Author Topic: Dollar Being Isolated  (Read 5858 times)

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Online Weisshaupt

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Dollar Being Isolated
« on: January 23, 2012, 11:12:11 AM »
More milestones on the march to loosing the world's reserve status

UAE and China

Quote
The currency swap agreement between China and the United Arab Emirates [UAE] signed during Premier Wen Jiabao’s tour of the Persian Gulf region ending today, will raise eyebrows in the western capitals, especially London and Washington. The list of countries with which China has such deals is slowly and steadily lengthening and this is the first such deal with a Gulf Cooperation Council [GCC] state.
 The deal with the UAE is worth $5.5 billion — bilateral trade was $36 billion last year with Chinese exports accounting for two-thirds — and aims at “strengthening bilateral financial cooperation, promoting trade and investments and jointly safeguarding regional financial stability”, according to the Chinese central bank. China is, in essence, providing ’seed money’ so that businessmen wouldn’t need to convert every transaction into dollars, thereby lowering the foreign exchange costs.

Iran and India
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"India  and Iran have agreed to settle some of their $12 billion annual oil  trade in rupees, a government source said on Friday, resorting to the  restricted currency after more than a year of payment problems in the  face of fresh, tougher U.S. sanctions."

Iran and Russia
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"Iran and Russia replaced the U.S. dollar with their national currencies in bilateral trade, Iran’s state-run Fars news agency reported, citing Seyed Reza Sajjadi, the Iranian ambassador in Moscow. The proposal to switch to the ruble and the rial was raised by Russian President Dmitry Medvedev at a meeting with his Iranian counterpart, Mahmoud Ahmadinejad, in Astana, Kazakhstan, of the Shanghai Cooperation Organization, the ambassador said.

Russia and China
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in the first summit of the so-called BRIC countries." And judging by the market's reaction, and the dollar resurgence overnight it appears that everyone has read through this as just posturing. Furthermore, keep in mind that Russia was not even a top 10 trading counterparty of China in 2010. If China does the same with any of its top 10 partners then there may be a reason to worry. For now, China is merely testing the waters, and has absolutely no intent on isolating the US, nor making its nearly $3 trillion US FX reserves lose a double digit percentage of their value overnight.
- But don't worry, its just posturing. Until it isn't.

China and Japan
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Japan and China will promote direct trading of yen and yuan without using dollars and will encourage the development of a market for the exchange, to cut costs for companies, the Japanese government said. Japan will also apply to buy Chinese bonds next year, the Japanese government said in a statement after a meeting between Prime Minister Yoshihiko Noda and Chinese Premier Wen Jiabao in Beijing yesterday."

And this is of course in addtion to the BRICS Agreement  and the coming  plan to end the sale of oil in dollars

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"Chinese financial sources believe President Barack Obama is too busy fixing the US economy to concentrate on the extraordinary implications of the transition from the dollar in nine years' time. The current deadline for the currency transition is 2018," added.

Nothing to see here. These attempts are really ust getting a system of trade in place before the dollar goes away, to lessen the impact of it. The dollar is still the major reserve currency overseas and there is only so fast that can change. They may be able to keep it ( and the euro) afloat so that the dollar dies with a wimper instead of the bang, but die it will, and we will be left with 16+ Trillion in debt and 30-60 trillion in liabilities we need to pay for in a circumstance where we have lost reserve status and we can't just print our way out and export the problem.

That which cannot continue, won't.

Offline Libertas

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Re: Dollar Being Isolated
« Reply #1 on: January 23, 2012, 11:16:58 AM »
What kills me is people thinking some other currency is any less fiat than ours...all currencies are built on a mountain of fog, suck the fog out of one, people will have ideas about another...next thing you know a little currency war turns into a real shooting war.

Oh well, gotta pass the time somehow...

 ::)
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Online Weisshaupt

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Re: Dollar Being Isolated
« Reply #2 on: January 23, 2012, 12:35:40 PM »
What kills me is people thinking some other currency is any less fiat than ours...all currencies are built on a mountain of fog, suck the fog out of one, people will have ideas about another...next thing you know a little currency war turns into a real shooting war.

Oh well, gotta pass the time somehow...

 ::)

Fiat is like the rule of Kings.  You have the right King in place, and the kingdom is stable, the people are free, and the government is far more efficient than anything we can do with a Democracy.  Of course, what we lack is a decent method of picking Kings.

A Fiat system administered with the wisdom of our Mythical Good King, would work fine, just as a kingdom works fine. Geither/Bernake and Greenspan were not good Kings. And how ever ever got off othe gold standard when the Consititution  clearly mandates it, I will never understand. If I don't pay my taxes, can't I argue that the government expects them to be paid in and pay taxes in an  illegal currency? I am no lawyer, but I expect at some point that did go to court and the court laughed and said, oh that bit of the Constitution? We excised that, just like we did the 9th and 10th amendments. Now pay us (in U.S. Mint  gold coins at $20 value if you want)  or go to jail.   Now there was a case where an employer DID pay in U.S. Minted Gold and silver, and of course the Fed has been harrasing him for years, but he has yet to loose in court.  I paid them  $400 of 100% legal U.S. currency, and they owe taxes ( paid in fiat of course) on $400 dollars.  The price of the gold in the coins is irrelevant. They are worth $20 each in U.S. currency.  Now if only I could get my liberal employer to go along.
 
Anyway...  other currencies are Fiat, but if they are administered by better kings,  that may be a better bet, even if they aren't a much better bet.  That was basically the thinking that allowed the dollar to become the reserve in the first place. Which govt do I trust to keep the currency more stable? My own, or the U.S. Government.  In Argentina you were an idiot if you trusted the govt to do the right thing, and dollars (in cash) were the right thing to hold. Better than gold in many cases as the .999 pure stuff was accepted at "junk gold" jewelery rates as there was no easy  way to verify the purity.  We are in a race to the bottom now, but that doesn't mean someone isn't marginally better. In fact that is what Russia and China are couting on.. being the last man standing, and the worlds new reserve by default of the others.
 
I expect the interconectedness of things will still cause a worldwide depression as the dollar fizzles (after all we are a major market),  but  countries which  have agreements in place will at  least allow them to continue trading even if the dollar drops out suddenly. All that is needed is a stable medium of exchange ( and by stable I mean predictable - 3% inflation is fine as long as I know its 3% and will continue to be 3%.. Even gold and silver backed currencies can't promise that - the gold and silver rushes would cause economic havoc.. and yes the Federal reserve has an excellent record ( up till Nixon took us off of gold completely and even then some time after - wish I could find that link again- it was a good chart) of keeping the money value predictable..

Bototm line, a managed fiat system can, in theory, be a better currency system than one based on metals with potentially unpreditable production numbers, just as a Kingdom can, in theiry, be a better system of government than a Democracy or a Republic. The problem is, has been, and always be, in finding the people who can make them so. As that is the case, you pick from the alternatives you have, not the ones you wish you had, and that might very well be another system of fiat - doomed in the long term to failure by human failings, but pretty much everything humans do is.  Good enough for now  (or if you prefer "good enough for government work" ) is usually the best we can achieve.

Offline Libertas

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Re: Dollar Being Isolated
« Reply #3 on: January 24, 2012, 07:54:01 AM »
I have no issue with what you are saying, but the key thing is the "peg", without the "peg" any fiat currency can kiss stability goodbye.  The dollar became the world currency "peg" because it was the strongest and most stable, and was so for quite a while.  Now, if nations decouple from the dollar, they are basically saying two things - our currency is stronger and more stable & the dollar is weaker and less stable.  If more and more nations decouple form the dollar the immediate effect will be a dollar in freefall.  Once that happens the "fog" as I call it is sucked out.  The ripple effect in our economy will be felt world wide, putting pressure on these independent currencies or whatever new pegs may exist.  Then there's the big fugly monkey in the corner, our national debt.  Our bondholders will quickly demand repayment, but in what?  The exchange value will be ridiculous.  Either the other nations take it in the shorts and get paid in worthless dollars or they wait for the dust to settle and negotiate new terms.  What if we just say screw it, were bankrupt, you got nothing but pulp in your hands?  And some point the pain cannot be escaped by those currently running away, and at some point financial pain can translate into shooting wars and real pain.  If I just got stiffed by someone who owes me, I might figure it is better to take some assets (land & resources) by force than accepting worthless currency, new empty promises or a raised middle finger.

PS-Love the idea of being paid in US gold coins and only owing taxes on the face value!!!

 ::whoohoo::
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Online Weisshaupt

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Re: Dollar Being Isolated
« Reply #4 on: January 24, 2012, 04:06:40 PM »
India agrees to pay GOLD for OIL with Iran. But don't let anyone tell you that outdated shiny rock, a relic from ancient history, will ever be used as money again. You are fool to buy gold when you can hold dollar denominated assets. Gold is in a bubble. Get out now!  ::smalldeadhorse::

Quote
India is the first buyer of Iranian oil to agree to pay for its purchases in gold instead of the US dollar, debkafile's intelligence and Iranian sources report exclusively.  Those sources expect China to follow suit. India and China take about one million barrels per day, or 40 percent of Iran's total exports of 2.5 million bpd. Both are superpowers in terms of gold assets. By trading in gold, New Delhi and Beijing enable Tehran to bypass the upcoming freeze on its central bank's assets and the oil embargo which the European Union's foreign ministers agreed to impose Monday, Jan. 23. The EU currently buys around 20 percent of Iran's oil exports.

Move along. Nothing to see here.






Offline Libertas

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Re: Dollar Being Isolated
« Reply #5 on: January 25, 2012, 07:37:41 AM »
Heh.  Amounts that large can't be hidden too easily...wonder if we (or Israel) could intercept the payment!

 ::evil::
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HenryJennifer

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Re: Dollar Being Isolated
« Reply #6 on: February 08, 2012, 01:49:33 AM »
I won't believe it, it's next to impossible.

Online Pandora

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Re: Dollar Being Isolated
« Reply #7 on: February 08, 2012, 10:22:09 AM »
You don't believe what?
"Under certain circumstances, profanity provides a relief denied even to prayer." - Mark Twain

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Online IronDioPriest

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Re: Dollar Being Isolated
« Reply #8 on: February 08, 2012, 10:24:24 AM »
You don't believe what?

I think Trap already got 'im. Go read his siggy in his profile...

 ::hysterical::

I think if this one doesn't come back within a day or so, we can safely delete the account.
"A strict observance of the written laws is doubtless one of the high duties of a good citizen, but it is not the highest. The laws of necessity, of self-preservation, of saving our country when in danger, are of higher obligation. To lose our country by a scrupulous adherence to written law, would be to lose the law itself, with life, liberty, property and all those who are enjoying them with us; thus absurdly sacrificing the end to the means."

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Online Pandora

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Re: Dollar Being Isolated
« Reply #9 on: February 08, 2012, 10:30:08 AM »
You don't believe what?

I think Trap already got 'im. Go read his siggy in his profile...

 ::hysterical::

I think if this one doesn't come back within a day or so, we can safely delete the account.

Don't have to; it's right there in the bottom of his post.  I did check his profile, though, and figured either you or trap slapped him, but decided as long as he wasn't deleted, engaged on the chance he might respond.
"Under certain circumstances, profanity provides a relief denied even to prayer." - Mark Twain

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Re: Dollar Being Isolated
« Reply #10 on: February 08, 2012, 10:58:00 AM »
....Don't have to; it's right there in the bottom of his post...

I forgot to take my anti-moron pill this AM.
"A strict observance of the written laws is doubtless one of the high duties of a good citizen, but it is not the highest. The laws of necessity, of self-preservation, of saving our country when in danger, are of higher obligation. To lose our country by a scrupulous adherence to written law, would be to lose the law itself, with life, liberty, property and all those who are enjoying them with us; thus absurdly sacrificing the end to the means."

- Thomas Jefferson

Online Pandora

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Re: Dollar Being Isolated
« Reply #11 on: February 08, 2012, 11:01:19 AM »
....Don't have to; it's right there in the bottom of his post...

I forgot to take my anti-moron pill this AM.

It ain't that; you're OLD NOW.  Not as frail and forlorn as you'll be next birthday, but accept it, approaching antiquity.  ;D

Oh, and Gunsmith told me to warn you that the AARP will begin contacting you this year ... in preparation for next year's approaching fossil-hood.
"Under certain circumstances, profanity provides a relief denied even to prayer." - Mark Twain

"Let us assume for the moment everything you say about me is true. That just makes your problem bigger, doesn't it?"

Offline Libertas

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Re: Dollar Being Isolated
« Reply #12 on: February 08, 2012, 11:43:06 AM »
AARP, Amerikan Association of Retarded Progressives!

 ::mooning::

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Offline Libertas

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Re: Dollar Being Isolated
« Reply #13 on: February 08, 2012, 11:44:33 AM »
BOT - More currency collapse warnings...

http://www.zerohedge.com/news/guest-post-why-our-currency-will-fail

Of course, nobody can answer the question "When?"!

It's just one of those things ya have to be ready for!
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Online Glock32

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Re: Dollar Being Isolated
« Reply #14 on: February 08, 2012, 12:00:39 PM »
Ammo: the currency of the new millennium.

Funny this is, I've been hearing that line since the mid-90s before things were palpably bad, back when it was more a joke than anything.
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charlesoakwood

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Re: Dollar Being Isolated
« Reply #15 on: February 08, 2012, 12:25:40 PM »

Quote
However, of all the challenges that catch my eye right now, the one most worrisome is the shredding of our national narrative to the point that it no longer makes any sense whatsoever. I'm a big believer that our actions are guided by the stories we tell ourselves. To progress as a society, having a grand vision that aligns and inspires is essential.

But when words emphasize one set of priorities and actions support another, any narrative falls apart. At a personal level, if someone touts their punctuality but chronically shows up hours late, the narrative that says "this person is reliable" begins to fall apart.

A new currency must be something that everyone has access to and
will accept at a constant value or it will be a barter item. 

Online John Florida

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Re: Dollar Being Isolated
« Reply #16 on: February 08, 2012, 10:30:12 PM »
....Don't have to; it's right there in the bottom of his post...

I forgot to take my anti-moron pill this AM.

It ain't that; you're OLD NOW.  Not as frail and forlorn as you'll be next birthday, but accept it, approaching antiquity.  ;D

Oh, and Gunsmith told me to warn you that the AARP will begin contacting you this year ... in preparation for next year's approaching fossil-hood.

 You guys just hate to see people have fun don't you. ::angry::
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Offline Sectionhand

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Re: Dollar Being Isolated
« Reply #17 on: February 09, 2012, 02:12:16 AM »
India agrees to pay GOLD for OIL with Iran. But don't let anyone tell you that outdated shiny rock, a relic from ancient history, will ever be used as money again. You are fool to buy gold when you can hold dollar denominated assets. Gold is in a bubble. Get out now!  ::smalldeadhorse::

Quote
India is the first buyer of Iranian oil to agree to pay for its purchases in gold instead of the US dollar, debkafile's intelligence and Iranian sources report exclusively.  Those sources expect China to follow suit. India and China take about one million barrels per day, or 40 percent of Iran's total exports of 2.5 million bpd. Both are superpowers in terms of gold assets. By trading in gold, New Delhi and Beijing enable Tehran to bypass the upcoming freeze on its central bank's assets and the oil embargo which the European Union's foreign ministers agreed to impose Monday, Jan. 23. The EU currently buys around 20 percent of Iran's oil exports.

Move along. Nothing to see here.







India and China don't love Iran THAT much ! I don't seriously believe that they would tap their gold reserves to pay for Iranian oil . That would be just about the dumbest thing they could possibly do .

Offline Libertas

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Re: Dollar Being Isolated
« Reply #18 on: February 09, 2012, 07:13:41 AM »
Depends upon alternative sources, why pay more and why pay with something tangible when there are much better options?

Unless they feel like subsidizing their Persian friends it does look stupid.
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Online Weisshaupt

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Re: Dollar Being Isolated
« Reply #19 on: February 09, 2012, 05:39:33 PM »
India and China don't love Iran THAT much ! I don't seriously believe that they would tap their gold reserves to pay for Iranian oil . That would be just about the dumbest thing they could possibly do .

There seem to be competeing narratives
I don't know how one would go about confirming one or the other without being in on the deal, but I don't disagree, and neither does this article.

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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).

But...

Quote
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.

Which is really the point.