President Obama spent last week on a European tour where he spoke at the Hague, met with Pope Francis, spoke on the phone with Mr. Putin and finished his trip with a visit to Saudi Arabia. We also found out that the Germans have made a deal with China where “renminbi” will be cleared to settle trades rather than dollars.
You really have to wonder “what was REALLY said?” in all of these various deals and conversations. To start off the week, President Obama gave a speech where it ended in nearly total silence. No clapping, no standing ovation, nothing. To see the clip was almost eerie as to what it means. Do the Europeans not believe what was said? Were they purposely “rude” to a sitting U.S. President? I suppose that the silence was better than the response Tim Geithner received from Chinese students where they outright laughed at him.
The President then met with the Pope on Thursday and the accounts of “what was said” differ greatly the Vatican’s and White House’ accounts don’t seem to match. I will let the reader follow the link and make up their own minds as religion and politics do not mix well, I will leave this one with “no comment.”
There was also a conversation between Mr. Obama and Mr. Putin. This one must have been hilarious. If I had to guess, Mr. Putin could have used only one word to suffice which differed in tone of voice and may have been surrounded by his own laughter. The one and universal word I believe is “nyet” as in “no.” I cannot imagine what possible sanction or set of sanctions Mr. Obama could threaten with that would have any traction at all. None that I know of will hurt the Russians nearly as much as us. As I wrote last week, we need them (and everyone else) to use the dollar more than “they” need to use the dollar and be a part of the SWIFT system.
Russia has in fact announced that they are in the process of setting up their own clearance system where dollars will not be used. They announced energy deals with both China and India last week while hiking gas prices by 40-50% to the Ukraine. All the while, they now have over 100,000 troops assembled at the Ukrainian borders, was any of this a part of the Putin/Obama conversation?
All of the above is very important but in my opinion pales in comparison to the meeting with Saudi Arabia. Even the New York Times speaks of a “split” in U.S./Saudi relations. I cannot say strongly enough how important this meeting and “relationship” is. Not for the Saudis mind you, for the U.S. Were the Saudis to switch horses in this race and switch allegiance to China (which includes Russian ties), Saudi Arabia will still “get paid” for their oil…from someone, somewhere. As for the U.S., the bottom line is that the dollar will be absolute toast and a FOREX crash will follow.
It has already been reported that the Saudi royal family are skeptical at the least and do not trust at the worst…President Obama and the U.S. It was even publicly said after the Syrian “non conflict” that Saudi Arabia felt “stabbed in the back.” Saudi Arabia is the last straw holding dollar hegemony together. If you recall, Prince Salman (next in line after King Abdullah) was in China 2 weeks ago and met with top Chinese officials including President Xi. Again, I really wonder what was said in this meeting. Could there be a deal brewing where Saudi Arabia accepts currencies other than dollars for their oil? Could they be planning to redirect oil sales “east” in place of supply going “west?” Has Saudi Arabia been given assurances by China (and Russia) that if they do decide to switch allegiances…they will be “protected?”
Any movement at all from the status quo since the early 1970’s will be a disaster for the dollar. Never mind the $300 billion plus that Saudi Arabia takes in which the world must bid for to begin with which has supported the dollar/treasury merry go ’round for so long, “others” will play monkey see, monkey do. “Other” oil producers will immediately follow suit and the “utility” of the dollar will be lost. All you need to do is look at the recent stance of the G-20 to know that the U.S. and thus the dollar are not currently favored. Unfortunately, the dollar is the very last “privilege” of the U.S., if reserve status is eroded or outright withdrawn then the playing field changes dramatically.
Why is this important to you? Because if you are reading this then it is more than likely that you “save” or count your net worth in dollars…which will be devalued. To finish, I’d like to point out that the Japanese who have never in recent times been big buyers of gold seem to be beginning a stampede into the metal. Zero Hedge did a piece yesterday that spoke of a 5 fold increase in sales at a well-known Japanese metals dealer and that “lines” were forming for purchases. This is in response to “Abenomics” by the Japanese people. Abenomics is the same central banking process as our “QE.” People are slowly “figuring it out” and acting in their own best interests. This movement is nothing more than what I’ve spoken of so often, “Mother Nature.” Investors are beginning to understand that currencies are being debased and that their banks holding these currencies may not be the safest place to hold savings. These are not people speculating to “make a profit,” these are people moving into gold to “save.” “Save” as in save purchasing power; get out of the system and save their own bacon so to speak. The West can sell all the gold and silver futures they’d like to depress prices. This will only give better (lower) pricing, entice more buyers to collect the physical metal and bring the paper defaults on that much faster. Human nature has a way of moving individuals towards self-preservation, in this case it means exiting the game where physical possession of metal will beat rock, paper and scissors.