Thursday, May 24, 2018

Would They?

The worlds largest consumer of oil (of a 14 trillion dollar per year market) is now paying for it's oil in it's own currency. Buying not just from Russia and Iran, but soon to be the Saudis. From LEAP:
We had anticipated that Saudi Arabia could not resist for very long and would soon sell its oil in yuan to ... China. In doing so, Saudi Arabia, historically at the heart of the petrodollar system, would put a definite end to the hegemony of the dollar as energy exchange currency. ... the yuan-denominated futures contracts did indeed appear on the Shanghai Energy Stock Exchange last March and, as anticipated, a meeting was held in Shanghai in December 2017 between Saudi Arabia's Finance Minister and the Governor of China's Central Bank… to discuss the date Saudi oil purchases in Chinese currency will start.
... petro-yuan contracts of the Shanghai International Energy Exchange made a notable entry into the markets on 26th March 2018. Foreign giga-operators like Glencore and Trafigura immediately positioned themselves on those futures. At the end of the first trading day, the oil price in this market was 429.9 yuan/barrel. Less than two months later, it is 447.8 yuan/barrel, i.e. between the price of Brent and that of WTI - after yuan-dollar conversion, reflecting the seriousness of this market.
Interestingly, Donald Trump’s recent decision to tighten the sanctions against Iran has had the effect of boosting oil sales in yuan. The contracts went from 8 to 12% ... of the world market share and the volumes traded doubled (125,000 to 250,000) between Tuesday 8th and Wednesday 9th May [footnotes removed. editing for brevity].
We have touched upon this before, but the speed and progress of these developments are noteworthy. The AADF will have Mnuchin on overdrive. Let us hope trophy-wifey can cool his jets with ice-water and fans.

Buckle up, get extra butter for that popcorn, and perhaps a chilled Belgian lager or two. Trade Wars and Sanctions at this point will only hasten the dollar's demise.

If oil was to suddenly become very expensive in dollars, dollar holders could be spooked. Remember expensive oil? Could you imagine a 14 trillion dollar market, becoming a 60 trillion dollar market in less than 90 days? What a ride that would be ;0)

But the dollar system has that under control, right? I mean, 14 generational wealth dynasty's wouldn't (couldn't) dump their dollars in the same 90 days ... or ... could they have been slowly getting out of dollars for a decade and are just now holding the very last few? How would we know?

Perhaps there is nothing left for the AADF to do but take the gold at gunpoint, and just eliminate whoever it takes, by whatever means it takes, to enforce dollar hegemony through full spectrum dominance. The question is. Would they?

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