The reasons to abandon the petrodollar Russia has, and serious. For the US, it may mean the collapse of the stock market amid the universal loss of confidence in the dollar. Undermines the credibility of the Federal reserve system, monthly buying billions of dollars in debt to the Treasury of the Ministry of Finance of the USA.
The fed hopes to stimulate the economy by artificially maintaining already reduced to a minimum interest rates at the zero level. But given the ongoing trend to decrease the possibility of the fed is limited next week, the decline may continue. The American economy depends on import, so if the demand for the dollar in international markets will decline, we in the USA will increase the prices literally on all.
Hyperinflation can cause a new economic recession, and as a result the USA will have to work hard to rebuild its economy.
On Friday the NASDAQ fell by 54,37 points (1,3%) — to 3,999,73. The Dow Jones fell by 143,47 points (0.9 per cent) – its value was 16026,75. The S&P 500 index declined turnout-17.39 points (or 1%), to 1815,69.
The newspaper "U. S. A. Today" reported that after a market sell-off last week, investors remain concerned because the NASDAQ dropped 3.1% — the lowest value since November 2011. S&P 500 falling 4% from its record high from the second of April and by 1.8% on annual average. The Dow Jones compared to the 31st December, when its value was 16576,66, decreased by 3.3%.
Ex-world Bank economist Peter Koenig last week warned that Russia may withdraw from the petrodollar as trading unit for oil and gas operations. Russia's trade in hydrocarbons is estimated to be a trillion dollars a year.
"The main supporters of this plan – Putin's adviser on regional economic integration Sergey Glazyev and General Director of Rosneft, Igor Sechin, said fourth April, the radio station "Voice of Russia". — Both officials declared their intention to replace the dollar with the ruble. And now some of the most important Russian officials begin to implement the plan."
According to Reuters, on March 21, Russia and China were close to closing the "Holy Grail" — Gazprom undertakes to pump 38 billion cubic meters of natural gas to China beginning in 2018-th year. Gas deliveries will be undertaken via the first direct pipeline between the world's largest natural gas supplier (Russia) and the world's largest consumer of natural gas (China). Currency will be Russian ruble, Chinese yuan or possibly gold.
"The Russian "war" with petrodollars can cause a major collapse in the stock markets of the USA," writes the economic blog ZeroHedge.com.
Also Russia continues talks with Iran – the deal involves barter of 500 thousand barrels of Iranian oil per day for the needs of Russia. Such a deal will allow Iran to sell additional crude oil worth $ 20 billion without the need to evaluate the deal in petrodollars.
U.S. senators Robert Menendez and mark kirk addressed to the White house the letter warned President Obama that if "Iran will manage to carry out conceived and to thereby avoid sanctions from the U.S., the States will have to impose new sanctions on crude oil and to oblige Iran to reduce global oil sales, and in the case of a breach sanctions to punish on all severity of the law."
The era of dollar devaluation
Editor of the economic blog ShadowStats.com economist John Williams reads that the policy of quantitative easing (CC) the fed has induced the Federal reserve to purchase the debt of the U.S. Treasury, undermined confidence in the dollar by the international community.
In March, fed Chairman Janet Yellen indicated that the fed still had not implemented all the plans for combating unemployment, in spite of maintaining interest rates near zero for five years and the COP policy, lowering the fed's balance sheet to 4,23 trillion dollars. Yellen's comments were understood by investors as an indication that the fed in the foreseeable future will continue to buy up U.S. debt.
Under the leadership of Yellen, the fed pursues a policy of "contraction" — after fed action the U.S. debt reduced by ten billion dollars a month in order to reduce the total amount to 85 billion a month to the end of the year.
"The Federal government and the fed limited its destructive fiscal and monetary policy – it leads to loss of confidence in the U.S. dollar, both worldwide and in the United States. This will lead to the dumping of the American currency on the world markets and hyperinflation in the country, as it was in the beginning of the great depression, said second of April Williams. By the end of 2014, the rate of hyperinflation will no longer grow, but the chances of such a development is 90%".
Williams continues to say that "gold remains the main obstacle for preservation of purchasing power and the value of the assets in this era of dollar depreciation".
In his weekly newsletter Williams warned that weak economic fundamentals will have a negative effect on business activity. It is expected that the position of the dollar on international currency markets will continue to weaken due to the pressure of the fed, which will continue monthly to buy up billions of dollars of debt.
In January, WND reported about a possible rise in interest rates, threatening to cause a decline in the stock market.
Last week after the publication of the minutes of the March meeting of the Federal Committee of the fed, the dollar lost ground against the Euro and the British foot. Yellen reiterated that the fed will consider lowering interest rates, growing for six months since the last purchase program of its own bonds in the framework of the COP.
After the publication of the protocols of the Euro increased by 0.4% compared to the dollar now, one Euro is equivalent to $1,3852, and this is the highest rate since March 24. The British pound also rose to $ 1,6801 – the highest since the 17th of February.
On Tuesday, WND reported that margin liabilities taken as stock brokers loans for loans for shares to its own customers, reached a record high of $ 466 billion, approaching for the first time the mark of half a trillion dollars.
These loans work only as long as prices in the stock market rising. When prices are static or fall sharply, buying on credit investors run the risk of losing money.
The account of the investor when the stock market loses its value. Brokerage firm in this scenario may require the investor to Deposit additional funds into the account or liquidate stocks to maintain the requisite Federal control authority the relationship between margin debt and the principal value of the acquired shares.
Tags: assessment , Russia , USA , oil
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