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Confidential Memos Indicate Oil SDR Pricing Shift Would Be "Most Damaging" To United States And Precipitate "Serious Market Reaction"
A recently declassified, formerly Confidential, 30 year old memo prepared by Henry Owen for President Jimmy Carter's eyes only, highlights the perils facing the United States if oil were to be priced in SDRs instead of dollars, a topic which is all the rage today as rumors are swirling that this is an imminent transition to be "put" upon the United States.
In response to your request, we have considered, and discussed with other agencies, whether the US should favor use of SDRs instead of dollars, to pay for cure oil... I have concluded that dollar pricing should be maintained -- a view that is shared by State, Treasury and CEA.
The reasons:
1. An announcement that dollars were no longer being used as the unit of account in paying for oil would trigger selling of dollars on the foreign exchange markets. So we would suffer.
2. I don't see any offsetting gain, since OPEC would probably raise prices in SDR terms, as necessary to recover revenue losses if the SDR appreciated relative to the dollar.
And the conclusion:
We might be able to persuade the OPEC countries to make the shift if the dollar weakened but that's precisely when the move would be most damaging to us.
Poor Mr. Owen- little did he realize that a mere 3 decades after this memo was penned, the administration would be consumed by a bunch of Wall Street pandering, middle class extortionists, who seek nothing else than to inflate the trillions of toxic "asset" loans that make up the broken backbone of the American financial system. It would come as no surprise if the move is now in fact spearheaded by the same administration which has no other purpose in life than to destroy what little savings Americans have and to throw all their cash to prop up artificially inflated equity prices so that insiders can sell their stock at agreeable levels, and so the toxic companies can use the run up to issue follow on offerings, moderating their untenable debt holdings.
Even more troubling, in another declassified memo, former Undersecretary of the Treasury and President of the New York Fed, Anthony Solomon, reaches this damning conclusion:
The choice of the unit of account for oil pricing is basically under the producing countries' control. There is no particular economic reason why a shift from the dollar would be contrary to U.S. interest -- unless the dollar were to depreciate significant in relation to the currencies in the pricing basket. But there could be major psychological effects. Given the unsettled conditions in the foreign exchange market [TD: so true today, 30 years later], such a step at this time could be interpreted as a lack of confidence in the dollar and as presaging a shift in OPEC investment policy away from the dollar. It could precipitate a serious market reaction.
Alas, even President Carter, seen by many as one of the worst American president in American history was smart enough to not bury his own middle class at the expense of landed Wall Street interests. It is a pity that his current incarnation, advised by the Bernanke-Summers-Geithner think tank, has such diametrically opposing motivations.
h/t Geoffrey Batt for document procurement
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Gold and Forex commercials dominate the airwaves like residential real estate did from 2004 to 2006. It seems safe to suggest that the carry trade and asset appreciation based on it are a bubble that will burst. Without the credit that is needed to turn paper gains into equity, this bubble should not last as long as residential real estate.
Yeah, that's been my issue with all the precious metal enthusiasts. If those assets are so awesome and so ready to take off, then why in the world are all the holders of these assets advertising so much to off load them? Flip this Canadian Maple Leaf?
Never heard of making money off the spread have you?
If Pms truly reach the stratosphere then perhaps there will be a market with only bids. Doubtful though.
You obviously haven't been paying attention. Or rather, you've been paying attention to the wrong actors.
I am Chumbawamba.
Most gold commercials are to solicit people to SELL their gold, foolio. By that metric, we haven't even started into the "bubble ramp" for precious metals.
The giant sucking sound as gold derivatives
available exceed dollars. Those that leap here
headlong into bonds, gold or stocks may break their
necks...
JubileeProsperity.com
More to the point, Chinese hedgers are defaulting on
billions of derivatives hedges, wiping out the usual
bank derivative suspects. Hardly inflationary...
JubileeProsperity.com
I still think the dollar can rally.
Maintaining the ability to print your own money whenever you want is key to pretty much everything from foreign policy to financial fraud. Dollar hegemony, and lets call it for what it is, is coming to an end.
At the end of the day, it becomes the Saudis' call on what oil gets priced in. And despite all the talk to the contrary, the Saudis have a lot of incentive to keep oil priced in USD.
It doesn't mean that the moved towards a basket currency is in vain, though. At the very least it sends a pretty powerful message that the rest of the world is getting fed up with the U.S. and it's dollar burning strategies.
As I've said before, you can bully and gain respect if you're an honest broker and are stong. If you become corrupt and continue to bully, the victims will unite and turn against you. And it's a lot easier to issue a backlash if the bully is not as healthy as it used to be...
We have to keep in perspective that we only get 10.7% of our oil from Saudi.
We get 12.5% from Mexico and more than twice as much from Canada. 2009 YTD.
http://www.eia.doe.gov/pub/oil_gas/petroleum/data_publications/company_level_imports/current/import.html
Good point... thanks for the link. And it further supports the rationale of pricing remaining in USD (well, unless NAFTA unravels).
Turn the equation around to oil exports as % of total and see what you get...
Mexico has about 8 years of oil left at current production rates. Saudi Arabia, has about a fourth of the world remaining reserves. The bs you hear from Canada about their tar sands being equal does not take into account the miniscule (relatively to the light sweet stuff from SA) amount of usable energy in that crappy oil ,after you get past the energy used in extracting and refining it.
http://www.lifeaftertheoilcrash.net/
http://www.lifeaftertheoilcrash.net/PeakGraph.jpg
http://www.hubbertpeak.com/
http://www.thesocialcontract.com/pdf/sixteen-two/xvi-2-93.pdf
Agree -- the marginal do control the price of oil as they are the only ones that can increase supply. I just can't see the the Saudi Royal family wanting to lose their body guards (the U.S. Armed forces) in the event of a revolution by their own citizens or attack by another country.
Commod prices up...Check Gold up...Check Dixie down...Check
Keep play'n the deflation thesis...Right!
After the last 8 years, I think it's time to put the whole "worst president in history" thing to rest. Let's face it, the last 8 or 9 have all been decidedly horrible. Carter has the distinction of perhaps doing the least damage while in office. Even Ford managed to do worse than him (pardoning Nixon).
I am Chumbawamba.
Did you live through the Carter years?
I did. IMO, the title "worst.president.ever" was fully and completely earned by Jimmuh.
You think that having lived through it, you'd be able to gain a better perspective on it by realizing that the world as we know it didn't end with Carter.
Bullshit, Little Bush makes Carter look like Fucking Washington and Jefferson put together
History will judge GWB as a better President and better man than Barack The Vain. Watch it crumble....
holeee shit the idiocy is just remarkable here. spare us the political hecketry please. they both suck a fat one so lets just leave it at that.
Sadly the title worst president ever does not even begin to describe Carter. He was an utter catastrophe. One of the lowest points was the ill-fated rescue attempt of the Iran hostages -- it was limp wristed, prevaricating, embarrassing, and a complete military failure because it did not bring enough resources to bear. It was the equivalent of putting on a sweater an turning down the thermostat to deal with the energy crisis. Hey everyone, inflate your tires.
He now has the title of the "worst ex-president ever" firmly in his grip. He cannot even shut up, one thing he has close in common with current Whitehouse resident.
It was the equivalent of putting on a sweater an turning down the thermostat to deal with the energy crisis. Hey everyone, inflate your tires.
It's a sad world when basic commen sense advice is ridiculed.
I am Chumbawamba.
The President after Mr. Carter ran far larger budget deficits; undermined the Constitution by claiming the executive branch did not have to follow the directions of Congress; made the United States the laughing stock of the world and the middle east in his handling of the Iranian hostage situations (among other things, he paid ransom for someone already dead); argued that laws, rules and regulations are bad despite the fact that the de-regulation of the S&L industry on his watch caused another $400 to $600 million or billion I cannot recall in losses, which have never been repaid. While the President after Carter talked tough, he was a classic bully: went into Lebanon talking tough and one bloody nose and he went home crying.
If you read Ollie North and Mr. Reagan's deposition testimony about iran contra, you may just well laugh and cry, because he and his crew were so incompetent its funny, yet they believe they were the smartest in the room.
As many on ZH have pointed out, had the regulatory agencies enforced the rules (which court assistance) much of our current financial crisis wld be muted.
Reagan did fire the air traffic controllers. At the time, I applauded the action under the circumstances. Now, older hopefully wiser, definitely more cynical, I see R's grand standing more as a RW swipe at the unions.
GWII tried to out-reagan reagan. How'd that work out for everybody?
I did live through the Carter years. he was not the best president. But he was FAR FAR better then delusional Ron and GWII.
oat (and had they been enforced as many here point arrue
The president after Carter isn't the issue. Hell, Carter isn't even the issue. I can't stand limp wristed little fuckers like you who measure a President's worth by what he does for you. Grow the fuck up.
Stop talking to yourself, anonymous.
I am Chumbawamba.
Carter has done one thing that no other President has done: he called the Israeli occupation for what it is.
I am Chumbawamba.
i was going to note that all usa presidents since
lbj have been disasters for the
country - it's only a matter of less bad rather
than good vs bad....however carter deserves
special attention as a dipshit...
Eisenhower was the only decent president in the 20th century. The rest led by cronyism.
Apocalypse Now - JFK has my respect, he tried to stand up to the banking system / secret societies. He also took a stand on the Cuban missile crisis when Russia wanted to put nukes in our backyard.
I am not sure how people are judging presidents, and if they understand that they are now puppets for large money interests that manage through committees and think tanks (accomplished by sponsoring and mentoring young, smart, up and coming politicians on both the Dem & Rep rosters, promoting their picks through the media to narrow races, and then whoever is chosen will work on their agendas). I am also amazed how little a President makes these days in salary, when compared to a football player or a banker - the stress is definitely not rewarded monetarily while in office.
I look for someone to amplify the idea(ls) of America at home and abroad, ensuring national sovereignty and a strong geo-political position.
Actually, what Carter was - was a nuclear engineer. He was and is, far from stupid.
His greatest downfall, and I fear, that which will bring Obama's fall, was that he did not have the ability to convince his party's membership to follow his lead, nor was he able (ala LBJ and Nixon) to bully them into following him. In short, he was limited in his role because of his inability to be a politician.
Far from being stupid, he was a realist who did not suffer fools well, thus his inability to work with Congress.
Carter was not a distinguished President, and accomplished very little. But I challenge any critical person to look at the state of the nation on Inauguration Day 2001, compared to its state on Inauguration Day 2009, and argue that GW Bush was not the worst US President in the post-WWII period.
That loss of faith in American honesty that Andy D. has been referring to? Who do you think did that?
carter was a moron but bush was downright evil...
that fuck's father ordered the destruction of the
wtc with skandia labs created nanothermite and
smirked while reading goat stories after heard about
it....
obama is carrying on bush's evil war and economics
clinton was traitor extraordinaire and economic
dimwit
daddy bush was a war mongering despot and taxaholic
reagan was a spendthrift and overly ambitious with
the military but the congress was even worse....
carter a buffoon
ford was a buffoon and rockefeller sock puppet plus
accomplice to the kennedy murder
nixon was corrupt but only incidentally in regards
to watergate; his biggest crime was repudiation of
gold
lbj was a murderer and another sock puppet of
rockefeller / rothschild but didn't even know who
is bosses were....
Agreed. Carter is a saint compared to the likes of Reagan, Ford and the Bush tools. Even Clinton, who repealed Glass-Steagall and bent over for focus groups and deregulators, is a pretender compared to Carter. What a waste.
In my opinion, U.S. policy provides an umbrella of protection for the Arabian pennisula via the U.S. military in exchange for the unit price of oil in dollars. If Russia can create a scenario where the Arabian pennisula comes to question the military committment of the U.S., Russia might be able to convince these countries to go along with a move away from the U.S. dollar.
You are certainly on the right track. The issue with Russia, however, is that it already "competes/colludes" with the Saudis on the supply side of the oil equation. The best "natural" partner for the Saudis is someone who contantly demands a resource it has in abundance.
Perhaps the Chinese will fulfill that demand role someday, but for now, they only serve as the swing demand source. Take the U.S. out of the equation today, and oil would hit single digits. Nobody in OPEC wants that.
The US will continue to buy oil. It just won't be priced in dollars.
I am Chumbawamba.
Good observation. And might I add that Russia and China holds the key to some form of mid-term truce in middle east now, because Iran gets its nuclear fuel, foreign exchange and military technology from either or both Russia and China. The corrupt regimes in middle east know this after the US' miserable failure under the neo-cons of Bush and the talkers of team-O to stop Iran producing a bomb. Iran is 2, max 3 years away from a bomb - that should scare some people, especially the Sunis in the house of Saud. And even Israel would support Russia and China - guess who is Israel's fastest growing trade partner today? In the next 3 months, Netanyahu's scheduile includes a sucking trip to kowtow in Beijing. Laymen from Europe to Latin America and Asia sees america abdicating its leadership and its leaders crumbling under bribes from its bankers, would they allow their regimes to continue supporting the funny monopoly dollar originated to save its "too big to fail" banks? Would they exchange their hard oil and commodities for monopoly currencies further. Sure they will lose big on their treasuries holdings, but we must not pretend that only we understand the meaning of "cutting loss". Stop deceiving ourselves, TD is correct - a huge spanner was thrown into Mr bean's USD generating machine. If you need to understand why Goldman Sachs share price was struggling today, look no further because they are the primary losers when the USD suddenly collapses. Days of hyperinflation are fast approaching.
Wrong. What has been damaging to the US economy is the continued indebtedness and the unnaturally strong dollar. Japan has decimated our engineering based industrial economy. China has decimated our production based economy.
What the strong dollar left us with is a banking based economy. Wall Street has been upheld at the sacrifice of our real economy. Nice to see the boyz on the street get $10,000,000 bonuses as carpenters in Ohio apply for food stamps. The irony is that socialism is the only way that Wall Street can stay intact.
http://www.independent.co.uk/news/business/news/the-demise-of-the-dollar-1798175.html
It is what we deserve after bowing, groveling and ring kissing.
The symbol of SA is crossed scimitars. I wonder what they are used for?
God bless presidential libraries. They have the tendency to let a few cats out of the bag every now and then. However, when I begin to see the flow of news shift in one direction or another, I begin to look for motives.
Just as the market doesn't move, it's moved, news doesn't always just "happen," sometimes it's a coordinated release of carefully selected information to condition or sway public opinion or understanding.
Presidents and corporations aren't the only entities trying to spin information and ideas. Propaganda is an equal opportunity employer.
Carter was the worst because of his dangerous dislocated idealist view of the world versus reality....sounds like someone else we know.
What a nice casino today.....Never seen such a market since 2000... What is the financial community doing (smart and conscencious asset manager)? I have never been so fearful since the start of the year.... I heard that some (big players) european asset managers were covering their underweight position through the buying of spx and dax calls... From a contrarian point of view, I hope it's true.... Who is the marginal buyer then? Never seen such a disconnection between hope and realty...
Please, hedge your mind... www.hedgeyourmind.blogspot.com
His current incarnation is Wall Street's bitch.
The one thing that still has me wondering, is the amount of untransparent assets available in the notorious CDS markets, better known as "Markit," and whose majority owners are the Wall Street Bankers(perated or aintained by the Fed). They can insure currencies that default to be swapped at face value.
Carter was the worst? Man, you yanks sure have forgotten the past 8 years. Carter didn't start any wars and he was only there for a single term. As a non-American, it's laughable to hear about what passes for 'good' and 'bad' on your side of the fence.
Typical American Economic Argument: "Making lots of money is good, but not too much money because that's bad, so we need to set a limit, but government shouldn't be the one to set or enforce that limit, so we'll let industry handle that themselves, and they'll be honest, and if they're not honest we'll rein them in, but we can't let government rein them in, because everything government does is bad...' etc. etc. etc. No wonder you guys can't get anything done anymore...your bullshit filters have been overwhelmed.
Carter didn't start any wars
NO, THE IDIOT ONLY GAVE US 30 YEARS OF NON-STOP TERRORISM THANKS TO IRAN, HIS GIFT TO THE WORLD!
No, Carter gave us the Camp David Accords, which Israel promptly violated, further inflaming the Arab world as we continued to support unchecked aggression against the Palestinian victims of Western imperialism and neocolonialism. You douche.
I am Chumbawamba.
Is your little island still afloat? If so, please show us the proper etiquette on how to transition as the world's superpower to a non-entity.
Carter appointed Paul Volcker, the last competent Fed chairman and the guy who killed inflation. That was a brave move, since Volcker's high interest rates made Carter very unpopular.
Carter, not Reagan, started the de-regulation process by deregulating airlines, trucking, railroads, oil, and interest rates.
I truly believe that what Carter did, he did for the American people. I cannot speculate this about any other president.
And how Carter can be worse than the guy he replaced (Nixon) is beyond me. Some people need to have the nails removed from their skull.
I am Chumbawamba.
The U.S. is insolvent, bankrupt under any objective rational analysis. Our ad hominem debt-to-infinity money print factory notwithstanding, our hour of reckoning cometh like the dawn. It is as inevitable as the passing of time. This psychological concept we conceived in that long ago age when our reason became hoodwinked will be evaporated as quickly as one blows out a candle and there will be nothing left but blood in the streets. Hang on to that irrational folly of value media which man calls his sacred dollar as long as you wish. A fool and his money soon part.
3 to 4.3 Billion Barrels of Technically Recoverable Oil Assessed in North Dakota and Montana’s Bakken Formation—25 Times More Than 1995 Estimate—
http://www.usgs.gov/newsroom/article.asp?ID=1911
I'm not sure what would be worse. Pricing oil in SDR's or a scorched earth policy like Saddam had in Kuwait after the Gulf War.
Nothin like bombing a few OPEC oil wells and refineries to bring clarity of mind into focus.
Hell, if we gotta sink into this cesspool, might as well drag all the other assholes in along with us.
HEY! If you can't beat them, them nuke them a few times until they agree with you. Classic.
The situation with gold is the same as oil en route to $147.
The breakout WILL hold, but only because a flood of dumb money is about to pile into gold. It's happening today as it always does with new highs.
Just as oil made $10 moves up, gold is doing the same. This will contiue until the credit/cheap money inflated 'all assets v the dollar' falls.
Gold up on speculation of dollar demise and speculation of inflation. Buying the rumour, selling the fact!
FDR was the greatest president of the 20th century. Preiod.
The USA will occupy SA before allowing oil to be priced in anything but $
Is it any mystery that Saddam began selling oil in Euro just before he met his maker?
Carter was a disaster, a liar and a wimp all rolled into one. Could not rescue the hostages held by Iran. Gave us 15% inflation. Lowered the respect to the Presidency to that of a dogcatcher. Never could maintain his iq higher than his age. Worst President by a mile!
At least he gave us honest numbers instead of trying to put lipstick on them and shove them down our throats as "growth", "stability" and a "strong dollar".
You just want to be lied to, and that's OK. It's a failing, but it's your failing. But, at least you got the leadership you desired. And deserve.
I am Chumbawamba.
Paul Wolfowitz, is that you? You still owe me a trillion, you fuck.
Carter was a disaster, a liar and a wimp all rolled into one. Could not rescue the hostages held by Iran. Gave us 15% inflation. Lowered the respect to the Presidency to that of a dogcatcher. Never could maintain his iq higher than his age. Worst President by a mile!
The fucking federal reserve is an independant corporate entity. 15% inflation didn't have one fucking thing to do with Jimmy fucking Carter.
er, sorry, claiming to be the first blogger to have developed the idea that the end of Federal Reserve Notes AKA US Dollars as commodity trading currency was the main reason why the USA invaded Iraq and now wants to go to war with Iran here:
http://prudentinvestor.blogspot.com/2005/08/iranian-oil-bourse-could-kil...
>50k readers since 2005
Anonymous
don't rewrite history on Volcker, Carter and Reagan. Read http://www.nationalreview.com/nrof_bartlett/bartlett200406140846.asp
and then comment again.
Fithal the Wise
I still do not understand why everything has gone down the memory hole. There was high inflation under President Carter. But it was under the sainted ronnie reagan that the country hit the Trifecta; double digit inflation, double digit interest and double digit unemployment. Thank God for ronnie, withoiut him we might still have manufacturing in this country and working people might be well off. Instead we glorify salesboys and marketeers like ronnie. And I do not understand why paul volcker is praised. Everyone at the time knew inflation could be beat by raising interest rates through the roof. Even tricky dick nixon had enough decency not to do it because of the damage it would cause. It would bring huge unemployment and ruin lives. It did that. And volcker and reagan were the inhuman, lowlife snakes who were willing to pay that price, or rather have others pay it. Since the nation has become a society and economy of b.s. artistes and snake oil salesmen rather than valuing productivity or cerativity or intelligence. When flipping houses passed for legitimate activity I knew that this country had fallen off of the cliff.
I believe there will be many here today contemplating monetary policy and its impact after Aug 15, 1971 while blabbering on and on about this versus that corrupt president on the tree of woe. As it should be.
At the end of the day, it becomes the Saudis' call on what oil gets priced in. And despite all the talk to the contrary, the Saudis have a lot of incentive to keep oil priced in USD.
It doesn't mean that the moved towards a basket currency is in vain, though. At the very least it sends a pretty powerful message that the rest of the world is getting fed up with the U.S. and it's dollar burning strategies.
As I've said before, you can bully and gain respect if you're an honest broker and are stong. If you become corrupt and continue to bully, the victims will unite and turn against you. And it's a lot easier to issue a backlash if the bully is not as healthy as it used to be...
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If indeed these are the actors set on setting the world ablaze, they are more than likely the same ones who are involved in Greece, Portugal, Dubai, and elsewhere. Presenting: Moore Capital, Brevan Howard and Paulson & Co... Oh and JP Morgan and, ahem, Goldman Sachs.
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