A Very Different Take On The "Iran Barters Gold For Food" Story

Tyler Durden's picture




 

Much has been made of today's Reuters story how "Iran turns to barter for food as sanctions cripple imports" in which we learn that "Iran is turning to barter - offering gold bullion in overseas vaults or tankerloads of oil - in return for food", and whose purpose no doubt is to demonstrate just how crippled the Iranian economy is as a result of the ongoing US embargo. Incidentally this story is 100% the opposite of the Debka-spun groundless disinformation from a few weeks ago that India was preparing to pay for Iran's oil in gold (they got the asset right, but the flow of funds direction hopelessly wrong). While there is certainly truth to the fact that the US is actively seeking to destabilize the local government, we wonder why? After all as the opportunity cost for the existing regime to do something drastic gets ever lower as the popular resentment rises, leaving the local administration with few options but to engage either the US or Israel. Unless of course, this is the ultimate goal. Yet going back to the Reuters story, it would be quite dramatic, if only it was not the case that Iran has been laying the groundwork for a barter economy for many months now, something which various other analysts perceive as the basis for the destruction of the petrodollar system. Perhaps regular readers will recall that back in July, we wrote an article titled "China And Iran To Bypass Dollar, Plan Oil Barter System." Specifically, we wrote that "according to the FT, China has decided to commence a barter system in which Iranian oil is exchanged directly for Chinese exports. The net result: not only a slap for the US Dollar, but implicitly for all fiat intermediaries, as Iran and China are about to prove that when it comes to exchanging hard resources for critical Chinese goods and services, the world's so called reserve currency is completely irrelevant." Seen in this light the fact that Iran is actually proceeding with a barter system, something that had been in the works for quite a while, actually puts the Reuters story in a totally different light: instead of one predicting the imminent demise of the Iranian economy, the conclusion is inverted, and underscores the culmination of what may have been an extended barter preparation period, has finally gone from beta to (pardon the pun) gold, and Iran is now successfully engaging in global trade without the use of the historical reserve currency.

Here is how Reuters presents its findings:

Difficulty paying for urgent import needs has contributed to sharp rises in the prices of basic foodstuffs, causing hardship for Iranians with just weeks to go before an election seen as a referendum on President Mahmoud Ahmadinejad's economic policies.

 

New sanctions imposed by the United States and European Union to punish Iran for its nuclear program do not bar firms from selling Iran food but they make it difficult to carry out the international financial transactions needed to pay for it.

 

Reuters surveys of commodities traders around the globe show that since the start of the year, Iran has had trouble securing imports of basic staples like rice, cooking oil, animal feed and tea. Grain ships have been held at its ports, refusing to unload until payment can be received for cargo.

 

With Iran's rial currency tumbling, the prices of rice, bread and meat in Iranian bazaars have doubled or more in dollar terms in recent months.

 

Iranian grain importers have in the past side-stepped sanctions by booking business through the United Arab Emirates, traders said, but this option was cut off by the UAE government in response to sanctions.

 

Iran has been trading oil in currencies like Japanese yen, South Korean won and Indian rupees, but such deals make it difficult to repatriate profits.

 

Deals revealed Thursday appear to be among the first in which Iran has had to result to offering cashless barter to avoid sanctions, a sign of new urgency as it seeks to buy food and get around the financial restrictions.

The article's punchline:

Another trader said: "As the shipments of grain are so large, barter or gold payments are the quickest option."

 

Details of how the barter deals work are still unclear as the payments problem is so new, and traders did not disclose the exact size of such deals.

Perhaps a different spin on the news is that gold is "suddenly" just as equially accepted as a pseudo-reserve currency virtually everywhere in the world, as the dollar: a blasphemous concept to many legacy economists for sure. But the truth is that gold and barter appear to be working. Especially when one considers what the FT had to say on this topic back in July 2011:

Tehran and Beijing are in talks about using a barter system to exchange Iranian oil for Chinese goods and services, as US financial sanctions have blocked China from paying at least $20bn for oil imports.

 

The US sanctions against Iran, which make it extremely difficult to conduct dollar-denominated business, mean that China could owe the oil-rich nation as much as $30bn, according to people familiar with the problem.

 

They said the unpaid oil bills had built up over the past two years and the governments, which are in early-stage talks, were looking at how to “offset” the debt.

 

Some Iranian officials are growing increasingly angry about the inability of the country’s largest oil customers to pay cash, a problem that has contributed to a shortage of hard currency and has hindered the central bank from defending the Iranian rial, which has been sharply devalued over the past month.

 

China and India together buy about one-third of Iran’s oil, the country’s economic lifeblood. China’s oil imports from Iran have risen 49 per cent this year, according to Reuters.

And what prevents China, whose secretive gold stockpiling is the stuff of legends to migrate from a barter system to one of gold, whereby the two countries exchange goods not in the form of barter but using the yellow metal currency equivalent. Furthermore, how would the world react if the entire Asian continent was found to be transacting in gold, coupled with the discovery that China's gold holdings have soared, very much the same way it disclosed its shocking gold expansion back in April 2009 when overnight its gold holdings went from 600 tonnes to 1054 tonnes:

Shanghai/Beijing: China disclosed on Friday that it had secretly raised its gold reserves by three-quarters since 2003, increasing its holdings to 1,054 tonnes and confirming years of speculation it had been buying.

 

Hu Xiaolian, head of the State Administration of Foreign Exchange (SAFE), told Xinhua news agency in an interview that the country’s reserves had risen by 454 tonnes from 600 tonnes since 2003, when China last adjusted its state gold reserves figure.

 

The confirmation of its surreptitious stockpiling is likely to fuel market talk about Beijing’s ability to buy secretly and its ambitions for spending its nearly $2 trillion (around Rs100 trillion) pile of savings. And not just in gold: copper and other metals markets are booming thanks to China’s barely visible hand.

 

Speculation has gathered speed over the last year, since the tumbling dollar has threatened to weaken China’s buying power—and give it yet more reason to diversify into gold, oil and metals.

Not only that, but consider our post from September 2011: "Wikileaks Discloses The Reason(s) Behind China's Shadow Gold Buying Spree"

Wondering why gold at $1850 is cheap, or why gold at double that price will also be cheap, or frankly at any price? Because, as the following leaked cable explains, gold is, to China at least, nothing but the opportunity cost of destroying the dollar's reserve status. Putting that into dollar terms is, therefore, impractical at best, and illogical at worst. We have a suspicion that the following cable from the US embassy in China is about to go not viral but very much global, and prompt all those mutual fund managers who are on the golden sidelines to dip a toe in the 24 karat pool. The only thing that matters from China's perspective is that "suppressing the price of gold is very beneficial for the U.S. in maintaining the U.S. dollar's role as the international reserve currency. China's increased gold reserves will thus act as a model and lead other countries towards reserving more gold. Large gold reserves are also beneficial in promoting the internationalization of the RMB." Now, what would happen if mutual and pension funds finally comprehend they are massively underinvested in the one asset which China is without a trace of doubt massively accumulating behind the scenes is nothing short of a worldwide scramble, not so much for paper, but every last ounce of physical gold...

In other words, we humbly submit that instead of taking the Reuters article at face value, and one may certainly do that, what may instead be happening as Iran migrates to a non-dollar based international trade system is the testing of the waters of a non-USD regime, more impotantly, one quietly encourage by  China, who is a very complicit participant in the transition to a world in which the US Dollar suddenly finds itself irrelvant. Whether replaced by gold, or a currency backed by a basket of hard assets (the CNY?) we don't know. However, we know one thing: China needs Iran's crude, which at last check was among the world's top 5 oil producers, and had the world's third largest proven oil reserves after Saudi Arabia and Canada, and despite media reports that it is actively looking for crude import alternatives, we would allege that this is nothing but purposeful disinformation. After all why would China comply with US demands for an enhanced Iranian embargo? The whole point of China's foreign policy to date has been to counteract US pushes and provocations abroad without fail. Why should it make an exception now. Frankly, we don't buy it, especially when one considers last summer's FT piece.

 

Finally, we leave readers with this interesting take from Casey Research's Marin Katusa, who looks at recent development in a rather comparable light.

Will Iran Kill the Petrodollar? (source)

The official line from the United States and the European Union is that Tehran must be punished for continuing its efforts to develop a nuclear weapon. The punishment: sanctions on Iran's oil exports, which are meant to isolate Iran and depress the value of its currency to such a point that the country crumbles.

But that line doesn't make sense, and the sanctions will not achieve their goals. Iran is far from isolated and its friends – like India – will stand by the oil-producing nation until the US either backs down or acknowledges the real matter at hand. That matter is the American dollar and its role as the global reserve currency.

The short version of the story is that a 1970s deal cemented the US dollar as the only currency to buy and sell crude oil, and from that monopoly on the all-important oil trade the US dollar slowly but surely became the reserve currency for global trades in most commodities and goods. Massive demand for US dollars ensued, pushing the dollar's value up, up, and away. In addition, countries stored their excess US dollars savings in US Treasuries, giving the US government a vast pool of credit from which to draw.

We know where that situation led – to a US government suffocating in debt while its citizens face stubbornly high unemployment (due in part to the high value of the dollar); a failed real estate market; record personal-debt burdens; a bloated banking system; and a teetering economy. That is not the picture of a world superpower worthy of the privileges gained from having its currency back global trade. Other countries are starting to see that and are slowly but surely moving away from US dollars in their transactions, starting with oil.

If the US dollar loses its position as the global reserve currency, the consequences for America are dire. A major portion of the dollar's valuation stems from its lock on the oil industry – if that monopoly fades, so too will the value of the dollar. Such a major transition in global fiat currency relationships will bode well for some currencies and not so well for others, and the outcomes will be challenging to predict. But there is one outcome that we foresee with certainty: Gold will rise. Uncertainty around paper money always bodes well for gold, and these are uncertain days indeed.

The Petrodollar System

To explain this situation properly, we have to start in 1973. That's when President Nixon asked King Faisal of Saudi Arabia to accept only US dollars as payment for oil and to invest any excess profits in US Treasury bonds, notes, and bills. In exchange, Nixon pledged to protect Saudi Arabian oil fields from the Soviet Union and other interested nations, such as Iran and Iraq. It was the start of something great for the US, even if the outcome was as artificial as the US real-estate bubble and yet constitutes the foundation for the valuation of the US dollar.

By 1975, all of the members of OPEC agreed to sell their oil only in US dollars. Every oil-importing nation in the world started saving its surplus in US dollars so as to be able to buy oil; with such high demand for dollars the currency strengthened. On top of that, many oil-exporting nations like Saudi Arabia spent their US dollar surpluses on Treasury securities, providing a new, deep pool of lenders to support US government spending.

The "petrodollar" system was a brilliant political and economic move. It forced the world's oil money to flow through the US Federal Reserve, creating ever-growing international demand for both US dollars and US debt, while essentially letting the US pretty much own the world's oil for free, since oil's value is denominated in a currency that America controls and prints. The petrodollar system spread beyond oil: the majority of international trade is done in US dollars. That means that from Russia to China, Brazil to South Korea, every country aims to maximize the US-dollar surplus garnered from its export trade to buy oil.

The US has reaped many rewards. As oil usage increased in the 1980s, demand for the US dollar rose with it, lifting the US economy to new heights. But even without economic success at home the US dollar would have soared, because the petrodollar system created consistent international demand for US dollars, which in turn gained in value. A strong US dollar allowed Americans to buy imported goods at a massive discount – the petrodollar system essentially creating a subsidy for US consumers at the expense of the rest of the world. Here, finally, the US hit on a downside: The availability of cheap imports hit the US manufacturing industry hard, and the disappearance of manufacturing jobs remains one of the biggest challenges in resurrecting the US economy today.

There is another downside, a potential threat now lurking in the shadows. The value of the US dollar is determined in large part by the fact that oil is sold in US dollars. If that trade shifts to a different currency, countries around the world won't need all their US money. The resulting sell-off of US dollars would weaken the currency dramatically.

So here's an interesting thought experiment. Everybody says the US goes to war to protect its oil supplies, but doesn't it really go to war to ensure the continuation of the petrodollar system?

The Iraq war provides a good example. Until November 2000, no OPEC country had dared to violate the US dollar-pricing rule, and while the US dollar remained the strongest currency in the world there was also little reason to challenge the system. But in late 2000, France and a few other EU members convinced Saddam Hussein to defy the petrodollar process and sell Iraq's oil for food in euros, not dollars. In the time between then and the March 2003 American invasion of Iraq, several other nations hinted at their interest in non-US dollar oil trading, including Russia, Iran, Indonesia, and even Venezuela. In April 2002, Iranian OPEC representative Javad Yarjani was invited to Spain by the EU to deliver a detailed analysis of how OPEC might at some point sell its oil to the EU for euros, not dollars.

This movement, founded in Iraq, was starting to threaten the dominance of the US dollar as the global reserve currency and petro currency. In March 2003, the US invaded Iraq, ending the oil-for-food program and its euro payment program.

There are many other historic examples of the US stepping in to halt a movement away from the petrodollar system, often in covert ways. In February 2011, Dominique Strauss-Kahn, managing director of the International Monetary Fund (IMF), called for a new world currency to challenge the dominance of the US dollar. Three months later a maid at the Sofitel New York Hotel alleged that Strauss-Kahn sexually assaulted her. Strauss-Kahn was forced out of his role at the IMF within weeks; he has since been cleared of any wrongdoing.

War and insidious interventions of this sort may be costly, but the costs of not protecting the petrodollar system would be far higher. If euros, yen, renminbi, rubles, or for that matter straight gold, were generally accepted for oil, the US dollar would quickly become irrelevant, rendering the currency almost worthless. As the rest of the world realizes that there are other options besides the US dollar for global transactions, the US is facing a very significant – and very messy – transition in the global oil machine.

The Iranian Dilemma

Iran may be isolated from the United States and Western Europe, but Tehran still has some pretty staunch allies. Iran and Venezuela are advancing $4 billion worth of joint projects, including a bank. India has pledged to continue buying Iranian oil because Tehran has been a great business partner for New Delhi, which struggles to make its payments. Greece opposed the EU sanctions because Iran was one of very few suppliers that had been letting the bankrupt Greeks buy oil on credit. South Korea and Japan are pleading for exemptions from the coming embargoes because they rely on Iranian oil. Economic ties between Russia and Iran are getting stronger every year.

Then there's China. Iran's energy resources are a matter of national security for China, as Iran already supplies no less than 15% of China's oil and natural gas. That makes Iran more important to China than Saudi Arabia is to the United States. Don't expect China to heed the US and EU sanctions much – China will find a way around the sanctions in order to protect two-way trade between the nations, which currently stands at $30 billion and is expected to hit $50 billion in 2015. In fact, China will probably gain from the US and EU sanctions on Iran, as it will be able to buy oil and gas from Iran at depressed prices.

So Iran will continue to have friends, and those friends will continue to buy its oil. More importantly, you can bet they won't be paying for that oil with US dollars. Rumors are swirling that India and Iran are at the negotiating table right now, hammering out a deal to trade oil for gold, supported by a few rupees and some yen. Iran is already dumping the dollar in its trade with Russia in favor of rials and rubles. India is already using the yuan with China; China and Russia have been trading in rubles and yuan for more than a year; Japan and China are moving towards transactions in yen and yuan.

And all those energy trades between Iran and China? That will be settled in gold, yuan, and rial. With the Europeans out of the mix, in short order none of Iran's 2.4 million barrels of oil a day will be traded in petrodollars.

With all this knowledge in hand, it starts to seem pretty reasonable that the real reason tensions are mounting in the Persian Gulf is because the United States is desperate to torpedo this movement away from petrodollars. The shift is being spearheaded by Iran and backed by India, China, and Russia. That is undoubtedly enough to make Washington anxious enough to seek out an excuse to topple the regime in Iran.

Speaking of that search for an excuse, this is interesting. A team of International Atomic Energy Agency (IAEA) inspectors just visited Iran. The IAEA is supervising all things nuclear in Iran, and it was an IAEA report in November warning that the country was progressing in its ability to make weapons that sparked this latest round of international condemnation against the supposedly near-nuclear state. But after their latest visit, the IAEA's inspectors reported no signs of bomb making. Oh, and if keeping the world safe from rogue states with nuclear capabilities were the sole motive, why have North Korea and Pakistan been given a pass?

There is another consideration to keep in mind, one that is very important when it comes to making some investment decisions based on this situation: Russia, India, and China – three members of the rising economic powerhouse group known as the BRICs (which also includes Brazil) – are allied with Iran and are major gold producers. If petrodollars go out of vogue and trading in other currencies gets too complicated, they will tap their gold storehouses to keep the crude flowing. Gold always has and always will be the fallback currency and, as mentioned before, when currency relationships start to change and valuations become hard to predict, trading in gold is a tried and true failsafe.

2012 might end up being most famous as the year in which the world defected from the US dollar as the global currency of choice. Imagine the rest of the world doing the math and, little by little, beginning to do business in their own currencies and investing ever less of their surpluses in US Treasuries. It constitutes nothing less than a slow but sure decimation of the dollar.

That may not be a bad thing for the United States. The country's gargantuan debts can never be repaid as long as the dollar maintains anything close to its current valuation. Given the state of the country, all that's really left supporting the value in the dollar is its global reserve currency status. If that goes and the dollar slides, maybe the US will be able to repay its debts and start fresh. That new start would come without the privileges and ingrained subsidies to which Americans are so accustomed, but it's amazing that the petrodollar system has lasted this long. It was only a matter of time before something would break it down.

Finally, the big question: How can one profit from this evolving situation? Playing with currencies is always very risky and, with the global game set to shift to significantly, it would require a lot of analysis and a fair bit of luck. The much more reliable way to play the game is through gold. Gold is the only currency backed by a physical commodity; and it is always where investors hide from a currency storm. The basic conclusion is that a slow demise of the petrodollar system is bullish for gold and very bearish for the US dollar.

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Thu, 02/09/2012 - 22:34 | 2144451 Xkwisetly Paneful
Xkwisetly Paneful's picture

I really hope you visit how easily you succombed to the unadulaterated ramblings of a bunch of lunatics.

If Iran could bring down the petro dollar don't you think they or someone else using them would have done that already?

Despite an ocean plus of reasons why the dollar should be significantly less relevant today vs 40yrs ago and yet it is largely as relevant as ever. Of course there has been no shortage of people orating the lunatic train of thought for as long as I can remember-first it was learn to speak German, than Japanese next it will be Chinese.

When the world loves the US is the time start worrying and when you find yourself nodding along with the lunatics it is time to start employing your brain again.

Thu, 02/09/2012 - 16:40 | 2143409 Joebloinvestor
Joebloinvestor's picture

You need gold to make a fissionable nuke, so maybe they can disarm them this way.

Thu, 02/09/2012 - 16:43 | 2143422 cossack55
cossack55's picture

Wait, wait. If suddenly Iran's CB is stuffed with gold, then the only thing standing behind their currency is a relic, as opposed to the "full faith and credit of the USSA".  Hmmmmm........

Thu, 02/09/2012 - 16:44 | 2143424 RobotTrader
RobotTrader's picture

Who gives a flying rat's ass about Iran?

 

Obviously, the market is ignoring it.

They are dumping gold stocks once again and piling into consumer names like Whole Foods

Which is breaking out to new highs on gigantic volume today.

http://www.wallstreetbear.com/board/view.php?topic=94424&post=342710

Thu, 02/09/2012 - 16:50 | 2143436 Treason Season
Treason Season's picture

Who gives a flying rat's ass about Rowbuttard?

Thu, 02/09/2012 - 17:09 | 2143522 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Robo I have been telling you about WFM since it was in the $20s and this is the first time I have ever heard you mention it!

Thu, 02/09/2012 - 21:21 | 2144207 Don Birnam
Don Birnam's picture

I am coming to the belief that "RobotTrader" is quite the genuine article: an AI post generator, tasked to precipitate the highest number of choleric responses possible -- whilst neither answering nor refuting any questions put to it regarding its "trade ideas."

If a "Robo" does indeed exist in some physical form, it likely bears a strong resemblance to one of the plasticine automatons from Kraftwerk, entering keystrokes to the synthesised bars of "Trans-Europe Express."

http://29.media.tumblr.com/tumblr_limybhQS4J1qaxnp6o1_500.jpg

Thu, 02/09/2012 - 16:53 | 2143453 drink or die
drink or die's picture

The only way to reply to a really good article is with a really good troll, right Robo?

Thu, 02/09/2012 - 17:00 | 2143482 AC_Doctor
AC_Doctor's picture

RoboRoach, you should be investing in companies like Emergency Essentials because when the BIG crash comes in the next 6 months, sales of long term storage food and survival supplies will be BOOMING!

Thu, 02/09/2012 - 17:01 | 2143485 brewing
brewing's picture

yes robo, the idiot of omaha said today that equities will outperform pm's and bonds over extended periods of time.  keep jumping on that bandwagon troll...

Thu, 02/09/2012 - 17:11 | 2143527 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

100% in stocks everybody!  Come on, follow the windbag douchebags!  Come on!!!!  There's a reason Uncle Warren is a billionaire and not you!  Come on!!!!

Thu, 02/09/2012 - 17:46 | 2143644 cossack55
cossack55's picture

Is this the same Whole Foods who just bent over and dropped trou for Monsanto?  Organic my ass.

Thu, 02/09/2012 - 18:30 | 2143794 Sean7k
Sean7k's picture

It will make it easier to identify those terrorists with their home grown food- having only two arms, eyes, legs, etc.

Thu, 02/09/2012 - 17:56 | 2143679 SgtShaftoe
SgtShaftoe's picture

I used to like your posts when you put in the pretty girls.  Now it's just, well, sad.  We care about Iran, because our blind idiotic leaders happen to be very close to lighting off a chain of events that could lead to WWIII.  That's why we care about Iran.  Also, don't you give a shit about your fellow man, even if they happen to live in Iran?  There are beautiful people that live there, and many will suffer, women, children... over what?  Pakistan has dozens, Israel has over 100, you probably have one buried in your back yard.   

More pretty girls!

Thu, 02/09/2012 - 18:44 | 2143840 CompassionateFascist
CompassionateFascist's picture

Along w GropeOn.

Thu, 02/09/2012 - 19:54 | 2144043 luna_man
luna_man's picture

 

 

"RoboTrader", if you own "whole foods", or not, please, tell us you just purchased 250 shares.

Just think, the stock is "breaking out to new highs"!!

 

 LOOK AT ALL THAT VOLUME!

Thu, 02/09/2012 - 16:47 | 2143426 pazmaker
pazmaker's picture

Wow very interesting read!   It really helps one to see all the pieces of the puzzle coming together.  Prepare accordingly, lots of instability on the horizon.  something has got to give.  I don't like Simon Black but I'm finding it harder to convince myself to stay in the USA.   Preparandome para salir de aqui en 2 anos vamanos!

Thu, 02/09/2012 - 16:49 | 2143433 illyia
illyia's picture

I just have to say, TD, that is some hell of an analysis. Watch your back.

Amazing.

i.

Thu, 02/09/2012 - 16:51 | 2143439 non_anon
non_anon's picture

of course gold, silver, et al and barter were successfully used by nations over the past 6,000 odd years before the dollar hegemony and other tp curriences.

Thu, 02/09/2012 - 16:56 | 2143463 Global Hunter
Global Hunter's picture

Yes what it boils down to is our main "industry" in the west is financial intemediary, the militairy industrial complex serves to protect our main industry.  If people transact through any kind of commodity between themselves and by pass the western economic system we lose the ability to conduct the transaction and take a big spread for our troubles...and then what av ya got?

Thu, 02/09/2012 - 16:54 | 2143454 Zero Govt
Zero Govt's picture

it's the beginning of the end of the US Dollar (and America)

Iran is a page note.. it's the pages on China-Japan, China-Russia, China-Brazil and China-Africa using their own currencies that are the foundations for the US flag sinking in international trade

Once it trickles, soon it pours

the US Govts fantastic foreign policies are bum-rushing the end of their tatty worthless paper ...Benny has lost it (all)

Thu, 02/09/2012 - 16:57 | 2143469 Global Hunter
Global Hunter's picture

I thought it was easy to put the genie back inside the bottle

Thu, 02/09/2012 - 17:08 | 2143497 Zero Govt
Zero Govt's picture

Benny never solves anything.. he plasters them over with whitewash

watch the mould come back on all he's 'fixed' : Wall Street, US Treasuries, Europe and ultimately the Dollar, his ultimate responsibility (that he flunked) 

Thu, 02/09/2012 - 17:13 | 2143536 resurger
resurger's picture

Zgov! Karma is a bitch man!

In an interview with Barron’s financial magazine with Bunker Hunt (Hunt Brothers)

 ‘‘Just about anything you buy, rather than paper, is better,” 

“…If you don’t like gold, use silver, or diamonds or copper, but something. Any damn fool can run a printing press.”

Thu, 02/09/2012 - 16:54 | 2143460 xcehn
xcehn's picture

Will economic strangulation lead to capitulation?  Or will the mullahs rather die and go to heaven (holy war) than surrender their HEU programme?  Hmmmm 

Thu, 02/09/2012 - 17:00 | 2143484 Zero Govt
Zero Govt's picture

this is only Round 1

the American-Jew thugs are ramping up their global bully-boy tactics (always a winner that) and throwing their toys outta pram when they don't get their petulent way like at the UN (such skilled 'diplomacy')

Round 2 will probably go to the AJ thugs too

Rounds 3, 4 and 5, the Arab Spring springing even higher into gear across the Middle East at the sight of an Arab neighbour being bullied by the usual retards is where the real fireworks begin 

if Saudi falls watch out

 

Thu, 02/09/2012 - 17:17 | 2143551 xcehn
xcehn's picture

I like the ZH take on this story, but I'm afraid that the sheeple face-value interpretation is the way I went.

Thu, 02/09/2012 - 20:35 | 2144156 Likstane
Likstane's picture

I like the ZH take on this story, but I'm afraid that the sheeple face-value interpretation is the way I will continue to believe/want it. 

fixed it

Thu, 02/09/2012 - 16:57 | 2143467 tony bonn
tony bonn's picture

"...leaving the local administration with few options but to engage either the US or Israel. Unless of course, this is the ultimate goal..."

well, buckwheat, i think that's the plan....and the iranians knew it which is why they made preparations...but you did find the raw nerve - that chutzpah - nay terrorism - of iran giving the usd the middle finger....that is iran's real sin - the nuclear malarky is just so much horsecrap that the rockefeller-mic-yale-cia terrorists have used to obfuscate the real issue.....hence 3 carrier groups are required to subdue iran....

Thu, 02/09/2012 - 19:20 | 2143945 roadhazard
roadhazard's picture

Iran has nothing that anyone would call an air force. 

Thu, 02/09/2012 - 16:57 | 2143468 Pancho Villa
Pancho Villa's picture

As long as they have gold or "black gold", I doubt the Iranians will go hungry.

Whereas people betting on the dollar holding its purchasing power might not be so lucky.

Thu, 02/09/2012 - 16:58 | 2143474 fonzannoon
fonzannoon's picture

how about that vix eh? Eh!

Thu, 02/09/2012 - 17:16 | 2143549 Hippocratic Oaf
Hippocratic Oaf's picture

Yes, bought a bundle of TVIX on Tuesday at 14.

A rockin' market as Robo says and the VIX is up too.

Even the retail motherfuckers are getting scared.

Thu, 02/09/2012 - 17:01 | 2143488 Frastric
Frastric's picture

Hmm Iran threatening the petrodollar system means the USA declaring war on Iran for some twisted purpose (perhaps to support some anti government resistance group) in the next year or two years time. I mean Libya tried to threaten the petrodollar system sometime ago and look what happened...

Thu, 02/09/2012 - 17:06 | 2143505 krispkritter
krispkritter's picture

Rickards on Iran: http://www.youtube.com/watch?feature=player_embedded&v=C6HKu8guMl8

(and a reference to ZH at 6:25!)

Thu, 02/09/2012 - 17:09 | 2143519 Taint Boil
Taint Boil's picture

 

 

Good post....

Remember there are women and children in Iran.

Bombing for peace is like fucking for virginity.

Thu, 02/09/2012 - 23:10 | 2144550 Cathartes Aura
Cathartes Aura's picture

as there are in Afghanistan, and Iraq, and. . . all the other countries on these bloody hands.

Thu, 02/09/2012 - 17:11 | 2143532 bigdumbnugly
bigdumbnugly's picture

Yet going back to the Reuters story, it would be quite dramatic, if only it was not the case that Iran has been laying the groundwork for a barter economy for many months now, something which various other analysts perceive as the basis for the destruction of the petrodollar system. Perhaps regular readers will recall that back in July, we wrote an article titled "China And Iran To Bypass Dollar, Plan Oil Barter System." Specifically, we wrote that "according to the FT, China has decided to commence a barter system in which Iranian oil is exchanged directly for Chinese exports. The net result: not only a slap for the US Dollar, but implicitly for all fiat intermediaries, as Iran and China are about to prove that when it comes to exchanging hard resources for critical Chinese goods and services, the world's so called reserve currency is completely irrelevant."

that's why ranting andy and others have been saying it won't be the money value of your pm's that will matter - but the number of ounces you have.

Thu, 02/09/2012 - 17:14 | 2143542 Mr Lennon Hendrix
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It's also the main reason the DXY has increased in "value".  It's volacity is down, and it tightened its perceived worth.

There will be a minute when the volacity increases, and in that minute, the dollar will be....gone.

Thu, 02/09/2012 - 17:16 | 2143544 marcusfenix
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but here's the kicker, if the Western PTB's go to war over the petro dollar, that gives China, Russia, India and the rest the opportunity to turn Iran into a trap much the same that the Soviets fell into, the "Afgan trap" back in the eighties. they don't even have to get directly involved, just supply Iran and there allies with enough weapons, training, support and resources to resist, and they can slowly bleed NATO and further drain the western Treasuries driving their public sectors further into debt and economies further into depression.  without a quick decisive victory, public support and morale would quickly erode and once the flag draped coffins start adding up, who knows, people may even start to take more direct methods of displaying their displeasure. 

if the east plays their cards right, the west could lose either way...

 

Thu, 02/09/2012 - 18:09 | 2143723 Eisenhorn
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Good plan.  China wants to bankrupt the US, thus rendering the US incapable of buying all their cheap crap, thus bankrupting China who also holds trillions in US Debt.

They could call it Operation China-cide.

Next plan.....

Thu, 02/09/2012 - 20:26 | 2144131 Citxmech
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First off, we're already bankrupt.  Which we both know means that gig where we trade Benny's Clown Bux for real, value-added goods is winding down anyway.

Thu, 02/09/2012 - 22:14 | 2144413 deflator
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 China buying US debt so that US "consumers" could buy Chinese goods is the old plan. The new plan is for the US "consumer" to decline because the global pie isn't big enough for Chinese consumption to grow alongside US consumption. If the global pie of resources isn't growing fast enough for growth in Chinese consumption then it has to come from somewhere?

Thu, 02/09/2012 - 17:18 | 2143558 Hannibal
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Hm,...looks like all the balls are in strange lands, far away from the USofA.

Thu, 02/09/2012 - 17:22 | 2143573 djudy003
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One of the most amazing articles I have read, it shows how the US has forced the entire world to share its wealth with it.

Thu, 02/09/2012 - 17:23 | 2143574 Mr Lennon Hendrix
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First, there hasn't been much trade done this way or else we would have already seen a large spike in demand.  Unlike the Greece bailout, it isn't priced in.

Second, this is pretty badass.  We knew Asia had already moved away from the dollar, but this answers how they did.

So, if this is at all correct, we should begin to see more volacity come into all markets as the dollars and USTs are dumped for gold and commodities.

Thu, 02/09/2012 - 17:29 | 2143598 InconvenientCou...
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Iran is a determined mortal threat to the U.S., all secular western civilization and non-Muslims wherever they may be.

Time is on their side and it's readily apparent.

So yes, the end of WW3 (started in 1971) is near and WW4 is nearing its commencement. The Earth is a (shrinking) closed system so there is virtually no other possible outcome. There's not going to be peace on this rock any time soon.

 

Thu, 02/09/2012 - 17:40 | 2143622 ChacoFunFact
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Dwindling time, rising tension make Iran top fear

http://tinyurl.com/6rxdpgl

Thu, 02/09/2012 - 17:45 | 2143641 Dermasolarapate...
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Rickards' book, Currency Wars, implies many countries will move away from the dollar as an exchange medium into their local currencies (as China and Russia and Brazil and India have already done) and may turn to bartering commodities, like Iran seems to be doing now.

It's a good book worth a read espcially if you are new to the entire currency/IMF/gold/dollar debate thing.

Thu, 02/09/2012 - 17:46 | 2143647 zerotohero
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I RAN -  U RAN - WE ALL RAN FROM FIAT PAPER DOLLARS

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