“Swift” Kick To The US Dollar

Posted at 8:47 PM (CST) by & filed under General Editorial.

My Dear Extended Family,

Today two events took place, one which has the capacity to make the recent low price of gold in the $1630s the low of this reaction (disappointing housing statistics), and another to fuel the gold price into its true 2012 range of $1700 – $2111 by this summer (utilization of selective lock out of the Swift system to India and others).

For fuel into the true 2012 range of $1700 to $2111:

"If a country doesn’t prove it’s making the necessary reductions by the end of June, any institution in that nation that settles petroleum trades through Iran’s central bank will be cut off from the U.S. banking system."

This is terribly ill advised and poorly timed. It smells like a threat of selective lockout via the Swift system.

At a time when the US dollar is sundering as the major international settlement mechanism this is the last thing that dollar managers should consider. Whoever came up with this idea has no appreciation of two points – the weakness of the Western financial system and whatever weapon of war will be used in kind.

The major financial weakness in the US is the level of the US dollar due to sundering use in international contract settlement, the clear and present trend of substituting both the Yuan and Euro as international settlement currencies, and the lack of true economic buyers in the US long bond market.

History will record this decision at this time as a major factor in the final move to financial unwind in the West.

The letdown of the housing report today does not support the majority view that the US is gaining take off speed economically. It is not. It will not and QE will go to infinity, about that there is no question.


U.S. Wants Iran Oil Buyers to Pledge Cuts or Risk Sanctions
By Indira A.R. Lakshmanan and Pratish Narayanan – Mar 23, 2012 8:11 AM MT

The Obama administration wants China, India and 10 other nations to present plans detailing how they will curtail Iranian oil imports, saying past cuts aren’t enough to win them an exclusion from new U.S. sanctions.

Secretary of State Hillary Clinton this week granted Japan and European Union countries six-month, renewable exemptions from the measures that take effect June 28, crediting them with “significantly reducing” imports from the Persian Gulf nation.

While China and India, the two biggest buyers of Iran’s crude, have made cuts in recent months and years, they were not granted exemptions. The distinction is that the EU and Japan offered assurances they will go beyond past reductions and continue to curb purchases from the world’s fourth biggest producer, U.S. officials say.

“What we are looking for is for countries to come to us and tell us if they believe that they should be in that category that deserves an exemption, what are the kinds of significant reductions that they are willing to pursue,” said Carlos Pascual, the State Department’s special envoy and coordinator for international energy affairs.

Japan, the No. 3 importer of Iranian oil, detailed to the U.S. its plans to boost purchases from alternative suppliers, the U.S. officials said. China, India, South Korea, Turkey and eight other buyers of Iranian crude haven’t yet made similar pledges, and past cuts alone can’t be taken as evidence of future intent, said four U.S. officials who spoke on condition of anonymity because diplomatic discussions are private.