In The News Today

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Moscow, Beijing taking on the dollar
26 July 2013, 14:11

Russia and China have united their efforts in the fight against the dollar as the main reserve currency, an influential American trader, Russ Winter, said. The expert says that Moscow and Beijing have been putting into practice, for a long time now, the first part of their plan aimed against the hegemony of the dollar on the world markets. Really, Russia and China have decided to give up the dollar in most cases involving international payments and to strengthen their own currencies through buying up gold.

Moscow is actively encouraging trans-border rouble remittances and restricts foreign currency remittances. For its part, Beijing is gradually introducing direct exchanges between the Chinese yuan and the euro, and also the pound sterling and the yen . Parallel with this, China has increased the import of gold considerably and is now buying much more of it than it produces. The higher the backing of the yuan by gold, the weaker the positions of the dollar as the main reserve currency become.

However, analysts say that this is only the consequence, and that the real reason is a drop in the dollar solvency, and a slowdown in the US economic activity as a result. Because of the growth of the money mass, the US currency may devalue twice in the coming three years. Beijing and Moscow have to protect their currencies against an undesirable turn of events, and therefore, they are converting their reserves into gold.

Russ Winters says that the two allies have a very simple plan : to gradually raise the convertibility of both the rouble and the yuan and to increase their role in international trade, which in time will make it possible to present them as reserve currencies. The USA, where the level of the state debt is approaching 110 per cent of the Gross Domestic Product (GDP), will simply not be able to respond to this challenge. Of course, it takes time to score a victory over the dollar, the euro and the pound. A reserve currency should meet certain demands, Head of the Trustee Management Department at Absolyut Bank Ivan Fomenko says.

“ First, the full openness of the currency market and the convertibility of this currency. Second – the reliability and openness of the financial institutions of countries which would like their currencies to heave a reserve currency status. Third – the consistency of actions of the monetary authorities. And fourth, which is the main thing here – the willingness of the companies to sign agreements with the yuan as the basic currency”.

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Russia prepares to attack the petrodollar
4 April 2014, 14:34

The US dollar’s position as the base currency for global energy trading gives the US a number of unfair advantages. It seems that Moscow is ready to take those advantages away.

The existence of “petrodollars” is one of the pillars of America’s economic might because it creates a significant external demand for American currency, allowing the US to accumulate enormous debts without defaulting. If a Japanese buyer want to buy a barrel of Saudi oil, he has to pay in dollars even if no American oil company ever touches the said barrel. Dollar has held a dominant position in global trading for such a long time that even Gazprom’s natural gas contracts for Europe are priced and paid for in US dollars. Until recently, a significant part of EU-China trade had been priced in dollars.

Lately, China has led the BRICS efforts to dislodge the dollar from its position as the main global currency, but the “sanctions war” between Washington and Moscow gave an impetus to the long-awaited scheme to launch the petroruble and switch all Russian energy exports away from the US currency .

The main supporters of this plan are Sergey Glaziev, the economic aide of the Russian President and Igor Sechin, the CEO of Rosneft, the biggest Russian oil company and a close ally of Vladimir Putin. Both have been very vocal in their quest to replace the dollar with the Russian ruble. Now, several top Russian officials are pushing the plan forward.

First, it was the Minister of Economy, Alexei Ulyukaev who told Russia 24 news channel that the Russian energy companies must should ditch the dollar. “ They must be braver in signing contracts in rubles and the currencies of partner-countries, ” he said.

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Moody’s downgrades Ukraine to ‘default imminent’
Published time: April 05, 2014 10:53

Moody’s Investors Service has downgraded Ukraine’s government bond rating one notch from Caa2 to Caa3, citing the current political crisis and deepening economic instability as reasons for its negative outlook.

The Caa rating is a credit risk grading pertaining to investments that are both very poor quality and entail a high credit risk. The current downgrade drops Ukraine from Moody’s "extremely speculative" rating to "default imminent with little prospect for recovery."

Moody’s said the downgrade was driven by three factors, which “exacerbate Ukraine’s more longstanding economic and fiscal fragility.”

The first factor is Ukraine’s political crisis, citing the recent regime change in Kiev and subsequent events in Crimea. The agency went on to cite Ukraine’s stressed external liquidity position, which faces continued decline in foreign currency reserves, the withdrawal of Russian financial support and a spike in gas import prices. Moody’s further noted that this assessment accounts for the near-term liquidity relief recently hammered out with the IMF. Finally, due to a “sizable fiscal deficit,” the agency expects a significant contraction of GDP and a sharp currency depreciation as the debt to GDP (Gross Domestic Product) ratio hits between 55-60 percent by year’s end.

On Thursday, Gazprom CEO Aleksey Miller announced Ukraine would begin paying $485 per thousand cubic meters of natural gas starting from April. The price rise followed a cancelation of the Black Sea hosting deal. On Wednesday President Vladimir Putin signed a federal law ending Russia’s commitment to the Kharkov Agreement, as the Black Sea port of Sevastopol is now under jurisdiction of the Russian Federation. This follows another steep hike on April 1, when the price Ukraine paid for gas went up 44 percent to $385, after Kiev failed to meet its debt repayments.

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Jim Sinclair’s Commentary

The USA is really going to war with China over China sea’s gas and oil?

Chuck Hagel reaffirms US ‘strong commitment’ to protect Japan
US defence secretary’s fourth trip to region comes as China, Japan and other nations are locked in bitter territorial disputes
Associated Press at Yokota Air Force Base, Japan
theguardian.com, Saturday 5 April 2014 09.09 EDT

Against the backdrop of Russia’s takeover of Ukraine’s Crimean region, Defense Secretary Chuck Hagel said on Saturday that a key message he will deliver to leaders in Tokyo this weekend is that the US is strongly committed to protecting Japan’s security.

Hagel said it was understandable for nations to be concerned as they watch the events unfold in Ukraine, where Russian troops are still massed along the border. The issue reverberates in Asia where China, Japan and other nations are locked in bitter territorial disputes, including over disputed islands in the East China Sea.

"It’s a pretty predictable, I think, reaction, not just of nations of this area and this region but all over the world," Hagel told reporters traveling with him to Tokyo. "I think anytime you have a nation, Russia in this case, try to impose its will to refine and define international boundaries and violate the territorial integrity and sovereignty of a nation by force, all of the world takes note of that."

Assistant secretary of state Daniel Russel also said this week that Russia’s annexation of Crimea heightened concern, particularly among some Southeast Asian nations, about the possibility of China "threatening force or other forms of coercion to advance their territorial interests”.

While the US has repeatedly said it takes no side on the question of the disputed islands’ sovereignty, it recognises Japan’s administration of them and has responsibilities to protect Japanese territory under a mutual defence treaty.

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Chris Martenson: The Screaming Fundamentals For Owning Gold

"Da boyz" were a no-show at the release of the jobs number yesterday"

Yesterday In Gold & Silver

The gold price didn’t do a thing in Far East trading on their Friday—and as I stated in The Wrap section of yesterday’s column, volume up until the London open was lower than I could ever remember seeing it.

But shortly after trading began in London, some positive price action got underway, with higher ticks at both the 12 noon BST silver fix—and again at the Comex open in New York.  The usual smash down at the release of the jobs numbers failed to materialize.  But the serious price rally that began when London closed at 11 a.m. EDT in New York, ran into the usual not-for-profit sellers within 15 minutes—and that was it for the remainder of the day.

The CME Group reported the low and high price ticks as $1,284.40 and $1,307.50 in the June contract.

Gold finished the trading day in New York at $1,302.30 spot, up $15.50 on the day.  Not surprisingly volume, net of April and May, was pretty decent at 156,000 contracts.

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Here’s the New York Spot Gold [Bid] chart so you can see the Comex trading session in more detail—particularly the price capping shortly after London closed.

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Silver did nothing in Far East trading as well, with the total volume under 2,000 contracts at the London open.  But once silver began to rally, it was obvious that there numerous times where a seller of last resort put in an appearance before prices got too far out of hand to the upside, especially in New York trading.  And, true to form, not only did JPMorgan et al cap the rally, but the also sold silver back down below $20 the ounce while they were at it.

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Kerry gives up on Israeli-Palestinian peace talks
Published time: April 04, 2014 19:18

Secretary of State John Kerry said Friday that the Obama administration will reassess its role in attempting to broker a peace deal between Israel and Palestine after the latest round of discussions proved to be all but fruitful.

Speaking to reporters from Rabat, Morocco amid his latest tour overseas, Kerry said that the most recent attempts from the United States to find common ground between leadership in the Middle East have failed.

Reporting from Morocco, the Associated Press said Kerry appeared “visibly downbeat” as he disclosed to journalists the results of the State Department’s latest attempt to find an answer to the long-standing issues between the Israelis and Palestinians.

Both sides said last year that they’d reach an agreement by the end of April 2014, but Sec. Kerry said this week that a negotiation between parties is nowhere as near as the White House had hoped. Israel had initially agreed to release a group of Palestinian prisoners, but earlier this week rescinded that promise, prompting discussions to deteriorate even further. Palestinian President Mahmoud Abbas responded on Tuesday by saying his nation would seek greater recognition from the United Nations, much to the chagrin of Israeli Prime Minister Benjamin Netanyahu.

"They say they want to continue,” the AP quoted Kerry as saying of both leaders. "But we are not going to sit there indefinitely. This is not an open-ended effort. It’s reality check time."

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White House sources tell Kerry to wrap up Mid East peace bid
DEBKAfile April 4, 2014, 12:38 PM (IST)

Some circles around US Secretary of State, including inside the White House, are quoted by the Washington Post as believing the time is near for him to say “Enough!” of his Mid East peace effort. Some high administration officials speaking on condition of anonymity say Kerry risks being seen as trying too hard at the expense of other pressing international issues, even perhaps his reputation. “A time will come where he has to go out and own failure.” For now, they say, Kerry needs to “lower the volume and see how things unfold.”

Kerry has made 11 trips to Israel in the past year and shuttled endlessly between Prime Minister Binyamin Netanyahu and Palestinian leader Mahmoud Abbas. This week, the process blew up when Abbas filed applications for a “Palestinian state” to join 15 UN agencies, in violation of his prior pledge to the US Secretary and Israel. Israel punished him Thursday with a string of sanctions against the Palestinian Authority after canceling the fourth round of jailed Palestinian releases.

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