Sell Oil for Gold, Mahathir tells Saudi Arabia

Forbes.com - Reuters, 01.18.04, 7:47 AM ET ^ | 01.18.04, 7:47 AM ET | Reuters

[shanec]

JEDDAH, Saudi Arabia, Jan 18

(Reuters) - Former Malaysian Prime Minister Mahathir Mohamad said on Sunday that Saudi Arabia should sell oil for gold, not dollars, to avoid being "short-changed" by a decline in the U.S. currency.

"The price of oil is $33, but the U.S. dollar has declined by 40 percent against the euro so you're effectively getting $20," Mahathir told an economic conference in Saudi Arabia's Red Sea city of Jeddah. "So you're being short-changed."

Saudi Arabia, the world's biggest oil exporter, has justified higher world oil prices by saying they are necessary to compensate for the slide in the U.S. currency.

Mahathir, who retired last October, spent much of his time in office upsetting Western governments and defying their economic orthodoxies. But he became a respected spokesman in Islamic and developing states and received an ovation in Jeddah.

He suggested countries tally their total annual imports and exports and settle the difference at the end of the year in "gold dinars". Sounding a discordant note, Mahathir also warned Saudi Arabia against rushing to join the World Trade Organisation (WTO), saying it was not necessarily a positive move.

Saudi Trade Minister Hashem Yamani said on Saturday his country had narrowed differences with the United States that were holding up accession to the organisation and said he wanted to join "tomorrow".

"Everybody should be careful before joining the WTO because it is not all positive. It can be very negative if you don't handle it properly," Mahathir said. "They try to impose their agenda without regard for some other countries."

Copyright 2004, Reuters News Service

[B4Ranch]

ping

[B4Ranch]

Hush up!

[waterstraat]

You may be right about silver, you seem to know more than I do. I dont follow silver, i just thought it was used in camera film, and nobody i know uses film any more, so i thought demand for silver would go down. It still takes a lot of pounds of silver to be worth anything. Any woman can put $50,000 worth of gold in her purse, but she cant put $50,000 of silver in her purse, and no woman couldnt pick it up if she did.

[blabs]

If you don't print your pictures on silver halide film, they will fade. Also, magnetic media and digital media has a relatively short shelf life compared to printed film. The chinese market will place a huge demand on silver. There are hundreds of millions of people who have never taken their first picture, so disposable cameras will be a huge boom (besides, how many people can afford a digital camera, and memory chips, the computer, the printer, etc).

What piqued my interest on silver was warren buffets purchase, and requested physical delivery, back in the late 90's. Buffet is a super long investor - he sees the train wreck coming. There are many good articles written about the coming silver boom. Go check out silver-investor.com and read some of their archives and current news. They have many great links also

[shanec]

The portability and security issue of holding lots of physical silver is a problem, I agree, but one that might be well worth the hassle, if really seen to potentially double faster than gold would/could. Also, for most Americans, they likely can not afford to buy and hold $50,000 worth anyways, so they don't have that challenge. (And, those that do will figure a way to.) Also, when the price does first double and finally gets everybodies attention and they start buying and acquiring it, even buying that $50,000 worth then will only be half as big a pile to cart home!

BTW, while there's a lot of hype surrounding all the commodity markets, here's a pretty good recent article, IMO, about the prospects for silver, for anybody interested... here.

[GregoryFul]

PA II also invades safety deposit boxes. So, if you want to hold gold privately, you need to stash it in your own "vault", (at risk of loss by burglery or official seizure).

If the US government recalled bullion gold, the value of one's coin holdings would crash to the "redemption" price. If a holder were to deal with the underground, they would face numerous risks, and would also have to sell at a severe discount to world market value. Then face the consequences should the government have a computer record of their former holdings. Not that this could happen in a "free" country...

[SkyRat]

From a FR thread:
The measure redefines "financial institutions" that was previously limited to banks, credit unions, and savings and loan organizations.
Now the definition also includes brokers and dealers registered with the Securities and Exchange Commission, investment bankers, operators of credit-card systems, insurance companies, dealers in precious metals, stones, or jewels, licensed senders of money, telegraph companies, airplane and boat dealers, Realtors and estate closings, and the U.S. Post Office.
Financial institution also means "any other business designated by the secretary [of the Treasury] whose cash transactions have a high degree of usefulness in criminal, tax, or regulatory matters."

Seems practial anything is included, or what does the last sentence mean?

I don't know if that's another reason gold went up.

Link to the FR thread, with additional links: http://freerepublic.com/focus/f-news/1047908/posts

[ordinaryguy]

These countries are essentially defending the Dollar for us while we don't lift a hand.

And what would happen if, at some point, others lost interest in propping up the value of the dollar? Perhaps after even more of our industrial base has been sent abroad? The resulting price shocks would probably make the price shocks during the oil embargo era seem tame.

[waterstraat]

Then you better start buying gold now before they someday come up with a law against "straw purchases" like they eventually did with guns.

[dljordan]

I told my wife ten years ago we should buy gold. Her response was "it's a bad investment" so we stuck with the investment funds and got wiped out.

[waterstraat]

And what would happen if, at some point, others lost interest in propping up the value of the dollar?

YOu mean like:

....when communist china finally realizes that since it is chinese labor, chinse factories, chinese land, chinese resources, chinese tools, etc that is producing everything so why would they need american shareholders anymore?

[waterstraat]

Investment funds(and stocks like Global crossing, enron, Putnam funds, etc.) had lots of fraud. There are too many people who want gold to be able to "fix the price". The BAss brothers tried to fix the price of silver and were wiped out - went bankrupt.

It is still not too late to buy gold unless you think the United States will get back its factories and jobs. If we dont get back our jobs and factories, we will continue to spend/import more than we produce/export and the US dollar will fall in value.

[ordinaryguy]

besides, how many people can afford a digital camera

Disposable digital cameras are no more expensive than those using film They may even be cheaper.

[blabs]

disposable cameras..the film still has to be printed, which is done on silver halide film.

Whether it's digital or optical, it's still disposable.

A quality digital camera will still cost some bucks..

[ordinaryguy]

Something like that.

Consider this: As the dollar weakens, prices only go up for those paying in dollars. Consumers in the United States will see prices on Chinese manufactured goods increase, but the European consumer won't. It seems to me that the US will be in a world of hurt at that point.

[oceanview]

a world of hurt? if a $39 chinese DVD players now costs $49, thats a world of hurt? we should have been raising the prices of these goods through tariffs all along.

[shanec]

"...so we stuck with the investment funds and got wiped out."

As did many more who'd prefer to not mention it.

BTW, it's interesting that while the stock market has gone up again recently in $'s, it's been much less impressive when based on most other major currencies as the dollar has lost value relative to them. Especially fascinating to see how un-impressive the stock market has been lately via the DJIA/Gold ratio...

If dollars, and their value and buying power in the world, was truly stable and could be counted on to stay so, we might could ignore most all the above. But, if not, and especially when we are having to buy things, like oil, from outside the U.S., we are at risk for legitimate price increases to compensate for when the $'s purchasing power dips further.

Too bad most of those winners in today's stock market both won't get out in time, when it lurches downward again, nor will they later be exchanging some of those $ profits for gold/silver. They will likely need to do both, this go-around, to escape being another losing statistic...

-Shane

[waterstraat]

It seems to me that the US will be in a world of hurt at that point.

The US will be in a "world of hurt" when interest rates rise and we have to pay much higher costs to service our federal debt.

It wont even have to go over 10% for the cost of servicing our federal debt to be higher than what we now take in in personal income taxes - and that is while we still have some jobs that have not been outsourced yet.

Interest rates will not stay low forever.

Sooner or later, interst rates will rise - just as sure as the turing of the earth . We keep adding more trillions of dollars of debt. Bush has added more than a trillion dollars of debt, and he has no hopes(and stated so just last month) of balanceing the budget(with so many americans not working anymore) even anytime in the next 4 years.

[ordinaryguy]

still has to be printed, which is done on silver halide film.

Some of the new non-optical photofinishing systems in development don't use silver-halide. Phogenix Imaging, for instance.

A quality digital camera will still cost some bucks.

Most people with film cameras don't have a quality camera. Those cost bucks too. Without competition from Kodak, prices might even rise now.

[Beck_isright]

{{{{{{{{{{ PING }}}}}}}}}}}}}

If anyone dreams that the Saudis are our allies, you're on crack. Look for this move to occur quietly.