Fisk starts a fire....

What all this tells you is that the world's markets simply do not believe the denials of the story that have been issued by several countries. Saying so may not suit those countries which have strong political relationships with the US to worry about, but it would be remarkable if talks about repricing oil had not taken place. Indeed, China, the prime mover in these talks, has already openly floated the idea of ending the dollar's reserve currency status, and has never made a secret of its views on the matter.

http://www.independent.co.uk/news/business/comment/david-prosser-chinas-push-for-power-is-irresistible-1798672.html

Gulf Arabs have begun planning – with China, Russia, Japan and France – to move from dollar dealings for oil to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new currency planned for nations in the Gulf Co-operation Council, which includes Saudi Arabia, Abu Dhabi, Kuwait and Qatar.

Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean oil will no longer be priced in dollars. The revelation was met with public denials yesterday. The Saudi central bank governor, Muhammad al-Jasser, said: "The future is in God's hands. Today, the conditions are good for the arrangement we have." The Japanese Finance Minister, Hirohisa Fujii, said he "doesn't know anything about it".

Dennis Gartman, the US investment guru who writes the daily Gartman Letter, said that no one should be surprised to hear denials. "We are certain that spokespeople for every single nation will be brought to the fore to deny that any such meetings have occurred, that no such decisions have been made, that it is not in anyone's interest to have held such meetings or made such decisions," he told clients as The Independent story broke. "The market will care not a whit."

http://www.independent.co.uk/news/business/news/dollar-tumbles-on-report-of-its-demise-1798713.html

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.

http://www.independent.co.uk/opinion/commentators/fisk/robert-fisk-a-financial-revolution-with-profound-political-implications-1798712.html

Jim Willie takes up the story....

This is truly incredible news. The US will soon no longer be permitted to sell its indulgences. This is major Paradigm Shift material.

To say the Jackass was jazzed in the last few days would be a gross understatement. This is a lock for gold to hit $1500 within months, and $2000 within a year. This is a lock for silver to hit $30 within months, and some screaming figure within a year that cannot be fathomed right now, like $50. Be sure to see almost zero follow-up for this story in the crumbling US press networks, widely compromised, distrusted, and mocked after years of lapdog behavior to twist story after story in line with syndicate marketing plans designed to maximize their profits, minimize public wealth, and further the march to a police state.

A quick read is required of two articles by Robert Fisk. He touches at the surface on a great many relevant and salient points. This story and its vast consequences will be discussed and analyzed for a full year. This is the biggest story on the USDollar in decades, sure to further develop. This is the biggest financial story since Lehman Brothers was killed, since AIG was hidden under the USGovt roof, and since Fannie Mae fraud was shoved in the USGovt basement, one year ago. To say this is not orchestrated by China is professed ignorance. They warned the US not to monetize the federal debt. We did. They warned the US not to reappoint Bernanke as USFed Chairman. We did. Next is transformation with consequences. A new important alliance has formed, which cuts out the United States and Great Britain. The drift that comes is directed toward the Third World. The great majority cannot comprehend or envision such change. Give them time. The most visible changes will come with the value of Gold & Silver, and the demoted USDollar exchange rate. The other visible changes will be to the landscape of the United States and Great Britain and the arrival of foreigners. They will be called carpetbaggers, when in fact they are creditors in receivership. We welcomed their purchase of our vast rafts of debt.

http://www.financialsense.com/fsu/editorials/willie/2009/1008.html

The demise of the dollar ~ By Robert Fisk

The demise of the dollar
By Robert Fisk
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

In the most profound financial change in recent Middle East history, Gulf Arabs are planning - along with China, Russia, Japan and France - to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.

Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars.

The plans, confirmed to The Independent by both Gulf Arab and Chinese banking sources in Hong Kong, may help to explain the sudden rise in gold prices, but it also augurs an extraordinary transition from dollar markets within nine years.

The Americans, who are aware the meetings have taken place - although they have not discovered the details - are sure to fight this international cabal which will include hitherto loyal allies Japan and the Gulf Arabs. Against the background to these currency meetings, Sun Bigan, China's former special envoy to the Middle East, has warned there is a risk of deepening divisions between China and the US over influence and oil in the Middle East. "Bilateral quarrels and clashes are unavoidable," he told the Asia and Africa Review. "We cannot lower vigilance against hostility in the Middle East over energy interests and security."

This sounds like a dangerous prediction of a future economic war between the US and China over Middle East oil - yet again turning the region's conflicts into a battle for great power supremacy. China uses more oil incrementally than the US because its growth is less energy efficient. The transitional currency in the move away from dollars, according to Chinese banking sources, may well be gold. An indication of the huge amounts involved can be gained from the wealth of Abu Dhabi, Saudi Arabia, Kuwait and Qatar who together hold an estimated $2.1 trillion in dollar reserves.

The decline of American economic power linked to the current global recession was implicitly acknowledged by the World Bank president Robert Zoellick. "One of the legacies of this crisis may be a recognition of changed economic power relations," he said in Istanbul ahead of meetings this week of the IMF and World Bank. But it is China's extraordinary new financial power - along with past anger among oil-producing and oil-consuming nations at America's power to interfere in the international financial system - which has prompted the latest discussions involving the Gulf states.

Brazil has shown interest in collaborating in non-dollar oil payments, along with India. Indeed, China appears to be the most enthusiastic of all the financial powers involved, not least because of its enormous trade with the Middle East.

China imports 60 per cent of its oil, much of it from the Middle East and Russia. The Chinese have oil production concessions in Iraq - blocked by the US until this year - and since 2008 have held an $8bn agreement with Iran to develop refining capacity and gas resources. China has oil deals in Sudan (where it has substituted for US interests) and has been negotiating for oil concessions with Libya, where all such contracts are joint ventures.

Furthermore, Chinese exports to the region now account for no fewer than 10 per cent of the imports of every country in the Middle East, including a huge range of products from cars to weapon systems, food, clothes, even dolls. In a clear sign of China's growing financial muscle, the president of the European Central Bank, Jean-Claude Trichet, yesterday pleaded with Beijing to let the yuan appreciate against a sliding dollar and, by extension, loosen China's reliance on US monetary policy, to help rebalance the world economy and ease upward pressure on the euro.

Ever since the Bretton Woods agreements - the accords after the Second World War which bequeathed the architecture for the modern international financial system - America's trading partners have been left to cope with the impact of Washington's control and, in more recent years, the hegemony of the dollar as the dominant global reserve currency.

The Chinese believe, for example, that the Americans persuaded Britain to stay out of the euro in order to prevent an earlier move away from the dollar. But Chinese banking sources say their discussions have gone too far to be blocked now. "The Russians will eventually bring in the rouble to the basket of currencies," a prominent Hong Kong broker told The Independent. "The Brits are stuck in the middle and will come into the euro. They have no choice because they won't be able to use the US dollar."

Chinese financial sources believe President Barack Obama is too busy fixing the US economy to concentrate on the extraordinary implications of the transition from the dollar in nine years' time. The current deadline for the currency transition is 2018.

The US discussed the trend briefly at the G20 summit in Pittsburgh; the Chinese Central Bank governor and other officials have been worrying aloud about the dollar for years. Their problem is that much of their national wealth is tied up in dollar assets.

"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."

Iran announced late last month that its foreign currency reserves would henceforth be held in euros rather than dollars. Bankers remember, of course, what happened to the last Middle East oil producer to sell its oil in euros rather than dollars. A few months after Saddam Hussein trumpeted his decision, the Americans and British invaded Iraq.

http://www.independent.co.uk/news/business/news/the-demise-of-the-dollar-1798175.html

Fraud in the Gulf ~ The economist

Duncan clipped this from the Economist. I can't say that I think that the Saudi royals are a force for good in the world and they are also the weakest link in the current setup on many levels.

Allegations of massive fraud in the Gulf
A $10 billion Saudi fraud claim
Jul 17th 2009
From Economist.com

A respected business family claims it has fallen victim to a spectacular swindle


OF THE merchant families that dominate Saudi capitalism, few are as respected as the Gosaibis, a “blue-chip” clan which could borrow on the strength of its name alone. It was, therefore, a shock when in May parts of the family conglomerate, Ahmad Hamad Algosaibi & Brothers Company (AHAB), defaulted, prompting lawsuits in various countries. But on July 15th the shock turned to astonishment. In documents filed in New York’s state Supreme Court and seen by The Economist, AHAB claims that it has been the victim of a “massive fraud” orchestrated for years by Maan al-Sanea, a Saudi billionaire who is married to a daughter of one of AHAB’s founders. The company says Mr Sanea “misappropriated” around $10 billion in the alleged swindle.

Mr Sanea has his own business, the Saad Group, a vast investment company once reckoned to hold over $30 billion of assets worldwide, including the second biggest stake in HSBC. He also used to work for the Gosaibis and, besides having married into their family, he freely admits he has “long had personal relations with the partners of AHAB”. But he insists that the business ties between his Saad group and AHAB are now on an “arm’s length commercial basis.”


However, AHAB claims that Mr Sanea was until very recently a “senior executive” of its financial-services arm, the Money Exchange, which chiefly handles remittances by workers inside and outside Saudi Arabia. It says Mr Sanea made use of this position to borrow from banks “using forged or falsified documents”. He then “diverted the funds received to his own use.”

AHAB has made these allegations in response to a lawsuit filed against it in New York by Mashreqbank, a lender based in the United Arab Emirates which was one of the first banks to admit openly to having an exposure to AHAB. Mashreqbank is going to court over a foreign-exchange deal on which it claims AHAB defaulted. It wired $150m to an AHAB account on April 28th and says it was due to receive 564.3m Saudi riyals a week later in return. But AHAB failed to pay. In its court document of July 15th AHAB responds that it knew nothing about this currency deal until the New York court sought to attach its assets over Mashreqbank’s claim.

Having looked into the matter further, AHAB now says the transaction was one of many organised by Mr Sanea with “a variety of financial institutions in the United States, the Middle East, and elsewhere”, while keeping them off the books to conceal them from AHAB’s partners and directors. It says that Mashreqbank alone entered into 52 such deals, totalling $4.7 billion, between January 1st 2008 and May 1st 2009.

AHAB claims that having these huge amounts of cash constantly sloshing around in the Money Exchange’s accounts allowed Mr Sanea to siphon off some of it by, among other things, writing fraudulent cheques, and transferring cash to people, companies and accounts that he “controlled directly or indirectly”. It says Mr Sanea told AHAB employees not to record the transactions in the company’s books and in July 2006, it alleges, he sent a memo to senior employees of the Money Exchange telling them to withhold any messages intended for the board of directors and “to deliver those communications to him instead”. AHAB says Mr Sanea’s manoeuvres allowed him “to continue looting AHAB and to conceal the massive scope of his thievery from AHAB and its Board”.

AHAB does not accuse Mashreqbank or the other banks that engaged in the currency deals of knowingly participating in the fraud it alleges. However it does claim that in the $150m transaction at the centre of the court case, Mashreqbank stood to enjoy a “grossly inflated profit margin”. And it argues that the transaction “had no legitimate commercial purpose which would have been obvious to both parties in the transaction.” It says almost all the other transactions involving Mashreqbank likewise gave it a substantial profit. Mashreqbank’s spokesman said on Friday that it felt unable to comment on the matter until it had consulted its lawyers.

A spokesman for Mr Sanea’s Saad group, asked to comment on AHAB’s accusations, said, “We have not seen or been served with this claim, although it appears from press reports to be a repetition of claims previously presented extensively to the press and elsewhere and which are baseless. If we are served with such a claim, we will respond to it vigorously through specialist counsel, confident in both the true facts and the judicial process.” Last week when The Economist put similar allegations to Mr Sanea’s lawyers, they described them as “scurrilous and utterly untrue”.

Although their scale is spectacular, the nature of the allegations will not come as a complete surprise to some bankers in the Middle East. The Gosaibis had previously said that they had found evidence of “substantial financial irregularities” in their financial-services arm. And in a confidential creditors’ meeting in Bahrain on June 24th the group disclosed the scale of the problem, according to sources familiar with the matter. They say it left creditors in little doubt about whom it suspected as the author of its misfortunes.

But to make this complaint in black and white, in a New York court document, is an extraordinary twist. Family businesses in the Gulf traditionally settle their disagreements behind closed doors, judging that “the preservation of the family reputation is of paramount importance,” as a banker in the region puts it.

In this case, more is at stake. The Algosaibi group owes more than $9 billion to more than 120 banks all over the world. The uncertainty over its finances is making some of them wonder if it is worth lending to Saudi Arabia at all. The group’s creditors had hoped that the Saudi monarchy would step in to broker a truce between Mr Sanea and his aggrieved in-laws. Instead, an internecine family feud in a normally secretive kingdom will now be pursued in the open through the American courts. Like Ahab’s harpoon in “Moby Dick”, the allegations that AHAB has fired off may drag Saudi Arabia’s financial reputation into the vortex.