Homeland Security to let Saudi fliers skip passport controls

A Department of Homeland Security program intended to give "trusted traveler" status to low-risk airline passengers soon will be extended to Saudi travelers, opening the program to criticism for accommodating the country that produced 15 of the 19 hijackers behind the Sept. 11, 2001, terrorist attacks.

Sources voiced concern about the decision to the Investigative Project on Terrorism, which issued a report Wednesday on the under-the-radar announcement -- which was first made by Homeland Security Secretary Janet Napolitano after meeting in January with her Saudi counterpart. According to the IPT, this would be the first time the Saudi government has been given such a direct role in fast-tracking people for entry into the United States.

"I think you have radical Wahhabism in certain elements in Saudi Arabia, and I think to be more lenient there than in other places would be a mistake," Rep. Frank Wolf told the Investigative Project on Terrorism. "There were 15 [hijackers] from that country, and there is a lot taking place in that region." Read more >>

US-Backed Saudis Step Up Help for Rebels in Syria With Croatian Arms

Saudi Arabia has financed a large purchase of infantry weapons from Croatia and quietly funneled them to antigovernment fighters in Syria in a drive to break the bloody stalemate that has allowed President Bashar al-Assad to cling to power, according to American and Western officials familiar with the purchases.

The weapons began reaching rebels in December via shipments shuttled through Jordan, officials said, and have been a factor in the rebels’ small tactical gains this winter against the army and militias loyal to Mr. Assad.

The arms transfers appeared to signal a shift among several governments to a more activist approach to assisting Syria’s armed opposition, in part as an effort to counter shipments of weapons from Iran to Mr. Assad’s forces. The weapons’ distribution has been principally to armed groups viewed as nationalist and secular, and appears to have been intended to bypass the jihadist groups whose roles in the war have alarmed Western and regional powers. Read more >>

Saudi women monitored with electronic tracking

Denied the right to travel without consent from their male guardians and banned from driving, women in Saudi Arabia are now monitored by an electronic system that tracks any cross-border movements.

Since last week, Saudi women's male guardians began receiving text messages on their phones informing them when women under their custody leave the country, even if they are travelling together.

Manal al-Sherif, who became the symbol of a campaign launched last year urging Saudi women to defy a driving ban, began spreading the information on Twitter, after she was alerted by a couple.

The husband, who was travelling with his wife, received a text message from the immigration authorities informing him that his wife had left the international airport in Riyadh.

"The authorities are using technology to monitor women," said columnist Badriya al-Bishr, who criticised the "state of slavery under which women are held" in the ultra-conservative kingdom. Read more >>

US Officially Arming Extremists in Syria

Recently reported in “Brookings Announces Next Move in Syria: War,” it was stated that “by the US policy think-tank Brookings Institution’s own admission, the Kofi Annan six-point peace plan in Syria was merely a ploy to buy time to reorganize NATO’s ineffective terrorist proxies and provide them the pretext necessary for establishing NATO protected safe havens from which to carry out their terrorism from.”

It was also examined in detail, how in 2007, US, Saudi, and Israeli officials admitted they were creating a militant front of extremists for the sole purpose of causing the destabilization of Syria we see today, and ultimately overthrowing the Syrian government.

It was noted how these extremist militants had direct ties to Al Qaeda. Now it is fully admitted that weapons, cash, and logistical support is indeed being provided to terrorist forces in Syria by the United States, Saudi Arabia, Qatar, and other Gulf States. This, despite a current UN ceasefire the West has continuously berated the Syrian government for violating, indicates that indeed reorganizing, rearming, and redeploying NATO’s terrorist proxies is complete, and another round of destructive violence has begun. More...

MI6 Recruited Underpants Bomber

A double agent allegedly recruited by MI5 and MI6 was a British passport holder, according to American media reports. The man is said to be from the Middle East, but to have grown up in Europe and become a British citizen.

UK and Saudi agents were involved in penetrating a plot by al-Qaeda in the Arabian Peninsula to detonate a sophisticated underwear bomb aboard an American jetliner, NBC said, citing unnamed security sources. The alleged bomber has not been identified publicly. Officials said the bomb - a refined version of an "underwear bomb" used in two previous failed plots - was driven from Yemen to Saudi Arabia and was being examined by US experts at FBI labs in Virginia.

British officials were reportedly left "slack-jawed" by the leaks and detailed reported in the US media, the Times reported, quoting Whitehall officials. MI5 recruited the agent and MI6 coordinated with Saudi intelligence, who had already infiltrated the Yemen-based group, the Daily Telegraph said. More...

Five Reasons Oil Prices Will Likely Stay High

Sean Brodrick
After tumbling last week, crude oil prices rebounded hard this week. So who can blame investors for being confused? Are oil prices going to march higher again, or slump back to more “reasonable” levels? And what is reasonable after crude oil’s 30% surge higher this year?

Let me give you my reasons why I think crude oil prices are likely to stay high and go higher — and how you can play it.

Reason #1: Iraq Cuts Future Production Target in HALF.

Over the weekend, Iraq announced that it will now pump between 6.5 million and 7 million barrels per day (bpd) by 2017 — way, way down from its original plan of 12 million bpd.

It’s not because of low oil prices — oil prices have doubled since the 12-million bpd target was set two years ago.

Currently, Iraq produces about 2.68 million barrels a day, barely higher than under Saddam Hussein.

Iraq was one of the great hopes of the oil cornucopians — those folks who think we’ll always find more oil. Apparently, we aren’t finding it in Iraq.

Reason #2: The Saudis Failed to Cover Libya’s Shortfall.

You’ll remember that when Libya — the world’s 17th largest oil producer, 3rd largest producer in Africa and that continent’s largest holder of crude oil reserves — fell into civil war in February, its 1.6 million bpd production was quickly cut in half. Saudi Arabia said it would make up the difference.

Saudi Arabia DID pump more oil in February — but that was the culmination of long-term projects. But more recently, Saudi oil minister Ali al-Naimi revealed that the country’s crude oil production for the month of March fell by 833,000 bpd from February’s production level.

The Saudis blame lower demand for their sour crude. And maybe that’s true. But if so, this doesn’t do much to reassure the oil market that the Saudis can make up the difference when producers of light sweet crude falls short.

Also, before the Libyan crisis, the Saudis claimed they could tap 4.2 million bpd of spare capacity at any time. During the Libyan crisis, the Saudis downsized their claimed spare capacity to 2.5 million to 3.5 million bpd. And some analysts believe the Saudis only have 1 million bpd in spare capacity. That’s really not a lot of wiggle room if something else goes wrong … and something always goes wrong.

Reason #3: The Mystery in the Desert.

The Saudis are always up to something. Recently, Saudi Arabia announced it was going to spend $100 billion on solar, nuclear and other renewable energy sources. That is a lot of money for a country that is supposedly floating on all the oil and natural gas it should ever need.

The Saudis say they are doing this to boost the amount of spare oil they have for export. And to be sure, the Saudis currently consume 2.7 million bpd (27% of total production) and that is expected to grow to 8 million bpd by 2025. In case you’re wondering, us fuelhog Americans consume 19.5 million bpd.

Still, if the Saudis have all that spare oil, why don’t they just sink a few more wells? Unless, maybe, they don’t have that spare capacity. Hmm …

Reason #4: The Global Economy Runs on Oil.

The International Monetary Fund (IMF), expects global economic growth for 2011 to be 4.4%, according to a recent report.

This will put more strain on a system that already saw global oil consumption grow by 2.6% in the first quarter of 2011, on top of 4.1% growth in the fourth quarter of 2010, according to the International Energy Agency.

What’s more, the second quarter typically sees an uptick in crude oil demand as refineries come out of maintenance. That should lead to higher oil prices.

Now the good news for U.S. consumers is that we are swimming in oil thanks to oil shale deposits that are coming into play — so much so that U.S. crude oil benchmark West Texas Intermediate trades at a $13-per-barrel discount to an international benchmark like Brent Crude. But that discount will come under pressure as more U.S. oil is shipped overseas to fast-growing economies.

Speaking of which …

Reason #5: Asia Puts the Pedal to the Medal.

While the IMF expects the world economy to grow at 4.4% pace, emerging market economies are growing much faster. The Asian Development Bank expects a growth in the region’s economy, of 7.8% and 7.7% for 2011 and 2012 respectively.

That’s bullish for oil prices because automobile ownership and gasoline and diesel usage is growing at a furious pace in those countries.

According to Financial Times, while European crude oil demand for February was largely flat, and U.S. oil demand might grow 2.9%, Asia as a whole is expected to see its oil demand rise 5.9% and China’s should rise 9.6%.

And it should keep rising. In China, a big driver has been growth in the domestic automobile market. Auto sales increased 2.6% in February, and March data released by the Chinese Auto Association shows sales grew 5.36% on a year-over-year basis.

There you have it — five reasons why oil prices should stay high. Of course, no one can foresee the future. There is a flip side … More...

Fear and loathing in the House of Saud

Image via WikipediaPepe Escobar
Early last week, US President Barack Obama sent a letter to Saudi King Abdullah, delivered in person in Riyadh by US National Security Advisor Thomas Donilon. This happened less than a week after Pentagon head Robert Gates spent a full 90 minutes face to face with the king.

These two moves represented the final seal of approval of a deal struck between Washington and Riyadh even before the voting of UN Security Council resolution 1973 (see Exposed: the Saudi-US Libya deal, Apr 1, Asia Times Online). Essentially, the Obama administration will not say a word about how the House of Saud conducts its ruthless repression of pro-democracy protests in Bahrain and across the Persian Gulf. No ''humanitarian'' operations. No R2P (''responsibility to protect''). No no-fly or no-drive zones.

Progressives of the world take note: the US-Saudi counter-revolution against the Great 2011 Arab Revolt is now official.

Those 'pretty influential guys'
The wealthy, truculent clan posing as a perpetual absolute monarchy that goes by the name House of Saud wins on all fronts.

Last month's ''Day of Rage'' inside the kingdom was ruthlessly preempted - with the (literal) threat that protesters would have their fingers cut off.

With the price of crude reaching stratospheric levels, and with Saudi refusal to increase production, it's a no brainer for Riyadh to dispense with a few billion dollars in pocket change to appease its subjects with some extra 60,000 ''security'' jobs and 500,000 low-rent apartments. More...

Dominoes falling in the Arab world

A series of street protests in December 2010 and January 2011 led to the ouster of Tunisia's former president, Zine El Abidine Ben Ali, who fled to Saudi Arabia on January 14.

The events in Tunisia have set off a chain reaction across the entire Arab world as citizens of Arab countries have been inspired by the Tunisians' people power movement.

Major demonstrations have been held in Yemen, Egypt, Algeria, and Jordan, and there have been smaller demonstrations and minor incidents in Saudi Arabia, Mauritania, Oman, Sudan, and Libya.

A demonstration was held in Jordan on January 14 in which protesters demanded that Prime Minister Samir Rifai and his cabinet step down. After demonstrations in Yemen, on January 23, Yemeni President Ali Abdullah Saleh announced that he would step down when his current term expires in 2013. Read more...

Kuwait's Petroleum Council - Oil Could Reach $110 in Next Few Weeks

Image via WikipediaSpeculation could push oil prices to rise to $110 per barrel within a few weeks, which may prompt OPEC to raise production, a member of Kuwait's Supreme Petroleum Council said on Sunday.

"Demand will increase slightly, but this increase in price is usually technical, due to analysts' forecasts and speculations," Imad al-Atiqi, a member of the country's highest oil policy body, told Reuters in a telephone interview.

"This (increase) could be a reason to increase production so the oil market does not get worried ... especially if the rise was quick and crossed the $110," he said. More...

Chomsky: What's At Stake in the Issue of Iran

Noam Chomsky via last.fm

Pravda
In an interview with the German publication, Freitag, Noam Chomsky talks about U.S. pressure on Israel and Iran and its geopolitical significance. "Iran is perceived as a threat because they did not obey the orders of the United States. Militarily this threat is irrelevant. This country has not behaved aggressively beyond its borders for centuries. Israel invaded Lebanon with the blessing and help of the U.S. five times in thirty years. Iran has not done anything like this," he says.´

Barak Obama won the Nobel Peace Prize in 2009 while sending more troops to Afghanistan. What happened to the "change" that was promised?

Chomsky: I am one of the few who is not disappointed with Obama because I placed no expectations on him. I wrote about Obama's positions and prospects of success before the start of his campaign. Saw your website and it was clear to me that this was a moderate Democrat in the style of Bill Clinton. There is of course a lot of rhetoric about hope and change. But this is like a blank sheet where you can write anything. Those who despaired at the recent moves of Bush sought hope. But there is no basis to expect any one time to examine properly the substance of Obama's speech.

His government has treated Iran as a threat due to its uranium enrichment program, while countries that possess nuclear weapons such as India, Pakistan and Israel did not suffer the same pressure. How do you evaluate this way of proceeding?

Chomsky: Iran is perceived as a threat because they did not obey the orders of the United States. Militarily this threat is irrelevant. This country did not act aggressively beyond its borders for centuries. The only aggressive act occurred in the '70s under the Shah's government, when, with U.S. backing, they invaded two Arab islands. Of course nobody wants Iran or any other country to have nuclear weapons. It is known that this state is governed today by a loathsome regime. But apply the same labels that are applied to Iran to partners of the U.S. such as Saudi Arabia or Egypt, and it will only be lost to Iran on human rights. Israel invaded Lebanon with the blessing and help from the U.S., five times in thirty years. Iran has not done anything like that.

In spite of that, the country is considered as a threat...

Chomsky: Because Iran has followed an independent path and not subordinate to any order of international authorities. They behaved in a manner similar to what Chile did in the seventies. When this country was ruled by the socialist Salvador Allende, it was destabilized by the U.S. to produce "stability." It was not a question of any contradiction. It was necessary to overthrow the Allende government - forcible "destabilizing" - to maintain "stability" to restore the authority of the U.S. The same phenomenon is occurring now in the Gulf region. Teheran objects to the authority of the USA.

How do you value the goal of the international community to impose severe sanctions on Tehran?

Chomsky: The international community: a curious expression. Most of the countries in the world belong to the non-aligned bloc and strongly support Iran's right to enrich uranium for peaceful purposes. It has repeated often and openly that it is not considered part of the so called "international community." Obviously only those countries that follow U.S. orders belong to it. It is the U.S. and Israel threatening Iran and this threat must be taken seriously.

For what reasons?

Chomsky: Israel now has hundreds of nuclear weapons and delivery systems. Of the latter, the most dangerous comes from Germany. This country provides Dolphin nuclear submarines that are virtually invisible. They can be equipped with nuclear missiles, and Israel is prepared to move these submarines to the Gulf. Thanks to the Egyptian dictatorship, Israeli submarines may pass through the Suez Canal.

I do not know if this was reported in Germany, but about two weeks ago the U.S. Navy said it built a base for nuclear weapons on Diego Garcia in the Indian Ocean. There submarines equipped with nuclear missiles would be stationed, including the so-called "bunker buster." These are projectiles that can penetrate concrete walls several feet thick. They were designed exclusively for an intervention in Iran. Prominent Israeli military historian, Martin van Creveld Levi, a man clearly conservative, wrote in 2003, immediately after the invasion of Iraq, that "after the invasion the Iranians went crazy for not having developed any atomic weapon." In practical terms: is there any other way to stop an invasion? Why has the U.S. has not occupied North Korea? Because there is a deterrent. I repeat: nobody wants Iran to have nuclear weapons, but the likelihood that Iran would use nuclear weapons is minimal. This can be proved in the testing of U.S. intelligence. If Iran wanted to equip themselves with a single nuclear warhead, probably the country would be devastated. Such a fate is not to the liking of Islamic clerics in the government: until now they have not shown any suicidal impulse.

What can the European Union do to resolve the tension of this so explosive situation?

Chomsky: It could reduce the danger of war. The EU could put pressure on India, Pakistan and Israel, the most prominent non-subscribers to the Nuclear Nonproliferation Treaty, so that they finally sign it. In October 2009, when they protested against Iran's atomic program, the IAEA (International Atomic Energy Agency) adopted a resolution that Israel defied, that this country sign the Treaty of Non-Proliferation of Nuclear Weapons and allow access for international inspectors to its nuclear systems. Europe and the U.S. negotiated to block this resolution. Obama made Israel know immediately that it should pay no attention to this resolution.

It's interesting what has happened in Europe since the Cold War ended. Those who believed in the propaganda of the previous decades had to expect that NATO would dissolve in 1990. After all, the organization was created to protect Europe from "Russian hordes." Now they are not "Russian hordes," but the organization expands and violates all the promises it made to Gorbachev, who was naive enough to believe what President Bush and Chancellor Kohl said, namely that NATO would not move a centimeter in the direction of Eastern Europe. In the assessment of international analysts, Gorbachev believed in everything they said. It was not very wise. Today NATO has expanded to large areas of the East and follows its strategy of controlling the world's energy system, the pipelines and trade routes. Today it is a display of the power for intervention of the U.S.A. in the world. Why does Europe accept that? Because it does not put its foot down and looks facing the U.S.A.?

Although the U.S.A. intends to keep on being a military superpower, its economy virtually collapsed in 2008. Billions of dollars were lacking to rescue Wall Street. Without the money from China, the U.S. might have entered into bankruptcy.

Chomsky: There is much talk of Chinese money and it is speculated much from this fact about a power shift in the world. China could overtake the U.S.? I consider that question an expression of ideological extremism. The States are not the only actors on the world stage. To a certain extent they are important, but not absolutely. The actors, who dominate their respective States, are primarily economic: the banks and corporations. If we examine who controls the world and determines policy, we will refrain from stating a shift of world power and global workforce. China is the extreme example. These interactions occur between transnational corporations, financial institutions and the State insofar as it serves their interests. This is the only power shift, but it provides no headline.

Original source: http://www.freitag.de/politik/1013-iran-obama-weltordnung-sanktionen

Translated from the Portuguese version by:

Lisa KARPOVA

PRAVDA.Ru

Nigerian Terrorist Attack Was Staged by CIA

rt.com
The recent failed attack on a US passenger jet traveling from Amsterdam to Detroit was a set-up provocation controlled by US intelligence, author and journalist Webster Tarpley stated to RT.

“[The terrorist’s] father, a rich Nigerian banker, went to the US embassy in Nigeria on November 19 and said ‘my son is in Yemen in a terrorist camp, do something about this.’ Nevertheless, the son is allowed to buy a ticket in Ghana, paying cash, $2,800, for a one-way ticket,” Tarpley said.

After that, a mentally deficient young man who doubtfully could make it from one gate to another managed to illegally enter Nigeria and get on a plane to Amsterdam.

“There was a well-dressed Indian man who brought him to the gate and said, ‘my friend does not have a passport, get him on, he is Sudanese, we do this all the time – that is impossible!” said Tarpley.

TARPLEY.net

Nigerian Terrorist Patsy Yet Another CIA Ploy in US-backed Buildup of al Qaeda in Yemen Civil War

Tarpley tells RT that the case of Umar Farouk Abdulmutallab is not a matter of unconnected dots, but rather that of a protected patsy or puppet deliberately used by the US intelligence community for a Christmas Day provocation designed to facilitate US meddling in the civil war in Yemen, which is where Umar Farouk allegedly trained and was given his PETN device. Banker’s son Umar Farouk had been denied an entrance visa to Great Britain , and had been denounced to the US Embassy in Lagos, Nigeria as a possible terrorist by his own father in mid-November.

His one-way ticket to Detroit was bought in Ghana for cash, and he reportedly entered Nigeria illegally. In Amsterdam , he was assisted at the Northwest Airlines gate by a “well-dressed Indian” who explained that Umar Farouk had no passport. He did have PETN, the same substance supposedly used by the mentally impaired shoe bomber Richard Reid in his abortive attack of eight years ago. In spite of all this, Umar Farouk’s US entry visa was never revoked, he never made it onto the no-fly list, and he was never thoroughly searched.

These egregious lapses in normal procedure show that Umar Farouk was part of an orchestration sponsored by the CIA, which has now yielded 4 solid days of media hysteria. Obama has formulated his new version of the Axis of Evil, composed of Afghanistan-Pakistan, Somalia, and Yemen.

In Yemen, a civil war pits the Saudi-backed central government against the Iranian-backed Shiite Houthi rebels, whom the US has bombed at least twice this month. The goal here is to play Iran against Saudi Arabia so as to weaken both the pro-Moscow Achmadinejad government in Iran, and also those Saudi forces that are fed up with their status as a US protectorate. The US is openly now sponsoring a regroupment of “al Qaeda” (the CIA Moslem legion) in Yemen , including by sending fighters direct from Guantanamo .

The new CIA-promoted entity synthetic entity is “Al Qaeda on the Arabian Peninsula or AQAP, a gaggle of US patsies, dupes, and fanatics which is claiming credit for the Umar Farouk incident. The US hopes to further dominate the exit from the Red Sea and the Suez Canal, while also easing pressure on the battered US dollar by jacking up the price of oil in an atmosphere of tension on the Arabian peninsula. Homeland Security Secretary Janet Napolitano is now Totalitariano to the left, and Incompetano to the right. Rather than harassing travelers, she should resign or be fired along with the other corrupt, bungling, or complicit officials of the Obama administration involved in this false flag provocation.

The plan to de-dollarise oil denied by the usual suspects

Fisk Image by Marjorie Lipan via Flickr

Robert Fisk
A financial revolution with profound political implications
The plan to de-dollarise the oil market, discussed both in public and in secret for at least two years and widely denied yesterday by the usual suspects – Saudi Arabia being, as expected, the first among them – reflects a growing resentment in the Middle East, Europe and in China at America's decades-long political as well as economic world dominance.

Nowhere has this more symbolic importance than in the Middle East, where the United Arab Emirates alone holds $900bn (£566bn) of dollar reserves and where Saudi Arabia has been quietly co-ordinating its defence, armaments and oil policies with the Russians since 2007.

This does not indicate a trade war with America – not yet – but Arab Gulf regimes have been growing increasingly restive at their economic as well as political dependence on Washington for many years. Of the $7.2 trillion in international reserves, $2.1trn is held by Arab countries – China holds about $2.3trn – and the nations interested in moving away from dollar-trading in oil are believed to hold over 80 per cent of international dollar reserves.

Saudi Arabia's denials of any such ambitions were regarded by Arab bankers as a normal part of Gulf politics. The Saudis, of course, managed to deny that Iraq had invaded Kuwait in 1990 – even when Saddam Hussein's legions stood along the Saudi frontier, until the US broadcast the news of Iraq's aggression to the world.

Saudi bankers are well aware that in nine years' time – the current timeframe for a transition away from the dollar in oil trading to Japanese and Chinese currencies, the euro, gold and a possible new Gulf currency – China will have doubled its national income to $10trn (assuming a growth rate of 7 per cent), at which point the US might hold no more than 20 per cent of the world's gross income.

Such massive financial movements, encouraged by the de-dollarisation of oil, will have enormous political effects in the Middle East, especially if economic superpower rivalry between America and China comes to dominate the Arab world. Will American economic support for Israel remain as loyal in nine years' time if China and the Arabs are setting the pace in global financial markets? Indeed – perhaps with this in mind – some Israeli financiers have been expressing interest over the past two years in non-dollar Arab bank investments. Whenever a change of this magnitude takes place over a number of years, it has to be commenced in secrecy.

Nor can it be denied that the very project to take oil trading away from the dollar market has deep political roots. The collapse of the Soviet Union has allowed the US to dominate the Middle East more than any other world region, and the Arabs – who can no longer contemplate an oil boycott of the kind they imposed on the West after the 1973 Middle East war – are still anxious to prove that they can flex their economic power to bring about change.

Saudi Arabia's pan-Arab offer to recognise Israel and its security in return for an Israeli withdrawal from occupied Arab land is not – according to the Saudis themselves – indefinite. If they are ignored or rebuffed, then they can search for other allies through new financial institutions to force a new Middle East peace. China will be happy to help.

Saudis, Russians Deny Secret Dollar Move

Image via Wikipedia

The story being denied entitled "The demise of the dollar" is by Robert Fisk in today's (UK) Independent, who refers to "plans, confirmed to The Independent by both Gulf Arab and Chinese banking sources in Hong Kong." It claims that, "in a graphic illustration of the new world order, Arab states have launched secret moves with China, Russia and France to stop using the US currency for oil trading."

The Independent also publishes a leading editorial today:
The end of the dollar spells the rise of a new order

Tuesday, 6 October 2009
Last autumn's global financial crisis set off an economic earthquake. And we are still feeling the tremors. The latest sign of the ground shifting beneath our feet is our report today of plans by Gulf states, China, Russia, France and Japan to end their practice of conducting oil deals in US dollars, switching instead to a diverse basket of currencies.

It is not hard to see the motivation for oil exporters to move away from the dollar. The value of the US currency has fallen sharply since last year's meltdown. And fears are growing, in the light of a spiralling US government deficit, that a further depreciation is likely. They do not want to sell their wares in return for a currency with an uncertain future.

Denials

Saudi central bank: report on replacing dollar is wrong
October 6, 2009
Reuters - A newspaper report that Gulf Arab states are in secret talks to replace the U.S. dollar in the trading of oil is wrong, Saudi Arabia's central bank chief said on Tuesday. Asked by reporters about the story in Britain's The Independent, Muhammad al-Jasser said: "Absolutely incorrect." Asked whether Saudi Arabia was in such talks, he replied: "Absolutely not." Asked whether Saudi Arabia was committed to the dollar, he said: "You asked the question, I answered it. You asked about the story."

Russia: hasn't discussed changing dollar role in oil
Tue Oct 6, 2009
Reuters - Russia has not discussed changing the dollar's role in the global trade of oil, deputy Russian finance minister Dmitry Pankin said on Tuesday. "We did not discuss this at all," he told reporters. Pankin was asked by reporters about a story in Britain's The Independent newspaper, which quoted unidentified sources as saying Gulf Arab states were in secret talks with Russia, China, Japan and France to replace the U.S. dollar with a basket of currencies in the trading of oil.
========
"These plans will change the face of international financial transactions," one Chinese banker said. "America and Britain must be very worried. You will know how worried by the thunder of denials this news will generate." --From Robert Fisk's original story in the Independent

Total Collapse is Near - All Paper Money Will Fail

Image via Wikipedia

ZeroHedge makes a strong argument for the physical possession of precious metals:

Gold and Systemic Crisis
Presently many otherwise intelligent and capable individuals in America do not seem to understand the origins of the present financial crisis -- and the multiple aspects (or shall we say 'tentacles'?) of its origination. These tentacles stretch far back in history: from the present demoralization and fragmentation of American society, to the demonetization of gold in 1971, stretching to the forces behind World War I and World War II, and ultimately, in terms of the 20th century, to the creation the Federal Reserve in 1913.

Our topic here is gold, and unfortunately we will have to save the analysis of totalitarianism's final forms for another paper. But what must be understood is that ultimately we are witnessing a 'failure of imagination' on the part of the general public -- a similar failure to what always permits radical evil to spread. This moral failure was characterized by both Hannah Arendt in Eichmann in Jerusalem , and Alexander Solzhenitsyn in The Gulag Archipelago. Because in our society people do not understand history nor human nature, and are saturated with lies and propaganda 24/7 via the CNBS broadcast media, they cannot imagine the moral consequences of their actions or inactions -- let alone the consequences of systemic failure. So to remedy this situation, let us take a quick glance at history, but try to avoid the pitfalls of the gold bug crowd. As someone mentioned, here at ZeroHedge, we are 'truth bugs'.

"If only it were all so simple! If only there were evil people somewhere insidiously committing evil deeds, and it were necessary only to separate them from the rest of us and destroy them. But the line dividing good and evil cuts through the heart of every human being. And who is willing to destroy a piece of his own heart?"
-Aleksandr Solzhenitsyn

History is a great teacher. One thing it shows us is that all systems of paper money fail. And they usually fail very quickly, not outlasting a man's lifetime. Gold and silver have been used as money for over 6000 years, including for extended periods of time, such as during the 1000 years of the Eastern Roman Empire. There are mathematical reasons why humans historically use precious metals as money, but we will not go into them here. Our present system is curious and almost astonishing that it has managed to last so long, given the lessons of history. Dr. Antal Fekete wrote in his latest paper that the mean time to failure of a non-gold backed system is approximately 18 years. Our present system has lasted over twice as long -- 38 years at last count, measured since the U.S.'s surreptitious default on it's foreign gold obligations under the Nixon administration in 1971 and currencies began to 'float'.

We have a fractional-reserve credit based system, where our money is mostly hallucinated computer pixels. The system is highly leveraged, but is almost entirely electronic. We now have multiple generations which have grown up without using money in its historic forms. For example, even the new Monopoly game uses electronic cards rather than paper money. Let me summarize these changes -- for simplicity sake, here we use gold to mean gold and/or silver. The global monetary system has changed three times: first, from gold to gold IOUs, then from gold IOUs to debt IOUs, and finally from debt IOUs to electronic-debt IOUs. But are these IOU's really 'unbacked', as claimed by the gold bugs? Actually , they *are* backed. They are backed as long as the IOUs can be exchanged for oil and gold at some realistic price metric.

According to Dr. Fekete, the reason our unmoored system has continued so long, past the usual 18 year lifespan of fiat currency experiments, is that we have invented a system of gold futures clearing and gold derivatives trading -- an innovation that did not exist in the past. In other words, we have created a gold 'price horizon' in electronic-debt IOUs, with the tendency to converge to the gold spot price. (Is the tail wagging the dog?) Additionally we have gold leasing, forward hedging, and all sorts of other trickery that has been going on for quite some time now. The electronic debt-IOU remains linked to gold via various Ponzi-like paper innovations.

The author FOFOA adds that additionally, what has characterized our system since 1971 is gold/oil flows between the various Petro States of the Middle East and the New York and London banking centers. These implicit deals allowed the United States to continue to purchase oil directly in dollars -- despite having defaulted on its international obligations. This 'innovation' somewhat resembles a US military-led protection racket. Remember that the second oil crisis of 1979-1980 coincided with price explosions in both gold and oil, yet catastrophe was avoided. This will not be the case the second time around.

There are also of course the lesser but nonetheless important details such as hedging which was done via large gold producers, the gold price suppression by the central banks, the geometric growth of OTC interest rate swaps, and so on. For those interested in these technical details, we highly recommend reading all the posts at FOFOA and the work of Rob Kirby. But here, the goal is a summary 'big picture' overview regarding the main points. What we can surmise though, is that our present system is a historical anomaly despite its technological innovations. And that should make us cautious of issuing blanket proclamations about the U.S. dollar's future stability over the next 8 weeks -- let alone the next 80 years. Have the pure dollar deflationistas skipped the Taleb? Sometimes we wonder.

The U.S. has a unique and deep relationship with Saudi Arabia, historically the world's largest oil producer. This relationship that goes back almost a century, to the foundation of Saudi Aramco by Rockefeller oil interests (specifically Standard Oil of California) in 1933. From 1933 to 1971 the payment system was somewhat stable, characterized by gold clearing on the international level at a fixed price of dollars for gold. This continued until the French under de Gaulle began draining the US Treasury of its gold, due to the expense of America's involvment in the Vietnam war. The French gold redemptions ultimately lead to the unilateral default of the United States on its gold obligations and the death of Bretton Woods I, which had been created post World War II with the dollar as gold-backed world reserve currency.

What has characterized our international system since 1971, or "Bretton Woods II" as it is sometimes called, is this: 1) the gold futures clearing system, and related paper markets and 2) the ability to swap oil for gold via these markets using exclusively US Dollars. This has given implicit support to the U.S. dollar far beyond what could be reasonably imagined considering the U.S. fiscal situation -- in the sense that the dollar is supported as long as 1) oil is for sale in dollars and 2) gold is for sale in dollars. This does not always have to be the case, and this is the core of the issue. If gold goes into permanent backwardation it will no longer be for sale in dollars on COMEX. Period. This will implicitly cut off oil flows to a trickle until payment is re-linked to gold via the IMF SDR or another mechanism.

To many of us, it is obvious the US equity markets will soon crash, but the real crisis will come with the failure of our currency -- a currency which is IMPLICITLY and historically linked with trading of both dollars for oil, and dollars for gold. Thus, these spot markets are the ones to watch. Some may be aware Russia recently surpassed Saudi Arabia as the world's number 1 oil producer -- and last week , number 2 oil producer Saudi Arabia has signed a $2bn weapons deal with Moscow. The final strategic alignment of Saudia Arabia and the rest of the Middle East remains up for debate, but we have certainly witnessed the tentative steps of the BRIC nations and their affiliated satellites to build their own international clearing system, based in Hong Kong and Moscow, rather than New York and London. Ultimately this will probably involve some form of the IMF SDR -- rebalanced with new currencies and possibly a gold component. Remember Medvedev at the G8?

Minus the political shifts towards a 'multipolar' world (prior to the onset of the final bloody form of the Hegelian dielectic), the weakest point in the present system is certainly the U.S. Dollar. Indeed there are many angles for speculative currency attack. And there are many weak points at which this may simply happen by accident. Assuming we see such an external speculative attack, what can we expect?

1) A currency failure will happen rapidly (likely overnight to 8-12weeks). The dollar will devalue against gold and oil. We are talking 50% decline or more.
2) Gold will go into backwardation (aka Spot Price above Near-Futures Price). This is the single most important indicator.
3) The Gold price will vault upwards -- and ultimately trading will halt in USD.
4) Oil will likely vault upwards as well, but this analysis is difficult. The gold:oil ratio is a useful indicator.

Where will capital flow during a time of a systemic crisis? Since 1971, capital has moved up this chart. Now it is reversing. Capital will flow into government bonds, treasury bills, physical cash, and ultimately its final home, gold.

There are all sorts of other things that may occur under conditions of currency failure, but you can find these sorts of analysis elsewhere. Use your imagination, as Hannah Arendt might suggest. Or google teotwawki and crack open a beer. The point here is that our present system is very fragile and cannot last much longer in its present form. It is far too unstable. There will be a collapse , and out of this a new system will emerge. The only guarantee of your purchasing power is in physical gold coins which you have in your possession. This is why the Zerohedge Dog, Scooby, keeps 20% or more of his assets in physical gold coins, and at least another 10-20% in physical cash with which to pay his bills. The world is changing, and to cope with the new reality requires both discernment and imagination.

China Embarks on USTreasury Dumping

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Jim Willie

While all manner of attention remains transfixed inside the United States on a remedy and recovery of its bank sector, once again Americans make dangerous assumptions. They tend to assume that the US Federal Reserve near 0% interest rates, Quantitative Easing (aka exploding Printing Pre$$ output), endless liquidity facilities (e.g. TALF), TARP funds (aka Wall Street slush fund), Stress Tests (rigged), bank stock sales (aided by FASB accounting fraud), bank carry trades (exploiting low short-term & higher long-term rates), and the passage of time can revive the US banking industry. They tend domestically to overlook the gradually worsening insolvency condition. Banks are bracing for a new wave of commercial mortgage losses, of prime Option ARMortgage losses, and credit card losses. The delinquency rate of prime Option ARMs is now higher than subprime home loans!!

Harken back to the summer 2007 when the hack USFed Chairman Bernanke called the bank crisis merely a subprime problem with upper limit potential for $200 billion in bank losses, and no risk of spilling over to the real USEconomy, and surely not the cause of any recession. Bernanke has understood next to nothing in advance, all forecasts hopelessly wrong, but is a great manager of the Printing Pre$$ Operation. So he is loved. This half blind man now is due for reappointment to USFed Chairman post, his past failure the qualifications for future service. The same is true of Treasury Secy Geithner, whose failure at the New York Fed was his qualification for current service. The approval of Bernanke is sure to cause a major rift with the Chinese credit masters. Their wishes and warnings have been ignored. Their vengeance is next.

The American perspective is almost always very limited in scope, due to chronic arrogance and delusions of grandeur. Their convenient parochial view tends to focus almost entirely within the United States, its bank leadership, its USFed monetary flexibility, its Wall Street syndicate influence, its federal tax latitude, its bank reserves management, and more. THE REAL THREAT TO US BANKS COMES FROM ENEMIES AT THE GATES, FOREIGN CREDITORS. The dangerous assumption made is that foreign creditors will remain firm and loyal. The arrogance extends from the continued belief that they have no choice, even if the trillion$ frauds on Wall Street occurred, even though such frauds were never prosecuted.

The real threat comes from foreign creditors who must contend with challenges greater than ever experienced, such as:

• Shrinking or vanished trade surpluses during global slowdown
• Their own financial systems in tatters (banks, stock & bonds, currencies)
• Vast regional construction booms gone bust (e.g. Dubai)
• Numerous nationwide housing bubbles gone bust
• Gathering storm from the need to liquidate insolvent banks
• Reserves erosion due to over-weight in US$-based bonds
• Systemic problems extended from a generation of USDollar reliance.

UAE & CHINA

Take just two important examples, the Persian Gulf and China. Other regions bloated with USTreasurys exist, like Europe and Russia, eager to unload them in what soon could become a torrent. The regional construction boom in the Arab world has an epicenter in Dubai. Unfortunately, it has gone bust, and loudly so. If not for the prompt aid by Abu Dhabi bankers, a vast liquidation of Dubai would have embarrassed them in front of the world. Instead, a new threat comes. The Abu Dhabi rescue next must contend with an indigestion problem, as USTreasurys and likely other US$-based bonds are flooding their banking system. They might own a considerable batch of US bank stocks, soon to be dumped. Ambition led to a whiff of hubris, as fantastic architectural design led to large scope, seen in the skyscrapers and bridges. Not shown are the spectacular communities designed as trees with branches and leaf petals, many empty, busted, and without investment income. But they overdid it, and now must deal with corporate failures and liquidation challenges. But the Persian Gulf bank failures represent the clear and present threat. The outsized projects have yielded to outsized rescues and next outsized indigestion to handle the funds in ways so as to avoid a string of national bank failures. Vast liquidations come, word comes from contacts.

A bank panic in the Persian Gulf could ensue very soon, a back door threat. It would clearly have origins in the United Arab Emirates, spread to the entire Persian Gulf like to Saudi Arabia, Kuwait, and elsewhere. From this global toehold, the bank panic could then spread to London, New York, and points in Europe. The UAE bankers must manage their situation. They are loaded to the gills with USTreasurys, the main currency used in the liquidations and rescues local to the UAE. They also have pet stock accounts in big US banks. As further liquidations occur, avoidance of bank failures seems a remote prospect. Watch the enemies at the gates, outside looking in, in urgent need of dumping USTreasury Bonds and other US$-denominated securities.

China must contend with some unique problems. From 2000 to 2005, they insisted on a rigid currency structure of the Yuan pegged firmly to the USDollar. In doing so, they became the 51st state, yoked firmly to the USEconomy and subject completely to the USFed monetary policy. Yet they had no voting rights on USDollar policy. Ironically, now they do as chief creditor nation. Nobody thought twice about accumulation of Chinese debt to replace US income. It was the insane movement known as the ‘Low Cost Solution’ at the time, a policy that the great majority accepted as the next chapter of progress in the Globalization movement, a policy based in corporate abandonment of US shores. Some, like the Jackass and other analysts on some of these gold journal websites, gave loud warning of a time bomb in construction certain to explode down the road. We are now down the road, reaping the bitter rotten harvest of the latest Economic Myth chapter.

China is experiencing a 40%+ decline in export trade. They have a mammoth $550+ billion stimulus plan that might have run its course. They have banks that are failing on a low level. Their stimulus might have found its way as much to their Shanghai stock market as to bank lending. Their industrial expansion is primarily linked to global trade and the export markets. As much as they would like to generate internal demand, it cannot prevent over 1000 industrial plants from shutdown, already done. More are to come. They respond with Yuan-based swap facilities in numerous foreign lands, but that can only accomplish so much in export markets. China is actively attempting to diversify its reserves. The reality (not a joke) is that they are trying to cobble together 2000 different $1 billion deals to secure hard assets in exchange for USTreasury Bonds, enough to dump their $2000 billion US$-based hoard at risk. They are acquiring stakes in foreign mining firms, stakes in mining projects, and entire properties. They are cutting fewer but larger energy deals, which include development of infrastructure and communities. The inescapable fact of life is that China has embarked on an USTreasury dumping initiative. They are even acquiring industrial property in Europe, unloading up to $10 billion per month in USTBonds. This aids the Euro Central Bank, stuck with too much bad debt from its southern member nations. They are dealing with the impaired debt from PIGS nations by means of vast commercial and industrial property sales. Discounts are being seen for both the USDollar and British Pound Sterling.