Can We Stop All this Chatter? Oil states say NO talks on replacing dollar

[bobbyw24]

Oil states say no talks on replacing dollar
Tue Oct 6, 2009 7:40am EDT

By Simon Rabinotvitch and Wayne Cole

ISTANBUL/SYDNEY (Reuters) - Big oil producing nations denied a British newspaper report on Tuesday that Gulf Arab states were in secret talks with Russia, China, Japan and France to replace the U.S. dollar with a basket of currencies in trading oil.

The dollar eased in response to the report, which was written by The Independent's Middle East correspondent Robert Fisk and cited unidentified sources in Gulf Arab states and Chinese banking sources in Hong Kong.

It said the proposal was for trade in crude oil to move over nine years to a basket of currencies including the Japanese yen, the Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, which includes Saudi Arabia and Kuwait.

The report comes amid a wider debate on the role of the dollar as the world's reserve currency, which has come under question. For most of this decade, the United States has struggled to maintain the dollar's value.

But top officials of Saudia Arabia and Russia, speaking on the sidelines of International Monetary Fund meetings in Istanbul, denied there were such talks. The two countries are the world's largest and second-largest oil exporters.

Asked by reporters about the newspaper story, Saudi Arabia's central bank chief Muhammad al-Jasser said: "Absolutely incorrect." He repeated thesame response when asked whether Saudi Arabia was in such talks.

http://www.reuters.com/article/wtUSInvestingNews/idUSTRE59507620091006

[tmosley]

They're lying, dummy.

[Cowlesy]

As much military support and aid we provide them, of course they aren't going to reveal they're scheming to decrease the importance of the USD.

[bobbyw24]

They're lying, dummy.

Just presenting both sides, my friend.

[Cowlesy]

They're lying, dummy.

no need to be a meanie

[wildfirepower]

Oct 6, UN calls for new reserve currency

The United Nations called on Tuesday for a new global reserve currency to end dollar supremacy which has allowed the United States the "privilege" of building a huge trade deficit.

"Important progress in managing imbalances can be made by reducing the reserve currency country?s 'privilege' to run external deficits in order to provide international liquidity," UN undersecretary-general for economic and social affairs, Sha Zukang, said.

Speaking at the annual meetings of the International Monetary Fund and World Bank in Istanbul, he said: "It is timely to emphasise that such a system also creates a more equitable method of sharing the seigniorage derived from providing global liquidity."

He said: "Greater use of a truly global reserve currency, such as the IMF?s special drawing rights (SDRs), enables the seigniorage gained to be deployed for development purposes," he said.
The SDRs are the asset used in IMF transactions and are based on a basket of four currencies -- the dollar, euro, yen and pound -- which is calculated daily.

China had called in March for a new dominant world reserve currency instead of the dollar, in a system within the framework of the Washington-based IMF.

http://www.breitbart.com/article.php?id=CNG.e272eaa74dccc30f21c6ff7638b0f37 b.461&show_article=1

[tmosley]

no need to be a meanie

:p

[specsaregood]

The price action in gold and silver belie their denials.

[ScoutsHonor]

no need to be a meanie

Lol...!

[lester1/2jr]

The price action in gold and silver belie their denials.


tht price action was related to the reports though

[specsaregood]

tht price action was related to the reports though

Except both started going up before those reports came out. And since they "denial" they have continued upward.

[paulitics]

Right now, I'm more concerned with traitors in own government devaluing the dollar, then Russia. Those guys and China will drop the currency at the opportune time, AFTER the IMF gives the nod.

Our government can solve this problem by favoring a strong dollar policy, but that isn't what they want. This is just pre-emptive propaganda so that people blame certain countries when they pull the rug out from under us.

[tmosley]

Understand that the devaluing of the dollar has already taken place, over the last 30+ years. It's the foreign nations that have shielded us from those decisions. If they drop that shield, all of the inflation will flood back in. Once that happens, there won't be any more spending without an immediate effect on inflation. The buffer will be gone, and worse, everything in the buffer will flood back in. Imagine the money in circulation supply increasing twenty or a hundredfold overnight. That is what will happen if this goes through.

[Zippyjuan]

Oct 6, UN calls for new reserve currency

The United Nations called on Tuesday for a new global reserve currency to end dollar supremacy which has allowed the United States the "privilege" of building a huge trade deficit.

"Important progress in managing imbalances can be made by reducing the reserve currency country?s 'privilege' to run external deficits in order to provide international liquidity," UN undersecretary-general for economic and social affairs, Sha Zukang, said.

Speaking at the annual meetings of the International Monetary Fund and World Bank in Istanbul, he said: "It is timely to emphasise that such a system also creates a more equitable method of sharing the seigniorage derived from providing global liquidity."

He said: "Greater use of a truly global reserve currency, such as the IMF?s special drawing rights (SDRs), enables the seigniorage gained to be deployed for development purposes," he said.
The SDRs are the asset used in IMF transactions and are based on a basket of four currencies -- the dollar, euro, yen and pound -- which is calculated daily.

China had called in March for a new dominant world reserve currency instead of the dollar, in a system within the framework of the Washington-based IMF.

http://www.breitbart.com/article.php?id=CNG.e272eaa74dccc30f21c6ff7638b0f37 b.461&show_article=1

The "privelege" of a trade deficit has helped other economies to grow. UN members have been helped by that deficit. SDR' s (which include the US dollar as one of the base currencies) would have to massively expand to be able to replace the US dollar as a reserve currency (there are about $300 billion in the entire world while the global economy is trillions of dollars in trade).

A weaker dollar would in the short term lead to higher inflation here but would help us cut back on imports while increasing our exports in the long run by making our imports more expensive and exports cheaper for other countries to buy.


Imagine the money in circulation supply increasing twenty or a hundredfold overnight. That is what will happen if this goes through.

Curious how this would increase the money in circulation by twenty to a hundred fold. A change in the global demand for dollars does not necessarily mean that the domestic supply of dollars changes.

[bobbyw24]

Why Would Anyone Want To Hold Dollars?


Surprise, Surprise, Surprise, Not: The oil hype story as noted in Ridiculous Hype Over Secret Oil Meetings has blown sky high already, just hours after I wrote the above.

Russia Denies Talks

Please consider Russia: hasn't discussed changing dlr role in oil.
Russia has not discussed changing the dollar's role in the global trade of oil, deputy Russian finance minister Dmitry Pankin said on Tuesday. "We did not discuss this at all," he told reporters. Pankin was asked by reporters about a story in Britain's The Independent newspaper, which quoted unidentified sources as saying Gulf Arab states were in secret talks with Russia, China, Japan and France to replace the U.S. dollar with a basket of currencies in the trading of oil.
Oil States Deny Talks

Inquiring minds are reading Oil States Say No Talks on Replacing Dollar.
Big oil producing nations denied on Tuesday a British newspaper report that Gulf Arab states were in secret talks with Russia, China, Japan and France to replace the U.S. dollar with a basket of currencies in trading oil.

It said the proposal was for trade in crude oil to move over nine years to a basket of currencies including the Japanese yen, the Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, which includes Saudi Arabia and Kuwait.

But top officials of Saudia Arabia and Russia, speaking on the sidelines of International Monetary Fund meetings in Istanbul, denied there were such talks.

Asked by reporters about the newspaper story, Saudi Arabia's central bank chief Muhammad al-Jasser said: "Absolutely incorrect." He repeated the same response when asked whether Saudi Arabia was in such talks.

Russia's deputy finance minister Dmitry Pankin said: "We did not discuss this at all."

Algerian Finance Minister Karim Djoudi told Reuters: "Oil producing countries need to stabilise revenues but...I don't see a need for oil trade to be denominated differently.

Analysts said that while individual countries would find it relatively easy to stop using the dollar in settling their oil trades, as Iran has already done, replacing the currency in which oil is priced would require a massive effort.

And apart from the strong political links between Gulf nations and the United States, the lack of convertibility for many Gulf currencies and the yuan tops the list of practical hurdles to making such a shift. Saudi Arabia and some other Gulf states now peg their currencies to the dollar.
To be fair, denial of talks does not mean talks did not happen. However, for reasons mentioned, it was easy to see the Fisk story for the hype that it was.

Here is the key sentence in the above article "Analysts said that while individual countries would find it relatively easy to stop using the dollar in settling their oil trades, as Iran has already done, replacing the currency in which oil is priced would require a massive effort."

While conceptually easy to price oil in something else, it might take a huge programming and retraining effort to do so. For what benefit? The answer is none, because outside of Yap Island stones, it does not matter what it is priced in.

Settlement, as stated above (and also by me years ago) is easy enough to do now. Iran does not want to hold dollars so it doesn't.

Who Wants To Hold Dollars?

I was just asked " Why Would Anyone Want To Hold Dollars?"

The question is actually moot.

The US runs a trade deficit. As explained in How Will China Handle The Yuan? holding dollars is a purely mathematical result of trade deficits.
The US runs a trade deficit with China. That means China must accumulate US assets. China does not have a choice in the matter; it is purely a mathematical function. When the US runs a deficit, mathematically someone must run a surplus.

There is no choice in the matter other than to raise the price of goods so high that consumers won't buy them. Pray tell, what would that do to unemployment and civil unrest in China? What would that do to demand in Europe? It is virtually impossible for China to strengthen its currency to the US dollar without affecting every other currency as well.

Some might suggest that China should buy oil with those dollars, but then what would the Mideast exporters do with them?

The reason China is buying fewer US treasuries recently is that the US deficit with China is shrinking. Again this is a simple mathematical equation, not some massive conspiracy to dump the dollar. Of course China could buy US ports and bridges or oil companies instead of treasuries, but such maneuvers have been blocked by Congress and last I checked no ports or bridges are for sale.
Simple Math Lesson

Math dictates that if the US is running a trade deficit someone else mathematically MUST run a trade surplus.

Whether someone wants to hold dollars or not is irrelevant.

That someone MUST be accumulating US dollars is a mathematically certainty. Suppose you suggest China dump those dollars.

Dump them to who, for what? Iran for oil? Surely you jest. Saudi Arabia? What will the Saudis do with them.

So China accumulates treasuries. And eventually those dollars will come home when China buys US assets, perhaps a toll road or a piece of a US corporation, or perhaps the balance of trade changes.

However, even though the question is moot, the reason why China might want to accumulate dollars is to suppress the prices of the RMB to help Chinese exports, the same reason Japan has. China, as noted above is very concerned about export jobs.

Japan is threatening once again to intervene in currency markets. To do so they would accumulate dollars in excess of what balance of trade might suggest.

The European Central Bank and the Fed are involved in currency swaps right now, to help diffuse the credit crunch.

So there are lots of reasons countries might want to hold dollars. Bear in mind, some of them are senseless, but since when do governments have policies that make any sense?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

[angelatc]

As much military support and aid we provide them, of course they aren't going to reveal they're scheming to decrease the importance of the USD.

Especially while they're still holding them.

[YumYum]

Understand that the devaluing of the dollar has already taken place, over the last 30+ years. It's the foreign nations that have shielded us from those decisions. If they drop that shield, all of the inflation will flood back in. Once that happens, there won't be any more spending without an immediate effect on inflation. The buffer will be gone, and worse, everything in the buffer will flood back in. Imagine the money in circulation supply increasing twenty or a hundredfold overnight. That is what will happen if this goes through.

Here is an excellent essay that supports what your saying. You may have read this, if not, read about "Phase Transition" on page 14. Armstrong compares the collapse of the dollar to boiling water.

http://www.contrahour.com/ItsJustTimeMartinArmstrong.pdf

[Dr.3D]

Jimmy: Mommy, Johnnie is taking cookies from the cookie jar!
Johnnie: I never even attempted to take any cookies from the cookie jar.
Mommy: Johnnie, what are those cookie crumbs doing on your shirt?
Johnnie: What cookie crumbs? Oh... Jimmy must have put them there.

[YumYum]

Especially while they're still holding them.

Instead of dumping our bonds, do you think that China, the Arabs and Japanese could throw them at a discounted rate into this proposed currency basket? I don't see how they can "dump" our bonds, because nobody will buy them except the U.S. government in a panic. According to Schiff, our government will buy them back with money that has been newly printed and not backed by U.S. Treasury Bonds.

[constituent]

The United Nations called on Tuesday for a new global reserve currency to end dollar supremacy which has allowed the United States the "privilege" of building a huge trade deficit.


What say does tuesday have in it?