The Decline and Fall of the Roman Denarius

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The Dollar Vigilante

History repeats itself, so the scholars say.  But according to Mark Twain it just rhymes.  Literary quips and hair-splitting aside, I’ve found that one of the most valuable things anyone can do to advance their knowledge and understanding of the world is the study of history.  Now I’m not talking about the kind of history you get in grade school and university, where all you’re told to do is rote-memorization of people, dates and events.  To get any value whatsoever out of studying history, you have to be able to discern cause and effect.  What causes civilizations to grow to greatness, and what causes them to collapse?

There are few collapsed civilizations that have been studied in quite the depth as the Roman Empire.  Many theories have been offered, some with more merit than others.  Ludwig von Mises argued that Rome was eroded from within and that economics played a huge part in it.  This is too big of a story for me to cover in a single article, so I will focus on one of the most important aspects; the currency.

For hundreds of years, the Romans were on a bimetallic standard, not unlike the currency system of the early United States.  There was a gold coin, the aureus, which was popularized by Julius Caesar.  There was also a silver coin known as the denarius, which was what most Romans used in their day to day transactions.  It was on a solid gold and silver standard that Rome ascended to the height of its development and power.

One of the greatest enemies of mankind is hubris, and the Roman Empire was certainly not immune to this.  The phrase “bread and circuses” refers to the massive welfare spending that occurred in Rome during the height of its power.  With the treasury filled with gold, spendthrift politicians quickly used the money to buy influence, votes and curry favour with neighbouring states.

“The budget should be balanced, the treasury should be refilled, public debt should be reduced, and the assistance to foreign lands should be curtailed lest Rome become bankrupt.  People must again learn to work, instead of living on public assistance.” – Cicero, 55 BC

When Julius Caesar first began minting large quantities of the aureus it was 8 grams of pure gold.  By the second century it had declined to 6.5 grams and at the beginning of the fourth century it was replaced by the 4.5 gram solidus.  The purity of the coin itself was never debased, but the ever decreasing weight was a sure sign that government spending had been outpacing revenues for centuries.

All of this however, pales in comparison with the devaluation of the denarius.  The denarius was the backbone of the Roman economy.  Citizens earning their income in gold were a rarity given that a day’s wage for an average labourer at the time is estimated at a single denarius.  Thus it also became the target of severe abuse by the Roman authorities.

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The collapse of complex societies

The collapse of complex societies of the past can inform the present on the risks of collapse. Dr. Joseph Tainter, author of the book The Collapse of Complex societies, details the factors that led to the collapse of past civilizations including the Roman Empire.

From Wikipedia:

According to Tainter’s Collapse of Complex Societies, societies become more complex as they try to solve problems. Social complexity can be recognized by numerous differentiated and specialised social and economic roles and many mechanisms through which they are coordinated, and by reliance on symbolic and abstract communication, and the existence of a class of information producers and analysts who are not involved in primary resource production. Such complexity requires a substantial “energy” subsidy (meaning the consumption of resources, or other forms of wealth). When a society confronts a “problem,” such as a shortage of energy, or difficulty in gaining access to it, it tends to create new layers of bureaucracyinfrastructure, or social class to address the challenge. Tainter, who first (ch. 1) identifies seventeen examples of rapid collapse of societies, applies his model to three case studies: The Western Roman Empire, the Maya civilization, and the Chaco culture.

For example, as Roman agricultural output slowly declined and population increased, per-capita energy availability dropped. The Romans “solved” this problem by conquering their neighbours to appropriate their energy surpluses (in concrete forms, as metals, grain, slaves, etc.). However, as theEmpire grew, the cost of maintaining communications, garrisons, civil government, etc. grew with it. Eventually, this cost grew so great that any new challenges such as invasions and crop failures could not be solved by the acquisition of more territory. Intense, authoritarian efforts to maintain cohesion by Domitian and Constantine the Great only led to an ever greater strain on the population. The empire was split into two halves, of which the western soon fragmented into smaller units. The eastern half, being wealthier, was able to survive longer, and did not collapse but instead succumbed slowly and piecemeal, because unlike the western empire it had powerful neighbors able to take advantage of its weakness.

We often assume that the collapse of the western Roman Empire was a catastrophe for everyone involved. Tainter points out that it can be seen as a very rational preference of individuals at the time, many of whom were actually better off. Archeological evidence from human bones indicates that average nutrition actually improved after the collapse in many parts of the former Roman Empire. Average individuals may have benefited because they no longer had to invest in the burdensome complexity of empire. Tainter notes that in the west, local populations in many cases greeted the barbarians as liberators.

This is part 1 of 7 of a keynote talk delivered to the 2010 International Conference on Sustainability: Energy, Economy, and Environment organized by Local Future nonprofit and directed by Aaron Wissner.


According to Tainter (1990), too many scholars offer facile explanations of societal collapse by assuming one or more of the following three models in the face of collapse: (Wikipedia)

  1. The Dinosaur, a large-scale society in which resources are being depleted at an exponential rate and yet nothing is done to rectify the problem because the ruling elite are unwilling or unable to adapt to those resources’ reduced availability: In this type of society, rulers tend to oppose any solutions that diverge from their present course of action. They will favour intensification and commit an increasing number of resources to their present plans, projects, and social institutions.
  2. The Runaway Train, a society whose continuing function depends on constant growth (cf.Frederick Jackson Turner‘s Frontier Thesis): This type of society, based almost exclusively on acquisition (e.g., pillage or exploitation), cannot be sustained indefinitely. The Assyrian and MongolEmpires, for example, both fractured and collapsed when no new conquests were forthcoming.
    Tainter argues that capitalism can be seen as an example of the Runaway Train model in that generally accepted accounting practices require publicly traded companies, along with many privately held ones, to exhibit growth as measured at some fixed interval (often three months). Moreover, the ethos of consumerism on the demand side and the practice of planned obsolescence on the supply side encourage the purchase of an ever-increasing number of goods and services even when resource extraction and food production are unsustainable if continued at current levels.
  3. The House of Cards, a society that has grown to be so large and include so many complex social institutions that it is inherently unstable and prone to collapse. This type of society has been seen with particular frequency among Eastern bloc and other communist nations, in which all social organizations are arms of the government or ruling party, such that the government must either stifle association wholesale (encouraging dissent and subversion) or exercise less authority than it asserts (undermining its legitimacy in the public eye).
    By contrast, as Alexis de Tocqueville observed, when voluntary and private associations are allowed to flourish and gain legitimacy at an institutional level, they complement and often even supplant governmental functions: They provide a “safety valve” for dissent, assist with resource allocation, provide for a for social experimentation without the need for governmental coercion, and enable the public to maintain confidence in society as a whole even during periods of governmental weakness.

An example of Tainter’s Critique of Simplistic Models

Tainter argues that these models, though superficially useful, cannot severally or jointly account for all instances of societal collapse. Often they are seen as interconnected occurrences that reinforce each other. For example, the failure of Easter Island‘s leaders to remedy rapid ecological deterioration (“Dinosaur”) cannot be understood without reference to the other models above. The islanders, who erected large statues called moai as a form of religious reverence to their ancestors, used felled trees as rollers to transport them. Because the islanders firmly believed that their displays of reverence would lead to increased future prosperity, they had a deeply entrenched incentive to intensify moaiproduction (“Runaway Train”). Because Easter Island’s geographic isolation made its resources hard to replenish and made the balance of its overall ecosystem very delicate (“House of Cards”), deforestation led to soil erosion and insufficient resources to build boats for fishing or tools for hunting. Competition for dwindling resources resulted in warfare and many casualties (an additional “Runaway Train” iteration). Together these events led to the collapse of the civilization, but no single factor above provides an adequate account.

Mainstream interpretations of the history of Easter Island also include the slave raiders who abducted a large proportion of the population and epidemics that killed most of the survivors (see Easter Island History#Destruction of society and population.) Again, no single point explains the collapse; only a complex and integrated view can do so.

Tainter’s position is that social complexity is a recent and comparatively anomalous occurrence requiring constant support. He asserts that collapse is best understood by grasping four axioms. In his own words (p. 194):

  1. human societies are problem-solving organizations;
  2. sociopolitical systems require energy for their maintenance;
  3. increased complexity carries with it increased costs per capita; and
  4. investment in sociopolitical complexity as a problem-solving response reaches a point of declining marginal returns.

With these facts in mind, collapse can simply be understood as a loss of the energy needed to maintain social complexity. Collapse is thus the sudden loss of social complexity, stratification, internal and external communication and exchange, and productivity.

What Happens If GLD Doesn’t Have The Physical Gold To Back Its Investment Funds?

Final installment of Reggie Middleton’s interview with the CEO of GBI: Gold Bullion International, a Wall Street firm that facilitates trading in  physical gold for retail and institutional investors directly through their brokerage account. This segment covers, among other topics, what would happen if GLD doesn’t have the physical gold backing their funds.

Nanex: HFT is Insatiable – its Hidden Costs

Article by Nanex research:

We have spent the last 24 years working with real-time market data on a tick-by-tick basis. We monitor our commercial datafeed in real-time to stay on top of market changes or issues. This past year, we have spentconsiderable time and effort studying the relentless growth of equity quotes. Based on our findings, virtually all of the additional quotes contribute zero or negative economic value to stock pricing, because they are either way outside the market or end up expiring before any investor or trader could possibly act on them. Furthermore, we can’t find any self-limiting mechanism in place that will ever put a stop to this unnecessary and expensive growth of misinformation. The only thing that prevents a sudden explosion in quote traffic is the capacity limitation set by SIAC which runs the Consolidated Quote System(CQS) for the exchanges.

Read more on Nanex web site

The chart below shows 2 ms peak quote rates on 1 minute intervals, illustrating just how often capacity limits are hit.  Copyright: NANEX llc.

Why the Gold Price is Manipulated – Chris Powell of

The Nature of Inflation

Author .  Article from
Official measures of ‘inflation’ or the ‘general price level’ are an attempt to measure the unmeasurable. Moreover, they are constructed in a manner that practically guarantees that what is reported has little resemblance with reality. The details include ‘hedonic indexing’, which is a highly arbitrary method of measuring quality improvements and for which no counterpart – a measure of declines in quality – exists, as well as ‘geometric weighting and substitution’, which assume that consumers will buy less of what has become more expensive and more of what has become cheaper. This fact is used to justify the underweighting of those items in the price index the prices of which have risen.

The reason for all these arithmetic acrobatics is that a price index that makes it appear as though final goods prices were rising only very slowly helps with holding down price-indexed entitlement spending and as a side effect makes monetary policy look a lot better than it actually is.

As we always point out, the fact that after decades of propaganda the meaning of the term ‘inflation’ has been successfully transferred from describing a cause to describing one of its many effects (all of which are negative as it were) is one of the shrewdest tricks the purveyors of the centrally planned fiat money system have pulled off. It is what allows central banks to masquerade as ‘inflation fighters’, while they are in truth the main source of inflation.

No matter what the CPI says however, the fact remains that the broad US true money supply TMS-2 has increased by nearly 60% in a mere four years (from $5.3 trillion in January 2008 to $8.42 trillion in January 2012). Since January of 2000, this measure of the money supply has grown by over 190%. If inflation could create prosperity, we’d surely have arrived in the Land of Cockaigne by now.

Let us briefly explain why it is that all the official ‘inflation measures’ are trying to measure what is inherently unmeasurable. In reality, there is no fixed yardstick or constant against which such a measurement could be taken. Even if the mathematical operations applied made logical sense (which they do not, as they purport to arrive at a sensible number by adding up the prices of  disparate goods – this is logical nonsense from the get-go) and even if the indexes were constructed in a manner that most people would regard as an honest attempt to measure economy-wide price changes, the attempt to create a sensible measurement would still be doomed to failure.

The fact of the matter is that there is a supply of and demand for money itself, which in conjunction with the supply of and the demand for goods is what creates prices. There is in short an interplay of four different forces, all of which are subject to constant change. Given this constant change, we lack an unchanging constant that would allow us to correctly ‘measure’ the effect inflation has on prices. The whole exercise is in other words smoke and mirrors. As Ludwig von Mises points out in ‘Human Action':

“In the field of praxeology and economics no sense can be given to the notion of measurement.In the hypothetical state of rigid conditions there are no changes to be measured. In the actual world of change there are no fixed points, dimensions, or relations which could serve as a standard. The monetary unit’s purchasing power never changes evenly with regard to all things vendible and purchasable.”

“The notions of stability and stabilization are empty if they do not refer to a state of rigidity and its preservation. However this state of rigidity cannot even be thought out consistently to its ultimate logical consequences; still less can it be realized. Where there is action, there is change. Action is a lever of change.

The pretentious solemnity which statisticians and statistical bureaus display in computing indexes of purchasing power and cost of living is out of place. These index numbers are at best rather crude and inaccurate illustrations of changes which have occurred. In periods of slow alterations in the relation between the supply of and the demand for money they do not convey any information at all. In periods of inflation and consequently of sharp price changes they provide a rough image of events which every individual experiences in his daily life.”

“A judicious housewife knows much more about price changes as far as they affect her own household than the statistical averages can tell. She has little use for computations disregarding changes both in quality and in the amount of goods which she is able or permitted to buy at the prices entering into the computation.

If she “measures” the changes for her personal appreciation by taking the prices of only two or three commodities as a yardstick, she is no less “scientific” and no more arbitrary than the sophisticated mathematicians in choosing their methods for the manipulation of the data of the market.”

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$15,OOO,OOO,OOO,OOO Fraud exposed in UK House of Lords

$15 TRILLION is equivalent to the the federal debt of the U.S. Treasury Department. Lord James of Blackheath has spoken in the House of Lords holding evidence of three transactions of 5 Trillion each and a transaction of 750,000 metric tonnes of gold and has called for an investigation.

I think there are three possible conclusions that may come from it. I think there may have been a massive piece of money laundering committed by a major government which ought to know better and that it has effectively undermined the integrity of the British bank the Royal Bank of Scotland, in doing so. The second alternative is that a major American department has an agency that has gone rogue on it because it has been wound up and has created a structure out of which they are seeking to get at least 50 billion Euros as a payoff. And the third possibility is that this is an extraordinarily elaborate fraud which has not been carried out but which has been prepared in order to provide a threat to one government or more if they don’t pay them off. So there are three possibilities and this all needs a very urgent review.

My Lords, it starts in April and May of 2009, with the alleged transfer to the United Kingdom, to HSBC of a sum of 5 trillion dollars and seven days later, in comes another 5 trillion dollars to HSBC, and then 3 weeks later another 5 trillion. 5 trillion in each case. Sorry. A total of 15 trillion dollars is alleged to have been passed into the hands of HSBC for onward transit to the Royal Bank of Scotland and we need to look at where this came from and what the history of this money is. And I have been trying to sort out the sequence by which this money has been created and from where it has come from for a long time.

India’s Axis Bank Plans Benchmark Sale of U.S. Dollar Bonds

By Anurag Joshi and Tanya Angerer
(Updates with company confirmation in second paragraph.)

Feb. 27 (Bloomberg) — Axis Bank Ltd., India’s third- biggest private sector lender, is marketing a benchmark U.S. dollar-denominated bond sale, its first issue since November 2010.

The 5 1/2-year senior unsecured notes will probably price today, Anil Kumar, senior vice president and head of global the financial institutions division, said today in a telephone interview from Mumbai. Axis Bank may price the benchmark offering to yield about 450 basis points more than similar- maturity Treasuries, he said. Benchmark typically means at least $500 million.

The Mumbai-based lender hired Barclays Plc, Citigroup Inc., HSBC Holdings Plc, JPMorgan Chase & Co., and Standard Chartered Plc to manage the sale, Kumar said.

Axis Bank would be the third Indian company to sell bonds overseas this year, data compiled by Bloomberg show. Reliance Industries Ltd., India’s biggest company by market value, raised $1.5 billion selling dollar-denominated debt, and Rural Electrification Corp., a state-controlled lender to power projects, raised $219 million in Swiss franc-denominated debt, according to the data.

Continue reading on Bloomberg

China gradually dumps its massive US dollar position and shifts to gold

China continues to gradually dump its massive US dollar position. It is difficult to gauge the accuracy of the data released by Governamental sources, but it is safe to consider that China, and Asia in general, are actively pursuing their dollar deleveraging, shifting to gold and hard assets.

China’s gold imports from Hong Kong increased nearly 10 fold YOY in November to 3,500,000 ounces. In addition, Chinese state owned companies are increasingly  pushing towards collaborations and participations  with European and South American companies and into acquisition of energy sources, land and real assets. In a meeting with Chinese investors this week, Chavez announced that Venezuela will develop its huge Las Cristinas gold project in partnership with Chinese state investment company CITIC, and cancelled Canadian company Crystallex International’s permit to develop the mine project south of the Orinoco river.

The reduction of US dollar reserve should not come to a surprise. Aside from the fact that it is the only logical response to the  efforts made by the FED to devalue the dollar,  China itself had announced in later 2011 that its foreign currency reserves where excessive and that they need to return to “reasonable” levels. The US Dollar is China’s largest single holding with roughly $900 billion in Treasury holdings and over $1 trillion with Hong Kong’s holdings included.

This comes on the heels of China deciding (along with Russia, India and Iran) to trade in their own
currencies. As already covered here, India reported recently that it had reached an agreement with Iran to transact all oil purchases in Rupees, this is in junction with the  dropping the dollar happenings in other Asian nations during the past few months:

All the nations involved are included in the top 6 oil consumers of the world.

Add to the scenario the tensions between the US and European block with Iran: European Union foreign ministers agreed on January 23 to ban oil imports from Iran and to freeze the assets of the Iranian Central Bank across the EU. The sanctions will become fully effective on July 1, 2012, to give EU member states enough time to adjust to the new conditions and find alternative crude oil supplies.  Today,  Iran has (obviously?) refused to deliver a 500,000-barrel shipment of oil to Greece in response to EU oil sanctions:
According to a report by Fars News Agency on Sunday, oil tankers that had come to transfer 500,000 barrels of Iranian crude oil to Hellenic refining complex in Greece were forced to return empty-handed after the Islamic Republic refused to deliver the shipment.

The consequences of the dumping of U.S. dollars are already visible in the substantial amount of currency that flooded into the markets  in addition to the money created for QEs, bailouts and other stimulus packages. All this  has caused weakness of the U.S. dollar across the board.

One question: if debt holders are selling and going into hard assets, who will step in and hold the bag?

In 2009, economist Brad Setser suggested the United States could establish emergency currency swap lines with political allies if a country like China ever abandoned the U.S. debt market. The list of countries that could  step in as buyers of  U.S. Treasuries, however, has changed since Europe entered in the debt crisis (which ultimately is being addressed by injections of liquidity from the United States).

It is hard to see how banks could sustain an increase in their holdings of treasuries, without the backing of the Federal Reserve.  The U.S. government could also call on the people of the U.S. to invest in U.S. debt but it is the  Federal Reserve the ultimate enabler, the one that will have to further step up the bond buying of  U.S. debt.

This could turning any dollar weakness into a slump. The U.S. Dollar’s end as world reserve currency appears inevitable.



Related articles

Silver micro bear raid, attack and counter-attack. So it seems.

Since I’ve not been able to find 1min prices of silver other than from Netdania, and since I haven’t read any statement by Netdania about a possible glitch or about price errors, I’m assuming that the readings they provide are correct.

If they are, then we can say that on Friday February 24th a bear raid has been registered on silver with the injection of   several million ounces of paper silver in 7 Minutes.

This time, however, the bear raid has been immediately absorbed and the price continued to rally up to $35.4 before the close.

Here is the 5 minute chart:

On the 1-minute chart the “anomaly” is visible:


UKIP Nigel Farage – Debating Greece Leaving the EURO, Sky News Feb 2012

This is a wonderful way to conclude your Sunday evening: Farage dismantling an  hippie looking economist ‘s opinion.

Greece or Iceland by Brotherjohnf

Brotherjohnf is one of the best bloggers/commenters on youtube. His videos and his blog are a source of invaluable information. Make sure you follow him on twitter and youtube.

The Milgram experiment

From wikipedia:

The Milgram experiment on obedience to authority figures was a series of notable social psychologyexperiments conducted by Yale University psychologist Stanley Milgram, which measured the willingness of study participants to obey an authority figure who instructed them to perform acts that conflicted with their personalconscience. Milgram first described his research in 1963 in an article published in the Journal of Abnormal and Social Psychology,[1] and later discussed his findings in greater depth in his 1974 book, Obedience to Authority: An Experimental View.[2]

The experiments began in July 1961. Milgram devised his psychological study to answer the question: “Was it that Eichmann and his accomplices in the Holocaust had mutual intent, in at least with regard to the goals of the Holocaust?” In other words, “Was there a mutual sense of morality among those involved?” Milgram’s testing suggested that it could have been that the millions of accomplices were merely following orders, despite violating their deepest moral beliefs. The experiments have been repeated many times, with consistent results within societies, but different percentages across the globe.[3] The experiments were also controversial, and considered by some scientists[which?] to be unethical or psychologically abusive, motivating more thorough review boards for the use of human subjects.



How Goldman Sachs Helped Mask Greece’s Debt

All the big banksters Resign… ?

by Charleston Voice – Knology

It appears that all the rats are being cleaned out of the banks. One wonders if it is to escape angry citizens or because they are being ferried off to someunderground bunker? Add to this list Germany’s President. .. Netanyahu’s Bureau chief – Natan Eschel ….. Las Vegas State Senator Elizabeth Halseth … and more.

Romanian prime minister and cabinet resign en masse

Global bank resignations
Resignations Global Banks ….
1 World Bank CEO Zoellick resigns…llick-resigns/
2 Anz Bank CFO Australia resigns…s-amid-turmoil
3 Nicaraqua Central Bank Pres Rosales resigns…-amid-row.html
4 Credit Suisse Chief Joseph Tan resigns…n-resigns.html
5 GERMAN PRESIDENT Christian Ruff resigns…ed-resign.html
6 Royal Bank of Scotland Austrailin CEO Stephen Williams resigns…-1226272513981
7 Kuwait Central Bank CEO resigns…OAR_story.html
8 Slovenia TWO largest Banks CEO’s (2) resign…s-resigns.html
9 Bank of India CEO Chaturvedi resigns…itabh-Cha.html
10 Tamilnad Mercantile Bank CEO resigns…resigns/464259
11 GOLDMAN SACHS CEO Blankenfein to resign (Nothing printed on this yet UNLESS this JUST happened. Last article said he is not stepping down in 2011).…_n_858647.html…OAR_story.html
N.C. banking official resigns
13. Switzerland’s central bank chief resigns
Mass Resignation of the Proxies: Why Are So Many Key Financial Figures Waiving the White Flag?
(some are repeats on this list)
Here are the recent resignations in chronological order:
February 6, 2012: Dhanlaxmi Bank CEO Amitabh Chaturvedi quits:
February 10, 2012: Tamilnad Mercantile Bank MD resigns:
February 13, 2012: Kuwait central bank chief resigns amid political tensions:
February 14, 2012: Nicaragua’s Central Bank President Antenor Rosales quit admist row:
February 15, 2012: Slovenia’s Two Biggest Banks’ CEOs Step Down:
February 15, 2012: World Bank President Zoellick Resigns:
February 16, 2012: CFO of ANZ Bank Resigns Amid Turmoil:
February 16, 2012: Royal Bank of Scotland’s Stephen Williams quits the role:
February 17, 2012: Credit Suisse’s Private Bank Chief Asian Economist Tan Resigns:
That’s 9 resignations in then eleven days, we have not included the other resignations from the likes of the head of the central bank in Switzerland a month ago, and the talk of the head of Goldman Sachs leaving. Why are the heads of very large financial instutitions resigning? Corporate governance experts would say thatpeople resign to make room for new policies, and way of doing things, but this is a peculiar situation of contagion amongst those with key exposure.
The first to see the flame, usually leave the building, maybe this is not the case, nonetheless, such events with obvious patterns should be taken note of.

Behind The Fed’s Covert Euro Bailout

Posted by Brittany Stepniak – on Wednesday, February 22nd, 2012

We recently reported that the Fed was up to something mysterious….

Recent activity has all but confirmed our suspicions: The Fed is “swapping” dollars for euros in a covert method to bailout Europe’s big banks.

According to a former Fed official’s op-ed in the Wall Street Journal, the Federal Reserve is indeed bailing out Europe by operating in the shadows, which is going mostly unnoticed by American citizens…

By participating in a currency swap, the Fed cannot technically be accused of loaning money to the ECB.

Former Vice President of the Federal Reserve bank of Dallas, Gerald O’Driscoll recently reported on the swap-situation in an interview with the Wall Street Journal:

The Fed is using what is termed a “temporary U.S. dollar liquidity swap arrangement” with the European Central Bank (ECB). There are similar arrangements with the central banks of Canada, England, Switzerland and Japan. Simply put, the Fed trades or “swaps” dollars for euros. The Fed is compensated by payment of an interest rate (currently 50 basis points, or one-half of 1%) above the overnight index swap rate. The ECB, which guarantees to return the dollars at an exchange rate fixed at the time the original swap is made, then lends the dollars to European banks of its choosing.

The two central banks are engaging in this roundabout procedure because each needs a fig leaf. The Fed was embarrassed by the revelations of its prior largess with foreign banks. It does not want the debt of foreign banks on its books. A currency swap with the ECB is not technically a loan.

Watch this video to see why Mr. O’Driscoll believes this arrangement is wrong for various reasons:

continue reading on

A few links about Greece and Gold

Default Threat “Will Keep Coming Back” in Despite Greece Bailout Agreement, Gold Trading Volumes Rise in London But Imports by India May Decline

Greece’s €130 billion second bailout was finally approved in the early hours of Tuesday morning, following a day of discussions among Eurozone finance ministers in Brussels.

The European Central Bank will pass on profits from its Greek debt holdings – bought below face value as part of its Securities Markets Programme aimed at supporting troubled sovereign debt markets – to the Greek government as a means of alleviating Greece’s debt burden.

Private sector creditors meantime will be asked to take bigger losses on their Greek debt holdings than previously agreed. “From my point of view, this is a solid deal for investors, a fair deal for all parties involved,” said Charles Dallara, managing director of the Institute of International Finance, which negotiated with the Greek government on behalf of private bondholders.

“We’ve been able to avoid a disorderly default.”

Private sector losses will be equivalent to “more than 70%” of the net present value of the bonds, according to Jean Lemiere of BNP Paribas, who was involved in the negotiations.

The bailout means Greece should now be able to pay €14.5 billion of bonds that mature on March 20.

“Does this alleviate the risk of imminent default?” asks Callum Henderson, Singapore-based global head of foreign-exchange research at Standard Chartered.

“Yes, but not further out. Further out, the concerns of a default will keep coming back.”

“The risk,” adds a Hong Kong gold bullion dealer, “that we are going to have a sovereign default which leads to the collapse of the Euro still exists, but for that to happen in March, that risk is gone.”

“They are aiming at slashing the debt to 120% of GDP by 2020.  This means if you believe that all of the assumptions they made are correct, then Greek debt will go from unserviceable to barely serviceable by 2020.  It’s important to remember that the people who are making these assumptions are the same people who made the decision to lend money to Greece in the first place.  This lending has Greece 160% in debt vs their GDP.

I suspect that ultimately we are going to see a Greek default.  Right now we are buying time so that more of the private sector and private banks can unload their Greek paper on the ECB.  This will socialize the losses which have occurred as a result of stupidity on the part of the banks.  As I said earlier, this is a bank bailout, not a bailout of Greece.

“Further, the European community is talking about increasing its ‘firewall.’  This is the amount of euros it holds in reserves for difficult times, up to 750 billion euros.  Given that none of the European countries have 750 billion euros floating around that they can move from an operating account into a rainy day account, one would have to assume this fund will be funded the same way it was in the US.

What this really means is this will be a printing facility.  So 750 billion euros will be counterfeited in this scheme.  We are just picking on Greece because they are in the headlines, but certainly there are difficulties in the rest of the economy.  Italy, Spain, Portugal, Ireland and France all have their own problems.

When asked how all of this will impact gold, Rule replied, “I think gold will continue to proceed higher.  That doesn’t mean gold can’t have corrections, but much of that volatility is background noise.  Gold competes with fiat currencies as a medium of exchange and gold competes with sovereign debt claims as a medium of storing wealth.

Greece has now been through five years of recession.  The economy has contracted by 14% already, but towards the end of 2011 the decline accelerated and the projection is now that the Greek economy will decline by a further 7% this year.  This will take us to an over 20% decline in six years.

Farage had this to say about systemic risk and gold:  “My view on gold has not changed for a very, very long time.  The downside risks for the banking sector are still absolutely enormous and therefore the knock-on effect on gold is huge.  Ever since we’ve been above $1,500 I have been cautious by saying hold gold.

I’m tempted (now) to think if you’ve got a big portfolio and you don’t know what to do, you should buy gold.  It is more likely that the price of gold will be between $2,500 and $3,000 an ounce 18 months from now, than it is that the price of gold will contract and go back to $500 to $1,000.  So hold gold, absolutely I stay with that view, but if you put me up against the wall and asked, ‘Are we buying or selling it?’  I wouldn’t be selling it.”

Eurogroup Statement on €130B Greek Bailout

Eurogroup statement

The Eurogroup welcomes the agreement reached with the Greek government on a policy package that constitutes the basis for the successor programme. We also welcome the approval of the policy package by the Greek parliament, the identification of additional structural expenditure reductions of € 325 million to close the fiscal gap in 2012 and the provision of assurances by the leaders of the two coalition parties regarding the implementation of the programme beyond the forthcoming general elections. 

This new programme provides a comprehensive blueprint for putting the public finances and the economy of Greece back on a sustainable footing and hence for safeguarding financial stability in Greece and in the euro area as a whole. 

The Eurogroup is fully aware of the significant efforts already made by the Greek citizens but also underlines that further major efforts by the Greek society are needed to return the economy to a sustainable growth path.

Ensuring debt sustainability and restoring competiveness are the main goals of the new programme. Its success hinges critically on its thorough implementation by Greece. This implies that Greece must achieve the ambitious but realistic fiscal consolidation targets so as to return to a primary surplus as from 2013, carry out fully the privatisation plans and implement the bold structural reform agenda, in both the labour market and product and service markets, in order to promote competitiveness, employment and sustainable growth.

To this end, we deem essential a further strengthening of Greece’s institutional capacity. We therefore invite the Commission to significantly strengthen its Task Force for Greece, in particular through an enhanced and permanent presence on the ground in Greece, in order to bolster its capacity to provide and coordinate technical assistance. Euro area Member States stand ready to provide experts to be integrated into the Task Force. The Eurogroup also welcomes the stronger on site-monitoring capacity by the Commission to work in close and continuous cooperation with the Greek government in order to assist the Troika in assessing the conformity of measures that will be taken by the Greek government, thereby ensuring the timely and full implementation of the programme. The Eurogroup also welcomes Greece’s intention to put in place a mechanism that allows better tracing and monitoring of the official borrowing and internally-generated funds destined to service Greece’s debt by, under monitoring of the troika, paying an amount corresponding to the coming quarter’s debt service directly to a segregated account of Greece’s paying agent. Finally, the Eurogroup in this context welcomes the intention of the Greek authorities to introduce over the next two months in the Greek legal framework a provision ensuring that priority is granted to debt servicing payments. This provision will be introduced in the Greek constitution as soon as possible.

The Eurogroup acknowledges the common understanding that has been reached between the Greek authorities and the private sector on the general terms of the PSI exchange offer, covering all private sector bondholders. This common understanding provides for a nominal haircut amounting to 53.5%. The Eurogroup considers that this agreement constitutes an appropriate basis for launching the invitation for the exchange to holders of Greek government bonds (PSI). A successful PSI operation is a necessary condition for a successor programme. The Eurogroup looks forward to a high participation of private creditors in the debt exchange, which should deliver a significant positive contribution to Greece’s debt sustainability. 

The Eurogroup considers that the necessary elements are now in place for Member States to carry out the relevant national procedures to allow for the provision by EFSF of (i) a buy back scheme for Greek marketable debt instruments for Eurosystem monetary policy operations, (ii) the euro area’s contribution to the PSI exercise, (iii) the repayment of accrued interest on Greek government bonds, and (iv) the residual (post PSI) financing for the second Greek adjustment programme, including the necessary financing for recapitalisation of Greek banks in case of financial stability concerns.

The Eurogroup takes note that the Eurosystem (ECB and NCBs) holdings of Greek government bonds have been held for public policy purposes. The Eurogroup takes note that the income generated by the Eurosystem holdings of Greek Government bonds will contribute to the profit of the ECB and of the NCBs. The ECB’s profit will be disbursed to the NCBs, in line with the ECB’s statutory profit distribution rules. The NCBs’ profits will be disbursed to euro area Member States in line with the NCBs’ statutory profit distribution rules.

• The Eurogroup has agreed that certain government revenues that emanate from the SMP profits disbursed by NCBs may be allocated by Member States to further improving the sustainability of Greece’s public debt. All Member States have agreed to an additional retroactive lowering of the interest rates of the Greek Loan Facility so that the margin amounts to 150 basis points. There will be no additional compensation for higher funding costs. This will bring down the debt-to-GDP ratio in 2020 by 2.8pp and lower financing needs by around 1.4 bn euro over the programme period. National procedures for the ratification of this amendment to the Greek Loan Facility Agreement need to be urgently initiated so that it can enter into force as soon as possible. 

• Furthermore, governments of Member States where central banks currently hold Greek government bonds in their investment portfolio commit to pass on to Greece an amount equal to any future income accruing to their national central bank stemming from this portfolio until 2020. These income flows would be expected to help reducing the Greek debt ratio by 1.8pp by 2020 and are estimated to lower the financing needs over the programme period by approximately 1.8 bn euro. The respective contributions from the private and the official sector should ensure that Greece’s public debt ratio is brought on a downward path reaching 120.5% of GDP by 2020.

On this basis, and provided policy conditionality under the programme is met on an ongoing basis, the Eurogroup confirms that euro area Member States stand ready to provide, through the EFSF and with the expectation that the IMF will make a significant contribution, additional official programme of up to 130 bn euro until 2014. 

It is understood that the disbursements for the PSI operation and the final decision to approve the guarantees for the second programme are subject to a successful PSI operation and confirmation, by the Eurogroup on the basis of an assessment by the Troika, of the legal implementation by Greece of the agreed prior actions. The official sector will decide on the precise amount of financial assistance to be provided in the context of the second Greek programme in early March, once the results of PSI are known and the prior actions have been implemented. 

We reiterate our commitment to provide adequate support to Greece during the life of the programme and beyond until it has regained market access, provided that Greece fully complies with the requirements and objectives of the adjustment programme.”


European Divergences


Weakness signs on European Markets:

Stochastic divergence on CAC40:

Stochastic divergence on DAX:

Stochastic divergence on EURUSD:

And a possible double top on Belgium BEL20




February 18, 2012. Weekly press review – Greece.

Greece will have to wait until Monday, for a new eurozone finance ministers meeting, to discover if it will receive the final approval for a new bailout.
The deal is worth at least 130 billion euros but an “additional consolidation measures” of 325 million euros has been idenfied as required.
This could involve a permanent presence for the troika in Athens.

European Commission set three terms for the bailout package:

  • The assurances provided by the leaders of the two coalition parties in Greece’s government,
  • The analysis on the sustainability of Greece’s public debt.
  • The possibility for the troika of maintaining a permanent presence in Athens to “strengthen the surveillance of the program”, as well as the creation of an escrow account so priority would be given to debt servicing.

As Zerohedge writes, all that matters is Germany’s response. The statement from German FinMin Schauble is likely indicative that this time around Greece will have a hard time convincing Europe (read Germany).

 “Greek promises on austerity measures are no longer good enough because so many vows have been broken and the country that has been a bottomless pit” 

The promises from Greece aren’t enough for us anymore, With a new austerity programme they are going to first have to implement parts of the old programme and save.”

This sounds like asking  like asking what half of a pin’s head angels ought to be dancing upon: the amount that the Greek economy has already shrunk: 16%, compared to 20%, peak-to-trough, in Argentina, and 29% in the US in the Great Depression. And Argentina was not stucked with a currency it couldn’t devalue.

“On the current path – which is not sustainable in my view – we may very well see Greek GDP go down 25-30 percent, which would be historically unprecedented. It’s a disastrous crisis for them,”

Former senior World Bank official, Dadush said.


As Zeus Yiamouyiannis points out:

 For the last three plus decades, debt-fueled “growth” has instilled a life sense that everyone gets rich, values always go up, and no one has to pay.

The infinite growth meme unwinds: The cancerous economic obsession with infinite growth in a finite world is already unwinding, but will hit full force with cascading defaults. It is one thing to have a “slowdown,” and another to have your economic brakes lock up on you and your gears slammed into reverse.

Politicians’ power of the purse unwinds: Greek politicians, like many other Western politicians, will do almost anything to get re-elected. The easiest way to do this is to pay people off, particularly government workers and constituents, in the form of generous benefits or pet projects.

So now the follow-up question is easy to answer: “Why are we paying for something we did not buy and had no hand in creating?” The answer: We no longer have functioning capitalism.

If the Greek default happens, it would not obviously be the first time a country has defaulted but it would be the first default within a currency union, which means that the informal framework normally used for restructuring a country’s debt is even less of a useful guide than it normally is.

And it’s not normally very useful: there are no hard and fast rules on what to do when countries run out of money to pay their debts.

Since defaults are not rare, hedge funds have developed a whole set of strategies to profit from these events. Vulture funds, for example,  buy distressed government debt and then sue governments in courts all over the world in the hope of securing a bigger pay-out. One of the best-known example is  Elliott Associates, winning in 2000 $56 million from Peru – which had defaulted in the early 1980s. Elliott gained $36.7 million with the operation.

The last piece of this week’s picture is Russia intention to give $10 billion to the International Monetary Fund to support the Euro crisis. This could be very well “in the hope to keep its largest export market from collapsing” but it is also a way to reduce exposure to dollars in exchange of  influence within the IMF.


“Bureaucrats and central bankers should be send to prison for a very long time”

The Petrodollar, Iran, and Gold—What You Need to Know


Rumors are swirling that India and Iran are at the negotiating table right now, hammering out a deal to trade oil for gold. Why does that matter, you ask? Only because it strikes at the heart of both the value of the US dollar and today’s high-tension standoff with Iran.

Tehran Pushes to Ditch the US Dollar

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 their 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.

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It’s Not Just Oil, It’s The Dollar, Stupid!

I learned something new today. I seem to continue to do that the more I look.

Why does the US wage  at the slightest ripple, anywhere in the world, and we just sit up here and take it?

Do you hear the sabers rattling on?

A very similar rattling sound to . And you may say, “well,  was responsible for the terrorist attacks on the … weapons of mass destruction right?

You should know better and I won’t even go there, because there is enough very valid data on-line and in your favorite bookstore to debunk such quite easily.

But why did we really invade Iraq and what does that have to do with Iran?

We all say, “OIL,”  right? Right, but there’s more to it. (It’s the dollar stupid.)

Iran Map, More Than Just Oil

After the war in 1944 at a big meeting in Breton Woods N.H. USA, the big bankers put the world on the dollar as its reserve currency, replacing the British pound.

That means, that everybody trades in dollars, to keep it simple.

We had enough military muscle and ample gold in our reserves, so the world readily accepted our dollar—as good as gold. So, of course, with that “confidence” in place the door was opened to printing more  with no gold to back it. Yet, the idea remained—a dollar is as good as gold.

Then the French and a few others threw a slight monkey wrench in the vault in the late 1960s. They demanded the US pay up in gold—the real stuff. Damn near drained Fort Knox – and put an end to the fake “gold standard.”

So, deep the night in 1971, tricky Dick, the then president, at the behest of the bankers that be, took the US off what partial gold standard that existed, to save the vault from being drained… Whether you realize it or not, that was in essence the admission of our insolvency as a country. We can’t pay our obligations and won’t.

This didn’t cause much alarm to most if not all nations who still believed the dollar was as good as gold.

But, the printing presses (and the  computers) revved up and started really printing the greenbacks … and part of the manipulation up of the dollar was an agreement made with the OPEC crew, whereby they made everyone pay for oil in dollars worldwide.

The dollar sort of became an oil-based currency. That’s a new one… didn’t know that before.

In return, the U.S. promised to protect the various oil-rich kingdoms (the OPEC crew) in the Persian Gulf against threat of invasion or domestic coup. This helped inginite the radical Islamic movement among those who resented our influence in the region.
Are the dots connecting yet?

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Roubini and Rosenborg forecasts

The following chart  has been drawn by Nomura, according to Dr Doom Roubini and Rosenberg’s forecasts.

February 13, 2012. Weekly press review.


Greece always on the spotlight this week: on Monday in an interview to The Spiegel , Luxembourg Prime Minister Jean-Claude Juncker, head of the Euro Group, said that additional austerity measures are required and that private creditors have to make their contribution.

“Only after that will we see whether the second aid package, with the €130 billion ($170 billion) that is currently planned, will suffice”.

If the country doesn’t meet Europe’s demands, it will have to declare bankruptcy in March. Since the deadline (March 27) isn’t set by one of the negotiating parties it weighs equally heavy on the Greeks and the troika.

The Greek commissioner Maria Damanaki got the troika message:

“There is a plan to take us out of the euro. Plan a we sign, plan b we default”

Greek  leaders also asked Papademos to prepare a report about the effect of default on society. The alternative, the austerity package agreed upon on Sunday contains:

-  public sector wage cuts at 22%, all wages not just the minimum ones
–   supplementary pension cuts and layoffs in the public sector
–  elimination of collective contracts in SOEs, and of all the sectorals
–  retaining bonuses and special wage lists until the next review in June
–  new collection measures of 3bil euros, yet to be defined.
–  strengthening of banks with common shares as exchange, but without the public appointing administrations.

The Greek government has also promised to cut 150,000 jobs by 2015 from the public sector, which employs an estimated 750,000 people.

The lovers of countdowns and suspense have not been disappointed since, as  Matina Stevis writes on WSJ on Monday the can-kicking continues:

One of the golden rules of political communications is to not set a goal you are likely to miss. For example, don’t declare deadlines to reach agreement with the Greek political leaders. You won’t make them, and the failure will be public.

Key dates from this document are as follows, taken from Costas Paris’s Friday story:

February 5

The European Commission, the European Central Bank, the International Monetary Fund, Greece and the European Financial Stability Facility submit a draft memorandum of understanding on private-sector debt restructuring, or PSI, that is expected to be completed by Monday. Also due are details of further aid from the EFSF and its disbursement. MISSED

February 6

Eurogroup of 17 euro-zone finance ministers, plus the ECB and IMF, discuss the documentation submitted on Sunday, as well as IMF’s updated debt sustainability analysis on Greece’s debt. Greece’s political parties submit written commitments to reforms to the finance ministers. MISSED

February 7

Commission together with the ECB adopts the proposal for additional EFSF funding agreements.

February 7-8

EU member nations approve the required increase in EFSF guarantees as well as the PSI documents.

February 9

Eurogroup gives final approval to the PSI package. Adoption of collective-action clauses by the Greek parliament.

February 10

All parties sign all key documents related to the bailout. Prospectus Supplement of bond-swap offer submitted to Luxembourg stock exchange for approval (if not approved earlier).

February 13

Greece launches its bond swap offer to its private-sector bond holders, a transaction expected to provide Greece with €100 billion in debt relief.

March 6

Settlement of the bond exchange between Greece and its private-sector creditors and disbursement of the EFSF loan.

Companies and corporations, on the other hand, have shown no intention of relying on Europe for a solution:  Vodafone Group,  is moving cash from Greece into the U.K. “every evening” and could bill in a different currency, mirroring efforts by GlaxoSmithKline, WPP and Reckitt Benckiser Group to hedge against the European debt crisis.

Meanwhile, the Greek economy has descended further into the abyss in January. First it became known that tax revenues came in 7% below expectations, with VAT collections light by high double digits – a shortfall of about € 1 billion. Others indicators show:

While banks have been forced to slash government bond portfolios or buy credit default swaps to shield themselves against southern European countries,  Morgan Stanley pulled off his hat a solution that allows it cut its peripheral exposure, and removed a sizeable chunk of its sovereign swaps trades:

The US bank had reduced its net exposure to Italy by a whopping 69% in late 2011, from US$4.9bn to US$1.5bn. In contrast, [to other banks] Ruth Porat, Morgan Stanley’s CFO, explained [...] that the bank began to restructure certain derivatives positions with Italy in December. These trades settled in January, leading to a material reduction in the bank’s net exposure to peripheral Europe from US$6.4bn to US$2.3bn excluding unfunded commitments, she added.

IMF propaganda machine couldn’t resist the temptation of bringing China’s story on the headlines:

China’s  annual economic growth could be cut nearly in half this year if Europe’s debt crisis tips the world economy into a recession, putting pressure on Beijing to unveil “significant” fiscal stimulus, the International Monetary Fund said.

The Fund outlined its central scenario for China’s 2012 growth outlook in its global outlook in January, cutting its forecast for 2012 growth from 9 percent to 8.2 percent and possibly to 4%.


On the US-Iran front, Obama gifted the international press with this jewel:

“I have determined that additional sanctions are warranted, particularly in light of the deceptive practices of the Central Bank of Iran and other Iranian banks to conceal transactions of sanctioned parties, the deficiencies in Iran’s anti-money laundering regime and the weaknesses in its implementation, and the continuing and unacceptable risk posed to the international financial system by Iran’s activities,” Obama said in a letter to Congress.

This is from the president of the country that repackaged the subprime mortgages and caused the second greath depression. Ironically, the same exact sentence could perfectly describe the policies of FED, SEC and CME. MF Global anyone?

Obama signed executive order freezing Iran assets in U.S.  The executive order, prevents any assets deemed to be in U.S. control – including foreign branches of American banks – from being transferred, paid, exported or withdrawn. China and Russia have big interests in play, and mountains of  dollars that are continuously being debased. What better use of the reserve than strategic acquisitions, takeovers and securing energy resources?

China,  in case of a fall in its imports from Iran, is seeking to negotiate lower prices from Tehran, and has been drawing heavily on Saudi Arabia:

“Iranian crude is important,” said an official at a Chinese state oil firm, who declined to be identified. “It is not very easy to replace all Iranian crude.”

China still needs Iranian oil and even Saudi Arabia and the rest of the Organization of the Petroleum Exporting Countries do not have the capacity to replace it.

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