Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Gold Amid Epidemiological and Economical Update - 15th Jul 20
Is it Time To Dump Gold Stocks? - 15th Jul 20
Retail Stock Market Traders & Investors Squeezed to Buy High-Risk Assets Again - 15th Jul 20
SPX about to Challenge 8/08 High - 15th Jul 20
How to Grow Huge Fruiting Magical Indoor Grape Vines at Home UK - 15th Jul 20
Stock Market Dow 30k before End of 2020? - 13th Jul 20
Credit Market Investments Turned Into End-User Risk Again - 13th Jul 20
Investors Are Going All-In on This Coronavirus Proof Industry - 13th Jul 20
5 Vital Insights That You Can Gain From Instagram Trackers - 13th Jul 20
Stop Believing The 'Economy' Is The Same As The Stock Market - 12th Jul 20
Spotify Recealed as The “Next Netflix” - 12th Jul 20
Getting Ahead of the Game: What Determines the Prices of Oil? - 12th Jul 20
The Big Short 2020 – World Pushes Credit/Investments Into Risk Again - 11th Jul 20
The Bearish Combination of Soaring Silver and Lagging GDX Miners - 11th Jul 20
Stock Market: "Relevant Waves Vs. Irrelevant News" - 10th Jul 20
Prepare for the global impact of US COVID-19 resurgence - 10th Jul 20
Golds quick price move increases the odds of a correction - 10th Jul 20
Declaring Your Independence from Currency Debasement - 10th Jul 20
Tech Stocks Trending Towards the Quantum AI EXPLOSION! - 9th Jul 20
Gold and Silver Seasonal Trend Analysis - 9th Jul 20
Facebook and IBM Tech Stocks for Machine Learning Mega-Trend Investing 2020 - 9th Jul 20
LandRover Discovery Sport Service Blues, How Long Before Oil Change is Actually Due? - 9th Jul 20
Following the Gold Stock Leaders as the Fed Prints - 9th Jul 20
Gold RESET Breakout on 10 Reasons - 9th Jul 20
Fintech facilitating huge growth in online gambling - 9th Jul 20
Online Creative Software Development Service Conceptual Approach - 9th Jul 20
Coronavirus Pandemic UK and US Second Waves, and the Influenza Doomsday Scenario - 8th Jul 20
States “On the Cusp of Losing Control” and the Impact on the Economy - 8th Jul 20
Gold During Covid-19 Pandemic and Beyond - 8th Jul 20
UK Holidays 2020 - Driving on Cornwall's Narrow Roads to Bude Caravan Holiday Resort - 8th Jul 20
Five Reasons Covid Will Change SEO - 8th Jul 20
What Makes Internet Packages Different? - 8th Jul 20
Saudi Arabia Eyes Total Dominance In Oil And Gas Markets - 7th Jul 20
These Are the Times That Call for Gold - 7th Jul 20
A Reason to be "Extra-Attentive" to Stock Market Sentiment Measures - 7th Jul 20
The Beatings Will Continue Until the Economy Improves - 6th Jul 20
The Corona Economic Depression Is Here - 6th Jul 20
Stock Market Short-term Peaking - 6th Jul 20
Gold’s Major Reversal to Create the “Handle” - 5th July 20
Gold Market Manipulation And The Federal Reserve - 5th July 20
Overclockers UK Custom Build PC Review - 1. Ordering / Stock Issues - 5th July 20
How to Bond With Your Budgie / Parakeet With Morning Song and Dance - 5th July 20
Silver Price Trend Forecast Summer 2020 - 3rd Jul 20
Silver Market Is at a Critical Juncture - 3rd Jul 20
Gold Stocks Breakout Not Confirmed Yet - 3rd Jul 20
Coronavirus Strikes Back. But Force Is Strong With Gold - 3rd Jul 20
Stock Market Russell 2000 Gaps Present Real Targets - 3rd Jul 20
Johnson & Johnson (JNJ) Big Pharma Stock for Machine Learning Life Extension Investing - 2nd Jul 20
All Eyes on Markets to Get a Refreshed Outlook - 2nd Jul 20
The Darkening Clouds on the Stock Market S&P 500 Horizon - 2nd Jul 20
US Fourth Turning Reaches Boiling Point as America Bends its Knee - 2nd Jul 20
After 2nd Quarter Economic Carnage, the Quest for Philippine Recovery - 2nd Jul 20
Gold Completes Another Washout Rotation – Here We Go - 2nd Jul 20
Roosevelt 2.0 and ‘here, hold my beer' - 2nd Jul 20
U.S. Dollar: When Almost Everyone Is Bearish... - 1st Jul 20
Politicians Prepare New Money Drops as US Dollar Weakens - 1st Jul 20
Gold Stocks Still Undervalued - 1st Jul 20
High Premiums in Physical Gold Market: Scam or Supply Crisis? - 1st Jul 20
US Stock Markets Enter Parabolic Price Move - 1st Jul 20
In The Year 2025 If Fiat Currency Can Survive - 30th Jun 20
Gold Likes the IMF Predicting a Deeper Recession - 30th Jun 20
Silver Is Still Cheap For Now - 30th Jun 20
More Stock Market Selling Ahead - 30th Jun 20
Trending Ecommerce Sites in 2020 - 30th Jun 20
Stock Market S&P 500 Approaching the Precipice - 29th Jun 20
APPLE Tech Stock for Investing to Profit from the Machine Learning Mega trend - 29th Jun 20
Student / Gamer Custom System Build June 2020 Proving Impossible - Overclockers UK - 29th Jun 20
US Dollar with Ney and Gann Angles - 29th Jun 20
Europe's Banking Sector: When (and Why) the Rout Really Began - 29th Jun 20
Will People Accept Rampant Inflation? Hell, No! - 29th Jun 20
Gold & Silver Begin The Move To New All-Time Highs - 29th Jun 20
US Stock Market Enters Parabolic Price Move – Be Prepared - 29th Jun 20
Meet BlackRock, the New Great Vampire Squid - 28th Jun 20
Stock Market S&P 500 Approaching a Defining Moment - 28th Jun 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Iran's Notice to Crude Oil Importers Results in Monetary Contraction of $500 billion of PetroDollar Reserves

Commodities / Global Financial System Jan 30, 2008 - 12:50 PM GMT

By: Rob_Kirby

Commodities

Best Financial Markets Analysis ArticleMuch was made of Iran's announcement back in December, 2007 – that they would no longer be accepting U.S. Dollars as payment for their chief export, crude oil:

Iran stops selling oil in dollars - Tehran moves closer to confrontation with U.S.


Posted: December 8, 2007
12:46 p.m. Eastern
By Jerome R. Corsi
© 2007 WorldNetDaily.com 
Iran today announced a decision to end all oil sales in dollar transactions, moving one step closer to confrontation with the United States….. 

Perhaps fewer people would remember a pre-cursor to this announcement – back on July 13, 2007 – when Iran put Japan [its largest oil trading partner] on notice that they would only conduct their crude oil trade in Yen going forward:

Times Online

July 13, 2007
Iran demands oil pay in yen not dollars

The dollar fell against the yen this afternoon on reports Iran has asked Japan to stop paying for its oil in dollars

Robert Lindsay 
The dollar was driven down against the Japanese yen this afternoon, hit by the news that Iran had asked Japan to pay for its oil purchases in the Japanese currency and not in dollars. 

Iran has sent a letter to Japanese refiners, signed by Ali A Arshi, the general manager of crude marketing and exports for Iran's national Iranian Oil Company, according to a report by Bloomberg. 

The letter asks for yen payments "for any/all of your forthcoming Iranian crude oil liftings." The request is for all shipments "effective immediately". 

One might logically think this would have quite an impact on countries that buy Iran's 2.5 million barrels per day of exported oil.
So let's take a look at which countries, or just who buys Iranian Oil:

Iran Economy - 2007 
http://www.theodora.com/wfbcurrent/iran/iran_economy.html 
SOURCE: 2007 CIA WORLD FACTBOOK
Oil - exports: 

2.5 million bbl/day (2004 est.)
Exports - partners: 
Japan 16.9%, China 11.2%, Italy 5.9%, South Korea 5.8%, Turkey 5.7%, Netherlands 4.6%, France 4.4%, South Africa 4.1%, Taiwan 4.1% (2005)

Now, let's take a look at the U.S. Dollar reserve positions of Iran's primary crude oil trading partners [ TIC data compliments of the U.S. Treasury]:

What the table above clearly shows is this: Countries that import Iranian crude oil clearly “took notice” and made dramatic adjustments to their foreign reserve holdings [for the most part] – beginning immediately after July 13, 2007 – when Iran put Japan “on notice” that they would be required to pay for their crude in Yen.

Adjustments To U.S. Dollar Reserve Holdings July / August 2007
[Iran's Crude Oil Trading Partners]

Japan -24.8 B

China + Hong Kong -10.7 B

Italy - .7 B

South Korea - .8 B

Turkey + .7 B

Netherlands +1.0 B

France - 4.5 B

Taiwan - 4.9 B

Net Change -44.7 B

The with-drawl of U.S. Dollar reserves in one month - on this scale – was almost certainly a contributing factor to the “liquidity event” that gripped the U.S. banking system in August, 2007.

Remember Rothbard's Explanation as to How Fractional Reserve Banking Works:

Let's see how the fractional reserve process works, in the absence of a central bank. I set up a Rothbard Bank, and invest $1,000 of cash (whether gold or government paper does not matter here). Then I "lend out" $10,000 to someone, either for consumer spending or to invest in his business. How can I "lend out" far more than I have? Ahh, that's the magic of the "fraction" in the fractional reserve. I simply open up a checking account of $10,000 which I am happy to lend to Mr. Jones. Why does Jones borrow from me? Well, for one thing, I can charge a lower rate of interest than savers would. I don't have to save up the money myself, but simply can counterfeit it out of thin air. (In the nineteenth century, I would have been able to issue bank notes, but the Federal Reserve now monopolizes note issues.) Since demand deposits at the Rothbard Bank function as equivalent to cash, the nation's money supply has just, by magic, increased by $10,000. The inflationary, counterfeiting process is under way. 

What we experienced last summer – namely, the with-drawl of U.S. Petro-Dollar Reserves from the banking system created the “reverse” of the expansionary multiplier effect outlined above by Murray Rothbard.

This means that a 44.7 B with-drawl of U.S. Dollar reserves from the U.S. Dollar-centric banking system had the predictable cause / effect of close to a ½ Trillion monetary contraction event.

This extremely destabilizing event sent the U.S. Dollar into a tail-spin – with the U.S. Dollar Index breaking major support at 80:

Not surprisingly, this also marks the same time that the price of gold takes off:

The response [to date] of the Anglo / American banking axis that rules this earth is clearly illustrated in the bloating of the United Kingdom's [Bank of England] U.S. Dollar reserve account in an attempt to take up the slack, or better stated, re-inflate the banking system. Since July, 2007 – U.K Dollar reserves have swelled from 209 to 315 billion – quite a trick for a deeply indebted country, ehhh?

This clearly illustrates Central Bank resolve to “inflate” this problem away.

You see folks, what is really at risk that officialdom will not speak of is this: the same Old European names that have been historically associated with owning the Bank of England are also the principal owners of the Federal Reserve. Their real business is a GLOBAL MONOPOLY on creating fiat money out of thin air.

This is why anyone [hello Iran?] and anything [hello gold?] that competes, or poses an alternative, to their U.S. Dollar-centric view of the world is the object of scorn and ridicule.

This is reality.

By Rob Kirby
http://www.kirbya nalytics.com/

Rob Kirby is the editor of the Kirby Analytics Bi-weekly Online Newsletter, which provides proprietry Macroeconomic Research.

Many of Rob's published articles are archived at http://www.financialsense.com/fsu/editorials/kirby/archive.html , and edited by Mary Puplava of http://www.financialsense.com

Rob Kirby Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules