists who see borders as just one more man-made obstacle to freedom to travel the world, as well as anyone with family or conducting business in those countries.

Even with all the angst and outrage, if Iran goes ahead with its plan to replace the dollar in its monetary system, the country’s theocratic leaders run the risk of falling victim to U.S. vengeance.

In fact, the United States is already preparing for potential conflict with Iran, the US has introduced H.J.Res.10 – Authorization of Use of Force Against Iran Resolution. 

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This resolution was quietly introduced last month with absolutely no media attention in spite of the fact that it “authorizes the President to use the U.S. Armed forces as necessary in order to prevent Iran from obtaining nuclear weapons.”

Other countries and their leaders have attempted to do the same thing as Iran, but it backfired in their faces and they were subsequently invaded by the US. TFTP’s Jay Syrmopoulos reported in January, NATO’s involvement in Libya, “was not for the protection of the people, but instead it was to thwart Gaddafi’s attempt to create a gold-backed African currency to compete with the Western central banking monopoly.”

Likewise, the involvement of the USA in Libya’s affairs, “was also driven by a desire to gain access to a greater share of Libyan oil production, and to undermine a long term plan by Gaddafi to supplant France as the dominant power in the Francophone Africa region.”

Just as in Libya, Iraq’s Saddam Hussein waded into the currency controversy when he announced Iraq would no longer sell Iraqi oil in dollars. According to The New American, “Iraqi despot Saddam Hussein, once armed by the U.S. government to make war on Iran, was threatening to start selling oil in currencies other than the dollar just prior to the Bush administration’s ‘regime change’ (George W. Bush) mission.” The year 2000 Time article stated Saddam’s purpose for making the change was for Iraq to no longer deal “in the currency of the enemy”.

In 2006, just prior to Syria’s Bashar Al-Assad being called by U.S. officials as a genocidal war criminal who needs to step down, the Chicago Tribune reported “Syria has switched the primary hard currency it uses for foreign goods and services from the U.S. dollar to the euro in a bid to make it less vulnerable to pressure from Washington. The decree signed by Syrian Prime Minister Naji al-Otari on Monday ordered government bodies and public-sector companies to use euros to pay for foreign transactions.” The announcement may seem insignificant, but it may have been the last straw in an already chilly relationship with Syria. After all, Syria had made business arrangements with nearly all of America’s foes and major competitors; Cuba, Venezuela, Argentina, Iran, Russia, and China.

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That plan backfired quickly after the U.S. targeted Assad for removal, going so far as to provide arms and cash to Sunni rebels in a proxy war against Syria’s Assad.

Donald Trump has said he may pursue a more diplomatic solution. However, that is yet to be seen. For the moment, he’s simply banning all immigration from Syria amid talk of establishing “safe zones” for Syrians to be able to remain in their homeland. It remains to be seen if the terms “safe zone” are equivalent to what the previous Bush administrations called “no-fly zones,” a tactical move which led to air superiority over Iraq and Libya, later leading to those countries’ downfalls.

As The Free Thought Project has reported on numerous occasions, Muammar Gaddafi, Saddam Hussein, and Bashar Al-Assad all attempted to move away from the dollar and replace it with another currency. All three saw their countries destroyed. Only Assad remains in power for the moment, protected only by Russia, and Syrian ally Iran. But after Russia withdraws, one could only expect the conflict to resume, with the expressed intents and purposes of overthrowing Syria and allowing for Western companies to enter and exploit Syria’s natural resources, and establish a more dollar-friendly national currency.

Make no mistake, the US has no problem invading Iran and will do so on a whim — all the while, maintain support of the citizens — in the name of spreading freedom. 

RBC Explains Why The Market Is Dumping, Adds "This Is Not The Big Short"... Yet

Having yesterday revealed what he believes is the single biggest risk to the buyside in general, and hedge funds in particular, in today"s market (the answer, for those who missed it, is the strong dollar suddenly turning weak, as it is continues to do today), here is the follow-up note from RBC"s Charlie McElliggott, explaining where we stand now.

* * *

Where We Stand

As laid-out in yesterday’s Big Picture note “THE SINGLE LARGEST MACRO INPUT RISK TO THE BUYSIDE,” as asymmetrically ‘long US Dollar’ positioning ‘tips over,’ so too should we expect a drawdown on consensual macro and thematic-equity trades.

Tactical cases are everywhere for an extension / acceleration of mean-reversion trades, largely based-upon positioning excess and reversing technicals.

As the case has been built over the past month and a half in the “RBC Big Picture,” reversal strategies are a regular feature in the January landscape—especially after such clear trend developed in the back half of ’16 with regards to ‘reflation—those being:’

• Long USD, stocks, small cap / domestically levered, value factor, cyclicals beta, inflation, high tax rate, HY / high beta credit (CCC over BB), CNH, curve steepeners, copper


• Short USTs / ED$ / duration, euro, yen, EMFX / EM eq / EM bonds, growth, defensives, low beta / low vol, VIX, gold

As some of the reversion was ‘pre-traded’ in the back-half of Dec, it made sense to us that this January wouldn’t be an outright repeat of the violent VaR shocks experienced in a number of recent Januarys as ‘momentum’ reversed hard and everything from ‘bonds vs stocks’ to equity factors turned upside-down.

That said…the driver for the acceleration of ‘reversal trades’ yesterday into the overnight was the Barnum-esque circus of a press conference yesterday from President-elect Trump. 

Expectations were built for a more “Presidential” tone, with more granular ‘policy talk’--especially as it pertained to the nuances of the tax plan, fiscal stimulus, and the Obamacare unwind.  Needless to say, we got a “goat rodeo” instead, and it spooked a lot of the TACTICALLY long reflation crowd.

Reflationary growth expectations have clearly been a significant driver of the USD ‘bull case’—but the tax component (overseas profits $ repatriation / border-adjusted tax (BAT) system theoretically driving ~15% currency appreciation) has been a massive-input as well.  As stated yesterday, any resetting of expectations there (“watering down” of the BAT) will see a lower Dollar concurrently.

Sure, spec net Dollar positioning is at 1 year highs.  But even more than ‘just’ the cumulative FX positioning itself is the observation that the Dollar is the “grand unifying asset” of the “domestic growth / reflation” trade theme.  So in that sense, “long USD” is a factor embedded in nearly every one of the aforementioned popular macro longs and shorts.

The idea I have to again stress here is this: nearly all of the gains from these “reflation” trades were “last year’s business.”  Point being, YTD, most of these trades are moving from “not great” to now approaching “REAL negative PNL.”  As risk-managers are highly-sensitive to such start of year drawdowns and we near the ever-present “tight stops,” you have to BOLO for capitulatory flows (perhaps as best expressed by yesterday’s mega-impressive $20B 10 year UST reopening auction which saw a blistering 70% indirect bid, which caused a very significant squeeze in USTs across boards).

It should be noted that thus far, the ‘least’ relatively effected trades have been the thematic and factor trades within the equities-complex.  Reasons for this are ‘three-fold’:

1. The very tactical nature of discretionary macro (making generalizations here but…) is concentrated on the FX, rates and commods side of the ledger as opposed to equities per se.  Thus, we’re seeing much of the reversal ‘profit-taking’ or ‘unwind’ concentrated in those ‘pure macro’ assets. 


2. Equities flows are still being largely dictated by the slow-moving rotation of ‘real money’ as they reallocate portfolios after living under the old “slow growth / slow inflation” narrative.  Now we currently see said ‘sticky long-term money’ reallocation into cyclical sectors like financials, industrials and energy, as again evidenced by yesterday’s NYSE MOC with the largest notional sector buys being #1 Financials and #2 Industrials… by a wide margin (“pros on the close”), and has been that way a majority of days in ’17 YTD. 


3. From a more tactical perspective, with the USD at the center of this unwind, the Dollar weakness has driven WTI higher, which in turn has kept the Energy sector and more importantly inflation-expectations “BID” (per the Quant-Insight macro factor PCA model, higher “inflation-expectations” continue to show as the largest positive price input driving SPX).

The US Dollar index (DXY) has now cracked lower through its 50DMA for the first time since the immediate period post- Election.  The 100 ‘psychological level’ also has some technical significance and is very much ‘in play’ now.  From there, we would have a looooong way to go down to the 100DMA (98.94) and the 200DMA (97.03). 

What can arrest this unwind from ‘metastasizing’ further?  The thing that drove the “true” basis for the “reflation trade” long before Trump won in the first place—the continued-ascension of cold hard global data.  As listed yesterday, the collective trajectory higher of the data has been nothing short of breath-taking, from global PMIs to Chinese inflation to US average hourly wages and ‘animal spirits’ confidence metrics. 

The data still makes a very real case for higher rates in the longer-term, and with it, more US hikes / quicker exits from say the ECB than the market is currently anticipating. Obviously this would be USD- positive.

Tactically-speaking in the ‘now,’ the Dollar reversal lower in this case is helping reignite the commodities bid as well, and with it, inflation expectations remain very strong (see Breakevens ‘strong like bull’).

And of course too, flow will be a massive driver of this: still being told that some in both the ‘overseas real money’ crowd and leveraged fund community would look to fade the rates move at say ~ 2.20 level.  In conjunction with the US varietal of real money rotating “growthier” in equities as well (‘turning the Titanic’ slowly), stocks can remain bid over the coming months (not for nothing, but I’ve had discussions with 3 large distressed credit funds in recent weeks who are concentrating much of the ‘going-forward’ within the equities universe—point being stocks continue to have that ‘best place to be’ perception). 

It still feels like there is another meaningful stocks rally to come, especially after the “positioning excess” is cleared through this “mean-reversion wobble” period.

* * *

Only then can we begin talking about “the big short” around say a “stagflation” or “real rates” financial-tightening trade.

U.S. REAL RATES AND U.S. DOLLAR INDEX SINCE ELECTION:

We Look at the Gold Trade From Election to December Rate Hike (Video)

By EconMatters

We examine Gold and the US Dollar Index from election into the December Fed Rate Hike in this video. If the December Rate Hike is a Go, then Gold is a Sell into said event. Pay attention to the pulse of the consumer, and how America and the World seem to react to the election results and aftermath for your clues on price range and degree of the move in Gold after the election.

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Follow The Carry Trade (Video)

By EconMatters

We look at the funding currencies for the risk on versus risk off mode of evaluating financial market capital flows from an investing standpoint. You are swimming upstream in a Carry Unwinding Mode like a Salmon. Check out the main components of the US Dollar Index and compare their interest rates versus the United States. This serves as the fundamental basis for the Carry Trade Structure, and we have seen major deleveraging of these Carry Trades before the Presidential Election this upcoming Tuesday. Look for these trends to reverse after the election event is over with next week.

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