Russia Just Pulled Itself Out Of The Petrodollar

Zerohedge ^ | 1-14-2015 | Durden

[tcrlaf]

The article goes pretty deep in to the weeds, but the gist seems to be that with lower worldwide demand, and much lower oil prices, the greatly-reduced churn of worldwide PertoDollars will result in another US Dollar liquidity crunch, despite the trillions that the Fed has printed up to now.

The value of the US Dollar is not as a store of wealth, but as a reliable unit of trade. If that changes, or gets bypassed, it could be big trouble.

[Red Badger]

I bet the former owner of Yugos Oil is laughing his ass off now........................

[no-to-illegals]

Has china responded?

[SunkenCiv]

Tinfoiled Again!

[grania]

I'm fascinated. Wasn't regime change the US and the EU have been involved in about punishing any leader who wanted to change the banking dominance that now exists? If the global monetary system collapses, who survives? My guess is it's the countries that have the capacity to be self sufficient and can keep the rule of law internally.

Correct me if my thoughts are astray, please.

[tcrlaf]

Who knows??

There is a ton of “Economist Speak” in the article, but I get the basic gist of it.

What we do know is that there is now a full-blown economic war going on. What we don’t know is which side the biggest player, CHINA, is eventually going to come to.

[Jan_Sobieski]

Isn’t the real threat to the US that Saudi Arabia and Iraq will start selling oil in currencies other than the dollar? Isn’t that why we have been kowtowing to the Arab Muslims for some many decades?

[no-to-illegals]

(imho) there is no completely ‘stable’ currency left anywhere worldwide. All currencies have been inflated. With the inflated currencies worldwide is difficult if not impossible to predict the outcome cause to hear the economists’ talk, “We’ve never been here before.” <-—That statement is always true, btw. (imho)

[no-to-illegals]

well, maybe that statement is true but have to think there is always the possibility of those that disagree.

[1rudeboy]

“Tyler Durden” is an economist? I thought he was a character in a film.

[tcrlaf]

As you already well know, “Tyler Durden” is a pen name used by about 30 different Zerohedge posters.

[Jan_Sobieski]

So basically, whatever currency is tied to Petro, is the world's defacto currency.?.? Correct?

That is why we went to war in Iraq (no selling oil in Euros). And we went to war in Libya (no oil based currency)...

[1rudeboy]

Which pretty much means that anything coming from ZeroHedge is BS.

[riverdawg]

Russia is converting about $80b in foreign-reserve currencies (not just dollars) to rubles for two purposes: (1) to inject liquidity into its domestic banking system to facilitate internal, ruble-based transactions; (2) to try to prop up the ruble against further speculative attacks. With Russian bonds and other ruble-denominated assets recently falling into the “junk” category, the Russian central bank is engaged in an extremely risky (and potentially disastrous) strategy.

[no-to-illegals]

The creation, by mankind, of currencies maybe was not a mankind creation but rather a supernatural occurrence but I do not have a clue for the reasoning behind currency creation though perhaps was nothing more than a discovery much like oil. I’ve never understood all the ‘reasons’ thus am at a loss on clues to answer that question. My apology.

[BeauBo]

I guess the main point is that instead of putting money into Western banks, buying US treasuries and buying US stocks in a big way, the big foreign oil producers will suddenly be withdrawing funds.

That is pretty straightforward - not some tinfoil hat conspiracy.

We could argue about how much, but we know that the price drop has been huge, and that many oil producers’ national budgets have gone from surplus to big deficits. Now they need to spend their profits rather than invest them.

These big investors will not be driving up stock prices this year, and may start some selling. They will not be buying mountains of US treasuries at near zero interest rates, so rates might have to rise a bit to sell all the debt US politicians want to spend. Banks won’t have quite as much money jamming their vaults, they will be more careful where they loan what is left, so some won’t get funded.

They are not the only, or even the largest players in these markets, but their swing from being big buyers to net sellers will effect the US stock market, US interest rates and availability of loans - to some marginal degree.

Other factors might make up the difference, but this is a significant impact to consider. Low oil prices are a net positive, but there will be some negative adjustments.

[editor-surveyor]

The Fed will nuke the Dollar when they meet in two weeks, by making the very necessary upward tweak in interest rates.

All hell will break loose after that. Bad for everyone but those that keep their wealth in precious metals.

If they don’t do it, metals will fall slightly first, but resume their climb as China begins demolishing the dollar from the outside.

[editor-surveyor]

.
>> “What we don’t know is which side the biggest player, CHINA, is eventually going to come to.” <<

.
You gotta be kidding!

China will “come to” themselves. It will be the “Petro-Yuan.”

.

[oldbrowser]

What we don’t know is which side the biggest player, CHINA, is eventually going to come to.

China is dependent on us. To buy their products and because we owe them so much money.

[JoeFromSidney]

Isn’t the real threat to the US that Saudi Arabia and Iraq will start selling oil in currencies other than the dollar?

In the past that mattered. We were an oil importer and needed to be sure we could buy oil with dollars. However, we're now a net exporter (natural gas and refined products), and could be an even bigger exporter if the law banning exports of crude was repealed. It's the other people who now need dollars to buy our oil.