Saudi minister warns of dollar collapse (Threat?)

The Business ^ | 17 Nov 07 | None

[SkyPilot]

The dollar could collapse if Opec officially admits considering changing the pricing of oil into alternative currencies such as the euro, the Saudi Arabian foreign minister has warned.

Prince Saud Al-Faisal was overheard ruling out a proposal from Iran and Venezuela to discuss pricing crude in a private meeting at the oil cartel's conference.

In an embarrassing blunder at the meeting in Riyadh, ministers' microphones were not cut off during a key closed meeting, and Prince Al-Faisal was heard saying: "My feeling is that the mere mention that the Opec countries are studying the issue of the dollar is itself going to have an impact that endangers the interests of the countries. "There will be journalists who will seize on this point and we don't want the dollar to collapse instead of doing something good for Opec."

After around 40 minutes press officials cut off the feed, which had been accidentally broadcast to the press room.

Prince Al-Faisal added: "This is not new. We have done this in the past: decide to study something without putting down on paper that we are going to study it so that we avoid any implication that will bring adverse effects on our countries' finances."

Iran and Venezuela have argued that the meeting's final communique should voice concern about the level of the dollar, which has recently fallen to new record lows against the euro. They are pushing for oil to be denominated against a basket of currencies.

The greenback also weakened slightly against the pound, although sterling's own recent weakness has pushed it down from $2.10 to $2.0457 during the week.

Nigerian finance minister Shamsuddeen Usman said that Opec could declare in the communique that: "While underlining our concern for the continued depreciation of the dollar and its adverse impact on our revenues, we instruct our finance ministers to study the issue exhaustively and advise us on ways to safeguard the purchasing power of our revenues, of our members' revenues."

Chancellor Alistair Darling will today urge his fellow finance ministers at a major G20 summit to increase investment in oil production and refinement.

[lentulusgracchus]

It will be over when you see long rates explode to the upside.

Yeah, 'fraid so......some economists are already predicting 10% inflation YOY by this time next year.

Make your substantial purchases very, very soon -- car, HDTV, any expensive durables. Heck, lay up some expensive consumables, too -- clothing. (You can slip the toils of fashion if you really work at it. Women know how.) Extra pair of boots, shoes, etc. Put them aside for later.

[Nathan Zachary]

BTW, we will never run out of oil, just reach the limit of what the earth produces ( abiotic petroleum ) Our future energy needs will be a combination of various fuels ( bio-fuels, hydrogen, nuclear electric) and possibly mining of those huge methane ice fields off the east coast, which could theoretically supply all our gas needs forever.

[G Larry]

America to the Saudi’s and Chinese:

“If you believe that Socialist and Communist economies can sustain free enterprise, have at it.”

OBTW: We’re elimnating the red tape for converting to nuclear power, resuming the mining of Utah coal, and drilling ANWR.

[kabar]

Business is business. Why should the Saudis suffer the financial losses associated with pegging oil to the crumbling dollar?

[lentulusgracchus]

Good post, thanks.

I've often wondered whether, beginning in 2003, Greenspan was monetizing a war, as in the days of LBJ, or monetizing the markets at the behest of the Plunge Group cartel (tinc).

Warren Buffett's redeployment of much of his Berkshire Hathaway portfolio overseas since then, when Buffett had never been an enthusiast of foreign securities, speaks reams.

Note, though, stories that some of the European countries (as China in the past) are trying to counter-reflate their own currencies. Both the euro and sterling.

[jrsmc]

some economists are already predicting 10% inflation

The TIC flows data shows a net outflow of $15 billion for the second month in a row.

Long term Treasury rates started up two months ago and this data shows that they will continue to do so.

The credit crunch is about to get much crunchier.

[BRL]

It is our own government’s policies that is bringing down the dollar. Those policies are:

1. Running huge government budget deficits.
2. Running huge trade deficits.
3. Allowing the Federal Reserve to increase the money
supply at double digit rate for years.

Ding ding ding... we have a winner.

And lets also add in an American population that went from being very fearful of debt, to thinking it is their ticket to prosperity. And a banking system that stopped lending based upon the prospects of getting paid in full at some future date.

[Nathan Zachary]

Trade deficits are very misleading. It doesn’t mean the country isn’t prospering. You see countries with trade surpluses yet running huge deficits.

Importing more than we export can also indicate we have more money excess to spend.

[dennisw]

Right..... not an accident LOL

[Brit_Guy]

“I thought a weaker dollar is better, more exports.”

These things always balance out over time. High or low interest rates have different winners and losers, and high or low currency valuations have different winners and losers. The transition from that one set of the winners to the other always has those old winners screaming and informing the media spin.

On the old adage “buy at lows, sell at highs” with a double whammy combination of your property problems, and the low dollar I’m looking at buying US real estate at the moment.

Now, if I’m thinking of doing that at a micro leval, I am sure at a macro level hundreds of thousands more Europeans/Chinese/Indians or whoever will be thinking the same.

One spin would be: Foreign invaders buy all our land.
Another would be: Buyers return to property market and finally reverse falls, Americans home equity is saved thanks to foreign investors.

The media will plum for the former - it sells more newspapers.

[Travis McGee]

Every country does what is in their own best interest. Why should countries continue to prop up our debased and devalued dollar? We have been doing this ourselves, we can't blame any other country for the plummeting value of the dollar.

It is stupid and childish to blame others for a self-inflicted wound.

"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."

~~Ludwig von Mises

"Let me issue and control a nation's money supply, and I care not who makes its laws."

~~Mayer Amschel Rothschild

"I am one of those who do not believe the national debt is a national blessing... it is calculated to raise around the administration a moneyed aristocracy dangerous to the liberties of the country."

~~Andrew Jackson, letter, April 26, 1824

I have ever been the enemy of banks, not of those discounting for cash, but of those foisting their own paper into circulation, and thus banishing our cash. My zeal against those institutions was so warm and open at the establishment of the Bank of the United States, that I was derided as a maniac by the tribe of bank-mongers, who were seeking to filch from the public their swindling and barren gains.

~~Thomas Jefferson to John Adams, 1814

[Star Traveler]

The circumstances of how it came to be heard, and then the context in which it was given (getting others to back off their threats against the dollar) — does not lend credence to the “question” as to whether it was a threat from the Saudis. You see, they’ve got a lot of their stuff wrapped up in the dollar. They’re not stupid.

[gathersnomoss]

The United States government, every last politician is to blame for the damage done by foreign oil imports.

The are all to be held accountable.

[Shanty Shaker]

Not only are you on track.. Changing from the dollar will collapse the economies of the oil producing companies when the dollar rebounds.

[Star Traveler]

You said — “We have to stop importing oil.”

That’s like saying you’ve got to stop breathing and eating. Good luck!

[Wuli]

“The dollar could collapse if Opec officially admits considering changing the pricing of oil into alternative currencies such as the euro”

Yea, right, and with the Euro already high enough that German manufacturing exporters, which earn 33% of the German GDP, are already screaming because of the exports they are now losing to US and Asian manufacturers, so imagine what German unemployment, now around 11%, will be when the Saudis boost the Euro even higher.

Changing currency values are not zero sum events; the proper currency value is not automatically “higher”. Too low and your investors cannot expand internationally as well; too high and your domestic manufacturers cannot export as well.

Unlike the US, France and Germany are much more export dependent, as a % of GDP. Every 1% drop in the dollar to the Euro raises uses US exports and lowers Euro-denominated exports. I say, go ahead Saudis, hurt European exports, leave manufacturing to the US and Asia. You’ve been trying to make Europe your vassals anyway.

[montag813]

Currency traders like myself knows what this means: buy the dollar.

[blam]

"America is being targeted by economic terrorism by many nations. If you can't see that, you are not paying attention."

I agree. They don't know who they're messing with though.

[Pining_4_TX]

You got it! Instead of whining about foreigners, we need to stop our profligate politicians from spending us into oblivion. And their answer to the problem? Spend more and print more money. The party has to end some time.

[SkyPilot]

Currency traders like myself knows what this means: buy the dollar.

I lived in Europe when the Euro became the currency.

I believe we will have a North American currency within 7 years; maybe sooner.