Posts Tagged ‘Dollar’

A brief perspective on the geopolitical strategic posturing and amalgamation occurring in real time. Political commentary by Chris Anthony.

 

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Russian banks are welcome in Iran, where the Russian-Iranian Chamber of Commerce is actively working on opening a joint Russian-Iranian bank, Bahram Amirahmadiyan of the Russia-Iran Friendship Society told Sputnik Persian.

Last week the Russian newspaper Izvestiya reported that Russian banks are at the front of the queue to enter Iran’s banking sector after the partial lifting of sanctions.

“Iran is emerging from years of sanctions, the quality of banking services there has declined and Russian players can enter the market with interesting products for business and the public,” Anatoliy Aksanov of Russia’s Association of Regional Banks told Izvestiya.
The newspaper reported that the two countries’ central banks recently held talks on the management of closer financial cooperation, and ten of Russia’s largest banks are preparing financial services for the Iranian market.
Former President of the Russia-Iran Friendship Society Bahram Amirahmadiyan told Sputnik Persian that banking cooperation between Russia and Iran has a long history.
“This is really a very important topic, particularly in the context of trading and economic links between Russia and Iran. Even under the Shah, before the 1979 Islamic revolution, Russian-Iranian banking cooperation was very active. There was even a joint bank which conducted trade operations,” he explained.
In 1924 two bilateral institutions were set up, the Russian-Persian Commercial Bank and the Russian-Persian Trade Company.
“After the 1979 that bank, along with many other joint banks, was closed, and bilateral transactions stopped,” Amirahmadiyan explained.
The volume of bilateral trade between Russia and Iran is currently four to five billion dollars, which is conducted using dollars or euros, and mostly through intermediate countries such as Cyprus or the UAE.
Russia’s trade representative in Iran Andrey Lugansky told Rossiyskaya Gazeta that following the lifting of sanctions, many Iranian companies conducting business through overseas subsidiaries will return their business to Iran and conduct their trade directly.
“We want to carry out all our trade operations in our national currencies, (although) this issue has not been resolved yet,” Amirahmadiyan said.
“Of course, the prospect of Russian banks opening in Iran is very attractive and important because it can widen and improve our economic cooperation. At the moment, all banking operations between Russia and Iran are carried out in dollars or euros. It’s very inconvenient, because all these operations are controlled either by the EU or US central banks.”
Amirahmadiyan said that the Russian ruble could also benefit from the banks’ entry to the Iranian market, which would enable Iranian companies to buy Russian goods in rubles.
“I also think that the Russian ruble can strengthen a lot on the Iranian currency market, and become a very attractive currency. There currently aren’t any Russian banks in Iran, and the Russian currency is not very well known on the market. When Russian banks begin to operate in Iran, there will be more currency operations and the ruble will strengthen. I hope the same will happen to the Iranian rial in Russia. That’s why we are waiting impatiently for this initiative to go ahead,” Amirahmadiyan said.
A single Iranian bank currently operates in Russia, called “Mir Business Bank.” The bank is a subsidiary of Bank Melli Iran and 70 percent of its customers import and export goods such as grain, timber and food products between Russia and Iran.
According to official figures from Russia’s Federal Customs Service, Russian-Iranian trade as a proportion of Russia’s international trade increased from 0.2 to 0.4 percent in the first half of this year, following the partial lifting of sanctions. Between January and June, the total turnover of trade between the two countries was $923.7 million.
“Iranian businessmen and entrepreneurs often tell me that the key problem in the way of increasing the volume of trade between the two countries is the lack of a single joint banking mechanism. This is a very valuable and rational initiative from Russian banks, and I am sure it will succeed in practice. The Russian-Iranian Chamber of Commerce is actively working on opening a joint Russian-Iranian bank,” Amirahmadiyan said.
In January the US and EU announced the lifting of all economic and financial sanctions against the Islamic Republic associated with its nuclear program, enabling Tehran to access previously frozen assets, use international financial messaging services such as SWIFT, and sell oil and other raw materials to EU countries.
While Russian firms are keen to increase trade with Iran, their Western counterparts still appear fearful of repercussions from the authorities.
In March Iran’s Supreme Leader Ayatollah Ali Khamenei told Iranian television that US authorities are dragging their feet on lifting sanctions, and that Iran’s international financial transactions face problems because banks “fear the Americans.” “The Americans have not acted on their promises and (only) removed the sanctions on paper,” Khamenei said.
While they have lifted some sanctions following the July 2015 nuclear agreement between Tehran and the 5+1 countries, the US and EU continue to impose some sanctions against Iran associated with its ballistic missile program, which Tehran maintains has purely defensive purposes.
In July the US House of Representatives blocked a deal between Boeing and Iran Air to supply 118 passenger planes to replace Iran’s ageing fleet. The move also prevents a similar deal between Iran Air and French manufacturer Airbus, since its planes use some parts from Boeing. The US representatives claimed Iran could modify the jets and use them for military purposes.

By Kenneth Schortgen

On June 15, the monetary body known for saying nothing, but revealing everything capitulated as Fed Chairman Janet Yellen virtually guaranteed that the momentous rate hike program the central bank laid out for the economy last October is over now, shortly after it begun.

To date, there has been only one minor rate hike in the past 10 years, and it was a paltry .25 bps that accomplished little last December before the invisible hand of the global financial system bitch-slapped the Fed into moving back onto the porch to try to yap at their betters.  In fact, the capitulation from the Fed Chair today was so concrete that even the central bank’s bought mouthpiece Steve Liesman conceded that the cycle of rate hikes was over.

“I think the first rate hike cycle is over. What Janet Yellen said in response to my question, and if you look at what has happened to the rate hike cycle, is pretty profound. It’s as close to the Fed getting to capitulation as I’ve ever seen, about the efficacy of Fed policy, about the outlook for the economy.

I just want to read this: “I think all of us are involved in a process of constantly reevaluating where the neutral rate is.” Basically they see these headwinds to the economy as becoming part of the new normal. This five-eights decline to the Fed Funds rate outlook for 2018 is pretty profound and GDP remained the same. That’s very important. And I am going to give rick a blue ribbon because Rick represents the markets. Rick – the markets won. The Fed has completely capitulated to the market’s point of view. The Fed is not leading the markets here, the markets are leading the Fed. Every single time.””

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Perhaps not ironically, the markets barely moved on the news of no rate hike for June, and even the dollar lost just 60 bps when the FOMC results were announced.

In addition, probably the most stark reality that the hiking cycle has fizzled out is that every single one of the voting members on the FOMC stood unanimous in holding rates as they are despite four regional Fed Presidents going public just four weeks ago and assuring the markets that June was a ‘live meeting’, and that a rate hike was almost a guarantee.

Sadly however, any economist with half a brain and the ability to look at the full measure of economic data knew that June was not going to see a raise in rates, and that the chances were much better that rate drops would come from the Fed before the next rate hike.  And entering into the forecasted Summer of hell that Rob Kirby, Bill Holter, Gregory Mannarino, and Bo Polny have all predicted is now upon us, the likelihood of a new quantitative easing program being implemented before the November election is taking the place on Vegas betting boards as it formally replaces the odds of months of ‘assured’ rate hikes.

 

 

By V. The Guerrilla Economist

 

The New Trade Order

As the sun sets on the American empire, the reality that it is fated to end up on the trash heap of history comes ever more into focus. Allow me to highlight the latest moves on the global economic chessboard that further cement this reality.

For years now, The Guerrilla has howled that most countries will refuse to participate in so-called “trade pacts” like the Toilet Paper Protocol (TPP). Look, for example, at the difficulties Exceptionalistan is having when it comes to getting even Europe’s neutered pantywaists to accept the TTP’s ugly stepsister, the Transatlantic Trash Investment Partnership (TTIP). What a joke these pieces of diplomatic garbage are. The idiocrats leading the Empire of Stupid still operate like the year is 1980 and the Cold War is in full swing. They seem to believe that other nations have no choice but to worship at the feet of King Dollar.

Ah, but Exceptionalistan’s delusional neocons have a poor understanding of the modern world! In their hubris they think they hold all the cards and that the rest of the world cannot figure out their dastardly schemes. They are soon going to find out just how wrong they are.

 

The Bear in Judea

Russianspecialforces

Russian Spetsnaz Special Operations Forces

 

Recently, Israeli Prime Minister Benjamin Nutzinyahoo (aka Netanyahu, aka Mileikowsky) visited with Russian President Vladimir Putin in Moscow. They met in private and judging by their statements afterward both men seemed very pleased by what they discussed. The Guerrilla has said for years that Israel will transition from being a war economy that engages in the bankster practice of perpetual war to an independent economy that is not living off U.S. largesse. In his speech after the meeting Nutzinyahoo said, “Russia is a world power and the relationship between us is getting closer all the time. I’m working to tighten this connection; it serves us and our NATIONAL SECURITY  at this time, and has also prevented superfluous and dangerous confrontations on our northern border.”

 

In other words, Nutz and Putin are both happier than pigs in sh** that Russia got involved in Syria. What’s more, Nutz also revealed that Russia’s Gazprom will help develop the Leviathan energy feild. He also noted that additional defense deals were possible. It’s really no wonder that political leaders and the press in Israel are calling their nation’s new relationship with Russia a “budding romance.” The truth of the matter is that trade, security, and diplomatic relations between Russia and Israel are the friendliest they’ve ever been thanks to the masterful policies of the Odumbo administration.

 

Mark my words, it will only be a matter of time before we see Russian military equipment in the hands of the Israeli Defense Force. It helps that Avigdor Liberman, the current Israeli Defense Minister, is a Russophile who’s had a keen interest in Russo-Israeli integration since 2009 when Agent Zero took the White House. The Israelis are quite pleased with how the Russians handled the Daesh-bags (USIS) and how their northern border with Syria is now quiet.

 

The other angle here is that Israel is being wooed by Russia to act as a buffer against the terror kingpin that is now Turkey. Hamas has a forward operating base on the Turkish border where it receives the Erdogan government’s full military and financial support. What better way is there for Putin to stick a finger into the eye of the Atlanticists and get Ankara back for shooting down a Russian jet than to cozy up to Israel?

Putin vs The Turd In The Hummus Bowl Erdogan

 

With the large number of Russian-Jews in Israel, many of whom have relatives that happen to be part of the “-stan” nations on the New Silk Road, what The Guerrilla has been saying since 2013 is coming to pass. Israel will integrate with the New Silk Road and the new Suez Canal development.

The Suez Canal expansion project is integral not only to trade and integration into the New Silk Road, it is also key for developing the Leviathan energy fields. Peace in the Middle East will be a reality as soon as King Dollar rasps out his last dying breath.

It’s not a perfect union, but Russia is playing a stronger role than the West is in maintaining a peaceful Middle East, a role that includes keeping all of the region’s actors, including Israel, in check. The point is that for the first time in decades the U.S. and the UK are on the outside looking in at the Middle East and there is nothing they can do about it.

The Russian-Israeli rapprochement takes place within the context of other moves involving Iran that The Guerrilla believes are related. Basically, Iran is courting Europe by announcing that they will accept petro-payments made in euros. Teheran’s game here is to work with Russia to shore up their combined share of the European energy market. This move prevents the Atlanticists from presenting an alternative (e.g., Qatar) to energy-hungry Europeans. Iran’s offer also leaves Russia free to work with Israel and it’s Leviathan energy fields as a way of crushing the Saudis. Do you see how things have changed, dear readers? Do you see how Russia has been one step ahead of the amateurs at work in the Empire of Stupid?

Royal Flush

The House of Fraud, I mean The House of Saud, has lost the oil war in spectacular fashion, just as The Guerrilla predicted it would years ago. The original intent of the oil war started by the Atlanticists with the collusion in July 2014 of a dying King Abdullah and his merry oil minister, Ali Al-Naimi, was to cripple both Russia and the booming U.S. shale oil business.

I can see my readers shaking your heads now. Why on earth, you wonder, would the Atlanticists want to hurt oil business in the United States? The reason is simple – because the petrodollar has less to do with oil than it does with keeping the debt-based Ponzi scheme going. Remember, the Anglo-American power players have no loyalty to any country, not even their own. They are loyal only to the paper wealth their system generates and the schemes they employ to leverage the power of that paper. It is the philosopher’s stone realized!

Fast forward from 2014 to today and what we see is Saudi Arabia circling the toilet bowl of irrelevance. Everything that she and the corrupt West have done to undermine Russia’s economy, markets, and her oil production has backfired. Is anyone surprised by this? They shouldn’t be. The Empire of Chaos doesn’t care what happens to it’s allies. What it cares about is full spectrum dominance over the worlds resources, a goal it achieves through economic hitmen, assassinations, coups, color revolutions, and outright invasions, what it calls “kinetic actions.” This has been American foreign policy for the last few decades no matter who has occupied the White House.

The Guerrilla remembers with disgust the moves made in 2001-2002 to maintain Exceptionalistan’s preeminence on the global stage. Recall for instance General Wesley Clark’s revelation at the California Commonwealth Club in October 2007 when he said that the decision to go to war with Iraq had been made “on or about the 20th of September” in 2001. Clark explained further that his contact in the Joint Staff informed him a few days later of a memo he had received from the Office of the Secretary of Defense, a memo that described how the U.S. was “going to take out seven countries in five years, starting with Iraq, and then Syria, Lebanon, Libya, Somalia, Sudan and, finishing off with Iran.”

Can we now lay the “American troops are fighting for your freedom” BS to the side?

Since King Salman came to power in Saudi Arabia he has tried, but failed, to reverse the disastrous course set by Abdullah. His first order of business was to fire Ali Al-Naimi and put in an ARAMCO chairman named Khalid Al-Falih to shore up the Kingdom’s bleeding finances. Alas, Al-Falih, surely inspired by western central banks, decided to keep the “pump to oblivion” strategy of his predecessor in place. As a result, the Saudis are only months from a total collapse.

The cards are stacked against them. U.S. shale oil firms are still in operation, having come up with new technologies to lower the cost of drilling and exploration. This will buy them 5 to 10 years at the most (shale oil fields are short-lived) before they go belly up, but by that time the Kingdom of Saudi Arabia will have also bitten the dust. The Kingdom is hemorrhaging the foreign currency reserves that it uses to keep the riyal pegged to the U.S. dollar. This has ruined domestic social programs, leading to unrest and now the House of Saud is facing a popular revolt because it pissed away its wealth on some harebrained scheme cooked up by idiots in Mogadishu-on-the-Potomac.

Over the last year and especially in the last few months, the exchange rate of the riyal has been swinging wildly. Recent Fed talk of rate hikes have not helped the situation either. At some point, the Saudis will be forced to de-peg the Riyal from the USD. When that happens they will need to sell U.S. dollars on the open market from their sovereign wealth fund. The more the Fed flirts with interest rate increases, the more the Saudis will deplete their reserves … until they run out of dollars. Of course, another option is keep the peg, but this will kill the Kingdom’s growth by forcing it to raise its interbank rates, prompting a drain on its GDP. Add to this soap opera the fact that Iran has rejected the OPEC demands to cap oil production, further lowering the price of oil. What’s more, Iran plans to increase oil production to 4 million barrels a day through March 2017!

Yes, my friends, heed what The Guerrilla is saying. Blood is in the water! The House of Saud is in serious financial trouble from which it cannot escape without maximum pain. While mainstream talking heads and lesser analysts focus on the funds and pegs of the Kingdom, The Guerrilla reminds his fans to recall the untold billions of dollars that Saudi Arabia has dumped into proxy wars in Syria and Yemen. Those wars are the Kingdom’s Vietnam. They are bleeding out the last remaining wealth the Kingdom has.

Then there is the U.S. Federal Reserve, headed by that troll, Janet Yellen. Thanks to the Riyal-Dollar peg, the last Fed interest rate hike caused the Saudis to raise their rates thereby wreaking havoc on the Riyal in the process. Saudi Arabia also sold billion in bonds to shore up the holes in its books. The Kingdom is about to learn the hard way that raising rates while oil prices plummet doesn’t work out too well in Dollar pegged Gulf Cooperation Council countries. As corporate and household borrowing costs begin to rise Saudi Arabia will experience credit contraction and a liquidity crisis the likes of which the Kingdom has never seen. Throw in social-political unrest and Riyal devaluation, de-pegging, and Dollar dumping are right around the corner.

In conclusion, the policy of chaos employed by the Empire of Chaos is about to come full circle. Exceptionalistan is about to meet the snarling bitch that is karma head-on. The drooling slack-jawed morons that run the U.S. are in for a rude awakening soon … very, very soon.

 

 

By Kenneth Schortgen

On June 8, the London Stock Exchange issued the first Chinese offshore sovereign bond, setting the table for the internationalization of the Renminbi currency.  This move had been months in the making when the City of London had signed an agreement to participate in Yuan denominated Chinese bonds being sold in their global markets.

This move also is another step in China’s ultimate plan to have the Yuan currency be on par or greater than the dollar as a medium of trade, especially following last year’s acceptance into the IMF’s SDR basket of reserve currencies.

“China’s Ministry of Finance listed its first sovereign offshore renminbi bond on the London Stock Exchange on Wednesday, marking a significant milestone in increasing London’s offshore renminbi liquidity as the renminbi embraces its new status as a global reserve currency.

The 3 billion yuan ($458 million) three year renminbi bond issued in London is the first sovereign bond Ministry of Finance issued outside China. It is expected to act as a benchmark to aid future renminbi assets’ pricing, hence encourage more issuance of renminbi investment products offshore. Bank of China and HSBC are joint global coordinators of the bond.”

— en.people.cn

For any currency to reach the stage of internationalization, bond hubs must be established where foreign countries and investors can have access to buying these bonds, and allowing for an expansion of the originator’s currency within the global monetary system.

Yet China’s partnership with the London Stock Exchange is not the only new activity for Yuan internationalization this week.  In fact, on the same day of their new bond issuance in London, the country’s Renminbi Qualified Foreign Institutional Investor (RQFII) campaign opened up in the United States with a licence to allow U.S. investors to buy renminbi-denominated A shares in companies on Chinese exchanges.

“China will grant the US a 250-billion-yuan ($38 billion) quota under its Renminbi Qualified Foreign Institutional Investor (RQFII) program, Central Bank Vice Governor Yi Gang said on Tuesday.

The announcement was made during the 8th round of the Strategic and Economic Dialogue talks in Beijing.

Launched in 2011, the RQFII is one of the first efforts by the Chinese government to internationalize the renminbi, allowing foreign investors to invest in the country’s capital market.
Once licensed, foreign financial institutions are permitted to buy renminbi-denominated “A shares” in mainland China.

The quota is the first granted to the US under the program. Hong Kong has the largest RQFII quota of 270 billion yuan ($41 billion).

The fact that the US was granted qualified investor status is a sign of the unprecedented level of economic cooperation between Beijing and Washington.”

— Sputnik News

As the world pursues an agenda of de-dollarization, and use the Euro, Pound, and Yen stagnate or slowly decline, the star rushing in to fill the gap is acting quickly to internationalize their currency in trade, equities, bonds, and credit markets.  And over the next years, or perhaps as quickly as just a few months, the world will have a choice in which medium of currency to conduct trade in, and it is becoming more likely that their primary currency of choice will be the Yuan.

 

By Kenneth Schortgen

Because the government and other ‘official’ statistics agencies have pretty much removed every standard consumer expenditure from their weekly, monthly, and quarterly reporting models, there are very few items available for Wall Street and the Fed to use to determine the strength of the American consumer.  One of these of course is automobile sales, and is an item that the mainstream loves to boast about over and over to say, ‘Look Here!  The Consumer is FINE!  They are buying lots of cars!’

So then what happens when all of a sudden all U.S. automobile manufacturers see a decline in sales at the same time?

“You can’t say we weren’t warned. As reported over a month ago, the biggest drag on recent consumer spending was auto sales.

And this is happening as Automaker inventories are at their second highest in 23 years. If sales are collapsing, then the violent spike in relative inventories as seen in 2008 is not far away.

GM sales plunged 18 percent, missing estimates for a 13 percent drop, with all four brands reporting declines of at least 14 percent. Ford’s light-vehicle sales slid 6.1 percent, according to Bloomberg, compared with an average estimate for a 4.9 percent decline. GM projects a sales pace for the month that is slower than analysts had predicted. GM said retail sales fell 13 percent and it continued to pull back on deliveries to rental-car fleets. The largest U.S. automaker said it sold 22,000 fewer rental cars in the month, the biggest reduction in the past two years.

Sales of Ford and Lincoln passenger cars plunged 25 percent, led by a 37 percent slide for the Taurus sedan, once the company’s flagship. Even the redesigned Mustang saw its momentum fade as deliveries dropped 24 percent. Sales of the recently restyled Ford Edge sport utility vehicle fell 14 percent. F-Series truck sales rose 9 percent and van sales had their best May since 1978 on the strength of a 16 percent gain by the full-size Transit.

To be sure, all of the six largest carmakers were estimated to report declines for May, but the severity of the drop has taken many by surprise. As Bloomberg notes, “even as auto sales gained in April and the U.S. consumer continues to spend, there have been signs of wavering economic confidence, and the industry may struggle to maintain its record pace. As a kickoff into summer on the back of Memorial Day weekend promotions, May is a bellwether for gauging buyer appetite.””

— Zerohedge

In a real world environment we would more often than not look at this monthly dip as an anomaly, or perhaps tied to some other circumstantial blip.  However, we know from looking at the real data outside the mainstream that consumers as a whole are in extremely dire straits.

In an article entitled, “The Secret Shame of Middle Class Americans‘, in this month’s issue of the Atlantic, writer Neal Gabler came out as one of the many millions of apparently middle-class Americans who are in fact living in a ‘more or less continual state pf financial peril’… scrabbling around to make ends meet, and mostly failing.

“Gabler draws attention to a regular survey by the Federal Reserve, which asks consumers a set of questions, including how they would pay for a $400 emergency. “The answer: 47% of respondents said that either they would cover the expense by borrowing or selling something, or they would not be able to come up with the $400 at all”, writes Gabler. “Four hundred dollars! Who knew? Well, I knew. I knew because I am in that 47%.”

Does the data support this?

Yes. Research into this niche area of microeconomics – day-to-day “financial fragility” – has boomed since the Great Recession, according to David Johnson, an economist at the University of Michigan who specialises in income and wealth inequality. A 2014 survey study found that only 38% of Americans would cover a $1,000 emergency medical bill or a $500 car repair bill with money they had saved.

Another academic study found that a quarter of households would definitely fail to get their hands on $2,000 within 30 days in an emergency, and a further 19% would be able to do so only by pawning possessions or taking out a payday loan.”

— Moneyweek.com

If nearly half of all middle-class Americans are unable to even find between $400-2000 to use in case of an emergency today, how bad will this get in the coming months when Obamacare premiums are expected to rise for them from between 14-20% in 2017?

The bottom line is that the American consumer is spent, and there is little that the illustrious Federal Reserve or Federal government can do about it.  And since consumer spending makes up more than 65% of the total GDP each year, even the smallest drop will drive the economy right into recession, or perhaps towards the  calamity that Japan’s Prime Minister Shinzo Abe is calling for as being imminent for the entire global economy.