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How The Petrodollar Quietly Died, And Nobody Noticed
Two years ago, in hushed tones at first, then ever louder, the financial world began discussing that which shall never be discussed in polite company - the end of the system that according to many has framed and facilitated the US Dollar's reserve currency status: the Petrodollar, or the world in which oil export countries would recycle the dollars they received in exchange for their oil exports, by purchasing more USD-denominated assets, boosting the financial strength of the reserve currency, leading to even higher asset prices and even more USD-denominated purchases, and so forth, in a virtuous (especially if one held US-denominated assets and printed US currency) loop.
The main thrust for this shift away from the USD, if primarily in the non-mainstream media, was that with Russia and China, as well as the rest of the BRIC nations, increasingly seeking to distance themselves from the US-led, "developed world" status quo spearheaded by the IMF, global trade would increasingly take place through bilateral arrangements which bypass the (Petro)dollar entirely. And sure enough, this has certainly been taking place, as first Russia and China, together with Iran, and ever more developing nations, have transacted among each other, bypassing the USD entirely, instead engaging in bilateral trade arrangements, leading to, among other thing, such discussions as, in today's FT, why China's Renminbi offshore market has gone from nothing to billions in a short space of time.
And yet, few would have believed that the Petrodollar did indeed quietly die, although ironically, without much input from either Russia or China, and paradoxically, mostly as a result of the actions of none other than the Fed itself, with its strong dollar policy, and to a lesser extent Saudi Arabia too, which by glutting the world with crude, first intended to crush Putin, and subsequently, to take out the US crude cost-curve, may have Plaxico'ed both itself, and its closest Petrodollar trading partner, the US of A.
As Reuters reports, for the first time in almost two decades, energy-exporting countries are set to pull their "petrodollars" out of world markets this year, citing a study by BNP Paribas (more details below). Basically, the Petrodollar, long serving as the US leverage to encourage and facilitate USD recycling, and a steady reinvestment in US-denominated assets by the Oil exporting nations, and thus a means to steadily increase the nominal price of all USD-priced assets, just drove itself into irrelevance.
A consequence of this year's dramatic drop in oil prices, the shift is likely to cause global market liquidity to fall, the study showed.
This decline follows years of windfalls for oil exporters such as Russia, Angola, Saudi Arabia and Nigeria. Much of that money found its way into financial markets, helping to boost asset prices and keep the cost of borrowing down, through so-called petrodollar recycling.
But no more: "this year the oil producers will effectively import capital amounting to $7.6 billion. By comparison, they exported $60 billion in 2013 and $248 billion in 2012, according to the following graphic based on BNP Paribas calculations."
In short, the Petrodollar may not have died per se, at least not yet since the USD is still holding on to the reserve currency title if only for just a little longer, but it has managed to price itself into irrelevance, which from a USD-recycling standpoint, is essentially the same thing.
According to BNP, Petrodollar recycling peaked at $511 billion in 2006, or just about the time crude prices were preparing to go to $200, per Goldman Sachs. It is also the time when capital markets hit all time highs, only without the artificial crutches of every single central bank propping up the S&P ponzi house of cards on a daily basis. What happened after is known to all...
"At its peak, about $500 billion a year was being recycled back into financial markets. This will be the first year in a long time that energy exporters will be sucking capital out," said David Spegel, global head of emerging market sovereign and corporate Research at BNP.
Spegel acknowledged that the net withdrawal was small. But he added: "What is interesting is they are draining rather than providing capital that is moving global liquidity. If oil prices fall further in coming years, energy producers will need more capital even if just to repay bonds."
In other words, oil exporters are now pulling liquidity out of financial markets rather than putting money in. That could result in higher borrowing costs for governments, companies, and ultimately, consumers as money becomes scarcer.
Which is hardly great news: because in a world in which central banks are actively soaking up high-quality collateral, at a pace that is unprecedented in history, and led to the world's allegedly most liquid bond market to suffer a 10-sigma move on October 15, the last thing the market needs is even less liquidity, and even sharper moves on ever less volume, until finally the next big sell order crushes the entire market or at least force the [NYSE|Nasdaq|BATS|Sigma X] to shut down indefinitely until further notice.
So what happens next, now that the primary USD-recycling mechanism of the past 2 decades is no longer applicable? Well, nothing good.
Here are the highlights of David Spegel's note Energy price shock scenarios: Impact on EM ratings, funding gaps, debt, inflation and fiscal risks.
Whatever the reason, whether a function of supply, demand or political risks, oil prices plummeted in Q3 2014 and remain volatile. Theories related to the price plunge vary widely: some argue it is an additional means for Western allies in the Middle East to punish Russia. Others state it is the result of a price war between Opec and new shale oil producers. In the end, it may just reflect the traditional inverted relationship between the international value of the dollar and the price of hard-currency-based commodities (Figure 6). In any event, the impact of the energy price drop will be wide-ranging (if sustained) and will have implications for debt service costs, inflation, fiscal accounts and GDP growth.
Have you noticed a reduction of financial markets liquidity?
Outside from the domestic economic impact within EMs due to the downward oil price shock, we believe that the implications for financial market liquidity via the reduced recycling of petrodollars should not be underestimated. Because energy exporters do not fully invest their export receipts and effectively ‘save’ a considerable portion of their income, these surplus funds find their way back into bank deposits (fuelling the loan market) as well as into financial markets and other assets. This capital has helped fund debt among importers, helping to boost overall growth as well as other financial markets liquidity conditions.
Last year, capital flows from energy exporting countries (see list in Figure 12) amounted to USD812bn (Figure 3), with USD109bn taking the form of financial portfolio capital and USD177bn in the form of direct equity investment and USD527bn of other capital over half of which we estimate made its way into bank deposits (ie and therefore mostly into loan markets).
The recycling of petro-dollars has benefited financial markets liquidity conditions. However, this year, we expect that incremental liquidity typically provided by such recycled flows will be markedly reduced, estimating that direct and other capital outflows from energy exporters will have declined by USD253bn YoY. Of course, these economies also receive inward capital, so on a net basis, the additional capital provided externally is much lower. This year, we expect that net capital flows will be negative for EM, representing the first net inflow of capital (USD8bn) for the first time in eighteen years. This compares with USD60bn last year, which itself was down from USD248bn in 2012. At its peak, recycled EM petro dollars amounted to USD511bn back in 2006. The declines seen since 2006 not only reflect the changed global environment, but also the propensity of underlying exporters to begin investing the money domestically rather than save. The implications for financial markets liquidity - not to mention related downward pressure on US Treasury yields – is negative.
* * *
Even scarcer liquidity in US Capital markets aside, this is how BNP sees the inflation and growth for energy exporters:
Household consumption benefits: While we recognise that the relationship is not entirely linear, we use inflation basket weights for ‘transportation’ and ‘household & utilities’ (shown in the ‘Economic components’ section of Figure 27) as a means to address the differing demand elasticities prevalent across countries. These act as our proxy for consumption the consumption basket in order to determine the economic benefit that would result as lower energy prices improve household disposable income. This is weighted by the level of domestic consumption relative to the economy, which we also show in the ‘Economic components’ section of Figure 27.
Reduced industrial production costs: Outside the energy industry, manufacturers will benefit from falling operating costs. Agriculture will not benefit as much and services will benefit even less.
Trade gains and losses: Lost trade as a result of lower demand from oil-producing trade partners will impact both growth and the current account balance. On the other hand, better consumption from many energy-importing trade partners will provide some offset. The percentage of each country’s exports to energy producing partners represents relative to its total exports is used to determine potential lost growth and CAR due to lower demand from trade partners.
Domestic FX moves are beyond the scope of our analysis. These will be tied to the level of openness of the economy and the impact of changed demand conditions among trade partners as well as dollar effects. Neither do we address non-oil related political risks (eg sanctions) or any fiscal or monetary policy responses to oil shocks.
GDP growth
The least impacted oil producing country, from a GDP perspective, is Brazil followed by Mexico, Argentina, Tunisia and Trinidad & Tobago. The impact on fiscal accounts also appears lower for these than most other EMs.
Remarkably, the impact of lower oil for Russia’s economic growth is not as severe as might be expected. Sustained oil at USD80/bbl would see growth slow by 1.8pp to 0.6%. This compares with the worst hit economies of Angola (where growth is nearly 8pp lower at -2%), Iraq (GDP slows to -1.6% from 4.5% growth), Kazakhstan and Azerbaijan (growth falls to -0.9% from 5.8%).
For a drop to USD 80/bbl, it can be seen (in Figure 27) that, in some cases, such as the UAE, Qatar and Kuwait, the negative impact on GDP can be comfortably offset by fiscal stimulus. These economies will probably benefit from such a policy in which case our ‘model-based’ GDP growth estimate would represent the low end of the likely outcome (unless a fiscal policy response is not forthcoming).
Global growth in 2015? More like how great will the hit to GDP be if oil prices don't rebound immediately?
On the whole, we can say that the fall in oil prices will prove negative, shaving 0.4pp from 2015 EM GDP growth. The collective current account balance will fall 0.58pp to 0.6% of GDP, while the budget deficit will deteriorate by 0.61pp to -2.9%. This probably has the worst implications for EM as an asset class in the credit world.
Energy exporters will fare worst, with growth falling by 1.9pp and their current account balances suffering negative pressure to the tune of 2.69pp of GDP. Budget balances will suffer a 1.67pp of GDP fall, despite benefits from lower subsidy costs. The impact of oil falling USD 25/bbl will be likely to put push the current account balance into deficit, with our analysis indicating a 0.3% of GDP deficit from a 2.4% surplus before. Fortunately, the benefit to inflation will be the best in EM and could help offset some of the political risks from reduced growth.
As might be expected, energy importers will benefit by 0.4pp better growth in this scenario. Their collective current account will improve by 0.6pp to 1.1% of GDP.
The regions worst hit are the Middle East, with GDP growth slowing to 0.3%, which is 3.8pp lower than when oil was averaging USD105/bbl. The regions’ fiscal accounts will also suffer most in EM, moving from a 1.7% of GDP surplus to a 1.8% deficit. Meanwhile, the CAB will drop 5.3pp, although remain in surplus at 3.9%. The CIS is the next-worst hit, from a GDP perspective, with regional growth flat-lined versus 1.91% previously. The region’s fiscal deficit will worsen from 0.7% of GDP to -1.8% and CAB shrink to 0.7% from 3% of GDP. Africa’s growth will come in 1.4pp slower at 2.8% while Latam growth will be 0.4pp slower at 2.2%. For Africa, the CAB/GDP ratio will fall by 2.4pp pushing it deep into deficit (-2.9% of GDP).
Some regions benefit, however, with Asia ex-China growing 0.45bpp faster at 5.5% and EM Europe (ex-CIS) growing 0.55pp faster at 3.9%, with the region’s CAB/GDP improving 0.69pp, although remain in deficit to the tune of -2.4% of GDP.
* * *
And so on, but to summarize, here are the key points once more:
- The stronger US dollar is having an inverse impact on dollar-denominated commodity prices, including oil. This will affect emerging market (EM) credit quality in various ways.
- The implications of reduced recycled petrodollars has significant ramifications for financial markets, loan markets and Treasury yields. In fact, EM energy exporters will post their first net drain on global capital (USD8bn) in eighteen years.
- Oil and gas exporting EMs account for 26% of total EM GDP and 21% of external bonds. For these economies, the impact will be on lost fiscal revenue, lost GDP growth and the contribution to reserves of oil and gas-related export receipts. Together, these will have a significant effect on sustainability and liquidity ratios and as a consequence are negative for dollar debt-servicing risks and credit ratings.
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Most of us here did.
Sure did. Those who spend more time toying with their fantasy football lineups than anything else in life probably didn't, but fuck them.
Considering that much of Alaska's crude oil went/goes to the former dynamo of both USD recycling and nuclear power, Japan, the Petrol Dollar isn't nearly as fucked as the Petrol Yen.
Sayanara Mrs. Watanabe. Enjoy burning JGBs to boil your rice, and tell Mr. Watanabe he might want to re-think how he and his father and grandfather have been treating all of those Chinese just West of you. I did some research and China is much closer to Japan than the USA and a much bigger market for your Datsuns and Hello Kitty vibrators.
Luckily the NarcoDollar is still recycling liquidity back to wall street or they would be seriously screwed. The only chance of that happening would be if the grown drugs were superceded by the synthetic chemical drugs, thus preventing the US military from cornering markets in Columbia and Afghanistan (and Mexico as a traffic hub).
Come to think of it, maybe the key to US Narcodollar hegemony is keeping the synthetic drugs priced out of the world market, sortof like...oil
Queue up Mary Jane legalization. Perhaps poppies to follow?
Well HH, it’s just a darn good thing that the liberals squashed an effort to use a lousy 2000 acres of the 19 million square acres in ANWR for drilling.
And it insures that the thousands of jobs the drilling and pipeline would create won’t mess up the liberal government’s plan to put everyone out of work and on a state stipend.
And it’s also good that they will keep the Porcupine Caribou up there honest as there will be no nice warm elevated and heated pipe to snuggle up to like the Central Arctic herd has on the pipe from Prudhoe Bay.
http://www.snopes.com/politics/gasoline/anwr.asp
http://en.wikipedia.org/wiki/Arctic_National_Wildlife_Refuge
This would be a good time for the Saudis to finish it by agreeing to price oil to its largest customer, the Chinese, in RMB - especially now there is an implicit Gold backing.
PS. The narcos prefer EUR because of the EUR500 note. The Fed should stay in the game and extend the Ponzi further by issuing a USD 1,000 note?
'Dying', yes.
'Dead', no.
The Petrodollar war machine is fighting for its very survival and will probably take the rest of the world down with it.
http://www.planbeconomics.com/2014/04/documentary-petrodollar-war-machin...
Agreed. They won't go down either figuratively or literally without a fight, including possibly WWIII...
How are lower oil prices bad? The other 85 percent of the economy benefits and it's more labor intensive.
US knows they lost the war. the cat is out of the bag. OIL will be traded in EUROS and RMB in MIDDLE EAST BURSE.
not on wall st or in london.
thus, government push for "energy independence".
Told democratic billionare bloomberg to pump solar energy on his news outlets.
population density push
solar energy push
electric car subsidies
hold off on syria, iran, afghanistan wars
Finely, Saudi figured it out. selling oil for Ctrl-P $s is same as selling it for free.
damn caribou...
poop all over the pipeline...
BTW:
Nikola says: Ignore the bad reviews on the Hello Kitty vibrator. This product works fine.
Well, okie dokie then.
Low oil prices + falling consumption = less petrodollars leaving the country
Less petrodollars leaving the country = lower balance of payments deficit and more money staying in the US.
How is this a problem?
As planned by the FED, to stay on top.
Well..... here's the teeny, tiny problem for your equation of "low oil prices + falling consumption" ...... rapidly falling revenues for those US oil explorers that are in the fracking fields. Since many, if not all of them, have borrowed huge amounts from the capital markets, and...... the debt needs to be serviced. With your "equation" that spells massive bankruptcies' in the near future, IMHO. But, maybe they can borrow more from the FED at zero rates???
The heavily leverage frackers will go bankrupt. That punishes both their investors and their foolish lenders on Wall St. The assets are then sold off (pennies in the dollar) and the new owners now only need to pay the costs of fracking and not the cost of debt servicing.
GOOD. That will lower the cost from the current $80 to a lower level and permit the new owners to better compete with the Saudis and others. Cheaper oil helps the rest of the economy and hurts the despots in the Middle East.
Bad for Wall Street and bad for the oil exporting nations that are building giant ghost cities like in Dubai:
http://www.bloomberg.com/news/2013-08-19/dubai-sees-need-for-tallest-off...
Alot of the oil companies and related suppliers went bankrupt during the 1980's energy bust and took down lots of banks with them along with with lots of good paying jobs.
Just wait... You'll eventually get ALL your dollars back, trillions of dollars held outsite the US. How could this possibly be a problem?
I'll bite! Hyper-inflation?
DaddyO
Bit overdone, Hedgeless,
Though many people have died in the War - and many deaths could have been avoided in Nanking - there seems to be a slight disconnect in the actual damages involved to the point were the claims to its extent are at times questioned.
From what I've been able to read, too much covering up appears to have taken place w/o punishing the appropriate people. Yet, many residents and Soldiers assigned there got along well on personal basis. Seeing photos of people from both groups smiling a few days after the incident doesn't help out the cause.
However, noticing that at least one member of the Imperial Family stood up to call for more accountability of its House Members' involvement in the War was interesting to read.
One thing I'm not too impressed about is all the Frenzy propped up by the TWNese in this: Many of them live work, and are vendors in Japan; and I don't see the "Frenzymongers" holding rallys in Japan. Are they a bunch of Ass kissers to the Alpha-Culture of the Lands they live in? Considering that they seem to kiss up to, stir up, and/or sabotage the Mainland CHNese, JPNese, and the USAmericans against one another (indirectly at times) on the same/similar/resultant issues do not impress me.
Sorry to say (I address the Upright here); but considering how the TWNese treated the Formosans after they were kicked off the Mainland, it pretty much sums up WHY they lost the Civil War (where the US Navy was invovled somehow, as my Late Father rcvd a Service Medal for it) were kicked off. I'm a postwar reconciliationist; but seeing anti CHN crap fanned by the TWNese over here and in JPN doesn't impress me at all.
Yet, no one's raising a finger on the GBRitish, who ran (and are still to some extent) running the "Laundered Opium Trade Funded Power Play" Racket in HKG, or the other (mostly) European Countries who've pillaged and plundered CHN for the better part of the 19th-20th Centuries.
I'd like to see some consistency, considering that the CHN/JPN Trade Valuations are larger than the USA/JPN Trade Valuations. TWN and HKG (and SGP, for that matter) KNOW their roles as "middlemen" btwn CHN and the Rest of the World will soon be eclipsed as CHN and its Trade Partners increase its level of interactivity. My read is that the Senkakus (which were always on the back burner and never resolved (even after JPN and CHN normalized politial dialogues; and Idon'tremember the CHN Primier's Name; but even he brushed the Island Issue off to "incompetent" bureaucrats (of both sides) who couldn't reach an agreement before the Summit Mtg), though solutions were duly being presented in a calm manner) and the anti-JPN demos too place shortly after JPN and CHN announced their rendition of the De-Dollarization (USD, HKD, SGD - ^_^) - while TWN and KOR followed JPN's announcements on the De-Dollarization of Trade with CHN.
JPN should have kicked out a few TWNese businesses out in response; but were too defanged to do so, pussyfied by the USA and too distracted distinguish the (really not so friendly) TWNese from the CHNese.
That being said, don't ge me wrong - "If I were a Military Judge, Flag Officer, or a War Tribunal Judge with Full Power bestowed by the State and Throne" presiding over Incident, I'd probably sh!+can and/or incarcerate/execute more JPN Officers and senior NCOs, since the welfare of Civilians rests in the hands of the Occupying Forces.
It'd be funny to see how much Petrol JPN starts accumulating via the new CHN Oil Bourse and/or direct Trade. CHN has been buying up the ISIL Discount Crude, hasn't it?
Gull Island - Prudoe Bay Alaska apparently has 1100 psi of well head pressure ready to flow oil.
But it was sealed and censored from the public.
Oil is Abiotic - THEY DO NOT WANT YOU TO KNOW.
And they were singin'
Bye, Bye, Miss American High
Can't drive the Chevy to the levy
Cause the gas tank is dry
And good ol' boys
Couldn't buy their whiskey and rye...
Can't drive the Chevy to the levee because they recalled 60 million GM pieces of shit due to bad ignitions.
Amerika = full retard. Morons watching college ball and the NFL/NBA like sheep or Hollywood films glorifying murder and the police state.
Fuck them indeed. The huddled masses of The Football watchers are quite a sight to behold.
Look at this fuck destroying his house because of a Cowboy's loss. If only we could direct these zombies to the Fed. - https://www.youtube.com/watch?v=G1mGzaDh0M8
@ Dr. Richard,
Just viewed that gem you posted. We are literally Doomed as a Human Race. Little does that Douche Bag realize that all sporting events are predetermined & fixed.
His problems go deeper than a football game....
Football games don't kill houses..., people kill houses.
Indeed, a former friend of mine destroyed my lawn furniture after our team lost a superbowl a few years back. We are both still football fans, but I refuse to be around him, for a plethora of other reasons. Football doesn't make crazies. It's just a popular sport, and it can be enjoyed without being a petuitary retard, despite the fact that they are the vast majority. Rigged? Sure. It's still a cerebral sport that includes smashing. Bill Hicks may not have liked American Gladiators, but I sure did, and that doesn't mean I'm an idiot for it.
"petuitary retard", very nice, going to have to borrow that one, thanks....
More than just bread and circuses, team sporting events divide the rubes over meaningless issues on a non-existed field of battle.
Major sports are just another government sponsored program...not unlike education.
seinfeld on sports: http://www.youtube.com/watch?v=2CPQBra3GI8
And to think we believe our country can be fixed one day.
He's the pill man who fills any bill, but never chills or grills.
Our country can be fixed in a day. But....my God....all the blood. There would be rivers of it.
LOL, that's awesome!
Krugman would be proud.
Thank you. I mean really - thank you.
I take way too much pleasure in videos like that, but my life is a bit pathetic and now I feel at least a little bit better.
Thank you.
I know what you mean. I won't even go out to any restaurant with a TeeVee on a Sunday during football season for fear of a game being on and then having to deal with the fans in the place.
Wow I have to say the plan to turn us into morons is working as planned.
between the need for a new tv, counter top, coffee table, various sundries and the cleanup, looks like goober is a regular job creating MACHINE!
More fans should be like him! It's good for the economy, broken windows and such.
It must not be entirely dead since gold keeps going down, not up. When it thoroughly dies, gold skyrockets
oh, and to be able to hit that inflection point perfectly....
see you at the beachfront condo in Destin.
jb
I think your inflection point will be very brief. Suppose you can cash out gold at $5K/oz. Who's going to sell you beachfront for dollars then? Gold is a store of wealth. If you are going to benefit from the inflation you really kind of need to rack up the debt now and have the gold to sell later. Agree to the price with a strong dollar (debt). Pay it off with a weak dollar (gold profits).
1+ Buy gold with a strong dollar, sell exchange gold into a new (gold-backed) dollar... Heck of a trade, but it requires brains, guts, nerves of steel, and patience, lots of patience.
I think your inflection point will be very brief. Suppose you can cash out gold at $5K/oz. Who's going to sell you beachfront for dollars then? Gold is a store of wealth. If you are going to benefit from the inflation you really kind of need to rack up the debt now and have the gold to sell later. Agree to the price with a strong dollar (debt). Pay it off with a weak dollar (gold profits).
Your update - AWESOME! There are bigger things to worry about than fantasy football. I woke up and went....HOREY SHEET after I saw what CRUDE did last night. DANG!
it already 1 day in and looks like it will be an exciting month for the markets.
CRUDE Broke its DECENDING triangle today. See here. ==>http://bit.ly/1B4K0wk
There's more collateral in Fantasy Football than the currency. I can't blame them.
Two of the big misses going on right now, completely ignored by all are...
Currency swaps between countries, which are not so much anti dollar, but more about efficiency. Think new tech, the dollar is needed as much as an answering machine or pager these days.
And... the complete disconnect of hard assets and paper futures on the comex, gold and silver sticking out like a bitch with her skirt in the breeze..
so true
derivative triggers on FX moves. With current volatility, thats whats gonna sink some ships, and there's no clearing house to monitor/track/warn
what petro dollar?
With all the references of the Putin checkmates and Petrodollar being dead here with no observable manifestation, I'm about to become a contrarian-contrarian.
Listen zeros.
What is the US without its MIC/USD grip on oil? A "SNAP powerhouse"? lmao
A cage going to implode.
Correct, the FED and the Pentagon - 2 organizations keeping US afloat... wonder for how long though, China already is ahead and what is more worrying for the US is that they hold all the long-term cards.
both coercive, criminal and while keeping us afloat for now, doing the most to ensure we sink
and look how they try to spin it....
LONDON, Nov 3 (Reuters) - The world's largest gold-backed exchange-traded fund, New York's SPDR Gold Shares, saw an outflow of over $1 billion of metal last month as investors lightened holdings in anticipation of a further price drop from current four-year lows.
Data from the GLD fund showed on Monday that its holdings slid to their lowest in six years after an outflow of 28.7 tonnes in October, their biggest of any month this year. Over the course of the month, gold prices also fell to their lowest since early 2010 at $1,161.25 an ounce.
"Last month we saw two sharp moves down, and that will make people think a little bit more before they buy, because of the possibility that the market could move against them again," Mitsui Precious Metals analyst David Jollie said. "It could be quite concerning if ETF outflows strengthen, first of all because it sends metal into the market, and also because it sends a message that is interpreted as bearish," he said.
"There is a self-reinforcing nature to these flows, and if they become substantial, in time that will become a bearish factor for gold." Gold ETFs, which issue securities backed by physical metal, are designed for investors seeking exposure to the gold price without taking delivery of the bullion itself.
They proved popular with investors during the financial crisis that followed the collapse of Lehman Brothers in 2008. The GLD fund, launched in 2004, saw its holdings hit a record 1,353.3 tonnes in late 2012. A sharp drop in the gold price the following year prompted investors to liquidate heavily, however, leading to outflows of 550 tonnes.
Selling eased off in early 2014, but has shown signs of resuming as prices lost traction in the second half of the year. Total holdings of the GLD have now fallen to just 741 tonnes, their lowest since September 2008.
http://www.reuters.com/article/2014/11/03/gold-etf-outflow-idUSL5N0SP5PJ...
This was the predicted/expected outcome. if only those 401k sheep had jumped on those gold ETFs hard....
It is discouraging and perplexing that people still dont get it.
Many PM gurus advised people to stay away from these paper scams from the very beginning (2004). These gold and silver ETFs are toxic ponzis and frauds.
The US is still exceptional though....so we will be ok.
all hands on deck, we need a dolla mop up pretty damn soon.
so where the fuck are all these dollas going to roost? surly not treasuries, hmmm.
fed adding to balance sheet? qe- save the titanic. just curious...
THese dollas gonna rest in my ass after you kiss it. hahahahahahahahahah Na but on the real we should just invade Iran and keep everything propped or better yet a place/country where we can actually win a war like Trinidad. Or depopulate and put chips inside everyones heads and asses and a fuckin barcode acroos your fuckin head. Don't forget to vote tomorrow.
maybe we could car poll to da poll,eh?
I'd love to car poll with you to the poll with a trenchcoat on and nothing else underneath. You sick freak.
There was a simulation of a war (a naval war game), in which Iran was the aggressor against the US. The initial outcome of simulation was that the entire regional US fleet within the Arabian Gulf was lost.
Of course, the war games were run again with a better outcome but.. Iran has basically built up anti-naval defenses all along the mouth of the Arabian Gulf. They can do rather significant harm to Western forces, without too much effort, because they are entrenched and dug in all along their potential defensive line.
listen...wake me when they are fueling war planes and tanks n shit with vodka( for russia), soy sauce (china) or hummus (Mid east). until then...
You'll be woken alright.
Those of us who see it now will be prepared when you dumbasses awaken.
my apologies, I forgot my sarcasm tag...without that, downvotes and bullshit angst riddled comments are sure to prevail. I down voted myself for not following my own rulz...oh yeah...and fuck you Yellen.
anyone suspect that WTI weakness is evidence of this ?
sure, other producers on the world markets can arrange
trades sans the petrodollar ...
but, here in the US the whole supply chain is soaked
in the stuff.
"but, here in the US the whole supply chain is soaked in the stuff." -- Yep, even worse, we all have to pay taxes in dollars...
the post election hangover is going to be a motherfucker for most sheep. I mean, I don't think we are fucked right out of the gates, but come on, our streets are still paved with oil for Christ sakes...
If the price continues to collapse that's a lot less in sales taxes. More over if energy is produced in situ or "on sight" then you'll never see that revenue again.
Your only hope is for a recovery of incomes. Since only profits not prosperity have recovered I fail to see how the government does not fall here.
"I fail to see how the government does not fall here." -- When did you become the optimist? Yes, increasing incomes would require that actual work being done is increasing. Don't see it.
"If the price continues to collapse that's a lot less in sales taxes."
Do you think that money isn't going to be spent on other stuff? Or saved and invested?
C'mon man, you're smarter than that..
"Do you think that money isn't going to be spent on other stuff?" -- Well, assuming the person is actually employed, the answer might be more complicated (Hey look, Sprint letting another 2,000 go...).
That aside, maybe, but with the costs of food, healthcare (aging population) and education rising not so sure. Then there's the evidence the more than half of the country is on the dole already (EBT+disability+medicaid+medicare)...
Forward comrade!
Onl 1/2 of the country? Why you left out all the public employees I see. Add another 30% or more. Then those who work for firms that sell predominantly to .gov which might add another 5% or so. Then you might start to be aware of the real issues. If the govt loses sales tax revenue do you really think they will give a shit? Fuck no, they will just raise property taxes some more and print some more fucking money. Its always the few productive people that carry the load for the rest. Trouble is they're tapped. When they turn what they have over to .gov what happens next? Laws change all of a sudden? No more property tax! You can expect that one for sure. LOL
You are preaching to the choir. I went long black markets and sharecropping some time ago as that which cannot be sustained, won't be, period. Moreover "taxes" and "laws" that cannot be collected or enforced are irrelevant.
Playing by the "rules" was your first mistake...
please, there are no rules to this "game"...
Then I'm to assume you have no real assets, except the paper kind? Because if you did have any real assets what makes you think taxes would not be revelant to you? Just try not paying property taxes for a few years. I know some who did just that and they ended up with shit, while the govt didnt give two shits about them not paying as they could borrow the money to replace those taxes for virtually nothing while using that same property as collateral. And you must be quite the wealthy mofo if no rules apply to you. They sure seem to apply to me and everyone I know.
My tribe is in order. It includes several local politicians. The "game" hasn't changed in thousands of years, technology has simply made it easier. We have numerous physical assets. How they are "valued", especially by the Feds, is something else entirely. We know our enemy. Yes, global fraud is ongoing, but all economies are always local at the end of the day. Local "authorities" want to live. Washington D.C. will choke on it's own greed. Fuck em.
well that makes my whole BBB plan look like shit GL.
Not at all. Taxes on gasoline are not percentages, but levied as cents on the gallon.
Wait, I thought Kuntsler said we only had 50 bbl's left a few weeks back.
There is a difference between a short term glut and the long term consequences.
The PetroDollar is under the threat of extinction due to the bilateral trade agreements of other Nation-States.
To make Dollars more attractive the policies must make it stronger.
This makes Oil relatively cheaper in the short term.
However the fatal damage to the US Dollar has already been done as the DEMAND for it is declining internationally.
It is too little and far too late as this decline in DEMAND is feeding upon itself. As the Oil Prices decline there is less need for as many Dollars to acquire it on World Markets, or as many units of any other currency, to acquire the Oil.
It is a spiral which is self feeding. And it is spiraling right down the drain.
Thus there is an imbalance of Supply/Demand and there is currently a glut.
This does not mean that the long term problems of Oil Supply have been solved. In fact, as the glut is consumed, burned off inexpensively, then it will only serve to exacerbate the supply problems in the long run as Oil is not a renewable resource.
Aw, come on, that's why we had the big ramp in 3Q GDP....
Imagine the debt servicing carnage at $50 oil...! But at least Ma will save money taking the kids to skool...so that's nice.
Increase production?
...below production costs... ...?
good luck with that.
Try to stop peeing....same thing
eventually the bladder empties, could be embarrassing though.
Is stopping peeing an aligory to the obama presidency ending?
Isn't there a joke like that?:
"I get people to buy from me by setting my prices so low I lose money on every sale."
How do you stay in business?
"Volume . . ."
Ahhh, talking bout the miners, ay?
"Increase production? "
"...below production costs... ...?
good luck with that."
IF money is being printed and the industry propped via that fresh counterfiat being pumped straight into the debt markets or into ETFs or via myriad other injection methods I can easily imagine; YES, increase production even while costs exceed market.
Malinvestment/subsidization of politically and militarily important constituencies should be expected.
Yes, the word you are looking for is subsidies and this has been happening for 40+ years!!!
Your missing something. It is the inneficiancies caused by government or also stated as imbalanced trade using subsidies. That is greed at the political level at the populations expense. Trade will rebalance. Good news, no we wont see $8.00 gas in America anytime soon... America is close to energy independence already but you won't see that in the news.
" .... for the less developed countries, when export receipts fail to grow as rapidly as the debt service requirement, the country enters the danger zone " < circa 1977 >
http://www.jstor.org/discover/10.2307/4478053?uid=3739744&uid=2129&uid=2&uid=70&uid=4&uid=3739256&sid=21104950840577
Nice thingy about being a massive food producing country is saying who cares about EM petrofacists
I really don't "feel" about all those T bill hoarders let them redeem bhwawawawawa!
The only reason why it has gone unnoticed is because the inflationary consequences have still largely been put off. At some point, enough anti-dollar momentum will pull the rug out.
Yup. Petro-Fiat.....
Commodities will be the first to normalize with no QE. What do ya'll think is gonna happen to stawks? The SP is 50% overvalued due to QE.
Shortdebt - My best guess is 30%, not 50%.
Yea I can tell the USD is on its way out by the fact that the /DX is making new multi year highs on a daily basis while gold and silver cant buy an uptick.
Wait till the rumours of bad debts, defaults and shakey banks start.
Relativity is a bitch.
and so is reality?
Saudis hoarding dollars has the same effect as Fed extinguishing dollars
It's worse.
Extinguishing credit also extinguishes debt. Hoarding doesn't.
Margin call for the ultra leveraged needing dollars
how does the FED extinguish dollars by bying Treasuries with dollars ?
It might extinguish debt as far as I understand, but not dollars. It brings MORE dollars in circulation in this way, with a logical downward pressure on the value of the dollar.
But not a finance guy so enlighten me if I am out of line.
Selling UST thus receiving USD. Fed is a black hole for usd
who is going to buy the Fed's balance sheet?
The Fed.
Anybody accepting high interest
selling UST you write. Not exactly what QE was. And by the way, even if the FED does sell UST, the holders of UST need at some point be paid in...dollars. So no extinguishing of dollars over the longer term. It seems that, over the longer term, you can only add dollars to the system.
The PetroDollar is Dead!
Long Live the PetroDollar!
Stained Class - More like "long live the petroyuan" but ask me if I really give a shit as to why it doesn't matter here in America. A couple of years of .gov beneficiaries getting the big shaft which is already beginning and then America one of the better places globally to invest in. So sorry cop enforcers ;-)
Fly home little birdies. Fly home.
bye, bye, miss amerikan pie, couldn't drive my chevy to the levee, the day the dollar died
Uncle SAM requires that you, and numerous corporations, still pay your taxes in dollars. So, not quite yet...
Saudis hoarding dollars, same concept of hoarding gold.
...the outcome will be notably different. Someone would actually want to exchange/trade for the gold. Paper promises? Not so much.
Which would you rather have?
I know my choice.
Interesting view from Bix Weir...
Greedspan the good guy???
Small amount is better to have paper cash, not digital.
Large amount? Good luck
Small amount is better to have paper cash, not digital.
Large amount? Good luck
If you have a small amount of cash it is better to have coins and not paper. The paper can go to zero but coins can have their metal content worth nearly their face value (Nickels). Not that hard to store an oil drum full of coins in the garage. Worst comes to worst and the coins make decent shrapnel.
It is hard to collect dollars in taxes when 40% or more are'nt making enough dollars to pay taxes.
...and the majority of real earners aren't paying taxes either.
Welcome to the mark to fantasy world.
What part of all fiat will go to zero isn't clear to everyone?
.
Corporations pay taxes?
The petrodollar was seriously wounded in the aftermath of the real estate bubble. A toxic mix of hydraulic fracturing and ineffective QE put it over the edge.
However, it's death was inevitable. There is no one to blame.
Peak oil was on the table, fracking was the only (real) option. The US wagered the USD hoping that the economy could deal with oil prices >80$. The bet failed.
Now it's pay day. But don't worry, it's not just the USD that's going to die, ...
The post war petro dollar was born with the likes of Ike and JFK at the helm, will die with Bush/Bammy/Hilary at the helm. Like I keep saying, no one is this stupid, it's a plan. They will use the collapse to go for "their" world currency.
Trade agreements between China , Russia and their 'friends' will be on more favorable terms between these partners than business outside this community. Pretty much how the USSAGOV , UKGOV, GERMANY.GOV and their banking syndicates operated in stuffing the R.O.W. on their terms.
Let's see if banking critter can thrive from a more level playing field.
Not like the U.S. wasn't warned a million times.
http://www.youtube.com/watch?v=lOaV06ruMqg
there is good news and bad news. the good news is the drop in oil prices is reflective of the real need for oil......in stronger dollars. this is just what the market doctor ordered, a drop in energy prices because of a drop in demand which strengthens the dollar as the safe haven of best resort which increases demand from a country able to print the world to prosperity. booyah! the market works!
the bad news is the market doesn't really work this way so it will escape the cage the quants have built so carefully, like ebola.
Nahhhh!
Juss need a good ol' WAR in the Middle East along with some damage to oil export terminals to get that damn oil up again and keep it up.
Lessee - who wants oil up?
US of A does - so frickin' frackers don't go bust.
Russia does - keep the dough rollin' in, baby!!! Build up that military machine!!!
OPEC does - keep the fat asses of those Sunni kings and princes bigger and fatter still!
War bees good - peece be bad!
It's settled then - BIG war is coming to the Middle East - who gets to engineer this one?
but---the ones buying it don't so-----it goes down---war or not--
Nobody noticed ?
Lol, ask the FED WHY there are currency wars raging since 2009 !
re death of the dollar:
to quote Mark Twain's famous quote:
The reports of my death are greatly exaggerated
He's dead now....and so will the dollar be....yen first though...
7 BILLION? Might you mean Trillion?
Janet can piss a billion away before morning tea.
As Evert Dirkson said a billion here a billion there...and you are still a piker..
Actually it was different but he lived in a different era.
Ask any starving billionaire from Harare.
I think it was, "A billion here and a billion there and eventually you get into some real money."
When does Gold price , say no more manipulation ????????
Should i bury my Gold and Silver or my Jacksons and Grants ???
The Zionist banksters of the west have a different interpretation of that chart:
"Must bomb, invade, "print," and steal more!"
An American, not US subject.
We watch this cycle repeat. Saudis ramp prices which sucks all of the impossible alternatives and their "opportunistic" investors into the daylight and once fully vested into their schemes, once government has spent and indebted as much as we can bear to support these alternatives, the Saudis dump, oil falls and kills all the alternatives AND our economy on the up and down swing. If fucking middle eastern terrorists thought they would crush us economically, they seem to be doing a damn good job. Between war and this shit we are as dumb as sheep. Tell me again why we can't have an America first energy policy rather than a "soak Americans first" energy policy?
Well thats easy, its because certain Americans are the one doing the soaking. Now mind you, they may have more than one citizenship...
It's because of this, http://www.4thmedia.org/2014/10/the-kerry-abdullah-secret-deal-oil-gas-p...
I suspect Saudi Arabia's lower oil prices are a result of their panic over an Iranian A bomb. War is always a factor as in ISIS selling black market oil at fire sale prices. Add to that the US fracking industry has opened a whole new spigot of oil into the fungible global oil market and the control of supply has slipped out of the cartel's hands.
All of these exigencies add up to more supply into limited demand.