Joe Doakes from Como Park emails:
The US keeps troops in the Middle East to prop up the governments of Saudi Arabia and United Arab Emirates so we can buy their oil at favorable prices. All the sudden, Saudi Arabia and the UAE won’t take our calls?
Might be time to think about redeploying US troops elsewhere. Those Yemeni Houthi rebels we’ve been keeping off your backs? Have fun with that.
Joe Doakes
I don’t know. I take that as more of a “this is how bad things have gotten on the foreign policy front since Joe Biden came along to save our worldwide…”
Yea, I’ve seen some reports that said the reason for the snub was because the U.S. stopped helping them and the pro Iran stance that Pedo Joe has revived.
The Saudis are no longer relying on the US for protection. They’ve turned to China.
https://www.cnn.com/2021/12/23/politics/saudi-ballistic-missiles-china/
Heckova job, Brandon!
Not my blog, but wasn’t this presented yesterday under a different subject?
I read that Lavrov was halfway to Beijing last night when his plane turned around abruptly and returned to Moscow. Unclear if Putin called him back or Chinese side got cold feet. Is China turning on Putin? Belarus is all Putin has left. Perhaps China wants the status boost from being the one who negotiates the peace, like Clinton got from Northern Ireland. It would be a terrific soft-power move for them.
jdm, yes, it happens occasionally.
I send Mitch emails when I feel like it, he reads them when he gets to them, he uses material he likes and deletes the rest. Sometimes there are overlaps.
Fine with me. The point bears repeating. Saudis want US troops on the ground to protect the King and his 15,000 princes so they can continue to live a lavish lifestyle. We prop up their government so we can buy thier oil cheap.
But suddenly American consumers are looking at more then $50 to fill the tank and Saudis won’t take Brandon’s calls? Hang on a minute, something is out of whack here. How about we pull those troops out and all you princes can pick up your own AKs? Patrol the border driving your Rolls? Take a chance on getting your pure white robes dirty?
It’s not a problem, JD, just an observation. May I repeat my comment from yesterday? Delete it if not.
*****
Well, this is true, JD, but maybe then snuggling up to the Iranians wan’t so smart. I mean, offering via the Russians to finance the Iranian nuclear weapons program, sort of indirectly, kinda sorta, by letting them sell oil on the open market (aka to us) maybe has consequences. Last I heard, the only group the Saudis hate more than Houthis are Iranians – who coincidentally aid the Houthis. Militarily.
Also, the reason that we’re friends with the Saudis – shit, the reason the Israelis are friends with the Saudis – is Trump. But that friendship kinda faded because there’s a new sheriff in town and Trump’s policies delenda est.
I’m sure that Joey Softserve and his team of foreign policy experts (experts, I tell you) are playing 4D chess and soon the pieces are going start to fall into place. Mostly likely on the floor, but well, they meant to do that.
PS Trump was also the reason we got along better with India, but India now is aligning itself with Russia. But if Trump cared about the 2nd largest country population-wise in the world, then Joey Softserve doesn’t.
Odd how personal and (domestic) political animosities begin to take center stage when Democrats are in charge.
three is a charm:
I posted this threadjack on the other thread but it is very much on topic here, thank you JD!
In the meantime, more winning by brilliant Diplomat™ and adults in the WH™ (emphasis mine):
Saudi and Chinese officials are in talks to price some of the Gulf nation’s oil sales in yuan rather than dollars or euros, The Wall Street Journal reported Tuesday, citing people familiar with the matter. The two nations have intermittently discussed the matter for six years, but talks have reportedly stepped up in 2022, with Riyadh disgruntled over the United States’ nuclear negotiations with Iran and its lack of backing for Saudi Arabia’s military operation in neighboring Yemen. Nearly 80 percent of global oil sales are priced in dollars, and since the mid-1970s the Saudis have exclusively used the dollar for oil trading as part of a security agreement
Petro-dollar to petro-yuan? Guess what that will do the value of the dollar? Bueller? Bueller?
jpa, I commented on this yesterday. If this deal goes through, and the Yuan is accepted by the worlds largest oil producers, it will be a smackdown the US will never recover from. It’s the first BIG step to establishing the Yuan as the world’s currency benchmark.
IMO, this is as much a refutation of the clown world the US has become as the fecklessness and incompetence of the current administration. The world is realizing we are not serious people any longer.
It is worth mentioning that it is possible to have a multi-polar currency world. It’s been a while since the last one, but it can exist. Found this From a historical point of view, the dominance of the Dollar over the last 75 years has been an anomaly rather than a rule. Multipolar monetary arrangements have been the standard in the Modern age: silver, gold and bimetallic blocs
Its incredible that SiTD analyst Swiftee still does not understand how deficits buttress the role of the dollar in international trade and surplus limits the role of the yuan. If you want trade surplus, whose assets will you acquire? Only those of trade deficit countries.
you are funny, jdm…
But E, if you want to buy my wheat and oil and offer to pay in Ningis but I’m only willing to accept Altarian Dollars, you sit hungry in the dark.
What happens to the US when nobody wants BrandonBucks?
Shorter rAT: “We need to dig the hole deeeeper to save dEmoCRAcy11!!!”
LMAO…you fucking moron.
JD, you silly man. The answer, of course, is to trade Ningis for Altarian Dollars at as steep a deficit as possible.
I cannot believe you cannot see this.
Speaking of money supplies, the US money supply vs other major economies for comparison. Here’s what I found for M2 from the IMF website.
US – 20.36 trillion (USD)
EU – 17.09 trillion (USD)
China – 36.19 trillion (USD)
Look like the Euro is also beyond repair and the Yuan is beyond, beyond repair. The US Dollar simply has no competition.
Schwoops! Left out a key component to smart economic policy…better fix it before rAT delivers another massive smekdown;
Once you trade your worthless Ningis for Altarian Dollars at as steep a deficit as possible, you then purchase the wheat and oil for the highest price possible. Then you are good to go.
Deficits, JD…it’s all about deficits.
China manipulates the value of its currency to achieve a trade surplus. Don’t know if that makes for a good “reserve currency.”
^ The basic point is you can print as much money as you like as long as your peers are doing the same.
The USD’s demise has been predicted ever since the mid-1980’s. So far, so wrong. The last thing that China wants is to displace the USD and take on the problems of being the worlds reserve currency, and the potential strengthening that would entail. Japan backed away from this in the late 1980’s when pundits were saying the same thing about the JPY. The EUR could grasp this mantle, but again, they don’t want the potential strengthening risk either. Keep in mind that there is a risk that *analysts* and reporters get carried away about reserve shifts. If the USD rallies, the reserves tend to shift to more USD holdings (they gain in value) and vice-versa. But, to be fair, you get clickbait hits and many banks pump out ‘the USD is doomed as a reserve currency…’ reports all the time, someday it may happen. But for now, the USD is liquid and it works.
MP, riddle me this:
How does the Fed print trillions of BrandonBucks to finance the D3mpanicwithout causing a massive disruption of the global currency market?
They can raise interest rates, or just ignore the inflationary pressure, but then prices would go sky hig…oh, wait. Never mind.
The displacement of the USD has been a topic that has been discussed time and again over the years. Let’s not forget that the USD accounts for around 80% of global trade. Also, when commentators talk about the weakness of the USD in relation to US debt and QE, they always forget that FX is a relative game. For the dollar to ‘weaken’, it would have to do so relative to another currency. So which would investors place their bets on?
The EUR is the next largest global currency — but investors think: no thanks.
Sterling? Pass
Yuan? Worse than monopoly money…
US dollar dominance will continue for many, many years yet.
They can raise interest rates, or just ignore the inflationary pressure
Very few people are talking about this. This is both metaphorically and literally the horns of the inflation dilemma. Volcker eventually raised interest rates to some 20% to defeat an inflation rate some 15%. Markets are swooning about yesterday’s increase of 0.25% with possibly six more increases to, say, 7%. The present inflation is 10% and going higher.
You want an explanation of why the establishment wants WWIII? Or the next Kung flu variant (just in time for the supposed oh-so catastrophic election this fall).
Squirrel!
So yesterday Biden said that Putin was not a war criminal, than corrected himself and said that Putin was a war criminal.
Nothing like a steady hand at the till to calm investors!
Since we left the gold standard, the dollar is no longer ‘money,’ it’s a money myth. Its value is not intrinsic, it is imaginary and relies on collective suspension of disbelief. The dollar is the living example of Bad Money Drives Out Good. That’s why people hoard silver coins – they have an actual value as precious metal aside from the face value of the coin.
Politicians tell us the greatest strength of the dollar is that it’s fully backed by the promises of the politicians currently running the country.
Consumers realize the greatest weakness of the dollar is that it’s only backed by the promises of the politicians currently running the country.
True, the US is inflating its money supply but so is everybody else and therefore, the relative value remains the same. It’s a race to the top. And there’s no limit because we don’t even print bills anymore, we just deposit more ones-and-zeros in bank accounts. E and his kind are sure it’ll all work out fine, same as every other society in history that counterfeited and inflated its money supply.
Eventually, everyone in the world will be a gazillionaire and will also be starving because the money will be worthless to buy actual things made by actual people who are no longer willing to accept an illusory store of value but instead demand tangible things having actual value. At which point the politicians running their governments will kill them to take the valuable things for themselves.
Heckova job, Brandon.
“They can raise interest rates, or just ignore the inflationary pressure”
I wonder what bankers of the 1920s would think if they looked into their Crystal Balls and saw the world of finance fret over 0.25% raise in interest rates.
Paul Volcker’s harsh medicine restored the Fed’s “credibility” as the new freely floating FX regime was being put in place. His and President Carter’s timing was brilliant and perhaps fortuitous. The USD was able to maintain its standing as top reserve dog.
Washington is “very aggressive in defending its currency, it tends to bomb anybody who tries to ignore the dollar,” (Russia Times host) Keiser said, adding that if Russia and China pull off the alliance then the greenback will start crumbling.
rAT evidently has a gig with Russia Times, plying his stupidity for the other side!
Bombs Away!!!!
LMAO!!!
Eventually, everyone in the world will be a gazillionaire and will also be starving because the money will be worthless to buy actual things made by actual people who are no longer willing to accept an illusory store of value but instead demand tangible things having actual value.
JD, surely you do not suggest that Atlas will shrug, no?
Waiting in *moderation purgatory*.
The solution — borrow less or pay the “market” interest rate for this borrowing. Or consume less and rapidly bring down the trade deficits. But consuming less would mean a reduction in the “standard of living” so politically unacceptable. And paying the “market” interest rate would be a crushing burden given the mountain of debt on which the economy rests. So what then ? Do more QE, weaken the dollar further, “tolerate” higher inflation and inflate-away at least a part of that mountain of debt. But that does not change the underlying deeply-entrenched habits of excessive consumption and over dependence on “cheap” consumer goods from overseas and a deep-rooted unwillingness to pay taxes that would support this level of goverment spending and entitlements. Well then, do something to ensure that the “reserve currency” status is not irrevocably damaged further.
“instead demand tangible things having actual value”
People often forget why precious metals have value. It’s certainly not because they’re easy to coin, or to use as currency. Every time someone handles a gold or silver coin, it loses some of it’s mass.
They are valuable because they are beautiful to look at, people use them to adorn themselves and to project wealth and power. Their rarity sets the price.
The intrinsic value of Brandon Bucks is measured in BTU’s.
The solution — borrow less or pay the “market” interest rate for this borrowing. Or consume less and rapidly bring down the trade deficits.
WTF? rAT, you *just* fucking said our power relies on our ability to pile on debt and deficits. Now, it’s our Achilles heel.
Fess up, nitwit; how many gin and tonics have you had today?
This is how we *know* rAT is lying about his fabulous Lake Front Estate(tm). If that idiot lived anywhere near a body of water deeper than the length of his nose, he’d have drunkenly fallen into it and drowned by now.
^ It’s a concise summary of the present situation.
The question is which currency is trusted enough and used enough to challenge the USD as the world’s reserve currency? The EUR is risky because the chance of breakup is non zero. Gold?! A retrograde step. And who trusts Xi Jinping?
It’s a concise summary of the present situation.
Oooh…so that first blathering was drunk rAT, but now it’s sober rAT.
LMAO…keep going, nitwit.
^ With Swiftee and other gold bugs, the usual contention is that inflation is any expansion of the money supply, regardless of what happens to prices.
^ (Hic)
😂
To the direct topic of oil exploration, one possibility is that it’s not yet about the dollar at all, but rather these countries simply saying, in effect, “don’t ask us to bail you out by cutting our profits when you’re doing everything you can to disrupt the markets in your own country. Fix your own d**ned problems first.”
But to the question of reserve currencies, it strikes me that you’d have to be insane to hold your financial transactions hostage to Beijing. The dollar and the euro make a lot of sense, but anybody watching what the Uighurs and Hong King are going through ought to say “no thanks” to giving Chairman Pooh the reins that way.
anybody watching what the Uighurs and Hong King are going through ought to say “no thanks”
Yeah, like the Rothchild’s (financiers of every great conflict since Waterloo) give a flying fuck about Uighurs.
^ What are you going to hold, CNY, EUR, GBP, JPY? CNY is a closed account, not attractive. The world needs to stop day dreaming, they’re all stuck with the USD. Get over it, nothing see here, move on.
it strikes me that you’d have to be insane to hold your financial transactions hostage to Beijing
Or move some – well, actually most – of your manufacturing to (be held hostage by) Peking. But we did that. V0V
Geez, E, we shouldn’t need an elementary lesson on monetary theory here, but if that’s what it takes…..
Counterfeiting is when I make fake money. It’s bad because my fake money increases the amount of money in circulation. More dollars chasing the same goods: rising prices.
Debasement is when the government fakes its own money. It’s also bad because the new fake money increases the amount of money in circulation. Same result.
Money that’s good for something other than its stated face value is Good Money. A 90% silver quarter can be melted down and used to make connections on a computer motherboard. A 0% silver quarter can’t even make a phone call. That’s Bad Money.
If I have two quarters in my pocket – one Silver and one Not – I’ll spend the Not and keep the Silver. The effect on quarters in circulation is: Bad Money drives out Good Money. Bad Money is given away while it’s still worth something. Good Money gets hoarded because it’ll always be worth something.
Lesko Brandon is doing his damndest to make American dollars into Bad Money. When that happens, America will be well and truly . . .
That’s a Bad Thing, okay?
When that happens, America will be well and truly . . .
That’s a Bad Thing, okay?
You write that as if you think they want to avoid it. I think that’s their plan, JD. The Curley Effect writ large.
Silver is $25.22 today.
Since 2000, it has increased +366.17%
I’ll be holding that. It’s purdy, too.
That’s a great point, jdm. The *only* thing the Rothchild’s, Goldman Sachs & the rest of the Global Money Men care about Uighurs is that they keep pumping out Nike’s.
Here’s a black pill for rAT and Bubba:
Per S&P Global
https://www.spglobal.com/marketintelligence/en/news-insights/research/the-worlds-100-largest-banks-2021
“In a year marked by the COVID-19 pandemic, the largest Chinese financial institutions maintained their positions as the world’s biggest banks by assets, S&P Global Market Intelligence’s annual global bank ranking shows.
China’s “Big Four” — Industrial & Commercial Bank of China Ltd., China Construction Bank Corp., Agricultural Bank of China Ltd. and Bank of China Ltd. — all held their top spots in 2021 as the four largest in the globe. Together, they reported a combined asset value of $17.321 trillion, up 16.88% from the 2020 ranking.”
#SadTrombone
China has been buying gold for at least the last 20 years, both physical and in the ground. Many gold (and mineral) mines around the world, are owned by Chinese companies, including Polymet. If they have the hard assets to back up their currency, like the U.S. used to do, they will have no trouble being the reserve currency and I doubt that they would consider it a problem. Just one more step toward their goal of global dominance, under Communist policies.
Nah, BB. No worries. rAT says so.
Imagine that you have your retirement savings. This is your nut, if it loses value you have to go back to work, maybe when your health and ability to earn is not so good.
You wanna invest that in China and Russia? Or in the US?
It is not a question of the US good and Russia and China bad, its a matter of which is better.
If you want to put your retirement savings into Russian and Chinese or even Swiss securities, you are free to do so. But I bet that you won’t.
MP, the Yuan is backed by the full faith and credit of the CCP.
The dollar is backed by the full faith and credit of the US government.
Let us compare the value of those warranties.
Last year, China:
-completed its own space station
-sent a mission to mars
-built 23 new electric power plants, one of which runs on biofuel
-completed a 2 mile long runway on an island it constructed in the South China sea
-completed a new bridge to Hong Kong
-sent it’s first domestically produced aircraft carrier to sea trials
During that time, someone wiped Biden’s butt, Kameltoe Harris correctly observed Russia is a country, larger than Ukraine and the US Navy commissioned it’s first female Admiral, who is actually a man in a dress.
–
The Yuans only weakness, and it’s a big one, is it’s controlled ny a government that is founded on the principle that there is no such thing as private property.
Now, NATO countries have also started to agree, and have seized bank accounts, homes, ships and other property from citizens of their own countries as well as others, so that obstacle is being overcome.
I’m hedging my retirement on solid silver and gold currency, and my faith in my ability to secure it, and defend it with my life if necessary.
At present, the aggregate portfolio of reserve currencies for 149 nations is: USD (61%), EUR (20%), YEN (6), GBP (5%), RMB (2%), and other (6%). These percentages have been fairly stable over time. The reason why the first four dominate is simply because of the size/quality of the asset markets, rule of law, full convertibility, aggregate demand (affluence), and the willingness to tolerate current account deficits (definitely the US).
The EUR could easily become as dominant as the USD but they need a political union for that. Even so, most currencies are anchored to the USD and Europe and the US (and UK and Japan) will typically make coordinated choices when it comes to global crises like the present. So, it is safe to say we are going to continue with the present system in the foreseeable future.
There may evolve two currency blocs — one based on the currencies and financial strength and capital markets of the OECD countries, with the USD as its foundational currency and an increasingly internationalized EUR, and another backed by authoritarian regimes centered on the renminbi and/or other commodity-backed means of exchange. The dollar is really the reserve currency of the advanced democracies, which produce about 60 percent of the world’s nominal GDP. How the dollar gets used within this group of countries says a lot about how it gets used by other countries outside the advanced economy nexus.
Democracy and authoritarian are going to increasingly define two broad economic zones in the global economy because as the Ukraine crisis is emphasizing there is a big differential in risk between advanced democratic regimes and authoritarian regimes. The advanced democracies are cohesion, coordinating, and cooperative in a way the authoritarian universe of countries will never be.
Democratic is international and cooperative. Authoritarian is national and nationalistic. They will price differently.
The ultimate exit value of an instrument is its purchasing power in the advanced democratic world.