The Death Of The Petrodollar Was Finally Noticed | Zero Hedge

Three months ago, we wrote "How The Petrodollar Quietly Died, And Nobody Noticed", in which we explained in painful detail why far from the simple macroeconomic dogma which immediately prompted the macro tourists to scream that "oil prices dropping are good for US consumers", the collapse in the price of crude is not only a disaster for oil exporting nations - one which will lead to a series of violent "Arab Springs" across the oil-producing developed world - but far more importantly, have a massive impact on capital markets as a result of the plunge in the most financialized commodity in history.

On the death of the Petrodollar we commented that unlike previously, when petrodollar recycling funneled the proceeds from oil-exports into financial markets, helping to boost asset prices and keep the cost of borrowing down, henceforth "oil producers will effectively import capital amounting to $7.6 billion." We added that "oil exporters are now pulling liquidity out of financial markets rather than putting money in. That could result in higher borrowing costs for governments, companies, and ultimately, consumers as money becomes scarcer."

The conclusion was simple: "net capital flows will be negative for EM, representing the first net inflow of capital (USD8bn) for the first time in eighteen years. This compares with USD60bn last year, which itself was down from USD248bn in 2012. At its peak, recycled EM petro dollars amounted to USD511bn back in 2006. The declines seen since 2006 not only reflect the changed global environment, but also the propensity of underlying exporters to begin investing the money domestically rather than save. The implications for financial markets liquidity - not to mention related downward pressure on US Treasury yields – is negative."

In retrospect, it probably was not "simple enough", because even three months ago everyone was confident that both higher yields and an increase in market liquidity are imminent. Since then not only has the yield on the 10 Year plunged to near record low levels (while 16% of global government debt now trades at negative yields), but judging by the absolute liquidity devastation in the E-Mini, in Trasurys and virtually every other asset class, few actually grasped the implications of what plunging oil really means in a world in which this most financialized of commodities plays a massive role in both the global economy and capital markets, not to mention in geopolitics, with implications far, far greater than the amateurish "yes, but gas is now cheaper" retort.

So, three months later, we are happy to report that somebody finally noticed that the Petrodollar has indeed finally died, and more importantly, has attempted to put together an analysis of what we said in early November, reaching the conclusion that plunging oil just may not be all that financial comedy TV has it cracked up to be.

Did we say somebody? We meant everyone!

Below are extensive, in-depth, and long overdue questions on petrodollar recycling, or rather its halt, and its implications from virtually every single Bank of America economist and strategist who after months of stalling, have finally been forced to confront this most critical of topics head on.

Complete story at - The Death Of The Petrodollar Was Finally Noticed | Zero Hedge

Vladimir Suchan: Logos politikos: The low prices of oil could be drying out the extraneous feeding of the US dollar through the petrodollar

This article by Taylor Durden has spotted an important change and trend, apparently thus marking an end of 40-some-year-long era. While the US economy can live in principle very well with low cheap prices of oil, low oil prices might be deadly for the overall US hegemonic system of fiat money, which, after 1971, was based on the so-called petrodollar, that is to say, 1) on recycling of the dollars for oil by the US oil producing allies into US bonds (and depositing them in US banks) and 2) on creating US- and IMF-controlled US-dollars-based debts of oil importing countries.

http://www.zerohedge.com/news/2015-01-14/russia-just-pulled-itself-out-petrodollar

The age of the disposable petrodollars for financing the US debt and bonds has now come to an end because the surplus of the petrodollars has dried out. Creation of US-dollar new debts for both the oil importing and oil exporting countries (including Russia) might be one possible, though very partial solution of sorts. The other possible solution is even more obvious--by creating chaos and war abroad making investments in the US debt and bonds appear comparatively the most "secure investment." In this case, the continuation of the system would become a much less concealed form of world racket. On top of it, the chronic and high unemployment is already a tell-tale sign of the high degree of disinvestment in the "real economy" and counter-productive depression of the earning power of the many.

The other "solution" clearly aimed at by the Empire's Drang nach Osten--against Russia--is to save itself by taking over Russia's vast natural resources and real estate. In this regard, I consider it a safe bet to bet that a good portion of Russian oligarchs are inclined to participate by sharing in the intended spoils ("securing their private property") and promised immunity and the Empire's good will and special treatment.

The system, as always, stands in front of its renewed fatal question of how to create more debt, whether public or personal, when the level of tolerance for further indebtedness is running into the greatly heightened risk of default and resistance, respectively, into plummeting tolerance of society to cope with the high burden of debt without crushing and falling apart?

As a result, the system is now turning more and more on the same "middle class" which is supposed to be the supporting pillar of the system. When wealth can no longer be extracted from others abroad as before, the system is forced to start cutting the branch on which it has been sitting. For squeezing the 1 or 0.1% is the very last idea to be tried by the system--only after all the others, which could include an option of the Last Judgment itself, are tried and fail.

By the way, democracy in Athens started in earnest with Solon's reforms, a key part of which was writing off personal debts and buying out citizens who fell into slavery due to their debts.

Complete story at - Vladimir Suchan: Logos politikos: The low prices of oil could be drying out the extraneous feeding of the US dollar through the petrodollar

A couple more nails in the petrodollar's coffin, courtesy of Turkey, India and Russia - Red Pill Times

This nail courtesy of Turkey and Russia, (via Sputnik news agency):

Russia and Turkey are set to work on increasing payments between the countries in their national currencies, the Russian-Turkish Intergovernmental Commission said Wednesday.

“The working group on financial and banking cooperation, taking into account information about detected barriers, is to continue its work to eliminate them and increase the volume of payments in the national currencies of Turkey and Russia,” the commission said.

Both sides noted the absence of legal and infrastructural constraints for conducting payments in their national currencies and agreed to work alongside representatives of the business communities to identify possible obstacles.

This nail courtesy of India and Russia, (via Sputnik news agency):

Transition to national currencies, the rupee and ruble, in trade between India and Russia will significantly increase bilateral trade, P.S. Ragahvan, the Indian Ambassador to Moscow told Rossiya Segodnya news agency on Tuesday.

“I would like to mention actually three specific ways in which we are looking to see a significant increase in trade exchanges between our two countries. The first is as mentioned, trade in national currencies,” Ragahvan stated. “It is obviously advantageous, because trade between Russia and India is now through the currency of a third country which means that business people have to hedge against two different currencies – between the rupee and the dollar and then the dollar to the ruble and vice versa,” the ambassador stated in an interview ahead of the Indian Trade and Industry exhibition in Moscow.

Besides the transition to national currencies, the ambassador proposed another two elements that could “have a huge impact on trade between the two countries.” The second and the third elements are discussions between customs authorities and the active use of the North South Corridor, going “from ports in India to ports in Iran, up by the overland route and then into Russia, either across the Caspian Sea or through Azerbaijan.” According to the ambassador, this could reduce “the total length traversed by goods between India and Russia by half.”

While Obama tries to hammer Russia into submission via Ukraine and sanctions with the support of the “international community”, Putin is hammering away at the petrodollar with an all to enthusiastic and willing group of participats known to many of us as the “rest of the world.”

Complete story at - A couple more nails in the petrodollar's coffin, courtesy of Turkey, India and Russia - Red Pill Times

The Beginning of World Shift , by Thierry Meyssan

The Shanghai Cooperation Organization will represent, from its probable extension in September 2014, 40% of world population.

The offensive led by Anglos-Saxons (USA, UK and Israel) for world domination continues on two lines simultaneously: both the creation of the "Greater Middle East" (Greater Middle East) by attacking simultaneously Iraq, Syria, Lebanon and Palestine, and separating Russia from the European Union through the crisis they organised in Ukraine.

In this sprint, it seems that Washington wants to impose the dollar as the single currency in the gas market, the energy source of the twenty-first century, the way it imposed it on the oil [1] market. The Western media hardly cover the war in Donbass and their population is ignorant of the scale of the fighting, the US military presence, the number of civilian casualties, the wave of refugees. On the other hand, Western media have a delayed reaction to events in North Africa and the Levant, presenting them either as the result of a so-called "Arab Spring" (that is to say, in practice, a takeover by the Muslim Brotherhood), or as the destructive effect of a civilization which is inherently violent. More than ever, it is necessary to help the Arabs who are incapable of living peacefully in the absence of Western settlers.

Russia is now the leading power capable of leading the resistance to Anglo-Saxon imperialism. It has three tools: BRICS, an alliance of economic rivals who know they can not grow up without one another, the Shanghai Cooperation Organization, a strategic alliance with China to stabilize Central Asia and finally, the Organization for Collective Security Treaty, a military alliance of former Soviet states.

At the Fortaleza Summit (Brazil), which was held from July 14 to 16, BRICS took the plunge and announced the creation of a monetary reserve fund (mainly Chinese) and a BRICS Bank as alternatives to the International Monetary Fund and the World Bank, the dollar system [2].

Even before this announcement, the Anglo-Saxons had established their answer: the transformation of the Al-Qaeda terrorist network in order to prepare unrest among all Muslim peoples of Russia and China. [3] They continued their offensive in Syria and spilled over the borders both in Iraq and in Lebanon. They failed however to expel part of the Palestinians to Egypt and to destabilize the region even more deeply. Finally, they keep away from Iran to give President Hassan Rohani a chance to weaken the power of the anti-imperialist Khomeinists.

Complete story at - The Beginning of World Shift , by Thierry Meyssan

Petrodollar Panic: EU Officials Admit Buying Oil From ISIS | Zero Hedge

We recently explained how ISIS remains so well funded but what was unclear was who exactly what purchasing their 'recently-provisioned' oil reserves? The assumption being some desperate third-world nation or some scheming offshore hedge-fund arbitrageur; however, as Sott.net reports, a senior European Union official has revealed that some EU member states have purchased oil from ISIL Takfiri militants despite their rhetoric against the group. The official declined to disclose any names but Turkey remains a front-runner (having already shunned President Obama) and potentially France (after their recent anti-Petrodollar comments).

As The Daily Signal's Kelsey Harkness ( @kelseyjharkness ) notes,

According to the Iraq Energy Institute, an independent, nonprofit policy organization focused on Iraq’s energy sector, the army of radical Islamists controls production of 30,000 barrels of oil a day in Iraq and 50,000 barrels in Syria.

Complete story at - Petrodollar Panic: EU Officials Admit Buying Oil From ISIS | Zero Hedge

Something to "Point At"? - WW III Moving Forward?

Not that you would know it by reading or viewing mainstream news last week, World War III took a very big leap towards going live. First, last Wednesday was the biggest news when Gazprom announced they would be selling oil and gas for rubles and yuan. We knew for a fact this was coming sooner or later, it has arrived. It is so important that you understand what this really means. This is the very first time since 1973 where oil will be traded with public terms NOT being dollars. Yes, Iran is and has been selling oil for gold and euros over the last couple of years but not “publicly” so to speak. Gazprom which is Russia’s equivalent to the American’s ExxonMobil has announced this publicly and as their new policy. As I wrote several weeks back, now you must ask yourself who will follow Gazprom’s example?

The following day (Thursday), there were NATO reports of Russian troops and hardware crossing the Ukraine border. I saw a report of an estimated 20,000 troops, but this link was taken down immediately and I believe it to be false. Russia has continually denied they have troops within sovereign Ukraine. Then came Friday, the U.S. proposed further sanctions and British Prime Minister Cameron proposed locking Russia out of the SWIFT system. Do you see a pattern here? Russia moves step by step further from the dollar which is followed by the West turning the screws tighter to start a live war. We have had several reports of “Russia invading” or “Russian tanks destroyed” and even an airliner actually shot down in an effort to spark war but Mr. Putin refuses so far to take the bait.

Let me switch gears here for a moment and then come back. If you look around the world today, there are many situations big enough to “point at.” What do I mean by “point at?” Think about this, the U.S. and the dollar system is clearly financially upside down and not viable any longer. How would it “look” if all of a sudden one Monday morning the banks and markets did just not open because a panic started? When I say “look,” I am talking about the “perception” to the common man. This cannot be allowed to happen, there absolutely MUST be “something” to point at as the reason or the cause.

What could these reasons or causes be? Are they or will they be real or manufactured? Before listing some possibilities I do want to point out the obvious, the world is (has been) totally interconnected with the use of dollars, banking, financial and trade systems, and of course the $1.4 quadrillion worth of time bombs planted all over the world. A cascade of financial collapse, once started will not be reversible and will take everything with it.

Complete story at - Something to "Point At"?

Putin Says The Petrodollar Must Die, "The Dollar Monopoly In Energy Trade Is Damaging Russia's Economy" | Zero Hedge

On one hand, despite initial weakness following Europe's triple-dip red alert, futures declined only to surge higher after some headline or another out of Russia was again spun to suggest imminent Ukraine de-escalation (something which Russia whose only interest is to keep crude prices high, has absolutely zero interest in), perpetuating a rumor which was set off by a Russian media outlet tweet last week that has sent S&P futures over 50 higher in less than a week on... nothing.

On the other, Putin just said the following, which no matter how one spins it, shows precisely how Russia is inclined vis-a-vis future (un-de-counter) escalations.

PUTIN SAYS RUSSIA SHOULD AIM TO SELL OIL AND GAS FOR ROUBLES GLOBALLY, AS DOLLAR MONOPOLY IN ENERGY TRADE IS DAMAGING ECONOMY

Reuters adds:

President Vladimir Putin said on Thursday Russia should aim to sell its oil and gas for roubles globally because the dollar monopoly in energy trade was damaging Russia's economy.

"We should act carefully. At the moment we are trying to agree with some countries to trade in national currencies," Putin said during a visit to the Crimea region, which Moscow annexed from Ukraine earlier this year.

Countries such as China, India, Iran, Brazil, and virtually every other non-insolvent, that is to say "developed, Western" country.

And now, bring on the Russian "isolation" (which is about to push Europe, not Russia, into a triple-dip recession) and further de-escalation.

Complete story at - Putin Says The Petrodollar Must Die, "The Dollar Monopoly In Energy Trade Is Damaging Russia's Economy" | Zero Hedge

The Global Financial Tsunami End Game: The Petro-Dollar Regime is Finished? | Global Research

I have written many articles on the Petro-Dollar being the lynch-pin of the US Dollar fiat money system and that once trade in oil is no longer denominated in the US Dollar, the bells will toll for the demise of the US Dollar and the global fiat money system. The renowned financial analyst and author, James Rickards has written two best sellers, “The Currency Wars” and now his latest, “The Death of Money”. And in his recent interview by Max Keiser, he explained that during the Cold War, the “M.A.D. Doctrine” (Mutually Assured Destruction) prevented a nuclear war between the two superpowers, the Soviet Union and the US, as if one superpower were to launch a pre-emptive first strike, there would be enough nuclear missiles remaining in the targeted superpower to retaliate with an equally devastating Second Strike.

In the last few months, we have witnessed a variation of the nuclear M.A.D. Doctrine and for which I have been warning for as long as I can remember but my ringing of the alarm bells have fell on deaf ears.

The “Financial Nuclear Weapon” (the sale of oil in a currency other than the US dollar) which was previously deployed by Saddam Hussein resulted in the total destruction of Iraq, but it failed to deter other countries pissed off with the highhandedness of the Global Policeman.

Libya made another attempt and it resulted in the destruction of the country and the brutal murder of its leader Muammar Gaddafi. Next was Iran. The US and the global financial war party found it much more difficult to isolate and annihilate Iran, even when she was threatened with outright nuclear attack by US and the rabid Israel. And in spite of unprecedented sanctions against Iran (which constitute economic warfare and are war crimes in itself), Iran stood defiant.

The leading members of BRICS (Brazil, Russia, India, China and South Africa) Russia and China restrained themselves so as to preserve global stability. However, the war party faction of the Obama regime (the leftovers of the Bush regime) took such restraint as weakness and went on a spree of regime change throughout the world to undermine the growing strength of BRICS.

Complete story at - The Global Financial Tsunami End Game: The Petro-Dollar Regime is Finished? | Global Research

US Threatens Russia Over Petrodollar-Busting Deal | Zero Hedge

On the heels of Russia's potential "holy grail" gas deal with China, the news of a Russia-Iran oil "barter" deal, it appears the US is starting to get very concerned about its almighty Petrodollar

*U.S. HAS WARNED RUSSIA, IRAN AGAINST POSSIBLE OIL BARTER DEAL

*U.S. SAYS ANY SUCH DEAL WOULD TRIGGER SANCTIONS

*U.S. HAS CONVEYED CONCERNS TO IRANIAN GOVT THROUGH ALL CHANNELS

We suspect these sanctions would have more teeth than some travel bans, but, as we noted previously, it is just as likely to be another epic geopolitical debacle resulting from what was originally intended to be a demonstration of strength and instead is rapidly turning out into a terminal confirmation of weakness.

As we explained earlier in the week,

Russia seems perfectly happy to telegraph that it is just as willing to use barter (and "heaven forbid" gold) and shortly other "regional" currencies, as it is to use the US Dollar, hardly the intended outcome of the western blockade, which appears to have just backfired and further impacted the untouchable status of the Petrodollar.

...

"If Washington can't stop this deal, it could serve as a signal to other countries that the United States won't risk major diplomatic disputes at the expense of the sanctions regime,"

Complete story at - US Threatens Russia Over Petrodollar-Busting Deal | Zero Hedge

The 4th Media » The First Real Russian Retaliation for American Sanctions

It starts:

Rosneft has recently signed a series of big contracts for oil exports to China and is close to signing a “jumbo deal” with Indian companies. In both deals, there are no US dollars involved.

Reuters reports, that Russia is close to entering a goods-for-oil swap transaction with Iran that will give Rosneft around 500,000 barrels of Iranian oil per day to sell in the global market.

The White House and the russophobes in the Senate are livid and are trying to block the transaction because it opens up some very serious and nasty scenarios for the petrodollar.

If Sechin decides to sell this Iranian oil for rubles, through a Russian exchange, such move will boost the chances of the “petroruble” and will hurt the petrodollar.

Complete story at - The 4th Media » The First Real Russian Retaliation for American Sanctions

And one more line from the story:

Note also the poke in the eye: the deal to take Iranian oil and sell it as Russian oil, bypassing the sanctions against Iran.

W(h)ither Petrodollar: Russia, Iran Announce $20 Billion Oil-For-Goods Deal | Zero Hedge

Spot what is missing in the just blasted headline from Bloomberg:

IRAN, RUSSIA SAID TO SEAL $20B OIL-FOR-GOODS DEAL: REUTERS

If you said the complete absence of US Dollars anywhere in the funds flow you are correct. Which is precisely what we have been warning would happen the more the West and/or JPMorgan pushed Russia into a USD-free corner.

Once again, from our yesterday comment on the JPM Russian blockade: "what JPM may have just done is launch a preemptive strike which would have the equivalent culmination of a SWIFT blockade of Russia, the same way Iran was neutralized from the Petrodollar and was promptly forced to begin transacting in Rubles, Yuan and, of course, gold in exchange for goods and services either imported or exported. One wonders: is JPM truly that intent in preserving its "pristine" reputation of not transacting with "evil Russians", that it will gladly light the fuse that takes away Russia's choice whether or not to depart the petrodollar voluntarily, and makes it a compulsory outcome, which incidentally will merely accelerate the formalization of the Eurasian axis of China, Russia and India?"

In other words, Russia seems perfectly happy to telegraph that it is just as willing to use barter (and "heaven forbid" gold) and shortly other "regional" currencies, as it is to use the US Dollar, hardly the intended outcome of the western blocakde, which appears to have just backfired and further impacted the untouchable status of the Petrodollar.

Complete story at - W(h)ither Petrodollar: Russia, Iran Announce $20 Billion Oil-For-Goods Deal | Zero Hedge

Russia’s secret weapon: crashing US economy by collapsing petrodollar - The Voice of Russia

Russia can collapse the United States, prominent US trader Jim Sinclair believes. The economist, famous for his forecasts, explains that the strength of the dollar is based on the US agreement with Saudi Arabia that all contracts for fuel deliveries be in the US dollars. Now, Moscow can collapse the petrodollar in one moment. The slapping of sanctions on Russia is tantamount to a shot in the foot. The expert explains that the only true value in the world today is the petrodollar. But Russia can collapse it by demanding Euros or Yuan for its oil.

What’s more, the US may lose its influence on Europe for good, if Russia starts selling its fuels for anything but the dollars. Angela Merkel would be only happy, for Germany, as well as other European countries would then have no need for currency markets. The rate of the Euro would then grow, while the cost of oil and gas would go down. But the United States should be ready for an abrupt increase in gasoline prices, for hyperinflation amid a poor business climate and a crash of the Dow Jones industrial average, Sinclair predicts.

But does Moscow need this kind of scenario? One of the tough measures that the West said it would resort to should be cutting Russia off the SWIFT interbank payment system. But should this happen, the sanctions would hit hardest their own authors, says a Stock Market Chair Professor at the Higher School of Economics in Moscow, Alexander Abramov, and elaborates.

"Technically, it is pretty easy to cut Russia off the SWIFT system by blocking Russian banks’ IP addresses. But SWIFT is one of the main systems that banks use for international payments. Hardly anyone in the US or Europe would like to resort to this kind of move, since banks are interrelated. If Russian banks are unable to use the system, they will fail to make timely payments to their western counter parties, which will prove quite a shock to the financial system. Now, this is by far more real a threat than using Euros to pay for oil. I think the financial world, which has just started emerging from the crisis, can’t be happy about these kinds of shocks".

Russia’s secret weapon: crashing US economy by collapsing petrodollar - The Voice of Russia

Russia’s secret weapon: crashing US economy by collapsing petrodollar - The Voice of Russia

Russia can collapse the United States, prominent US trader Jim Sinclair believes. The economist, famous for his forecasts, explains that the strength of the dollar is based on the US agreement with Saudi Arabia that all contracts for fuel deliveries be in the US dollars. Now, Moscow can collapse the petrodollar in one moment. The slapping of sanctions on Russia is tantamount to a shot in the foot. The expert explains that the only true value in the world today is the petrodollar. But Russia can collapse it by demanding Euros or Yuan for its oil.

What’s more, the US may lose its influence on Europe for good, if Russia starts selling its fuels for anything but the dollars. Angela Merkel would be only happy, for Germany, as well as other European countries would then have no need for currency markets. The rate of the Euro would then grow, while the cost of oil and gas would go down. But the United States should be ready for an abrupt increase in gasoline prices, for hyperinflation amid a poor business climate and a crash of the Dow Jones industrial average, Sinclair predicts.

But does Moscow need this kind of scenario? One of the tough measures that the West said it would resort to should be cutting Russia off the SWIFT interbank payment system. But should this happen, the sanctions would hit hardest their own authors, says a Stock Market Chair Professor at the Higher School of Economics in Moscow, Alexander Abramov, and elaborates.

"Technically, it is pretty easy to cut Russia off the SWIFT system by blocking Russian banks’ IP addresses. But SWIFT is one of the main systems that banks use for international payments. Hardly anyone in the US or Europe would like to resort to this kind of move, since banks are interrelated. If Russian banks are unable to use the system, they will fail to make timely payments to their western counter parties, which will prove quite a shock to the financial system. Now, this is by far more real a threat than using Euros to pay for oil. I think the financial world, which has just started emerging from the crisis, can’t be happy about these kinds of shocks".

Russia’s secret weapon: crashing US economy by collapsing petrodollar - The Voice of Russia