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Did WikiLeaks Confirm "Peak Oil"? Saudi Said To Have Overstated Crude Oil Reserves By 300 Billion Barrels (40%)

Tyler Durden's picture




 

In what can be the "Holy Grail" moment for the peak oil movement, Wikileaks has just released 4 cables that may confirm that as broadly speculated by the peak oil "fringe", the theories about an imminent crude crunch may be in fact true. As the Guardian reports on 4 just declassified cables, "The US fears that Saudi Arabia, the world's largest crude oil exporter, may not have enough reserves to prevent oil prices escalating, confidential cables from its embassy in Riyadh show. The cables, released by WikiLeaks, urge Washington to take seriously a warning from a senior Saudi government oil executive that the kingdom's crude oil reserves may have been overstated by as much as 300bn barrels – nearly 40%." Could the OPEC cartel's capacity for virtually unlimited supply expansion to keep up with demand have been nothing but a bluff? That is the case according to Sadad al-Husseini, a geologist and former head of exploration at the Saudi oil monopoly Aramco, who met with the US consul general in Riyadh in November 2007 and "told the US diplomat that Aramco's 12.5m barrel-a-day capacity needed to keep a lid on prices could not be reached." And yes, that conspiracy concept of peak oil is specifically referenced: "According to the cables, which date between 2007-09, Husseini said Saudi Arabia might reach an output of 12m barrels a day in 10 years but before then – possibly as early as 2012 – global oil production would have hit its highest point. This crunch point is known as "peak oil"." And it gets worse: "Husseini said that at that point Aramco would not be able to stop the rise of global oil prices because the Saudi energy industry had overstated its recoverable reserves to spur foreign investment. He argued that Aramco had badly underestimated the time needed to bring new oil on tap." Look for Saudi Arabia to go into full damage control mode, alleging that these cables reference nothing but lies. In the meantime, look for China to continue quietly stockpiling the one asset which as was just pointed out is the key one to hold, for both bulls and bears, according to Marc Faber.

More from the Guardian:

One cable said: "According to al-Husseini, the crux of the issue is twofold. First, it is possible that Saudi reserves are not as bountiful as sometimes described, and the timeline for their production not as unrestrained as Aramco and energy optimists would like to portray."

It went on: "In a presentation, Abdallah al-Saif, current Aramco senior vice-president for exploration, reported that Aramco has 716bn barrels of total reserves, of which 51% are recoverable, and that in 20 years Aramco will have 900bn barrels of reserves.

"Al-Husseini disagrees with this analysis, believing Aramco's reserves are overstated by as much as 300bn barrels. In his view once 50% of original proven reserves has been reached … a steady output in decline will ensue and no amount of effort will be able to stop it. He believes that what will result is a plateau in total output that will last approximately 15 years followed by decreasing output."

The US consul then told Washington: "While al-Husseini fundamentally contradicts the Aramco company line, he is no doomsday theorist. His pedigree, experience and outlook demand that his predictions be thoughtfully considered."

Seven months later, the US embassy in Riyadh went further in two more cables. "Our mission now questions how much the Saudis can now substantively influence the crude markets over the long term. Clearly they can drive prices up, but we question whether they any longer have the power to drive prices down for a prolonged period."

A fourth cable, in October 2009, claimed that escalating electricity demand by Saudi Arabia may further constrain Saudi oil exports. "Demand [for electricity] is expected to grow 10% a year over the next decade as a result of population and economic growth. As a result it will need to double its generation capacity to 68,000MW in 2018," it said.

It also reported major project delays and accidents as "evidence that the Saudi Aramco is having to run harder to stay in place – to replace the decline in existing production." While fears of premature "peak oil" and Saudi production problems had been expressed before, no US official has come close to saying this in public.

The conclusion:

Jeremy Leggett, convenor of the UK Industry Taskforce on Peak Oil and Energy Security, said: "We are asleep at the wheel here: choosing to ignore a threat to the global economy that is quite as bad as the credit crunch, quite possibly worse."

Obviously, if true, the implications of this discovery are massive, and will have a huge impact on the price of oil imminently.

The four key cables can be found at the links below.

 

 

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Tue, 02/08/2011 - 21:44 | 944911 dick cheneys ghost
dick cheneys ghost's picture

black swan????

Tue, 02/08/2011 - 22:01 | 944962 Michael
Michael's picture

The elites will try anything to get the oil price higher. What was oil at today? Down to $86?

Don't worry. The 22.5% unemployed won't be using much of it in the foreseeable future.

Crude Oil is going up to $150-$200 a barrel: Lindsey Williams Predictions

http://www.youtube.com/watch?v=id9HmXw0RXE

Tue, 02/08/2011 - 22:20 | 945023 More Critical T...
More Critical Thinking Wanted's picture

 

Those libertarian idiots who are blaming the Fed for high global food prices need to read all this uncensored material to see how commodity prices like oil go up:

Poor Price Elasticity in China, India, ME: Food Price Inflation is a New Complication

 

5. (C) Bourland noted that given the widespread public subsidies in China, India, and the rapidly growing markets of the Middle East, there is no pass-through of these higher crude prices to the consumer in much of the world's market. Essentially there is no price signaling, "go slow" sign in the form of higher prices for consumers as crude rises. As a result, he expects we will continue to see unrestrained demand growth, especially in the Middle East and China.

6. (C) Bourland was not optimistic about prospects for encouraging greater price elasticity in the world energy markets. Inflation, particularly food inflation, recently has become a front-burner issue for many nations. Pressed consumers in many nations have recently found themselves on a knife's edge regarding food security, and are not likely to peacefully accept the rolling back of petrol subsidies which have become effectively institutionalized. Bourland also cautioned that Saudi Arabia's domestic consumption of crude continues to grow by about 100,00 bpd annually, ensuring a tight global market for the foreseeable future.

 

Summary: it's not the Fed, dummies :-) It's fuel subsidies in China and India that are driving up demand and are driving up food inflation as well ...

 

Tue, 02/08/2011 - 22:26 | 945054 alien-IQ
alien-IQ's picture

look at a 10 year chart of the USD and put that against ANY commodity at all and try to say with a straight face that the decline in the value of the USD has had no bearing on the rocketing price of...well...EVERYTHING!

Tue, 02/08/2011 - 22:36 | 945069 More Critical T...
More Critical Thinking Wanted's picture

 

LOL, yours is one of the most stupid replies in any of these threads.

Tell me, when India buys Saudi Oil, does it care about the price of oil in USD? :-)

No, it does not - it cares about the price of oil in Rupees.

The USD's decline matters to the US, but does not matter to India ...

Oil is denominated in dollars but its price is set by global demand and global supply - not by the strength of the dollar.

(And yes, there is some coupling - but only in proportion to how much oil the US consumes and produces - which is a small portion of the global picture.)

 

Tue, 02/08/2011 - 22:41 | 945101 alien-IQ
alien-IQ's picture

What does OPEC price oil in? Rupees? Euros? Pounds? Goats? or US Dollars?

Tue, 02/08/2011 - 22:52 | 945115 More Critical T...
More Critical Thinking Wanted's picture

 

Oil is denominated in dollars.

That does not mean that oil's real value (the global price) goes straight up and down by the value of the dollar.

Check the charts: on quiet days where the dollar strengthens by 1% oil's price in USD goes down by 1%. The reason? The real value of oil did not change.

Just like rice futures are priced in USD as well, still the real value of rice is obviously not set by the value of the USD ...

You get the real value of any commodity that is priced in USD by dividing the commodity price with the dollar index (DXY) value.

Why do you think is there a highly liquid dollar index instrument, while there's no notable 'euro index' equivalent? Because most commodities are traded in USD and the real value of the commodity has to be readily available as well :-)

Welcome to commodities pricing 101 ...

 

Tue, 02/08/2011 - 22:56 | 945150 alien-IQ
alien-IQ's picture

this is a fruitless conversation as it is obviously colored by your jingoistic view of the world.

I can't penetrate that wall...nor do I have any desire to try.

good luck.

and lay off the steroids. they shrink your brain also.

Tue, 02/08/2011 - 23:25 | 945236 More Critical T...
More Critical Thinking Wanted's picture

 

You are still in denial, why? You only need to google around a bit to see that commodity prices move inversely to the dollar.

One of the first hits is:

http://www.sentracommerce.com/

THE DOLLAR MOVES INVERSELY TO COMMODITY PRICES

 

 

A rising dollar is noninflationary. As a result a rising dollar eventually produces lower commodity prices.

The reason for this is obvious: the dollar is just a unit of account. Oil could be measured in euros or in gold - that would not change its real value. You would buy gold then pay for oil and that's it. The price of gold would not play a role in the value of oil - it's just an intermediary currency.

Same goes for the USD.

 

Tue, 02/08/2011 - 23:30 | 945252 Calmyourself
Calmyourself's picture

RNR & MCT - Dumb & dumber, MCT your brain is probably no larger than your shrunken gonads, and RNR well your just a troll never to be taken seriously..

Tue, 02/08/2011 - 23:36 | 945277 More Critical T...
More Critical Thinking Wanted's picture

 

Here's an example of how India buys oil from Russia.

Say if India buys $1b worth of oil from Russia then the following happens (simplified):

  • India converts Rupees to 1 billion dollars
  • India transfers 1 billion dollars to Russia
  • Russia pumps the oil to India
  • Russia converts 1 billion dollars to Rubles
  • India uses its oil
  • Russia uses its Rubles

See how it was largely immaterial what currency the transaction was conducted in? 1 billion dollars were bought then sold within a short timespan. The real net transaction was Rupees to Rubles, for oil transport from Russia to India.

Again, this is commodities 101.

If you do not understand this and if you are trading then I welcome you as one of my counter-parties :-)

 

Wed, 02/09/2011 - 00:24 | 945439 Sophist Economicus
Sophist Economicus's picture

Hmmm.  Oh, I get it, you assume that ALL oil transactions are based on supply and demand!   But let's suppose we have speculators in the middle of these transactions, to 'grease' the wheels of hedging and the like.  And let's also suppose that these speculators are tied into the Fed fire-hose of liquidity and can borrow or carry-trade dollars at near free frictional costs.  Then, let's get really wild and assume that they place bets on oil - keep oil in tankers and rent storage on land, for a speculative profit.   That fire hose of liquidity has directly replaced that quaint, straight-forward supply/demand chart you read about in econ 101.    And, oh yea, the Fed chairman has EXPLICITLY stated that a ZIRP and steep yield curve is in place to ENCOURAGE the purchase of risk assets

 

CLASS DISMISSED

Wed, 02/09/2011 - 01:13 | 945531 More Critical T...
More Critical Thinking Wanted's picture

 

Then, let's get really wild and assume that they place bets on oil - keep oil in tankers and rent storage on land, for a speculative profit.

Erm, do you realize how much storage just a million barrels of oil needs and how much it costs to store it? Oil is expensive to store. And even a million barrels of oil is a drop in the bucket: global demand of oil is above 80 million barrels a day ...

"Keeping oil in tankers" is awfully naive: tankers take years to build and especially now they are in hot demand. Letting one sit around 'idle' just to store oil is crazy. And even the biggest of tankers can hold only 1-2 million barrels of oil - a drop in the global bucket: about 1% of a single day's global oil consumption.

If you want to speculate in commodity prices, just use the futures. Holding oil physically only makes sense if you want to manipulate the demand and supply equation and thus manipulate prices via physical buffering - but that is rather hard with tankers being very inelastic bottlenecks and with governments being eager to find any speculator who can be blamed for high fuel prices and food inflation ...

Read the Wikileaks material referenced in the fine article - oil producing countries themselves were conceding it in secret talks that they do not think that any significant amount of oil speculation is behind the 2008 surge in oil prices. They were convinced that it's supply & demand.

Note the motivation: those oil producing countries would be happy to blame speculators and not be blamed for the shortfall in supply ...

 

Wed, 02/09/2011 - 01:21 | 945552 Sophist Economicus
Sophist Economicus's picture

Ok.   I don't have the data handy, but in the 1990s, I think a barrel of oil in USD was under $20.   Cut to about 10 or 11 years later it ramps up to $140+.    Do you mean to tell me the ACTUAL DEMAND for oil increased 7X, and that is what drove the price?

Then in the subsequent year, it drops to $30+.   Did demand then drop by 60+%????   and in the last 18 months, did demand TRIPLE, and that is why oil sits at about $90?

I wanna see your supply and demand data, cause from my vantage point, these violent price movements don't look correlated to spot demand

Wed, 02/09/2011 - 01:30 | 945572 TruthInSunshine
TruthInSunshine's picture

oil was $10 a barrel in 1999.

Wed, 02/09/2011 - 01:30 | 945574 Dr. Porkchop
Dr. Porkchop's picture

Oil prices spiked right around the run up to the Iraq war as I recall.

Wed, 02/09/2011 - 11:39 | 946049 More Critical T...
More Critical Thinking Wanted's picture

 

The supply/demand curve is not like the parent poster assumes: the real numbers are that a roughly 1% cut in real oil supplies increases oil prices by about 10%. (!)

The reason: the demand side needs fuel badly and is only willing to cut consumption when price goes up by a lot. (demand is 'inelastic')

That 10x leverage makes prices fluctuate/spike and drop very quickly - even without any speculation ...

 

 

Wed, 02/09/2011 - 09:07 | 945936 Flakmeister
Flakmeister's picture

  Take another look at the definition of a supply-demand curce, oil demand is quite inelastic. IIRC, the inelasticity is ~0.05. You show you know nothing about oil supply and little about basic economic theory.

Wed, 02/09/2011 - 09:40 | 945997 Sophist Economicus
Sophist Economicus's picture

That was my point!   Demand has had a slow creep upwards, with a fairly predictable demand curve YET prices have increased and decreased wildly.    Simple supply and demand explanations would not explain those moves - since there were neither high spikes in demand, nor large disruptions in supply.   "simplistic" economic theory cannot get you to predict the prices we've experienced

Wed, 02/09/2011 - 09:58 | 946036 More Critical T...
More Critical Thinking Wanted's picture

 

Exactly because demand is inflexible it does not need "large" disruptions in supply for the price of oil to spike.

The inelasticity has roughly the following effect: only a relatively brutal, +$10 change in oil prices reduces daily demand by 1 million barrels - and that's still a drop in the bucket in the daily global consumption of 85 million barrels.

Consumers rather pay than face cuts in fuel use. Fuel subsidies in India and China increase this 'price multiplier' effect.

It does not take much to disrupt supply a bit: Iraq, Iran, Nigeria, Venezuela, you name it - not the most stable regions on the planet.

So whenever instability cuts (or threatens to cut) oil production, the price of oil reacts wildly, especially futures, which are volatile to begin with - but real delivery prices will react as well if the instability persists and the cut in production is real.

 

 

Wed, 02/09/2011 - 01:27 | 945566 Simen
Simen's picture

"Keeping oil in tankers" is awfully naive: tankers take years to build and especially now they are in hot demand. Letting one sit around 'idle' just to store oil is crazy.

 

Congratulations, you are getting my first ZH-comment ever.

 

Tanker-rates are currently close to rock-bottom. Please see

http://www.platou.com/dnn_site/EconomicResearch/WeeklyFreightRates.aspx

(please site contrary sources)

As to storing oil in tankers - this has been done previously, and with the glut in the market, it will very probably be happening again unless the transport rates improve.

 

-S

Wed, 02/09/2011 - 02:28 | 945657 More Critical T...
More Critical Thinking Wanted's picture

 

Tanker-rates are currently close to rock-bottom

As in "2 times higher than they were a couple of months ago"?

True that it's still not as high as in 2008, so I concede the point - it's plausible and possible to do it.

Still I maintain this point:

with governments being eager to find any speculator who can be blamed for high fuel prices and food inflation ...

It's risky.

Plus I maintain that it would need a lot of tankers to have any real impact on global prices. So you can use it for cheaper rollover, but to manipulate prices?

 

Wed, 02/09/2011 - 02:56 | 945697 chumbawamba
chumbawamba's picture

Oil tankers parked off British coast as speculators wait for prices to rise

Also:

Is speculation driving commodity prices to crash?

Yes, they've done it.  Yes, they've managed to impact prices globally.

You're ass has pretty much been handed to you on this one.

Repent.

I am Chumbawamba.

Wed, 02/09/2011 - 03:13 | 945715 More Critical T...
More Critical Thinking Wanted's picture

 

Oil tankers parked off British coast as speculators wait for prices to rise

That looks real.

Also:

Is speculation driving commodity prices to crash?

This one is absolutely bogus. Have you read the article? It says:

They are instead trading as "hot money" repositories where speculators rotate in and out of various instruments literally on a minute-by-minute basis.

Delaying tankers is how it can be done. Flipping in and out of futures within minutes not: every new futures position is created symmetrically by creating a sell and a buy position. It does not affect physical supply.

Yes, they've done it.  Yes, they've managed to impact prices globally.

Maybe. More likely they lowered their rollover costs (and risks) and made a tidy profit on the price movements.

But yes, if then Brent is the one that has been manipulated. But look at the numbers: even at a dozen tankers (and look at the pictures, these aren't supertankers) it's maybe 5 million barrels of oil, so a value of $500m at $100 oil. Say they managed to win $10 or $20 - that's a profit of $50m-$100m. Chump change compared to the global oil turnover and chump change compared to all the Fed easing.

You're ass has pretty much been handed to you on this one.

Repent.

I repent 20% for getting the tanker rent rates wrong :-)

 

Wed, 02/09/2011 - 10:38 | 946120 Flakmeister
Flakmeister's picture

Add up all the oil being parked off shore, now compare to daily world demand. It is a pimple on the ass of the market

Yeah, some speculators are selling forward. And its a cheesy way to make money, but it does not drive the market.

Wed, 02/09/2011 - 11:52 | 946426 More Critical T...
More Critical Thinking Wanted's picture

 

Add up all the oil being parked off shore, now compare to daily world demand. It is a pimple on the ass of the market


Yeah, some speculators are selling forward. And its a cheesy way to make money, but it does not drive the market.

Lets run a few numbers.

It can be estimated how much impact speculators can have on oil prices: lets assume they command a huge fleet of 50 super-tankers, 50 million barrels of oil.

That's less than a day's worth of world demand, around 0.1% of yearly demand and about 1% of one month's oil demand.

I can see this 1% of supply shortage used for a single month impacting prices to the tune of 10% (that's roughly the leverage supply levels have over oil prices, right now). That's a nice return but nowhere near the price doubling and tripling we've seen.

To believe that delivery prices (not futures prices) are mainly speculation driven for a single month and double the price you'd have to believe that speculators can influence world supply by 10%, that's 500 tankers and 500 million barrels of oil.

And that's just a single month - if you want to have that impact for two months it's 1 billion barrels of oil - 1000 super-tankers. You'd have to hide so many tankers somewhere and there's the small problem that there's not that many super-tankers in the world to begin with ...

And we've seen persistent high oil prices double (and more) the price levels of the early 2009 levels, for months and months.

So yes, while I can believe the forward selling speculation angle, with a dozen tankers or so parked off the coast of the UK, but to impact world supply (or even just Brent supply) for an extended period of time looks exceedingly difficult to say the least.

 

Wed, 02/09/2011 - 22:07 | 948161 Backspin
Backspin's picture

Thanks, guys.  Good food for thought.   I'm learning a lot from both sides of this discussion.  Critical T, these guys have some good points but I think a lot of what you say makes sense and I think they're overjunking you.  Good discussion, though.  Glad ZH is here.

 

Wed, 02/09/2011 - 00:30 | 945456 tellsometruth
tellsometruth's picture

What would the emotional impact on investors if the Dollar were to loose its Reserve status?  virtous circlejerk up in this market? or would there be a nominal change to usd with such an event?

Wed, 02/09/2011 - 00:48 | 945497 More Critical T...
More Critical Thinking Wanted's picture

 

You mean what would happen to oil markets if oil was suddenly traded in EUR, gold or goats?

Not much, except the inconvenience of migrating thousands of well-established trading flows and customers over to another instrument ... it's not simple.

That 'other instrument' has risks too: EUR's prospects as a reserve currency were shaken in the 2010 debt crisis. What other currency would there be? Rubles? Yuan? Yen? CHF? Each has its own problems.

The effects on the dollar? Not much because the (physical) commodity trading itself is mostly dollar-invariant.

There's certainly some secondary effects: the convenience of the dollar makes it easy to move commodities related funds into treasures and there's a whole ecosystem of dollar denominated instruments: bonds, equities, commodities.

So any commodity that migrates out of that USD system will lose all these 'synergy' benefits. Which may not be much - but if you are a commodity producing country that is competing with other commodities then you certainly do not want to be the first one to risk that move.

But the main problem is, which currency to move to? Dollar strength and weakness is only a problem if it's too fast and 'surprises' participants. If the moves are slow and steady like most of the ones in the past 20 years:

http://research.stlouisfed.org/fred2/graph/fredgraph.png?&chart_type=lin...

then even the large 40%+ devaluation of the dollar during Bush's terms is not a big problem to commodities markets.

 

Wed, 02/09/2011 - 01:11 | 945533 Sophist Economicus
Sophist Economicus's picture

All kidding aside, do you really believe what you just typed or are you playing 'devil's advocate'?   Cause if you do believe this you are really missing the boat here

Lemme ask you - forget oil for the moment.   What happened to the purchase price of computing power in USD over the past forty years in real terms?

Now, what would that price be in real terms, if there wasn't a depreciation in the purchasing power of the dollar?   Easy to quantify?  But you probably know the direction, right?

Now, what is the price of oil in nominal and real terms, over the past 40 years for oil, in USD?   Now, ask yourself the other questions too...

 

Wed, 02/09/2011 - 02:15 | 945642 More Critical T...
More Critical Thinking Wanted's picture

 

Not sure what your point is as it's apples to oranges.

"Computing power" is not a commodity with an inflexible (finite) supply.

Firstly, the basic unit of "computing power" is ever expanding by Moore's law. Secondly, whatever demand there is for chips, it's met almost immediately - the market is largely demand controlled. There's a constant over-supply of most types of chips and producers are struggling with a constant churn in quickly-obsoleted stocks of chips.

The oil market is supply controlled: there's more demand for oil on the planet than there is supply. Demand is very inflexible and only relatively large rises in the oil price decrease demand so much that it can meet supply.

So the two markets could not be any more different in nature.

So could you please make a clear point and state it like a man, instead of letting me to guess your intented point? :-)

 

Wed, 02/09/2011 - 09:59 | 946041 Bill Bogus
Bill Bogus's picture

I don't get why you are being junked. I see your points as absolutely valid and I appreciate your explanations.

I'm dedicating my first post on here to applauding you as I'm feeling this discussion is getting a fair bit one-sided.

Thanks for the input, keep it up!

Wed, 02/09/2011 - 01:26 | 945564 tellsometruth
tellsometruth's picture

"There's certainly some secondary effects"...

I know we will agree to disagree on many topics, we can agree to that then.

 

as the forum would say "blowback bitchez"

 

Wed, 02/09/2011 - 01:28 | 945567 Boxed Merlot
Boxed Merlot's picture

So, who pays the sales tax, India when they buy US "dollars", or Russia when they redeem US dollars back to Rubles? 

 

Hey, get Geitner, I think someone's scamming the treasury!

 

 

Wed, 02/09/2011 - 02:18 | 945646 More Critical T...
More Critical Thinking Wanted's picture

 

None pay any sales taxes - international bank transfers of capital are exempt from most types of taxes.

There's a few pips of FX transaction overhead at most, in the 0.001% range, plus the rollover cost - which is a similar order of magnitude.

You really have absolutely no idea what you are talking about, right?

 

Wed, 02/09/2011 - 04:31 | 945765 Bringin It
Bringin It's picture

Here's the hook MCt.  Everybody, in some way or another has to keep an inventory of this shite paper on hand.  Everyone in the world, thru their national treasury and/or business/employer needs an inventory of dollars and will pay a premium to get them to avoid the threat/risk of being cut off from international trade.

Because dollars is the only thing trade-able for the necessity --> oil, all countries, all banks, all multinationals are gorged on dollars.

Let me put it in terms you can understand --> The Reserve Currency status is like steroids for dollar demand.

What's more likely to happen in your Russia/India scenario is a straight barter deal, which are becoming more common as dollar believability wanes.

Wed, 02/09/2011 - 04:58 | 945774 More Critical T...
More Critical Thinking Wanted's picture

 

In the Russia/India scenario I agree that there will probably be a straight barter deal if the deal is large enough, priced in the Rupees->Rubles FX rate and the price of oil in Rubles.

That underlines my point that there's no USD involvement at all. There is no obligation of producers and consumers to clear through USD markets.

If it's mid-sized then the USD footprint is both temporary (a couple of days) and small (for a big bank who will clear the whole transaction).

Also, I think you are over-stating the dollar inventory pressures.

Global trade is around $75 trillion per year, or about 200 billion per day.

Lets assume all of it is cleared through USD accounts that would roughly require a $200x2 billion inventory for two-day clearing - or just credit lines between the top banks as the transactions would net out shortly later.

And that distributes across dozens of large banks.

The benefit to the US is that the banks are holding this liquidity 'for free' - losing around 2% on it per year. That would be an around $10 billion per year 'free' income for the US from reserve currency status - a large number but chump change compared to the US GDP.

And that assumes that all trade happens via the USD, which is not nearly true and assumes that none of it is netted out via interbank credit lines which is not nearly true either ...

 

Wed, 02/09/2011 - 06:53 | 945822 AnAnonymous
AnAnonymous's picture
  • India converts Rupees to 1 billion dollars
  •  

  • Russia converts 1 billion dollars to Rubles
  • And these operations are cost free? What is the use of reserves then if you can convert one currency to another with no cost?

    The real net transaction was rupees to rubles? After describing the money circuit? The short timespan is irrelevant. No matter how long they hold USD, they hold it, therefore pressuring the demand on USD.

    The real net transaction was in USD, without it, there is no transaction possible.

    Both of these countries are limited in their reciprocal trade dealings by their capacity to acquire USD. And that is why the price of a commodity like oil can be rather steady in USD, which is the reference point for all transactions.

    If indeed, the trade relationship were established in rupees and rubles with no intermediation of USD, it would be another story.

     

     

    Wed, 02/09/2011 - 12:27 | 946539 More Critical T...
    More Critical Thinking Wanted's picture

     

    And these operations are cost free?

    They are not, there's a few pips spread (in the <0.01% cost range) and there's a few days of nightly financing cost (in the <0.01% cost per day range as well).

    What is the use of reserves then if you can convert one currency to another with no cost?

    Uniform accounting is beneficial and the USD is immediately convertible into any target currency with low spreads.

    That does not mean that the actual denomination of the USD directly matters to commodity pricing: as long as the USD exchange rates move slowly relative to the typical clearing delay of such a transaction (a day or two) it's a largely neutral factor to non-US trade relations.

    Just check the charts and see how the price of gold in Euros is largely independent of USD weakness. So is the price of oil in Euros - or Yens or CHF.

    Commodities have their real global price levels and most trade happens outside of the US, so commodity prices are largely not set by the US and not set by the exchange rate of the USD.

    For example check the price of oil measured in gold:

    http://finance.yahoo.com/q/bc?s=GOO.L+Basic+Chart&t=2y

    You will see it shows few of the weakness/strength patterns of the dollar index:

    http://research.stlouisfed.org/fred2/graph/fredgraph.png?&chart_type=lin...

    And where there's correlation it's typically due to big world events affecting both the strength of the dollar and the real price of a commodity.

     

    Wed, 02/09/2011 - 13:51 | 946904 AnAnonymous
    AnAnonymous's picture

    The USD is the reference point.

    The cost is generated by the capacity of every other country to acquire USD.

    Wed, 02/09/2011 - 14:59 | 947127 More Critical T...
    More Critical Thinking Wanted's picture

     

    That may be a transaction cost - but in the 0.01% range.

    Here's a numeric example:

    http://www.zerohedge.com/article/did-wikileaks-confirm-peak-oil-saudi-sa...

    My point was that dollar weakness is not the main source of commodity price inflation ...

     

    Wed, 02/09/2011 - 04:26 | 945764 EscapeKey
    EscapeKey's picture

    Seriously, don't waste your time. Whenever he realizes he speaks out of his ass (which is often), he attempts to move the goalposts. When people then point this out, or tells him to fuck off, in his world he considers himself triumphant.

    It's intellectual dishonesty of the worst kind, right up there with RedNeck's progressive admission, once he realizes he can't hold a given point of view (only then to recapture this point at the start of the next discussion).

    Tue, 02/08/2011 - 23:37 | 945284 ColonelCooper
    ColonelCooper's picture

    I think the part that one of you is missing, and one of you is not explaining well is that: hang on....

    Yes, the price oil (in USD) goes up and down relative to the strength of the dollar.  Assuming no big demand change, the value of the oil stays basically the same.  Since the rupee isn't directly pegged to the dollar, then it will take the same number of Rupees to buy more dollars worth of oil, but the number of barrels stays the same. (Holy Yogi Bera, Batman! That could be Abbott and Costello material) I know I butchered that, but it seemed the point that was missing in the debate.

    Muscleman: I would agree that the Fed isn't the only source of the problem, ie. oil price, subsidies using grains for other uses, poor yield/weather conditions, global currency inflation,,,,  but do you really think that the amount of currency the US and other CB's have created in the last ????? has contributed nothing?

    Wed, 02/09/2011 - 00:21 | 945427 More Critical T...
    More Critical Thinking Wanted's picture

     

    Muscleman: I would agree that the Fed isn't the only source of the problem, ie. oil price, subsidies using grains for other uses, poor yield/weather conditions, global currency inflation,,,,  but do you really think that the amount of currency the US and other CB's have created in the last ????? has contributed nothing?

    I don't claim that - there's certainly secondary or tertiary relationships.

    What I tried to counter here was the silly "today's charts show that crude oil got 2% more expensive, so India must be paying 2% more for oil!!" notion and its blame-the-Fed followups.

    The oil price and dollar relationship is complex and there's a lot of caveats:

    • the US itself is an oil consumer and producer as well, and its exchange rate impacts its internal demand - which couples back to global demand. Note that the coupling is negative: a 1% dollar weakness would couple back with a 0.02% real oil price drop. Not much more because oil demand is pretty inelastic.
    • China will try to match up the dollar's strength so that will couple back too. We cannot blame the communist leadership's decade old centrally planned protectionist yuan intervention on the Fed though ...

    The biggest argument against the USD <-> real oil price link is the WTI/Brent spread: why is the US domestic crude trading at a $13 discount to the more expensive to refine Brent crude?

    The main reason: because demand in Europe is higher than in the US.

    This again teaches us that oil prices (physical delivery, not futures) are mainly influenced by supply and demand, and that rising prices are a sign of demand meeting supply and supply not being able to expand any more ...

    Regarding Fed easing: economic growth expectations certainly increases expectations of future demand of oil. So if the Fed is successful at stimulating the US economy then that growth will certainly increase the price of oil.

    That in itself is not a bad thing though - unless you think that the US economy should never grow.

    As far as Fed stimulated dollars flowing out and being used for speculation in oil futures - I'm sure that's happening, but it's irrelevant to physical delivery prices.

    As far as Fed stimulated dollars flowing out and being used for speculation in physical oil - I'm somewhat doubtful but maybe it's happening. It takes a lot of rollover costs though as storing oil is expensive - and the political risk is very high: the moment a 'speculator' is found hoarding a lot of real oil all hell will break loose ... So why do that if there's tens of thousands of much safer instruments to speculate in?

    As an additional data point read the 2007/2008 Wikileaks cables and see the candid admission of various important players in the oil market that it's genuine supply and demand that is moving oil prices up, not speculation. Also note the motivation: oil producing countries would love to point at speculators as that would move the blame away from them. Instead they have to admit that it's their inability to increase supply that is causing the problems.

    I think most of the Fed dollars went into US equities and emerging market currencies, equities and bonds.

    It went into commodities as well, just indirectly: it went into commodities linked equities.

    Moving into physical commodities can be rewarding but it's hard and messy - you have to take physical delivery of the stuff, which is a lot of trouble and does not really scale either. Those Wall Street geniuses do not have nearly as much experience in moving ships around as they have experience in moving funds around.

    So yes I'm sure the likes of Jim Rogers did it and are doing it - but to the tune of tens of billions of dollars? I doubt it. (but I could certainly be wrong, as usual.)

     

    Wed, 02/09/2011 - 06:56 | 945825 AnAnonymous
    AnAnonymous's picture

    What I tried to counter here was the silly "today's charts show that crude oil got 2% more expensive, so India must be paying 2% more for oil!!" notion and its blame-the-Fed followups.

     

    It is a waste of time then because very few people hold this view here. Most people focuse on the part the FED plays in the scheme.

    Wed, 02/09/2011 - 12:29 | 946555 More Critical T...
    More Critical Thinking Wanted's picture

     

    Well, you must be reading a different ZH then, as I see the 100+ replies thread above where almost everyone argues that dollar inflation == global commodities price inflation ... :-)

     

    Wed, 02/09/2011 - 13:41 | 946862 AnAnonymous
    AnAnonymous's picture

    Or you might be one of those making an equivalence between the two. Most the others think in terms of impacting.

    Wed, 02/09/2011 - 15:01 | 947136 More Critical T...
    More Critical Thinking Wanted's picture

     

    What correlation are you suggesting by 'impacting'? I made very specific claims.

    Here's a numeric example:

    http://www.zerohedge.com/article/did-wikileaks-confirm-peak-oil-saudi-sa...

     

    Tue, 02/08/2011 - 23:38 | 945286 tmosley
    tmosley's picture

    You talk big, but you don't seem to realize that oil is not just denominated in dollars, but it is TRADED in dollars.  Until recently, it was EXCLUSIVELY traded in dollars.  This means that if India wanted to buy oil from Saudi Arabia, they had to export goods to the US to get dollars.  Easy money policies have made it easier for these countries to get dollars without sending us as many goods.  Can you guess what this means?  

    Since you are incapable of critical thinking, let me spell it out for you.  Da Fed prints da monie, da monie buys less!  Further, since everyone around the world now has a lot more dollars, they are able to bid up the price of oil, the main thing they buy with dollars (since the US doesn't make enough to balance its trade deficit).

    Welcome to real-world economics 101.  You get an F.

    Wed, 02/09/2011 - 00:28 | 945450 More Critical T...
    More Critical Thinking Wanted's picture

     

    This means that if India wanted to buy oil from Saudi Arabia, they had to export goods to the US to get dollars.

    Have you ever heard of this obscure little market called the 'foreign exchange (FX) market', which trades 3+ trillion dollars a day?

    Yes, it allows the changing of Rupees to Dollars, without moving any goods. Wow!

    In short: your argument is an epic fail.

    See this (simplified) example of how India buys oil from Russia, and how the transaction is USD-neutral:

    http://www.zerohedge.com/article/did-wikileaks-confirm-peak-oil-saudi-sa...

     

    Wed, 02/09/2011 - 01:02 | 945516 snowball777
    snowball777's picture

    Did you get all the muscles trying to pull their heads out of their asses?

    Wed, 02/09/2011 - 01:16 | 945542 More Critical T...
    More Critical Thinking Wanted's picture

     

    Yeah, especially this tmosley fellow is a return client - no amount of embarrassment seems to be enough for him. A natural born masochist.

     

    Wed, 02/09/2011 - 02:07 | 945627 CrockettAlmanac.com
    CrockettAlmanac.com's picture

    If libertarians are such a nuisance to you why do you insist that we should be "saved" by being forced into your "safety nets?" Why not just let us succumb to pernicious freedom and be done with us?

    Wed, 02/09/2011 - 03:29 | 945731 More Critical T...
    More Critical Thinking Wanted's picture

     

    Do you mean universal health care for example?

    Assuming you do not pay a health care tax and get involved in a bad accident or get seriously ill. Further assuming you could not pay for the treatment (which is a real possibility amongst libertarians as well) there's two options:

    • you do not accept treatment and die. I'd not want to allow this because I think it's not civilized to let people die who could be saved and who could live a happy life afterwards.
    • you accept treatment but you do not (can not) pay. I'd not want to allow this because you are freeloading on others. If enough people did this out of "libertarian conviction" then the whole system becomes unsustainable.

    Also, libertarians have kids too, and I do not find it civilized to let kids die or suffer just because their parents are stupid in some matter. If I'm stupid to the extent of hurting my kid I'd expect the rest of society to intervene - against my will. I have no freedom to hurt my kids.

    Pretty much the only way you could guarantee that you would not impact the rest of society in such negative ways was:

    • if you moved to some other country (then you become someone else's problem)
    • or if you convinced society that your way is the right approach. (Then my views would be in the minority and I'd have to accept that vote.)

    Does that explain my position?

     

    Wed, 02/09/2011 - 03:39 | 945733 CrockettAlmanac.com
    CrockettAlmanac.com's picture

    Does that explain my position?

     

    Yes, but it does not justify your crime of trying to enslave me due to what you claim is your excessive good will. Nobody's falling for that "white man's burden" crap anymore.

    Wed, 02/09/2011 - 03:51 | 945741 More Critical T...
    More Critical Thinking Wanted's picture

     

    It's only partly 'good will' - it's partly self interest: against freeloading.

    Also, you made the decision to live in this civilization, thus you are expected to pay a fee as civilization is never cheap. That concept is hardly 'slavery'.

    Also, you did not reply to my points about kids. If you define 'freedom' as 'you are free to hurt your kids' then I strongly disagree with that.

    Does civilization have a duty to stop you if you are beating your kid? Yes.

    Does civilization have a duty to stop you if you are keeping your kid away from life-saving vaccines? Yes.

    Does civilization have a duty to stop you if you are giving crack cocaine and heroine to your kid? Yes.

    Does civilization have a duty to stop you if you are not providing your kid with adequate education? Yes.

    Does civilization have a duty to stop you if you are keeping your kid away from life-saving medical treatments? Yes.

    Even within the scope of libertarianism your freedom does not give you the right to enslave and hurt your kid - even with the best of intentions. So there inevitably must be a minimum set of requirements that is expected of parents.

    Read: your kid's future notion of freedom can be in conflict with your notion of freedom.

     

    Wed, 02/09/2011 - 03:55 | 945747 CrockettAlmanac.com
    CrockettAlmanac.com's picture

    "Every man's nature is a sufficient advertisement to him of the character of his fellows. My right and my wrong, is their right and their wrong. Whilst I do what is fit for me, and abstain from what is unfit, my neighbour and I shall often agree in our means, and work together for a time to one end. But whenever I find my dominion over myself not sufficient for me, and undertake the direction of him also, I overstep the truth, and come into false relations to him. I may have so much more skill or strength than he, that he cannot express adequately his sense of wrong, but it is a lie, and hurts like a lie both him and me. Love and nature cannot maintain the assumption: it must be executed by a practical lie, namely, by force. This undertaking for another, is the blunder which stands in colossal ugliness in the governments of the world." -- Emerson's Politics

    Wed, 02/09/2011 - 04:15 | 945757 More Critical T...
    More Critical Thinking Wanted's picture

     

    Sorry, but you did not reply to my (I think valid) points about the rights and freedoms of kids, at all.

     

    Wed, 02/09/2011 - 07:58 | 945865 Husk-Erzulie
    Husk-Erzulie's picture

    Darnit, I was completely in your corner until you started in on the "think of the poor  children" business.  That shit is tired dude,besides, you forgot to mention the puppies and the polar bears.

    Wed, 02/09/2011 - 12:45 | 946625 More Critical T...
    More Critical Thinking Wanted's picture

     

    I'm with you, I really hate the 'think of the children!!!' spiel as well (frequently played on both sides of the political spectrum), but in this case it simply applies:

    Even if I could be convinced to let stupid adults rot as they wish to (I cannot be convinced about that: if there's subsidized services available then the freeloading begins - it's either everyone-pays or everyone-for-himself), I simply cannot be convinced to let children suffer physical harm from the stupidity of their parents. We might as well stop doing this civilization thing if we allow that.

    I will not suppress a point just because it may sound cheesy and manipulative to others. Political correctness is censorship of the worst kind.

    And no, I do not want to protect the children from the opinion or world views of their parents, even if I strongly disagree with those views. I'm 100% sure that the overwhelming majority of libertarians are fantastic parents and that their kids are happy.

    My point is to just minimally and optionally intervene to prevent irreversible physical harm, in extreme cases, until the child had a fair chance to reach adulthood. (like not getting measles and living the rest of his life with physical brain damage.)

    I'd expect others to extend this favor to my kids as well, should I go clinically insane. (I'm sure there's plenty of folks here who would argue that I've reached that stage long ago. :-)

     

    Wed, 02/09/2011 - 09:49 | 946018 Blankman
    Blankman's picture

    MCT, I enjoyed the discussion you had with the posters above it was very informative. When it comes to macro econ and oil I consider myself a novice, though I have an open mind and am learning.

    Re your rant about the kids I can agree on most points. Where I have a question is what is your belief on this matter regarding adults? Should adults be allowed to do as they please? Do I have the right to keep myself away from vaccines or education or life saving medical treatments? I believe that yes adults should be allowed to do as they please to themselves as long as they are not hurting or affecting others.

    Wed, 02/09/2011 - 13:05 | 946720 More Critical T...
    More Critical Thinking Wanted's picture

     

    Re your rant about the kids I can agree on most points. Where I have a question is what is your belief on this matter regarding adults? Should adults be allowed to do as they please? Do I have the right to keep myself away from vaccines or education or life saving medical treatments? I believe that yes adults should be allowed to do as they please to themselves as long as they are not hurting or affecting others.

    I very much agree with you - I don't think adults should be 'protected' from their own stupidity. (as long as it does not hurt others [*])

    • Firstly, for pragmatic reasons: it's pointless - they will find a way. If an activity is truly harmful then Darwinian selection will eliminate that particular gene in a few generations ...
    • Secondly, for theoretical reasons: what seems stupidity to me might be the real good thing in the long run. Many people we consider geniuses today were once regarded idiots.
    • Thirdly, I think even if it has disadvantages it's a fair price for freedom.

    'Children' I simply consider a messy pragmatic special-case problem to which no-one will find a perfect solution. It's a trade-off between freedom of the parent and freedom of the child.

    Like it or not, strictly speaking children are legally temporary slaves to their parents. Whose opinion matters, the parent's or the child's future opinion about any given matter such as vaccination? How do we figure out what the child's future opinion will be?

    So the best solution I think is to maximize the freedom of the parents, to the extent it does not irreversibly harm the child's future prospects of exercising freedom.

    I.e. do not allow parents to irreversibly harm children physically, up to the point the child reaches adulthood. At which point it will be his decision.

    Does this adequately explain my position?

    [*] 'It does not hurt others' is a strong statement that should be interpreted inclusively. Taking drugs in public can hurt others and hard drug use by parents hurts the child as well - in many cases drug abuse is not a victimless crime. If an adult with no dependants takes drugs it's probably his own problem only. Having children brings responsibility - and that responsibility somehow (and imperfectly) has to be defined and enforced by civilization.

     

    Wed, 02/09/2011 - 20:53 | 948038 Blankman
    Blankman's picture

    Clear enough to me.  Thank you.

    Wed, 02/09/2011 - 02:46 | 945682 Red Neck Repugnicant
    Red Neck Repugnicant's picture

    Yeah, especially this tmosley fellow is a return client - no amount of embarrassment seems to be enough for him...

    *LOL*

    More Critical Thinking - 

    Once again, you've completely decimated every argument set against you.  It's a pure joy (and very educational) to read. 

    I hope you continue to post here, as it's endlessly refreshing when compared to all the redneck, doom/gloom, libertarian disinformation that gets repeated day after day here.

    Warmest regards..

     

    Wed, 02/09/2011 - 02:55 | 945696 CrockettAlmanac.com
    CrockettAlmanac.com's picture

    Once again, you've completely decimated every argument set against you.

     

    So you're saying he's only right ten percent of the time? That sounds about right.

    Wed, 02/09/2011 - 08:56 | 945917 jeff montanye
    jeff montanye's picture

    its meaning certainly has drifted from the original hasn't it?  also isn't this article about the saudis not having the reserves or the output they (or others) claimed?  isn't that bullish for oil, on average and at the margin?  why did hillary call back all those ambassadors?  was it this?

    Wed, 02/09/2011 - 09:36 | 945991 tmosley
    tmosley's picture

    I honestly can't believe that it is possible for a human being not to be embarrassed by their constant LACK of critical thinking.  Every god damn thing you have ever posted has been utterly devoid of it.  I have demonstrated this time nad time again, but you just keep up the bullshit like you never read it.  

    I mean, you think that FX traders get their dollars from the sky!

    Wed, 02/09/2011 - 03:13 | 945714 Burnbright
    Burnbright's picture

    The point is that those countries must use USD for their transactions. The US only needs to print its own dollars to pay for everything. The US exports inflation regardless of FX trade swaps because it nets inflation either way. If a foreign country exports to our country they get US dollars and thus inflation (as more US dollars are sequestered via exports or bond purchases), or they get inflation in their own currency if they try to keep certain exchange rates via FX swaps such as dollar pegs etc. If a Foreign country were to begin devaluing ther currency they could easily cause hyperinflation because their currency is not required for international trade.

    The very fact that this is occuring is why the dollar will collapse. The US is proping up its own economy by destroying all other economies in the process until each of those soviergn nations either sucumb to rioting and starvation and ultimate revolution, or they simply stop trading in US dollars.

     

    If I was in that position I know what my choice would be. Got Gold Bitch?!

    Wed, 02/09/2011 - 03:36 | 945734 More Critical T...
    More Critical Thinking Wanted's picture

     

     

    The point is that those countries must use USD for their transactions. The US only needs to print its own dollars to pay for everything.

    What you write is a nice theory but it is incorrect.

    Check the charts - on a quiet day, if the dollar weakens by 1% then oil gets more expensive by 1%.

    So for the rest of the world, who does not own dollars but Rupees and Rubles, oil still costs the same.

    So no, the US can not print 'free dollars' - printing USD decreases the FX rate and essentially all commodity prices compensate for that. Why? Because the commodities are only priced and traded in dollars, but their real value depends on global supply and demand - and that is largely USD neutral.

    You can check gold as well: on a quiet day (no big events) if the dollar gets stronger by 1% then the price of gold goes down by 1%. If you look at the price of gold in Euros or Yens you will see no change. This is called the inverse price relation between the USD and commodity prices.

    The rest of your argument fails because it's based on that fundamentally false premise.

     

    Wed, 02/09/2011 - 12:09 | 946479 Burnbright
    Burnbright's picture

    So for the rest of the world, who does not own dollars but Rupees and Rubles, oil still costs the same.

    No it doesn't, are you brain dead? THEY CAN'T USE THEIR OWN CURRENCY TO BUY OIL. 

    Wed, 02/09/2011 - 13:47 | 946870 More Critical T...
    More Critical Thinking Wanted's picture

     

    Yes but the denomination of those dollars does not matter to the oil transaction!

    Let me give you a simple numeric example, maybe that way we can get somewhere.

    In that example I'll show you that in the "India buys oil from Russia" transaction the strength of the dollar does not materially impact the trade. (so the strength of the dollar does not directly impact price inflation in India.)

    Day 1: (note, the FX rates are simplified to keep the example simple)

    a barrel of oil costs $100, the Rupee->Dollar exchange rate is 1.0, the Dollar->Rubles exchange rate is 1.0.

    India wants to buy 10 million barrels of oil, it first converts 1 billion Rupees to 1 billion dollars, at the 1.0 exchange rate. It pays Russia with 1 billion dollars and the 10 million barrels of oil starts getting pumped towards India. Russia exchanges the 1 billion dollars to 1 billion Rubles.

    Day 2:

    The USD weakened by 1%, so the price of oil went up to $101 dollars. (there were no major events in the oil market, so the inverse price relationship did its work.)

    The Rupee->Dollar exchange rate is 1.01, the Dollar->Rubles exchange rate is 0.99.

    India wants to buy 10 million barrels of oil, so it first converts 1 billion Rupees to 1.01 billion dollars. It pays Russia with 1.01 billion dollars who starts pumping the oil towards India. Russia converts the 1.01 billion dollars to 1 billion Rubles (1.01 * 0.99 ).

    Compare day 1 and day 2. Despite the dollar weakening by 1%, despite oil 'getting more expensive by 1%' (as seen on the USD priced oil price charts) India could buy the same 10 million barrels of oil for 1 billion Rupees and Russia got 1 billion Rubles as a result, like it was able to do it with a stronger dollar.

    There was zero inflationary effect of the USD weakening on this oil transaction between India and Russia: both parties got exactly the same money they got before, and traded the same physical amount of oil. [*]

    There was a slight sell pressure on the Rupee and a slight buy pressure on the Ruble FX rate: but that is what happens when two countries trade with each other - and this pressure was USD neutral as well.

    Does this explain it to you?

    [*] the FX transactions were obvious slightly different due to the different numeric rates, but they netted out due to the inverse pricing. There was $10 million more used in the temporary transaction - but that was a temporary position and not a cost, those dollars appeared and vanished in short order from both country's accounts - so there was no permanent effect on the dollar supply either. (The cost of the FX transaction was a tiny bit larger: with a 10 pips spread that extra cost was around a few thousand dollars - a 0.001% range cost and absolutely minuscule compared to the size of the deal.)

     

    Wed, 02/09/2011 - 04:50 | 945769 EscapeKey
    EscapeKey's picture

    That would be true if US Dollar holdings, or denominated assets thereof, would stay static. But they don't. They have been progressively climbing since... well, forever. This means the Russians DON'T convert the Dollars into Rupees, and the Dollar stays at its overvalued high.

    But no doubt you knew that already.

    Of course, what will happen once the realization kicks in that these assets are worth a lot less than their stated value... oh, what's that? 2 and 10 year yields increasing despite Bernanke monetizing 100% of the deficit?

    Wed, 02/09/2011 - 15:17 | 947185 More Critical T...
    More Critical Thinking Wanted's picture

     

    Even assuming a $200 billion of world-wide dollar trade inventory (which is a generous estimation),  a 1% devaluation of the dollar has trivial effects ($2 billion) compared to the size of international trade ($75 trillion).

    So even that link to 'commodity price inflation' is very, very weak: around +0.002% for every 1% of dollar weakening ...

     

    As for the (freely made, unforced) investment decisions of various nations, what does that have to do with the strength of the dollar impacting global inflation? If Russia decided to short the dollar they'd be helped by a weaker dollar! If Russia is so stupid to keep all its oil revenue in dollars then it will of course be exposed to the FX rate of the dollar. If it decides to keep it all in Euros (it can convert from dollars to Euro with almost zero costs) then it will be exposed to the Euro exchange rate. If Russia keeps it all in gold it will be exposed to the (real) price of gold.

    If I keep pulling out a bit of hair every time the dollar weakens do I get to blame my eventual baldness on Bernanke? :-)

    Really, you are mixing up basic rules of causality.

     

    Wed, 02/09/2011 - 07:03 | 945828 AnAnonymous
    AnAnonymous's picture

    Yes, it allows the changing of Rupees to Dollars, without moving any goods. Wow!

     

    This is playing on words and splitting hair.

    People buying rupees and  people selling in exchange USD are interesting in what?

    What are the Indians buying USD interested into? A fair number of times, they are interested in getting an access to the world commodity market therefore goods. The USD is the entry ticket to the world commodity market. There are of course other causes to enter the FX markets but one cause is indeed to trade goods from one country to another. The US has positioned itself as the middle man of the world, the one people has to deal with if they want to establish trade between themselves, to trade their own goods.

    And the demand on the USD has an impact on the strength of the USD relatively to all the other currencies.

     

    Wed, 02/09/2011 - 15:14 | 947198 More Critical T...
    More Critical Thinking Wanted's picture

     

    People buying rupees and  people selling in exchange USD are interesting in what?

    My original (and unchanged) claim is very simple: that 'global inflation' is largely decoupled from the USD rate.

    To help you understand my points I described to you how international trade is done, and I described the forces that determine 'food price inflation' and 'fuel price inflation' in India or Russia.

    Here's a numeric example:

    http://www.zerohedge.com/article/did-wikileaks-confirm-peak-oil-saudi-sa...

     

    Wed, 02/09/2011 - 09:34 | 945985 tmosley
    tmosley's picture

    And where, praytell, do you think the sellers of those dollars got them?  The sky?

    No, it only means someone ELSE had to produce and export goods to the US.  

    Stop thinking you get a free lunch.  There is no such thing.

    Wed, 02/09/2011 - 15:25 | 947239 More Critical T...
    More Critical Thinking Wanted's picture

     

    And where, praytell, do you think the sellers of those dollars got them?  The sky?

    No, they will be held by the (large) bank handling the trade transaction and the dollar inventory is generally relatively small (compared to the total size of global trade) because international trade is balanced so there's offsetting sellers and buyers of dollars all the time.

    The dollars will first be acquired but then sold as the transaction clears. Beyond the transaction cost there's no USD rate exposure and the USD rate does not impact how much India had to spend on the transaction.

    So believe it or not, it's a pure Rupees->Rubles transaction and the USD rate does not impact the number of Rupees India has to pay for Russian oil. See an example calculation here:

    http://www.zerohedge.com/article/did-wikileaks-confirm-peak-oil-saudi-sa...

     

    Wed, 02/09/2011 - 00:56 | 945507 Cistercian
    Cistercian's picture

     You are wrong.If I knew nothing of what he wrote, I would, after reading his missive still know nothing.

     F--

      Less than an F in other words.

      Carry on!

    Wed, 02/09/2011 - 04:41 | 945767 Bringin It
    Bringin It's picture

    It's interesting to me how the topic of Proof of Saudi overstating reserves, gets such energetic responding from MCt.

    Clearly hit a nerve.  Shattered world view or appoplectic response from his handlers?  You decide.

    Tue, 02/08/2011 - 23:41 | 945297 bankrupt JPM bu...
    bankrupt JPM buy silver's picture

    What happens when they only except gold as payment for Crude?  And I'm not talking about the GLD ETF.

     

    www.silvergoldsilver.blogspot.com

    Wed, 02/09/2011 - 00:35 | 945472 More Critical T...
    More Critical Thinking Wanted's picture

     

    That's an intelligent question. If oil is measured in gold then oil charts look like this:

    http://finance.yahoo.com/q/bc?s=GOO.L+Basic+Chart&t=2y

    And still nothing would happen to the real value of oil: it would be gold-neutral just as much as it is largely USD-neutral now.

    The price of oil is mainly set by demand and supply.

    Btw., if you want a quick & dirty look at the 'real price of oil' you can look at the GOO chart - it removes the USD denomination noise from the real price of oil.

    (It adds gold pricing artifacts though - the dollar neutral "real" price of oil can be gotten via oil/dollar-index (DXY) charts.)

     

    Wed, 02/09/2011 - 09:02 | 945924 jeff montanye
    jeff montanye's picture

    maybe i'm missing most of this argument but is it really about the "real" value of oil or another commodity?  isn't it about the value of those in dollars?  for people whose national currency is dollars?  or whose portfolio has a lot of dollars in it?  and a weaker dollar, cet. par. means a more expensive barrel of oil/tank of gas.  create lots and lots more dollars through qe... and endless bond sales/structural budget deficits/spending on largely transfer payments and unproductive investments (war, tbtf) and oil price in $ goes up.  something to avoid (or profit from) no?

    Wed, 02/09/2011 - 10:04 | 946047 Calmyourself
    Calmyourself's picture

    Of course a large component of its cost is the value of the dollars.  MCT wants you to forget that and think demand and supply.  Why, because he likes nanny government printing and taking care of the children..  Profiting from the falling dollar is a losing investment.

    Wed, 02/09/2011 - 15:28 | 947251 More Critical T...
    More Critical Thinking Wanted's picture

     

    Here's an example calculation that shows what the "real" value of a commodity means:

    http://www.zerohedge.com/article/did-wikileaks-confirm-peak-oil-saudi-sa...

    And how commodity transactions between non-US countries are largely USD-neutral.

     

    Tue, 02/08/2011 - 23:46 | 945312 crazyjsmith
    crazyjsmith's picture

    To both you guys,

    To try to define one variable as the end all reason for such a complex and intertwined web of supply and demand, is foolish.  It is more than likely to be caused by many many many factors, some stronger than others.  USD Dollar, OPEC, Subsidies, Demand, Perception, Speculation, The Bernank, Faith, Trust, Russia...

    So just buy the dip, oh shit, never mind. 

    Wed, 02/09/2011 - 00:09 | 945377 Popo
    Popo's picture

    Wow, I've seen some people humiliate themselves on ZH before, but that was a brilliant, blazing fireball of humiliation. Oil is sold in dollars. Yes, every nation on earth cares deeply about the value of the dollar when they purchase oil.

    Wed, 02/09/2011 - 00:37 | 945481 More Critical T...
    More Critical Thinking Wanted's picture

     

    That's a common misunderstanding. See the discussions above for an explanation.

     

    Wed, 02/09/2011 - 06:25 | 945811 Popo
    Popo's picture

    But you haven't "explained" anything.  Your definition of a USD-neutral transaction isn't USD neutral at all.

     

     

     

    Wed, 02/09/2011 - 10:07 | 946052 Calmyourself
    Calmyourself's picture

    Give it up, your monkey avatar has more brains and less political slant in his reasoning than shrunken gonad boy above..  The value of the dollar does not matter, lol..  Yes in one short posting series tiny gonad man has reversed economics for all of mankind..

    Wed, 02/09/2011 - 15:33 | 947269 More Critical T...
    More Critical Thinking Wanted's picture

     

    See a sample calculation here:

    http://www.zerohedge.com/article/did-wikileaks-confirm-peak-oil-saudi-sa...

    To see how in that example India paid the same 1 billion Rupees for 10 million barrels of Russian oil and how Russia got the same 1 billion Rubles for it, despite the dollar weakening by 1%. I.e. how commodity prices are largely [*] USD-neutral.

     

    Wed, 02/09/2011 - 09:40 | 945999 tmosley
    tmosley's picture

    No, that is a real concern, considering every major nation in the world stockpiles dollars in order to buy oil.

    But hey, don't let the facts get in the way of your anti-critical "thinking".

    Wed, 02/09/2011 - 10:44 | 946147 Flakmeister
    Flakmeister's picture

     Which is the defacto statement that the US is the reserve currency. The dollar is backed by oil, and that will be maintained at gun point. Exhibit A is Iraq.

    Wed, 02/09/2011 - 01:56 | 945594 G-R-U-N-T
    G-R-U-N-T's picture

    Not this "Peak Oil" crap again!!! Just like the CO2 is a pollutant crowd their both full of shit!

    Wed, 02/09/2011 - 09:05 | 945933 jeff montanye
    jeff montanye's picture

    you wish.

    Tue, 02/08/2011 - 23:35 | 945274 whatsinaname
    whatsinaname's picture

    Thats the MOST MORONIC POST OF THE YEAR !! If we quit playing around with our interest rates and artificial liquidity, crude prices would be far more stable. If it were not for the fiat money system since 1971, crude would be around $30 per barrel (of course our GDP would not be at these currently unsustainable levels either). Meanwhile, if WL is right, then peak oil will fix all of our "phony growth" problems. Meanwhile, who encourages China to play the currency game and at what cost to future Americans ?

    Tue, 02/08/2011 - 23:51 | 945326 More Critical T...
    More Critical Thinking Wanted's picture

     

    If we quit playing around with our interest rates and artificial liquidity, crude prices would be far more stable. If it were not for the fiat money system since 1971, crude would be around $30 per barrel (of course our GDP would not be at these currently unsustainable levels either).

    LOL, the US interest rate itself does not have much effect on crude prices - not even on the nominal prices - let alone real prices.

    When India is buying oil from Russia why it would give a damn about the US interest rate or about the strength of the USD?

    It will not change how much oil India can buy from Russia for its Rupees: the price of oil and the dollar generally moves inversely. You get the real global, dollar-neutral price of oil by dividing the USD denominated oil price by the dollar index (DXY).

    You can even measure oil price in gold:

    http://finance.yahoo.com/q/bc?s=GOO.L+Basic+Chart&t=2y

    That will show you an approximate picture of the currency-neutral oil price ...

     

    Wed, 02/09/2011 - 00:58 | 945509 snowball777
    snowball777's picture

    And if a country is pegged to the USD?

    Wed, 02/09/2011 - 01:23 | 945559 More Critical T...
    More Critical Thinking Wanted's picture

     

    You mean if communist leaders of China centrally plan a protectionist, mercantilist dollar selling/buying scheme to subsidise their export industries, might that scheme hurt their industries if the dollar weakens too much?

    Possibly, but as the doctor said: if it hurts, stop doing that!

     

    Wed, 02/09/2011 - 01:34 | 945578 snowball777
    snowball777's picture

    I meant vis a vis your 'India doesn't care about dollars when buying oil' thesis...if the purchasing power of the USD is eroded and they're pegged, doesn't that make commodities more expensive for them too?

    Wed, 02/09/2011 - 01:50 | 945603 More Critical T...
    More Critical Thinking Wanted's picture

     

    Rupees are not pegged to the dollar.

    The only significant currency pegged to the dollar is the yuan, and I described what China's 'dollar peg' really is:

    Communist leaders of China centrally planned and implemented a protectionist, mercantilist dollar selling/buying scheme to subsidise their export industries.

    Will such a peg have effects on its real purchase price for oil? Yes, of course, because every time China lowers its export prices (the effect of the voluntary peg they are implementing), which devalues its currency and increases its (relative) internal prices - i.e. increases Chinese inflation - of oil products too (but other products as well).

    Can the US be blamed for that? How on earth: the US has asked China to balance out its trade and float its currency on the free market like a million times already ...

    I could do that too: every time the dollar is devalued I could pull out some hair. If the dollar weakens some more can I fairly blame Bernanke for making me bald? :-)

     

    Wed, 02/09/2011 - 11:04 | 946236 snowball777
    snowball777's picture

    "It's fuel subsidies in China and India that are driving up demand..."

     

    India was not the sole target of your thesis though...you can't change horsies now...you'll get all wet. And Sophisticus' point about carry trade above IS relevant to India and speculation in dollars is a problem worldwide (think Irish potato famine dynamics...they still had potatoes, but it was worth more to sell them to England than to their fellow countrymen).


    Wed, 02/09/2011 - 18:35 | 947277 More Critical T...
    More Critical Thinking Wanted's picture

     

    Are you talking about China's centrally planned intervention on the dollar market to always lower export prices of its goods to below the price of US products?

    If I pull out some hair every time the dollar weakens a bit, do I eventually get to blame Bernanke for my baldness? :-)

    China's actions are unforced and voluntary. To the extent it is introducing inflation in China (and it is ...) it is an entirely self-inflicted wound. Blaming Bernanke or dollar weakness for it is beyond silly.

    As the doctor says: "If it hurts, don't do it".

     

    Wed, 02/09/2011 - 00:42 | 945490 meizu
    meizu's picture

    "Our aggregate demand and supply analysis shows that Keynesian and monetarist views
    of the inflation process are not very different. Both believe that high inflation can occur
    only with a high rate of money growth. Recognizing that by inflation we mean a continuing
    increase in the price level at a rapid rate, most economists agree with Milton
    Friedman that “inflation is always and everywhere a monetary phenomenon.”

    - The Economics of Money, Banking and Financial Markets, Seventh Edition by Frederic S. Mishkin

    Wed, 02/09/2011 - 00:52 | 945501 meizu
    meizu's picture

    "Monetarist analysis indicates that rapid inflation must be driven by high money
    supply growth."

     

    "Keynesian analysis indicates that high inflation cannot be
    driven by fiscal policy alone."

     

    "Supply-side
    phenomena cannot be the source of high inflation."

    - Economics of Money, Banking, and Financial Markets, Seventh Edition, Frederic S. Mishkin

    Wed, 02/09/2011 - 01:39 | 945587 More Critical T...
    More Critical Thinking Wanted's picture

     

    You are confusing general across-the-board price level inflation with the price volatility of certain commodities.

    You want to check this graph:

    http://lh5.ggpht.com/_VgJQTp0Bsf0/TUgwIeY_oPI/AAAAAAAAAIo/ojOzqCOCthk/un...

    The run-ups of inflation in the 70s were certainly a monetary phenomenon: both wages and prices were going up, in a spiral.

    Most of the price level fluctuations following that era was temporary price volatility: after it spiked up it spiked downwards as well and core CPI did not change much.

     

    Wed, 02/09/2011 - 01:49 | 945601 meizu
    meizu's picture

    or more likely the core CPI formula was modified, cause commodities prices have been rising across the board for the last 10 years

    Wed, 02/09/2011 - 01:59 | 945614 More Critical T...
    More Critical Thinking Wanted's picture

     

    No, the core CPI index intentionally does not include volatile prices, to be able to measure the non-volatile component of inflation. You should not use it to judge 'everyday inflation' - use the blue line for that.

    Core CPI is a bit like the 'average daily temperature' metric used by meteorologists. It intentionally does not include the "daily low", nor the "daily high" values, and as such it cannot be used by you to judge whether you can step out of the door in shirts. Average daily temperature is still a very useful metric for meteorological models and it's a well-understood and meaningful value.

    So in the graph I linked to the blue line is 'real inflation' which affects your grocery bill - the red line is what economists watch, the 'dangerous', sticky component of inflation: core CPI.

    As you can see in the 1970s the red line very much increased - there was a real danger of runaway inflation and that was partly due to excessive monetary easing.

    If you check the 2010 line you'll see a different picture: the danger was (is) sticky deflation, not runaway inflation.

    Was this clear enough of an explanation?

     

    Wed, 02/09/2011 - 02:05 | 945624 meizu
    meizu's picture

    so where is the deflation?  the price of goods and services are not deflating; the only thing deflating is housing prices, which is asset deflation, which can happen simoutaneously with monetary inflation.

    Wed, 02/09/2011 - 04:13 | 945756 More Critical T...
    More Critical Thinking Wanted's picture

     

    What was deflating?

    Transportation:

    http://research.stlouisfed.org/fred2/graph/fredgraph.png?bgcolor=%23B3CD...

    "Other Goods and Services":

    http://research.stlouisfed.org/fred2/graph/fredgraph.png?bgcolor=%23B3CD...

    (i.e. misc goods and services, none of the major categories)

    Apparel:

    http://research.stlouisfed.org/fred2/graph/fredgraph.png?bgcolor=%23B3CD...

    Education and communication contributed a small dip as well in the summer:

    http://research.stlouisfed.org/fred2/graph/fredgraph.png?bgcolor=%23B3CD...

    Recreation:

    http://research.stlouisfed.org/fred2/graph/fredgraph.png?bgcolor=%23B3CD...

    All seasonally adjusted indices, so deflation was the real deal.

    Housing was actually flat, so it did not contribute to the historic record low CPI readings.

    Food and energy was high but that's high all around the planet due to supply shortages and spiking demand - which will probably fluctuate back in the other direction, letting deflation hit full force.

     

    Wed, 02/09/2011 - 12:30 | 946562 meizu
    meizu's picture

    dude, your own chart shows goods and services price index rising, except recreational services

    Wed, 02/09/2011 - 15:43 | 947291 More Critical T...
    More Critical Thinking Wanted's picture

     

    No, look at the summer of 2010 period (August in particular), when deflation became a worry and when QE2 became a necessity.

    Prices dropped then.

    They rose afterwards when the dollar started weakening in September.

     

    Wed, 02/09/2011 - 05:24 | 945790 CH1
    CH1's picture

    Dude, you're a time-sink.

    I think that is your purpose.

    Tue, 02/08/2011 - 22:21 | 945036 Michael
    Michael's picture

    FU!

    This is the first comment I ever got through on the Jack Cafferty blog.

    I just thank God every day for the complete and total economic collapse of the USA that is now a mathematical certainty.

    It is the only thing that will cure the American mental disorder known as fiscal ir-responsibility.

    Wed, 02/09/2011 - 00:36 | 945351 Michael
    Michael's picture

    You cannot reason with the Creaton Libs. The best you can do is marginalize them just like we did in the November elections.

    "Creaton" definition as per urban dictionary; 

    1) A person who is a TOTAL idiot and a pain in the ASS.

    2) One who CREEPS around and prays on the young boys and senior men in their old age.

    I will use this more widely used spelling;

    "Cretin Lib" is my new ad hominem attack. Troll is so yesterday.

    Tue, 02/08/2011 - 22:34 | 945080 Hephasteus
    Hephasteus's picture

    Yes I will pray with you. Dear GOD of ILLUSION. Welcome to lower case society.

    Let us pray to god in the real in the flesh in all his glorious bullshit.

    http://www.youtube.com/watch?v=GfQTZBA6Jg8

    Tue, 02/08/2011 - 22:35 | 945085 Cistercian
    Cistercian's picture

     Blasphemy as a means of attack.

      You are ignorant and tasteless too.

     Gold and silver are merely a hedge against the evil you serve.

     Be gone, troll.

     

    Tue, 02/08/2011 - 23:10 | 945162 Red Neck Repugnicant
    Red Neck Repugnicant's picture

    How devilishly ironic that a person hiding behind the moniker of "Cistercian" would comment on blasphemy and the tasteless! 

    Is that a double entendre? Perhaps, but I shall only refer to one edge of that sword: go fetch me a creamy Trappist ale, forthwith!  The other - less delightful - reference is between you and your God. 

     

    Tue, 02/08/2011 - 23:31 | 945258 Cistercian
    Cistercian's picture

     I recommend the cheese, btw.

     No irony, I actually understand what blasphemy is.

      What monastic college did you graduate from?

     I won't say, so as to protect my alma mater from my frequent peccadilloes.

     But rest assured, my avatar is fitting.How many Trappist houses accepted you as a postulant?

      I note your posts accumulate an inordinate number of junks.

     How bizarre considering your laser like insight.FAIL

     

     

    Tue, 02/08/2011 - 22:52 | 945138 ColonelCooper
    ColonelCooper's picture

    RnR: You are a racist bigot of the worst sort, and so high on the smell of your own farts that you can't even see that you have become that which you claim to despise.

    I actually wish painful death apon you.

    Tue, 02/08/2011 - 23:06 | 945193 Red Neck Repugnicant
    Red Neck Repugnicant's picture

    Apon?

    And I wish you would have paid attention in fourth grade. 

    Tue, 02/08/2011 - 23:19 | 945226 ColonelCooper
    ColonelCooper's picture

    Oops, sorry Professor, you are quite correct.

    Care to address the claim, or just continue passing judgement upon everyone who is different than you, while stroking your intellect (cunt)?

    You judge those who are different.  If you were only ragging on "tea baggers" because you thought they were short sighted I would understand (if not necessarily agree) with you.  You however, take it to the next level and attack anyone rural; anyone who lives outside your frame of reference.  That is the ultimate irony of you. 

    What's your next step, Eugenics? 

    Tue, 02/08/2011 - 23:28 | 945249 tmosley
    tmosley's picture

    Democrats don't make typos.  This is one of the features that makes them superior to low class simpletons who don't deserve rights of any description.

    Tue, 02/08/2011 - 23:42 | 945307 ColonelCooper
    ColonelCooper's picture

    Your the best Dude.

    (tick, tock.  tick, tock.  waiting to see how long Repugnifuck can stand it before he edits this one......) 

    Wed, 02/09/2011 - 00:11 | 945398 Freddie
    Freddie's picture

    +1

    Tue, 02/08/2011 - 23:30 | 945256 tmosley
    tmosley's picture

    There is but one God, and Obama is his prophet.

    Tue, 02/08/2011 - 23:34 | 945271 MsCreant
    MsCreant's picture

    And deliver me, O Lord, from vain and frivolous thoughts and from evil desires which defile me.

    So you admit you wish you could have guns, gold, and grub? Or are there other firvolous thoughts and evil desires defiling you?

    Tue, 02/08/2011 - 23:50 | 945323 Logan Tassajar
    Logan Tassajar's picture

    yes

    Tue, 02/08/2011 - 23:53 | 945334 ColonelCooper
    ColonelCooper's picture

    You do bring out the worst in many of us from time to time.

    Wed, 02/09/2011 - 08:32 | 945885 MsCreant
    MsCreant's picture

    Why thank you Coop! You flatter me, after all, I am a MsCreant.

    For some, it is an opportunity to man up. For others, this is not even a possibility. I hear crickets on this one.

    I like how your avatars have mellowed. Watching yours evolve (and what my head did with them) was interesting. Your dick and hemmeroids were very provocative. ;-)

    Wed, 02/09/2011 - 00:14 | 945412 Gully Foyle
    Gully Foyle's picture

    MsCreant

    "So you admit you wish you could have guns, gold, and grub? Or are there other firvolous thoughts and evil desires defiling you?"

    Loose shoes, tight pussy and a warm place to shit?

    Wed, 02/09/2011 - 00:38 | 945479 Cistercian
    Cistercian's picture

     Classic MS.You asked once why such a "heavy avatar" look higher in this thread for the answer.But I wanted children...and have them.Which is why I am on here....

      Because Father Abbot would NOT approve of my snarkiness, or time spent online.

     That and your Avatar is an occasion to sin!!!

       Hope you are well, btw.On vacation here...and enjoying ham radio as well as trolling the trolls.

     And tommorow I will try making real 100% semolina dough and make pizza with it.To the delight of my fabulous 7 and 3 year old girls.We home school, so it is baking and eating until we can't move here in western North Carolina.

     And lots of naps.And silly games.Life is good, even in the greatest depression!

    Wed, 02/09/2011 - 08:45 | 945904 MsCreant
    MsCreant's picture

    What a beautiful picture of your life you paint! I can smell the bread and hear the squealing girls. I have a boy, 15. He is scary smart and sweet and a bit of a dweeb. I know I am not suited to have lots of kids (temperament), my one will do me very nicely, though I do get girl envy from time to time (I might be a slave to a little girl, living through her, catering to her whims and desires).

    I am well in the biggest picture. Too much work pressure. I come here to blow off steam and f-off so I can face the work I don't want to do, again. Lucky for them I am not on a clock, just gotta get it done.

    Here is to snuggling, warmth, naps, and lots of silly games.

    If I wanted to surprise my hubby with a Ham radio, do you have easy links to things to consider? Don't want to put you out. I am thinking power down scenario eventually, but something to learn on is good too. He is a natural. Spied on Russian transmissions in the army. 

    Wed, 02/09/2011 - 10:48 | 946162 Cistercian
    Cistercian's picture

     Try gigaparts(google it).They have a huge catalog online to browse.

       I would recommend an HF transceiver in the 1000 dollar range as a good start.All in one radios in the roughly similar class can be put in the car or house and offer uhf,vhf and hf in a tiny package.But they are small, and the controls are too.

      I use an Icom 718 which is a basic HF radio I scored used for 400 bucks.I can easily work most of the eastern half of the US every night.It runs on 13.8 volts like most other amateur gear, so powering it from a battery/solar cell/windmill is very easy.

     

     There is a huge range of radios available.I talked to a guy the other night who had just purchased an Icom 7800.Those are around 15 grand.Yikes!!!(it is a flagship rig.Less expensive radios work very, very well too.He lives in England and I talk to him frequently, so my 400 buck rig works!)

      You can study for the tests online.Eham and qrz both have practice tests that use actual test questions so you can work on your weak areas.I recommend building your own antennas out of wire...max bang for the buck.

     I hope this helps.

    Thu, 02/10/2011 - 11:30 | 949298 MsCreant
    MsCreant's picture

    The ball is now in play. I will keep you posted if something comes of it. It won't be a surprise any more. Turns out he was looking at stuff on his own.

    Tue, 02/08/2011 - 23:38 | 945290 Shed Boy
    Shed Boy's picture

    I thought Robin Hood was in Sherwood Forest.

    Tue, 02/08/2011 - 23:52 | 945328 snowball777
    snowball777's picture

    Amen!

    Wed, 02/09/2011 - 01:54 | 945609 Michael
    Michael's picture

    Ron Paul says Bernanke is delusional on his 100% sure comment.

    http://www.cnbc.com/id/15840232?video=1785971349&play=1

    Tue, 02/08/2011 - 22:18 | 945018 More Critical T...
    More Critical Thinking Wanted's picture

    ...

    Wed, 02/09/2011 - 06:57 | 945827 johan404
    johan404's picture

    Actually the elites want the oil price to stay low so they can maintain their power over the people. There is very little resistance to the powers that be when everybody gets their cheeseburgers and American Idol at affordable prices.

    Lindsey Williams is a crackpot. Crude is going to go up but it's not because "the elite want it to".

    Tue, 02/08/2011 - 22:08 | 944984 El Hosel
    El Hosel's picture

       Where are the wikileaks that were touted weeks ago to have big dirt on the Banksters?

         Might "bring down a bank or two"  ... bring that shit on. I said.

    Tue, 02/08/2011 - 22:19 | 945028 More Critical T...
    More Critical Thinking Wanted's picture

     

    Well, the question is, will President Palin order the assassination of Wikileaks activists?

     

    Tue, 02/08/2011 - 22:25 | 945045 Idiot Savant
    Idiot Savant's picture

    McCain should be charged with crimes against humanity for creating the American Bimbo.

    Tue, 02/08/2011 - 22:45 | 945117 DonnieD
    DonnieD's picture

    No shit. Palin is fast approaching the annoyance level of the Kardashians and I hold that bastard Senator from Arizona responsible.

    Tue, 02/08/2011 - 22:47 | 945119 Red Neck Repugnicant
    Red Neck Repugnicant's picture

    Palin was carefully engineered by the Republican party to appeal to the American redneck and to conservative, comatose right-wingers who felt a growing sense of powerlessness as their country evolved faster than their reptilian brains.  

    Unfortunately, she has morphed into an unstoppable political Frankenstein, and everything she touches becomes radioactive.  The few morons who still endorse her are the same 11 people who think American unions caused QE, the Earth is 6,000 years old, and/or that Obama is a reincarnation of Hitler.  Or, in a nutshell - all the Glenn Beck viewers.    

    Tue, 02/08/2011 - 22:52 | 945137 RoRoTrader
    RoRoTrader's picture

    Amen.

    Tue, 02/08/2011 - 23:03 | 945181 President Palin
    President Palin's picture

    Palin was carefully engineered by the Republican party to appeal to the American redneck and to conservative, comatose right-wingers who felt a growing sense of powerlessness as their country evolved faster than their reptilian brains. 

     

    You betcha!

    Tue, 02/08/2011 - 23:27 | 945248 bugs_
    bugs_'s picture

    Sarah I demand that you go back in time and sign up on ZH much earlier.  Thanks in advance.

    Tue, 02/08/2011 - 23:27 | 945243 tmosley
    tmosley's picture

    Republicans are evil.  Democrats are saints.  Every one.

    Anyone who disagrees should be castigated and labelled some derogatory term.  They should be characterized as less than human whenever possible.  Dehumanization is the first step toward extermination.  These scum, all of lesser classes, deserve nothing.  They are animals and should be dealt with as such.

    How am I doing, RnR?  I wanna be just like you when I grow up!

    Tue, 02/08/2011 - 23:33 | 945267 Calmyourself
    Calmyourself's picture

    Scumbags with no truth to offer, no arguments, no proof just their feeeelings..  Demonrats have their feelings and science that cannot be falsified..

    Its all a joke, mother forgive me..

    Tue, 02/08/2011 - 23:56 | 945317 Michael
    Michael's picture

    You cannot reason with the Creaton Libs. The best you can do is marginalize them just like we did in the November elections.

    Creaton definition as per urban dictionary; 

    1) A person who is a TOTAL idiot and a pain in the ASS.

    2) One who CREEPS around and prays on the young boys and senior men in their old age.

    "Creaton Lib" is my new ad hominem attack.

    Do NOT follow this link or you will be banned from the site!