Friday, January 16, 2015

While World Attention Is Diverted (On Purpose) Elsewhere: Russia Just Pulled Itself Out Of The Petro-Dollar!

Yes, so much attention has been focused in on the bogus "Charlie Hebdo shootings" in Paris France the last few days that little attention has gone to what really matters in the world, which is of course the world economic situation and its impending slide into oblivion....I have long said that is done on purpose to keep peoples' attention focused elsewhere while their very livelihoods are about to radically change and probably permanently...

I came across a most important article the other day that I want to share with all of my own readers here... It comes from the "Zero Hedge" website, at, and is a must read by everyone.. According to this article, it appears that without anyone noticing (done on purpose), the Russian Federation has now pulled itself out of the Petro-Dollar ponzi scheme and fraud.... This is important news, and the ripple effect of this move by Russia will be felt by everyone very soon..... I have that article right here in its entirety for everyone to see for themselves, and I do have my own thoughts and comments to follow:

Russia Just Pulled Itself Out Of The Petrodollar

Tyler Durden's picture

Back in November, before most grasped just how serious the collapse in crude was (and would become, as well as its massive implications), we wrote "How The Petrodollar Quietly Died, And Nobody Noticed", because for the first time in almost two decades, energy-exporting countries would pull their "petrodollars" out of world markets in 2015.
This empirical death of Petrodollar followed years of windfalls for oil exporters such as Russia, Angola, Saudi Arabia and Nigeria. Much of that money found its way into financial markets, helping to boost asset prices and keep the cost of borrowing down, through so-called petrodollar recycling.

We added that in 2014 "the oil producers will effectively import capital amounting to $7.6 billion. By comparison, they exported $60 billion in 2013 and $248 billion in 2012, according to the following graphic based on BNP Paribas calculations."

The problem was compounded by its own positive feedback loop: as the last few weeks vividly demonstrated, plunging oil would lead to a further liquidation in foreign  reserves for the oil exporters who rushed to preserve their currencies, leading to even greater drops in oil as the viable producers rushed to pump out as much crude out of the ground as possible in a scramble to put the weakest producers out of business, and to crush marginal production. Call it Game Theory gone mad and on steroids.

Ironically, when the price of crude started its self-reinforcing plunge, such a death would happen whether the petrodollar participants wanted it, or, as the case may be, were dragged into the abattoir kicking and screaming

It is the latter that seems to have taken place with the one country that many though initially would do everything in its power to have an amicable departure from the Petrodollar and yet whose divorce from the USD has quickly become a very messy affair, with lots of screaming and the occasional artillery shell. 

As Bloomberg reports Russia "may unseal its $88 billion Reserve Fund and convert some of its foreign-currency holdings into rubles, the latest government effort to prop up an economy veering into its worst slump since 2009." 

These are dollars which Russia would have otherwise recycled into US denominated assets. Instead, Russia will purchase even more Rubles and use the proceeds for FX and economic stabilization purposes. 
"Together with the central bank, we are selling a part of our foreign-currency reserves,” Finance Minister Anton Siluanov said in Moscow today. “We’ll get rubles and place them in deposits for banks, giving liquidity to the economy."

Call it less than amicable divorce, call it what you will: what it is, is Russia violently leaving the ranks of countries that exchange crude for US paper.
Russia may convert as much as 500 billion rubles from one of the government’s two sovereign wealth funds to support the national currency, Siluanov said, calling the ruble “undervalued.” The Finance Ministry last month started selling foreign currency remaining on the Treasury’s accounts.

The entire 500 billion rubles or part of the amount will be converted in January-February through the central bank, according to Deputy Finance Minister Alexey Moiseev. The Bank of Russia will determine the timing and method of the operation.

The ruble, the world’s second-worst performing currency last year, weakened for a fourth day, losing 1.3 percent to 66.0775 against the dollar by 3:21 p.m. in Moscow. It trimmed a drop of as much as 2 percent after Siluanov’s comments. The ruble’s continued slump this year underscores the fragility of coordinated measures by Russia’s government and central bank that steered the ruble’s rebound from a record-low intraday level of 80.10 on Dec. 16. OAO Gazprom and four other state-controlled exporters were ordered last month to cut foreign-currency holdings by March 1 to levels no higher than they were on Oct. 1. The central bank sought to make it easier for banks to access dollars and euros while raising its key rate to 17 percent, the emergency level it introduced last month to arrest the ruble collapse.

Today’s announcement “looks ruble-supportive, as together with state-driven selling from exporters it would support FX supply on the market,” Dmitry Polevoy, chief economist for Russia and the Commonwealth of Independent States at ING Groep NV in Moscow, said by e-mail. “Also, it will be helpful for banks, while there might be some negative effects related to extra money supply and risks of using some of the money on the FX market for short-term speculations.
Bloomberg's dready summary of the US economy is generally spot on, and is to be expected when any nation finally leaves, voluntarily or otherwise, the stranglehold of a global reserve currency. What Bloomberg failed to account for is what happens to the remainder of the Petrodollar world. Here is what we said last time:
Outside from the domestic economic impact within EMs due to the downward oil price shock, we believe that the implications for financial market liquidity via the reduced recycling of petrodollars should not be underestimated. Because energy exporters do not fully invest their export receipts and effectively ‘save’ a considerable portion of their income, these surplus funds find their way back into bank deposits (fuelling the loan market) as well as into financial markets and other assets. This capital has helped fund debt among importers, helping to boost overall growth as well as other financial markets liquidity conditions.
[T]his year, we expect that incremental liquidity typically provided by such recycled flows will be markedly reduced, estimating that direct and other capital outflows from energy exporters will have declined by USD253bn YoY. Of course, these economies also receive inward capital, so on a net basis, the additional capital provided externally is much lower. This year, we expect that net capital flows will be negative for EM, representing the first net inflow of capital (USD8bn) for the first time in eighteen years. This compares with USD60bn last year, which itself was down from USD248bn in 2012. At its peak, recycled EM petro dollars amounted to USD511bn back in 2006. The declines seen since 2006 not only reflect the changed global environment, but also the propensity of underlying exporters to begin investing the money domestically rather than save. The implications for financial markets liquidity - not to mention related downward pressure on US Treasury yields – is negative.
Considering the wildly violent moves we have seen so far in the market confirming just how little liquidity is left in the market, and of course, the absolutely collapse in Treasury yields, with the 30 Year just hitting a record low, this prediction has been borne out precisely as expected. 

And now, we await to see which other country will follow Russia out of the Petrodollar next, and what impact that will have not only on the world's reserve currency, on US Treasury rates, and on the most financialized commodity as this chart demonstrates...

... but on what is most important to developed world central planners everywhere: asset prices levels, and specifically what happens when the sellers emerge into what is rapidly shaping up as the most illiquid market in history.

NTS Notes: I have said for the last few years that if the Petro-Dollar scam collapses, there would be hyper-inflation and a collapse of the US economy to follow.....I have not moved from these assertions....

People need to understand that this is very important and should be a signal to everyone to prepare for a severe "economic downturn" that will definitely follow its implications..... This move by Russia may be followed up very shortly by moves by other nations as well away from the Petro-Dollar which could cascade very quickly and signal the end of the US dollar as the primary "world's reserve currency"...

This is also why the insane US government is pushing for war and in fact any war right now... These criminals know that with the collapse of the Petro-Dollar scam, the full US dollar collapse will soon follow... With no nations trading their Petroleum in US dollars, there will be no need for these nations to hold any US dollars in their reserve currencies and therefore the US dollars will quickly become worthless.... The only choice now for the US government would be a radical change in policy in terms of its dependence on the archaic Bretton Woods agreements that made the US dollar the world's reserve currency,  or go to war to prop up the failing US dollar... Knowing full well how these criminals have "lived off the fat" of forcing nations to keep US dollars in their reserves and knowing that they are too arrogant and selfish to change these policies, they will of course push for the alternative which is war to keep the US dollar scam going! 

This action by Russia is also exactly why the US is pushing for war with that nation... Yes, these criminals would indeed consider war with nuclear armed Russia just to keep their Petro-Dollar scam alive for a while longer... Billions of people could die due to their incessant greed and stupidity....

More to come



Stephan said...

Very interesting, but I agree only partly with hyperinflation because I think that this is a controlled mass demolition tool used at the push of a button. (Hyperinflation should have kicked in when Mises' Libertarians, a Rothschild front, predicted another Weimar after the bail out tsunami years ago.)

buelahman said...

Not that you are incorrect, but I would add that as the American economy falters and is destroyed, so will be America's puppets' economies (including Canada's).

Flanders said...

Good info, NTS. Hope you are feeling better.

"The Jewish banking capital became international, united through [mutually] intersecting [incestuous] marriages, and turned into a real international fortress... What could be a more convincing illustration of the fantastic conception of a worldwide Jewish government than the Rothschild family, uniting citizens of five different countries the separate conflicts of which didn't affect the interests of their respective state banks even for a moment!" — Jewess Hannah Arendt author of Eichmann in Jerusalem

Sophie said...

I hope everyone has a stockpile. Seriously.

Anonymous said...

Those Palestinians got B A L L S! Look at them pelting Sodomite John (or is that Joan?) Baird with eggs when he visited Ramallah! Whoo-Hooo!

We need to do that every time one of the 'israel'-firsters comes to town in Canada!

Raj Express said...

nice blog