We have already gotten many pieces to the ending of the petrodollar puzzle. We know about Russia and China (and the remaining BRICS) making deals in all directions that will not use the dollar. We have seen the U.S. allies Britain, France and South Korea all doing trade deals with the East that will not use dollars. We know that Saudi Arabia, (the lynchpin of the “petrodollar”) has had high level talks with both Russia and China over the last 180 days. Unless you are an ostrich and just want to “hope” that these talks were merely about the weather and how Aunt Millie and Uncle Joe are doing then you know that “energy” and trade in general was discussed. Obviously, Saudi Arabia accepting rubles, yuan, euros (and God forbid gold of all things) was a part of the discussions.
Of course there probably were a few “what if’s?” discussed. The Saudis would have wanted to know “what if” the U.S. were to freeze their assets? What if the U.S. shut them out of the SWIFT system? What if the U.S. decided some sort of military retaliation? In order for Saudi Arabia to cross the U.S. they would need some, if not many “assurances” to these and probably other questions. My question is “did they get all of the answers that they needed?” …or are there more?
I don’t know the answer to this but I do know that if both Britain and France (with South Korea as a cherry on top) have decided to do business with our “enemies” and do this business without using dollars for settlement …then something really big is afoot. It also tells me that now the Saudis can do business deals WITHOUT using dollars and all they’ll need to do is point a finger. You see, prior to any of these 3 other deals being done, Saudi Arabia could not “defect” and go it alone. Now, all they need to do is say that “they are modeling their deal” after the Brits, French or South Koreans.
I must confess that after hearing about France and the South Korean deals on Friday, I thought that gold (and silver) would be up sharply and the dollar down sharply this Monday morning, they were not. I usually try to look 2, 3, or more steps into the future as the markets used to do but that thinking is so passé. Gold is and has been “locked down” for 2 years now. We can argue that it is or is not manipulated but in my opinion that would be a waste of precious time. We can argue the supply and demand points or the fact that the metals now trade at or below the cost of production. We can argue about the dangers of systemic leverage, a bloated money supply, monetization, the fractional reserve nature of nearly everything or the mathematical bankrupt nature of the U.S. Treasury or …we could talk about the “fraud” that is pervasive everywhere. Again, in my opinion it is a waste of time.
You see, even if just one of these points is true (they all are, each and every one of them) then you should prepare for the worst because something is really wrong. Actually, all you need to do is look at the “market reactions” to any of these topics to know that something is wrong. Should interest rates on U.S. Treasuries be close to all time lows when we already know that the money supply has been pumped up and the fiscal sustainability of the nation is in ruin? Dilution on the one hand and nothing but risk on the other. It doesn’t make sense does it?
No, it does not make sense and will not until it does. The derivatives that have been used to paint the pretty pictures will snap like rubber bands, prices will “adjust” without ever trading between “here and there.” What I am telling you is that we are very close to waking up one day to a world that is unrecognizable. Stocks might look like they split, bonds, currencies, gold and commodities will all look like the decimal points or comma’s are in the wrong places.
Why am I sounding so urgent with this piece? Because as I see it there is just the one last piece of news from Saudi Arabia to come out. No amount of dollar printing or derivatives creation will be able to hold back the financial tsunami once the Saudis defect officially and publicly. As I wrote in my last piece, no matter what spin you hear after a Saudi announcement, do not believe it! If you hear anything out of Saudi Arabia that does not sound “kissy smoochy” to the U.S., you absolutely MUST prepare for what will come.
You should have already been making preparations and only need to “top off” or finish final preparations. If you have not done anything yet then PLEASE, get off of your duff and move as fast as you can NOW! I believe that from the day that Saudi Arabia announces that they will accept currencies other than dollars for oil, it will only be 2 weeks or less that some other country comes out and says they will NO LONGER accept dollars for oil. This will create a “run” on dollars. A “run” as in trying to spend as many as possible as fast as possible before they lose much or all value. This will also be seen at your local Wal Mart with maybe a few days delay. Make no mistake whatsoever, we have sat back and watched as the Chinese and other foreigners have “run” the gold market. The next market to be “run” will be dollars (and thus Treasuries). This will work it’s way all the way down to daily items and will be seen as a “crack up boom”. The first 24-48 hours will probably be explained as consumers finally starting to spend, after that everyone will know exactly what is happening.
Whether it is Saudi Arabia or not, you can mark my words. A currency crisis and run on the dollar of epic proportions is only “one event” or one announcement away from happening at which point “you” will be out of time! Regards, Bill Holter