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Topic: Politics, planes, ports and people. AKA THE aMERIKAN pEEPLE w0N! (Read 870 times) |
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Hermit
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Politics, planes, ports and people. AKA THE aMERIKAN pEEPLE w0N!
« on: 2006-03-11 15:46:04 » |
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The Dubai Ports World deal is no more, and Sultan Nasser Al-Suweidi, governor of their central bank, is looking to migrate some of their estimated $27 billion dollar holdings (up from 13.5 billion in late 2004 and now representing almost a third of all OPEC dollar holdings) into the Euro, Dinar and Gold. This isn't a new move. As early as mid-last year the members of the UAE were discussing reserve diversification of the order of a 5% shift to Euros. The fear is that the combination of the Iranian Bourse, the current oil price and the Dubai Ports World affair has shifted discussion to a question of "what small percentage should we retain in dollars" rather than "what small percentage of our dollar reserves should we sell" - and a greater than 50% divestment seems probable. The $10 billion annual joint trade between the UAE and USA may still act as a damper but this is thought likely to become less significant as trade is impacted by current events. And make no mistake, trade is already being impacted.
For example, on a highly related note, Boeing is looking decidedly nervous. I've heard from somebody at Emirates Airways (who like most pilots actually prefers Boeings but won't speak up in their favor as he plans to keep his job) that they have good reason to. Government honchos have been talking to management and management to staff at Emirates Airways, looking at whether if it is possible,and if so, how fast it is possible and what size penalties would be involved, to switch orders placed in November 2005 for 42 aircraft (worth around $ 10 billion) from Boeing to Airbus. Given fleet replacement and expansion budgets of about another $ 15 billion for this year, this is really significant. To put these amounts into whatever distant perspective so much money can acquire, the USA is the world's largest single exporter of weapons and military hardware. Some people think these US sales are excessive, but in all of 2004 (the last year for which I can find good statistics), the US sold “only” $12.4 billion worth of weapons and military hardware to all foreign purchasers. The hard currency share of the Emirate-Boeing deals alone is worth considerably more than that. Another way of looking at it, is that with the US trade deficit approaching a trillion dollars, i.e. $ 1,000 billion, we are looking at a potential of somewhere between 1% and 3% of actual revenues coming in being lost on just these orders should they be switched courtesy of American Bully tactics - without taking any additional sympathy and knock-on effects into account. As a final comparative example, pornography is generally accepted as being the largest single Internet marketplace and IIRC still represents over 50% of all Internet revenues. Well, the US pornography industry is a $12 billion a year business. Still smaller than just the already placed order from Emirate Airways.
I think that an even greater risk exists, that this blatant prejudice and protectionism will enhance pressure for OPEC revenues to move to the non-dollar denominated Iranian bourse which as we have previously discussed is scheduled to open in the Iranian new year on 2006-03-20. According to wikipedia which cites the economist Henry K. Liu,
Quote:| the "float" achieved by the necessity of all industrial nations needing to keep a U.S. dollar reserve to hedge against rising prices of oil, is numbered in trillions of dollars. |
(My estimate is that six times (down by a third in real terms, but inflated back by the dollar slide) the internal USA dollar holdings are floating in oil settlement stabilization accounts).
Quote:A shift to a different reserve currency that would float as well, would send those saved dollars back to U.S. shores to be redeemed for goods. This would induce inflation, a rise in interest rates, and increases in bankruptcy as obligations and assets are called in, to increase flow of cash or goods to the offshore buyers redeeming dollars.
The impact of this would likely be that U.S. bonds have to raise rates to appeal to investors in a thinner market, which would trigger inflation around the industrialized world, given the central position the U.S. holds in it. This would introduce the possibility of a round of hyper-inflation that could break the capacity of states to react. This would be a larger scale repeat of the George Soros attack on the British Pound Sterling that forced Britain out of the European Union fixed-rate exchange system.
Every dollar of increased U.S. public debt, every rise in interest rates, and every shift in pricing of a major industrial commodity, decreases the cushion available, and increases the potential that the U.S. might default on its own bonds. This would likely mean that U.S. dollar savings would be worth drastically less. Far-fetched as this seems, it happened in Argentina when International Monetary Fund-required measures forced an economic austerity regime that was widely blamed by economists as leading to a meltdown in its currency. |
I tend to agree with them.
What is ironic is that since the fall of Iraq, the UAE is al Q'aeda's enemy - and to a very much greater extent than can be explained in terms of “the enemy of my enemy is my friend” and certainly to a very much greater extent than any other Middle Eastern nation, the UAE has cooperated with US military and intelligence in managing American enemies in the gulf and surrounding areas (e.g. they are hosting the 380th Air Expeditionary Wing which is undertaking (illegal) U2 surveillance flights over “South West Asia” (hint, use google earth to look at 32N,54E from an altitude of around 2000 miles to understand )).
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With or without religion, you would have good people doing good things and evil people doing evil things. But for good people to do evil things, that takes religion. - Steven Weinberg, 1999
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JD
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Re:Politics, planes, ports and people. AKA THE aMERIKAN pEEPLE w0N!
« Reply #1 on: 2006-03-12 14:45:46 » |
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This ports debacle is a gigantic mistake for America but I don't think there will be such a big fall out.
I suspect that behind the scenes a deal was brokered. DP World seem to done Bush a favour by their surrendering of the ports to a "US entity".
The crisis was suddenly over. The talking heads are damning those who opposed it. Bush was made to look like a forward thinking progressive.
DP World will simply sub-contract this to a US company (whatever that is) and still make their profits.
Meanwhile the UAE will be extracting some very large favours from the US as compensation.
JD
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Re:Politics, planes, ports and people. AKA THE aMERIKAN pEEPLE w0N!
« Reply #2 on: 2006-03-14 12:14:52 » |
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Arab central banks move assets out of dollar
Source: The Independent
Authors: Philip Thornton (Economics Correspondent)
Dated: 2006-03-14
Middle Eastern anger over the decision by the US to block a Dubai company from buying five of its ports hit the dollar yesterday as a number of central banks said they were considering switching reserves into euros.
The United Arab Emirates, which includes Dubai, said it was looking to move one-tenth of its dollar reserves into euros, while the governor of the Saudi Arabian central bank condemned the US move as "discrimination".
Separately, Syria responded to US sanctions against two of its banks by confirming plans to use euros instead of dollars for its external transactions.
The remarks combined to knock the dollar, which fell against the euro, pound and yen yesterday as analysts warned other central banks might follow suit.
Last week the US caused dismay after political opposition to the takeover of P&O by Dubai Ports World forced DPW to agree to transfer P&O's US port management business to a "US entity" .
The governor of the UAE central bank, Sultan Nasser al-Suweidi, said the bank was looking to convert 10 per cent of its reserves, which stand at $23bn (£13.5bn), from dollars to euros. "They are contravening their own principles," he said. "Investors are going to take this into consideration [and] will look at investment opportunities through new binoculars."
Hamad Saud al-Sayyari, the governor of the Saudi Arabian monetary authority, said: "Is it protection or discrimination? Is it okay for US companies to buy everywhere but it is not okay for other companies to buy the US?"
Syria has switched the state's foreign currency transactions to euros from dollars, the head of the state-owned Commercial Bank of Syria, Duraid Durgham, said.
Last week the White House told US financial institutions to terminate all correspondent accounts involving the Commercial Bank of Syria because of money-laundering concerns. Mohammad al-Hussein, Syria's finance minister, said: "Syria affirms that this decision and its timing are fundamentally political."
The euro rose a quarter of one percentage point against the dollar to a one-week high of $1.1945, although it retreated in later trading.
Monica Fan, at RBC Capital Markets, said: "The issue is whether we will see similar attitudes taken by other Middle Eastern banks. It is a question of momentum."
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With or without religion, you would have good people doing good things and evil people doing evil things. But for good people to do evil things, that takes religion. - Steven Weinberg, 1999
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JD
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Re:Politics, planes, ports and people. AKA THE aMERIKAN pEEPLE w0N!
« Reply #3 on: 2006-03-14 19:04:50 » |
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Interesting. But does this not leave these central bankers vulnerable to having their currencies devalued against the dollar or the reverse?
I read that the reason central banks keep dollar reserves is to hedge their currencies in the event of currency instability.
JD
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Re:Politics, planes, ports and people. AKA THE aMERIKAN pEEPLE w0N!
« Reply #4 on: 2006-03-15 01:53:32 » |
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[Hermit] Order of questions swapped
[Jonathan Davis] I read that the reason central banks keep dollar reserves is to hedge their currencies in the event of currency instability.
[Hermit] Reserve currencies are held for many reasons. As a hedge against currency instability ands in particular to guard against speculative attacks on the holder's currency is indeed an important reason, but far from the only reason. Another is to support the reserve currency when you hold significant debt against it. Yet another to reduce the value of your own currency against the reserve currency. Still another to hedge against fluctuations in reserve currency denominated markets. Even to create a static transactional basis even for transactions where neither party is reserve currency denominated, but where (as the dollar has been for at least a decade - and arguably three decades) the reserve currency can be used as a de facto "currency standard". Often (as in Japan and increasingly in China) these reasons are conflated. The fact that most countries have used the dollar as their reserve countries since the ending of dollar-gold convertibility in the early 70s was an unintended, but very happy (for the US), consequence of a throw away remark. The fact that this era seems to be ending is likely an unintended consequence of America - and the dollar's - recent behaviour.
[Jonathan Davis] Interesting. But does this not leave these central bankers vulnerable to having their currencies devalued against the dollar or the reverse?
[Hermit] Remember that in the case of the UAE (and other gulf OPEC members) we are talking about quasi-mono product exporters which do most of their trading with Europe and the Far East, not the USA. This is clearly visible if we use the UAE as an example:Exports: Japan 24.8%, South Korea 9.9%, India 5.4%, Thailand 5.2% (2004)
Imports: China 10%, India 9.8%, Japan 6.8%, Germany 6.5%, UK 6.2%, France 6.1%, US 6% (2004) As you can see, they really don't need dollar stability to do very well indeed as long as they can perform their exports in a currency which is relatively stable against their exports - which the dollar has not been. For structural reasons, the Euro, dinar, gold, yen and yuan have and are all likely to do better than the dollar in the medium term, and are ultimately needed for their imports, so switching to one or more of these for their sales (as the Iranian Bourse and probable benchmark will almost certainly encourage), and hedging in the same units would leave them better off, more, not less stable (and much more secure from dollar shenanigans as US protectionism and instability threatens to destabilize global trade patterns - see e.g. US deficit threatens global recovery).
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With or without religion, you would have good people doing good things and evil people doing evil things. But for good people to do evil things, that takes religion. - Steven Weinberg, 1999
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Hermit
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Re:Politics, planes, ports and people. AKA THE aMERIKAN pEEPLE w0N!
« Reply #5 on: 2006-03-20 00:59:16 » |
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Launch of Iranian oil trading hits wall
Oil exchange unlikely to begin till at least midyear
Source: Globe & Mail
Authors: John Partridge, Investment Reporter
Dated: 2006-03-19
As the nuclear standoff pitting Iran against the West continues, some conspiracy theorists are more focused on another plan that the Middle Eastern nation is pursuing.
But they are jumping the gun if they still figure Iran is within days of launching a new international oil exchange that would sell its own and other Middle Eastern oil producers' black gold in euros rather than U.S. dollars -- and which, the theory goes, could ultimately torpedo the greenback and the U.S. economy.
Despite repeated reports over the past 18 months or so that the planned bourse would finally open for business on March 20, 2006 -- and go head to head with the New York Mercantile Exchange and the ICE Futures Exchange in London -- the start date has been postponed by at least several months and maybe more than a year.
"In the middle of 2006, we are able to start the bourse," Mohammad Asemipur, special adviser on the project to Iran's Oil Minister, said when reached in Tehran. The plan is to trade petrochemical products first, with a crude oil contract coming last, a rollout that likely will take three years, he said.
"Oh, crikey, it's at a much earlier stage than people would think," said British consultant Chris Cook, who claims credit for coming up with the idea for the exchange in the first place and is a member of the consortium headed by the Tehran Stock Exchange that is charged with bringing the project to life.
"You can rest assured, there will not be a crude oil contract, Gulf-based, in my opinion, within a year -- and that would be really pushing it," Mr. Cook, a former director of ICE's predecessor, the International Petroleum Exchange, said when reached in Scotland.
The electronic exchange is to be located on Kish Island in the Persian Gulf, an Iranian duty- and tax-free zone.
There has been far less talk about the planned bourse in the mainstream media than on the Internet, particularly on websites aimed at gold bugs and other economic conspiracy theorists.
The theory is that all trades through the new bourse would be made in euros, not the U.S. dollar, which for decades has been the world's primary reserve currency, as well as the one in which oil and most other commodities have been priced. As a result, European nations and other countries, especially Middle East oil producers, tired of having to buy billions of now weakening greenbacks to pay for their energy purchases, would no longer have to do so.
This, the conspiracy theorists contend, would knock the stuffing out of the U.S. currency and hasten the decline and fall of the American Empire, all the while allowing Iran to stick it to the Great Satan.
But, the theory continues, Washington will pre-empt all this by using Iran's nuclear ambitions as a pretext for attacking the country.
Kamal Daneshyar, chairman of Iran's Majlis [parliamentary] Energy Commission reportedly told the Iranian Students News Agency in December that the exchange would at first operate in both dollars and euros, but gradually move to the European currency exclusively. He was also quoted as saying that this would enable Iran to get even with the U.S. for the economic damages it has inflicted on the Islamic republic.
Dr. Asemipur, meanwhile, was noncommittal on the currency question, saying market participants, not the Iranian government, would make the decision. He also denied the planned bourse could harm the U.S. economy.
Mr. Cook dismissed the idea that Iran's goal is to use the bourse to sabotage the greenback. "I have a technical term for that," he said. "Bollocks!"
As for trading oil in euros, he said the Iranians likely would find it very difficult, at least in the next several years. "Basically, there aren't enough euros in circulation, and nor are there likely to be," he said.
Mr. Cook cited a recent article on Hong Kong-based Asia Times Online by William Engdahl, who specializes in the geopolitics of oil.
"For the euro to begin to challenge the reserve role of the U.S. dollar, a virtual revolution in policy would have to take place in Euroland," Mr. Engdahl wrote. "First the European Central Bank . . . would have to surrender power to elected legislators. It would then have to turn on the printing presses and print euros like there was no tomorrow."
A full challenge to the U.S. dollar as the world central bank reserve currency, Mr. Engdahl added later, would entail a "de facto declaration of war on the 'full-spectrum dominance' of the United States today," and that is something no country or group of countries is yet willing to launch.
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With or without religion, you would have good people doing good things and evil people doing evil things. But for good people to do evil things, that takes religion. - Steven Weinberg, 1999
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