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Thursday, March 13, 2008

Only USD or EUR - oil relationship?

Kathy Lien and Boris Schlossberg write in their article "Deciphering the Dollar-Oil Relationship":

"... in May of last year, Kuwait surprised the markets by unhooking the dinar with the dollar. Since then, markets have watched the UAE and Qatar for any signs of a similar move. The main reason why this is happening is because the weakness of the U.S. dollar is driving up inflation and hurting the domestic economy".

"We all know that oil is a political asset. Now couldn’t be a better time for countries like Iran, Russia and Venezuela to step up the pressure to sell oil in a currency other than the U.S. dollar. Just last month, Iran officially opened the Iran Oil Bourse, which trades oil in non-dollar currencies. In December 2007, they stopped accepting dollars for oil. This had a limited impact on the U.S. dollar at the time because the U.S. is by far the world’s largest oil importer and Iran is only the world’s fourth largest oil exporter. If Saudi Arabia made this announcement, things would be different. Saudi Arabia and the U.S. are allies so don’t expect it to announce a similar change anytime soon, especially since the U.S. dollar is already this weak. To do so would be like kicking someone when they are already down. Russia on the other hand is the bigger threat. Back in 2003, Putin openly said that Russia could switch its trade in oil from dollars to euros. In 2006, they officially opened up an exchange to trade oil in rubles. Did it matter to the U.S. dollar at the time? No. So an announcement by UAE or Qatar will not matter for the U.S. dollar either.

None of these factors mattered because oil really trades in only two places in the world – London and New York. Iran’s exchange efforts are a laughing stock because the country has no political clout or economic know how to establish a world class trading exchange. Dubai, however, is different. The emirate boasts some of the fastest growth rates in the world and some of the best infrastructure facilities anywhere. Furthermore, it has made a foray into the exchange business by buying stakes in Nasdaq and LSE. Having been there many times myself, I can tell you that Dubai has been tremendously successful at adopting advanced Western business practices and management methods. If the Dubai Mercantile Exchange (which is jointly owned by Dubai Holdings and NYMEX) were to one day decide to trade oil in euros, the landscape could change very quickly".

"Aside from the fact that U.S. has the deepest, most liquid and most credit worthy capital markets which attract a massive amount of the worlds savings, the other major reason for the world to own dollars is because almost all key commodities from foodstuffs to metals to softs to energy are denominated in dollars. If oil is suddenly traded in euros, why not any of these other commodities? Therein lies the real problem. It’s either a dollar denominated world or it is not. And if we lose our hegemony on the commodity markets of the world the greenback is in even more trouble than we think".


Yes it's true - if oil & gas commodity backed currency for goods & services (not loans) trading will emerge, who will need USD or EUR loan pyramids?

Who knows, maybe he was right many years ago:

50 comments:

Ivo Cerckel said...

The St. Petersburg Exchange is conducting since last week oil transactions in ruble. (1)

Iran is issuing invoices in dollars for its oil and agreeing with clients that the l/cs [letters of credit] and other means of payment will have a non-dollar basis. (2)

Is the acceptance of the U.S. dollar as the oil currency a religious belief?

The question of the dollar as oil currency is related to the question of the pegging of the Gulf currencies to the dollar.

As to the pegging-question, on March 23-24, there is a Bahrain Conference on inflation where Gulf Arab policymakers and chambers of commerce officials will unpeg their currencies from the dollar. (3)

Jordan is therefore trimming the amount of dollars in its foreign reserves (4)

Still, I found this Thursday morning a report saying that the Kingdom of Saudi Arabia has no plans to start selling oil in euros. (5)

Why is that?

Is it that the sheeple are mot aware of the Freegold concept, a free floating price of gold, as an alternative to the dollar regime?
Don’t they know that Freegold makes gold the natural vehicle to temporarily or eternally store one’s wealth in, in order to be able to later convert it into tangible wealth?
That Freegold in the central banks’ strong-rooms has the same role to fulfill as the Mona Lisa in the Louvre-museum in Paris?
A wealth reserve which would be in the strong room (the Louvre) of a monetary union.

Ivo Cerckel
ivocerckel AT siquijor DOT ws

NOTES

(1)
St. Pete Bourse’s First Sales
Wednesday, March 5, 2008
http://www.themoscowtimes.com/stories/2008/03/05/06 1.html
ST. PETERSBURG — The St. Petersburg Exchange said Tuesday that it conducted the first two auctions of refined oil products for private brokers, selling 120 tons of gasoline for a total of 2.3 million rubles ($96,000).
Perm-based oil trader Uralmontazhstroi offered the two lots Monday, the exchange said in a statement.
Twenty-six Russian companies and agencies have registered to participate on the bourse, the statement said. (Bloomberg)

(2)
Iranian official reports record oil revenues
By Najmeh Bozorgmehr in Tehran
Financial Times, February 28 2008 16:15 http://www.ft.com/cms/s/0/88af02e2-e579-11dc-9334-0 000779fd2ac.html
SNIP
Mr Ghanimifard told the FT a quarter of export transactions had been conducted in the Japanese yen and the rest in euros during the past three months, while dollar transactions had been “almost totally deleted”.
“We issue invoices in dollars and agree with clients that the l/cs [letters of credit] and other means of payment will have a non-dollar basis,” he said.
Ali Shams-Ardakani, head of the energy committee of Iran’s Chamber of Commerce, said the move away from the dollar was “absolutely right” and was economically justifiable on the grounds that it helped prevent losses due to the fall in the value of the US currency. “It should have happened much earlier,” he said.
Mr Ghanimifard did not deny some problems with letters of credit but declined to say which banks were refusing to issue them, or whether they included Chinese banks which, along with UAE banks, have provided the greatest assistance to Iran in getting around sanctions.
“Iran uses many other normal means”, he said, adding that this did not include front companies as guarantors instead of banks, but instruments like promissory notes, drafts,

(3)
Gulf chambers plan conference on inflation By Agencies on Sunday, March 9 , 2008
http://www.business24-7.ae/cs/articl...eadlineID=3538
SNIPS
Gulf Arab policymakers and chambers of commerce officials will meet in Bahrain on March 23-24 to discuss how to tackle inflation at near-record peaks, including hearing International Monetary Fund recommendations.
+
The conference, entitled "The phenomenon of price rises in Gulf states: causes and future directions", will include speakers from the IMF and European Union, according to the conference agenda, which did not name the officials.
+
Dollar pegs in all Gulf Arab oil producers but Kuwait restrict their ability to fight inflation by forcing them to shadow US monetary policy when the Federal Reserve is cutting rates to ward off recession.
+
Gulf Arab inflation rates would fall "significantly" were the oil producers to sever their links to the dollar and allow their currencies to float freely, former Fed Chairman Alan Greenspan said during a regional visit last month.

(4)
Jordan cuts US dollar reserves
http://www.ameinfo.com/149869.html
The Central Bank of Jordan is trimming the amount of dollars in its foreign reserves because of the falling value of the U.S. currency and the need to service debt, reported Bloomberg citing an interview with Deputy Governor Faris Sharaf. The central bank official would not provide a break down of the bank's reserves, totaling around $7bn. The Jordanian dinar has been pegged to the dollar since October 1995 at an average price of 0.709 fils.

(5)
Saudi says dollar is 'good buy'
http://www.ameinfo.com/149873.html
The governor of the Saudi Arabian Monetary Authority said the US dollar, which has fallen to a record low against the euro, is undervalued and a 'good buy', reported Bloomberg. He also said there are 'no impediments' to the use of the euro as a reserve currency and it will become more attractive as it increases in liquidity. But the kingdom has no plans to start selling oil in euros and any such decision would be made by the oil ministry, he added.

Nikolay Kryachkov said...

The Moscow News Weekly reports:

"According to one Western investment bank, the total losses of the global financial sector could come to $600 billion. Of this sum, $350 billion would be the losses of banks and brokerage companies.

To date, the banking sector has written off $160 billion in debts owed to the sector. Such tremendous losses could slash lending to the real economy by over $900 billion, leading to a sharp decline in spending by businesses and households. This would inevitably cause the U.S. economy to stagnate"
.

Nikolay Kryachkov said...

Is the acceptance of the U.S. dollar as the oil currency a religious belief?

No, Ivo, I think the concept of "debt" is based on religious concept of "sin" in some religions.

Gold is limited resource and therefore it can't support unlimited growth of debts (except the situation of the constant growth of gold's price). Are you talking about Islamic banking or about growing gold's price?

About E-dinar.

Nikolay Kryachkov said...

In comparison with gold money oil & gas money:

- is for supporting exchange of goods & services - rather for movement than for accumulation of wealth in someone's hands;

- must not be converted into other currencies;

- is for supporting true (not symbolic gold based) liquidity.

Ivo Cerckel said...

Ivo asked:
Is the acceptance of the U.S. dollar as the oil currency a religious belief?

Nikolay replies:
No, Ivo, I think the concept of "debt" is based on religious concept of "sin" in some religions.

Ivo understands
from a lecture “The building blocks of the dinar economy” by Dr Ibrahim Vadillo delivered at a Conference on the Gold Dinar Economy in Kuala Lumpur in July 2007
http://www.allconferences.com/conferences/20070702034852/
that Islamic banking is haram-haram (unlawful and prohibited by Allah),
that this is by far their biggest crime
and that Islamic banking cannot be made good (according to Islamic standards).

Nikolay also said in his reply:
Gold is limited resource and therefore it can't support unlimited growth of debts (except the situation of the constant growth of gold's price).

Ivo:
or, which is the same, except the situation of a constant decrease of the value of the debts (deflation)

Nikolay also asks:
Are you talking about Islamic banking or about growing gold's price?

Ivo replies
I understand that in Islamic Banking,
it is not debt, but (excessive) interest (riba) which is sinful
(Riba = "Usury" or excessive and exploitative charging of interest, while according to others, interest per se.
http://en.wikipedia.org/wiki/Riba )

Ivo said earlier this week on another forum under
“Carnage on forex markets as US dollar plunges”
http://www.bignewsnetwork.com/forum/showthread.php?p=71976#post71976
In all these battles, the sheeple are always forgetting the Freegold concept as an alternative to the dollar regime.
Freegold makes gold the natural vehicle to temporarily or eternally store one’s wealth in order to be able to later convert it into tangible wealth.
Freegold in the central banks’ strong-rooms has the same role to fulfill as the Mona Lisa in the Louvre-museum in Paris.
A wealth reserve which would now be in the strong room (the Louvre) of a "Community of the Believers" (ummat al-mu'minin).

Ivo was then accused at that forum under the title “Default gold will never be king”
as follows:
you cannot actively use gold in trade ...too many people, monetary system is working, just weak American dollar for a few years, no biggie !

To which Ivo replied today under the heading “free-floating price of gold”:
A free-floating price of gold,
with gold as store of value or wealth reserve,
does NOT mean that
trade will be conducted in gold.
Trade will be conducted in currencies which have gold in reserve.

Nikolay is now saying:
In comparison with gold money oil & gas money:
- is for supporting exchange of goods & services - rather for movement than for accumulation of wealth in someone's hands;
- must not be converted into other currencies;
- is for supporting true (not symbolic gold based) liquidity.

Ivo thinks that Nikolay and Ivo are almost on the same line.
Both say that gold is a wealth reserve.
It is true that Ivo said that oil could be traded DIRECTLY in gold,
without having to pass through the ruble or the euro
(and thus without having INDIRECTLY to be traded in the gold reserves of the ruble and the euro.)

As Ivo said, the St. Petersburg Exchange is conducting since last week oil transactions in ruble.

Nikolay Kryachkov said...

I am not about reforming USD, EUR, Rubles, etc. - based on debts, gold, etc.

I am about oil & gas money - i.e. based on oil & gas. This kind of global money might be neutral for religions.

I don't think that wealth can be stored at all, though some illusions can be and they have real forms while people believe them.

Every nation has the right to trade national resources in national currency.

Nikolay Kryachkov said...

Ivo:

"It is true that Ivo said that oil could be traded DIRECTLY in gold, without having to pass through the ruble or the euro
(and thus without having INDIRECTLY to be traded in the gold reserves of the ruble and the euro.)"


Where this gold is stored?

Nikolay Kryachkov said...

IMF: "Policy makers world-wide needed to "think the unthinkable", said the IMF's deputy managing director, John Lipsky, because of the possibility of a "global financial decelerator"."

Ivo Cerckel said...

The gold is stored in the stores of the issuer of the money.

I have never heard of money based on oil and gas. I had understood that oil producers convert their earnings to gold. I am interested however.

Gold is the store of wealth par excellence. Gold is real wealth no matter what currency price is put on it. Therefore it is the natural vehicle to incorporate one's wealth. The natural vehicle to store one’s wealth temporarily or eternally in a currency in order to be able to later convert it into tangible wealth.

Here’s what the late Harry Browne has to say about the subject (in his book “The Economic time Bomb – How You Can Profit From the Emerging Crises”, New York: St. Martin’s Press, 1989, p. 174):
Although gold’s primary purpose is to provide protection during a period of inflation, it is also a SECURITY OF LAST RESORT – the one asset that isn’t owed to you, but represents value in your hand. gold is real money – portable, independent, divisible, durable, and recognizable. It survives when everything else fails.

As I said, one must be able to store one’s wealth temporarily or eternally in a currency in order to be able to later convert it into tangible wealth. That’s what gold can do, and what I had understood it is doing for oil producers. As I said, I am interested in your alternative view.

What is the essence of money?
http://www.usagold.com/goldtrail/default.html
Everyone has their own view as to the definition of money. It seems it can be almost any thing. It can be WEALTH but, not necessarily. Although the definitions may change and, the values of those things defined as money may change, the essence should not.
The essence seems to be "A marker of value that is [readily] recognisable, transferable and, accepted by others." […]
Somehow, the concept of REAL, USABLE, FUNGIBLE, TANGIBLE AND TRANSFERABLE RESERVES has gotten lost in the new central banker vocabulary.

I don’t think oil and gas satisfy this definition of money.

“Nation” comes from “nasci”, “to be born" in Latin. When you are born, you speak one, not five or six, language. There is no nation, not even one nation, on this planet.
Or can you show one country/state which is truly a nation?

Ivo Cerckel

Ivo Cerckel said...

OFF SUBJECT (or is it?)

Russian steelmakers in $4bn oil pipes deal
Financial Times, Mar 14 2008 11:40
Two Russian steelmakers are set to become among the largest suppliers of specialist steel pipe to the politically sensitive US energy industry, after a $4bn deal announced on Friday.
Read more >>
http://www.ft.com/cms/s/cc2164f8-f19e-11dc-9b45-0000779fd2ac,s01=1.html
SNIP
The deal means that the US energy sector will be dependent on two Russian companies for key parts of its key pipe requirements, at a time of increasing political concern in North America over energy security.

We don’t trade in Mona Lisa's.
(Freegold in the central banks’ strong-rooms having the same role to fulfill as the Mona Lisa in the Louvre-museum in Paris?
A wealth reserve which would be in the strong room (the Louvre) of a monetary union.)

Shall we trade in pipelines?

In the title of the article, FT indicates the price in … dollar.

Nikolay Kryachkov said...

Oil & gas money is not a fact or not yet.

It might be a private and/or state(s) initiative.

Regarding gold:

During Russian reforms in the second half of 19 century the government exported foodstuff in order to purchase gold for debt banking. The slogan was "be underfed, but export". Poor peasants paid debts because it was the price for their abolition from slavery (1861). One of the results was import of marxism and revolution.

In comparison with gold I think it's better to have oil than gold, because you can't burn gold to make your home warm.

All depends in which form oil and gas can be used for money emission.

Any nation/state which has one common language is nation. You know Russia, for example, has Russian as the common language and it doesn't contradict the fact that there are more 100 national languages (similar and different) in Russia. Even pop-culture reflects it - you can see "Born in the USSR" (the translation is here) and "Culture in networks".

There was a discussion in my group "Knowledge Persons" "Intangibles: brands, values ... Why not money?".

Nikolay Kryachkov said...

>Russian steelmakers in $4bn oil pipes deal

It's about interdependence.

Who knows maybe the Russian owner will sell steel in SKR to support Swedish currency?

Ivo Cerckel said...

I am sorry. I live in the Philippines. I don't understand your comparison: “In comparison with gold I think it's better to have oil than gold, because you can't burn gold to make your home warm.”

“All depends in which form oil and gas can be used for money emission.” That was precisely my question. How do you make oil and gas the basis for money emission?

“Russia, for example, has Russian as the common language and it doesn't contradict the fact that there are more 100 national languages.”
I want to know the mother tongue of people which is the language they speak on their death bed.
For at least some people in Russia this is NOT Russian.
Since Aristotle, the principle of non-contradiction says that it is impossible to be and not to be at the same time and to the same extent.
How can Mother Russia then be a nation?
So that gangsters masquerading as politicians, sorry as statesmen, can extract taxation which differs from theft only in that the thief does not pretend to stealing in the public interest and in that the thief does not come back periodically?
The same gangsters who imposed their language over the whole territory over which they allege to have sovereignty.

Ivo Cerckel said...

The nation must exist BEFORE the country/state can come into existence.

It is inadmissible to institute a state/country
and then to start the process of nation-building.

A nation exists or not.
It cannot be built up.

The nation is PRIOR to the state/country.
The state/country cannot make the nation.

Nikolay Kryachkov said...

>How do you make oil and gas the basis for money emission?

I'm not ready to say.

About Russia:

My mother tongue is Russian, but I know people (Tatars, for instance) which know Russian like Russians know and their own language as well. Sometimes they speak their language at home, but I know they usually think in Russian. Also there are many international families in Russia and Russian is common language for them.

Russian language is changing – sometimes it's difficult to understand all from how Russians wrote 300 years ago. There are Tatar (Turk) words in Russian language, etc. Both orthodox and islamic clergymen was in the old Russian army, etc. No contradictions here, it's symbiosis within the Russian state. Russain state and its territory is changing as well.

Russian, Ukrainian, Belorussian, Polish, Czech, Serbian, Croatian, etc. languages have the same roots. I can understand 50% in some of these slavic languages.

All this is not my opinion, it's from history. I thought you know this.

Aristotle was right in that principle, but except analysis don't forget about synthesis – i.e. consider the time period.

What is gangster language?

>It is inadmissible to institute a state/country
>and then to start the process of nation-building.

>A nation exists or not.
>It cannot be built up.

You can consider the United States of America. Do you think the EU has no future?

How far from the money issue we'll go?

Ivo Cerckel said...

If we moved away from monetary matters, it’s because you said:
Every NATION has the right to trade national resources in national currency.

Yes, I consider ALL politicians to be gangsters.

Most bureaucrats also, except those from the European Central Bank.
But most of these ECB-bureaucrats don’t understand what they are doing.

Ideas result in actions. Actions result in changes.
Most of the ECB bureaucrats don’t understand the ideas behind the euro.

We’ll see next week-end.

As I said, on March 23-24, that’s next week-end, there is a Bahrain Conference on inflation where Gulf Arab policymakers and chambers of commerce officials will unpeg their currencies from the dollar,

OPEC President Chakib Khelil said on March 5 that he and OPEC’s secretary-general were authorised to call an extraordinary meeting or hold phone consultations “at any time, depending on the pressures on the market”
(OPEC to maintain current output; crude hits new highs
Associated Press
3/6/2008 3:33 AM
http://www.observer-reporter.com/OR/...hru-03-05-0981
“If the prices are high, definitely they are not due to a lack of crude. They are due to what’s happening in the U.S.,” [OPEC, the Organization of Petroleum Exporting Countries, President Chakib Khelil] said he and OPEC’s secretary-general were authorized to call an extraordinary meeting or hold phone consultations “at any time, depending on the pressures on the market” — an apparent gesture to ease global economic jitters.)

What OPEC must do is call an extraordinary meeting for March 25, the day after the Bahrain conference and agree on shifting to another currency.

Ivo Cerckel said...

From Krzysztof Rybiński,
(former?) Deputy President of the National Bank of Poland,
's website
http://www.rybinski.eu/index.php?p=618&language=en
SNIP
US has committed a crime of short-termism. It will pay the price: US will lose global leadership, and the dollar will lose the global reserve currency status. Panic and ad hoc moves to weather the present storm make me more and more confident that the above scenario will happen faster than most people expect.

Ivo Cerckel said...

Sorry, thew Rybinski-link seems broken already.
Maybe, it will come back.
This was the e-mail whose link I opened. That link was working.

Sat, 15 Mar 2008 12:10:40 +0100 (CET)

A new entry titled 'Crisis of confidence and the sin of short-termism'
has been posted to Rybinski.eu.

http://www.rybinski.eu/index.php?p=618&language=en

Nikolay Kryachkov said...

What are the ideas behind the euro?

Ivo Cerckel said...

Nikolay,

Here’s glimpse at the ideas behind the euro.

If you want understand the total story,

you will have to take time to study the whole goldtrail at usagold:
The Gold Trail -- FOA reveals the message behind evolution of the gold market
http://www.usagold.com/goldtrail/

and before that Another’s Thoughts also at usagold:
Another (Thoughts!): The Profound Story of Gold and Oil
http://www.usagold.com/goldtrail/archives/another1.html

But it’s worth the effort.


So the here’s the glimpse:.


FOA (2/26/2000; 11:13:56MT - usagold.com msg#7)
Foundation

SNIP
A broad view from the ridge

http://www.usagold.com/goldtrail/archives/goldtrailone.html

Not long after the US defaulted on it's gold loans,,,, dollars held as gold certificates,,,,,, major thinkers began the long process of forming another world currency. One that would not maintain the fiction of a gold standard with the somewhat fixed gold prices inherent in such a system. The creation was distorted, to say the least. Just as the River in my first post was often seen in distortion, so too was this currency issue. It began with the European Currency Unit (ECU) and has later progressed to it's present state of the Euro.

After operating on a fiat system for 20+ years people are starting to realize that the only thing that backs a currency is the real productive efforts of their people. Yes, over time we always borrow more than out productive efforts can pay back and proceed to crash the money system.
But what else is new? (smile)

We call this a money's "timeline" and it's as new an idea a life, death and taxes! Time and debt age any money system until it dies. The world moves on. Only this time gold is going to play a different part in the drama. We will all watch it unfold.

It seems people saw something else that would make the Euro unique. Paid up assets also stand behind circulating money. Indeed, if someone owes a $100,000 dollar piece of land , has a good producing job and borrowed $50,000 against his land,,,,,, the world is likely to circulate that debt note as a fiat land backed currency. But, if his gold (the land) is worth $1 million in a free physical market,,, AND RISES FURTHER IF CURRENCY SUPPLY OUTPACES REAL PRODUCTION,,,,,,, and his other debts are relatively low ,,,,,, the same note would circulate just as effectively if the $50,000 was borrowed against his name alone.

In essence, the jump into the Euro is more based on a new currency that is more honest in dealing with our historic human dynamics. Let's try not lying to ourselves and admitting that gold alone in a currency will not remove our will to borrow and lend and therefore eventually defraud each other! Would it not be better to at least not shackle the money to gold. Indeed, a real physical freegold market will constantly be devaluating any fiat currency over a long term. While removing the need for CBs to maintain fixed exchange structure through a dirty float against gold.

But, the most important aspect is in the escape valve gold would provide to developing countries with positive trade flows. Those that wish to settle their debts outside the currency arena using gold as a settlement. Or, if they wish, to buy gold in the open market with their trade reserves.

The secret to all of this is in the "Legal Tender laws". Allowing gold to be used as a Legal Tender,,,, "for the settlement of all debts public and private",, but changing international law such that no form of debt can force it's payment in gold! This opens a one way street for gold and a two way street in fiat currencies. No one will lend gold because they cannot force it's return in the courts, thereby making gold a physical only international currency. Yet, on the other hand, we all must borrow in this modern world and currencies will be the only avenue for this. Creating a demand (and added value) for them in addition to general use demand.

The first thought many will have is that everyone will just buy gold to make debt payments, driving out fiat currencies. But remember, if you have debts they will be in currency settlement only. One will weigh the cheapest form for repayment! Gold in this atmosphere will be completely free to trade, become extremely expensive and stay that way. Not to mention that it's sale as a commodity (outside it's money use) on the private level will be well taxed.

Ivo Cerckel said...

This was my Kuala Lumpur paper last July.
(I was NOT a speaker in Kuala Lumpur.)

Forget about the first function of the Gold Dinar.

Replace “Bank Negara Malaysia”(BNM)
with “European Central Bank” (ECB)


The Islamic Gold Dinar -
the natural vehicle to store one’s wealth
by Ivo Cerckel

1.
In the initial stages after the introduction of the
Islamic Gold Dinar, the Islamic Gold Dinar will have
two functions to fulfil for Bank Negara Malaysia
(BNM).

By introducing the Islamic Gold Dinar, Malaysia will
show the world what is the natural vehicle to
temporarily or eternally store one’s wealth in order
to be able to later convert it into tangible wealth.
(first function)

By wanting to prevent the coming into play of
Gresham’s law, BNM will display the concept of
Freegold (freely-priced gold, no longer
“fixedly”-priced gold) as wealth reserve (no backing
or redeemability) to the world. (second function)

This second function will temporarily give rise to the
theoretical concept of the Gold Ringgit.

These two functions will merge once the Gold Ringgit's
wealth building power will be seen as "complementing"
BNM’s reserves.

2.
The Islamic Gold Dinar’s first function will be that
of the Islamic Gold Dinar in the strict sense, the
Islamic Gold Dinar as a physical unit of gold.

Its aim is to re-link currency to gold.

It will result in gold being real wealth no matter
what currency price is put on it,

thereby becoming the natural vehicle to incorporate
one's wealth,

the natural vehicle to temporarily or eternally store
one’s wealth in order to be able to later convert it
into tangible wealth.

The Islamic Gold Dinar achieves this aim of
remonetising gold by being himself an instance of the
100 percent gold standard whereby every unit of money
is a physical unit of gold.

3.
Gresham’s law, which is only applicable when
government intervenes in monetary matters in order to
debase currency, says that:

“Money overvalued by the State will drive money
undervalued by the State out of circulation”,

in short: “Bad money runs out good money”.

This means that if the market value of the physical
unit of gold, which the Dinar is, is higher than the
official exchange-rate of the Dinar vis-à-vis the
ringgit, the Dinar will be hoarded.

Gold continues to be a dollar-derivative because the
US Federal Reserve is able to create as much dollars
as it wants and is thereby able to keep the price of
gold (gold exchange value) in close connection with
the dollar-exchange-value.

A Gold Dinar whose value would still be determined by
the dollar exchange-value would be stillborn.

Hence,

we may temporarily need a free-floating gold ringgit.

This free-floating ringgit must be wringed out the
dollar-International Financial and Monetary System
(dollar-IFMS) to prevent the operation of Gresham’s
law as long as gold continues to be a
dollar-derivative.

This will make it possible that the ringgit will not,
like the old gold standard, be defined as a certain
quantity of gold,

but that dinar in reserve will be used as a
free-trading financial reserve.

Each increase in the price of gold will then bring
about an increase in the value of the ringgit’s
reserves and thus an increase in the value of the
ringgit itself.

4.
The Islamic Gold Dinar’s second function will be
exercised through the Islamic Gold Dinar being part of
BNM reserves. This will temporarily give rise to the
theoretical concept of the Gold Ringgit.

Indeed, the 26 March 2002 proposal of Prime Minister
Tun Dr. Mahathir Mohamad to settle international trade
balances in Islamic Gold Dinars included the proposal
that the Dinar be held as central bank reserve.

The second function of the Islamic Gold Dinar is to
co-determine the value of the ringgit.

By co-determining the value of the ringgit, BNM’s gold
reserves will prevent the operation of Gresham’s law,
will prevent that the ringgit runs out the Islamic
Gold Dinar, will prevent that the Dinar will be
hoarded because the value of the physical unit of
gold, which the Dinar is, would be higher than its
exchange-value to the ringgit.

If the theoretical Gold Ringgit is able to prevent the
operation of Gresham’s law until the Gold Ringgit's
wealth building power will be seen as "complementing"
BNM’s reserves, the two functions of gold in Malaysia,
and thus the two concepts of the Islamic Gold Dinar
and the Gold Ringgit, will have merged.

In the intervening period between the introduction of
the Islamic Gold Dinar and the merging of gold’s two
functions in Malaysia, the question remains:

How does BNM value these reserves?

5.
How could/should BNM value the gold reserves of the
ringgit?

How could/should BNM value that part of the reserves
of the ringgit which will consist of Islamic Gold
Dinars?

At present, accounting standards by central banks
differ, the US Treasury valuing its gold reserves at
fixed price, the State Bank of Pakistan (SBP) and
European Central Bank (ECB) valuing their gold
reserves on a mark-to-market (MTM) basis.

The ECB on a quarterly basis. The SBP even on a
monthly basis.

Nothing prevents the Ummah from copying what the SBP
is doing and keep gold (the Mona Lisa) in the strong
rooms of its central banks (the Louvre-museums in
Paris) and marking it to market price on a regular
basis. Every individual on this planet would then be
free to copy the concept of Freegold. By the same
token, the Ummah-concept will have been made real in
the minds of people

This, Freegold, is the total opposite of the absurd
IMF virtual SDR-situation.

Special Drawing Rights (SDRs) is a potential claim on
the freely usable currencies of International Monetary
Fund members. It is neither a currency, nor a claim on
the IMF. SDRs are defined in terms of a basket of
major currencies used in international trade and
finance. At present, the currencies in the basket are
the euro, the pound sterling, the Japanese yen and the
United States dollar. Freegold is the opposite of this
absurd (virtual) situation.

The IMF wants its members to use SDRs as reserve.

We, the People in the know of the fact that the
dollar-IFMS cannot be expected to start making the
concept of gold-wealth-reserve public, want Freegold
as reserve.

In this situation, the IMF has no more role (to
fulfil) except that of bailing out the US.

In this situation, Freegold in the Central banks’
strong-rooms have the same role to fulfill as the Mona
Lisa in the Louvre-museum in Paris. A wealth reserve
in the strong room (the Louvre) of a "Community of the
Believers" (ummat al-mu'minin).

Every individual, not just the Islamic World, would
then be free to copy the concept of Freegold
(freely-priced gold, no longer “fixedly”-priced gold)
as wealth reserve (no backing or redeemability).

Just like anybody can come to the Islamic World and
determine for himself what is the nature of the
Islamic-world economy and can then appreciate and/or
copy it.

Ivo Cerckel

Ivo Cerckel said...

This is the translation of my article which, in early February 2000, made it to Belgium's De Financieel Economische Tijd.
I only regret that I didn't write in it about oil for euro.


About euro, dollar, oil and gold

Insert: 'Will the euro replace the dollar as the reserve currency in international trade?'

Since its birth in early January 1999, the euro lost already 16 percent of its value vis-a-vis the dollar to the effect that one euro is now worth less than one dollar. If you look at the behaviour of the European Central Bank (ECB), this is no reason to worry. Why not? The answer has perhaps something to do with the role which the euro could play in international trade. Until the birth of the euro, international trade was completely dominated by the US dollar. Since the end of the 19th century, the dollar was freely convertible to gold. President Roosevelt knew better in 1933 and he retained this convertibility only for foreigners. Americans were ordered to hand in all their gold. President Nixon knew even better in 1971 and put also an end to this convertibility, then $ 35 an ounce, for foreigners.

The oil producers from the Middle-East could therefore obtain less gold than before with the dollars received for their oil. Out of love for gold, they were thus forced to increase their prices which caused the first oil crisis. The price of gold rose to over $ 800 up till 1980. Since then gold has fallen back to $ 230 to be at present just above $ 280.

The reason is not that there is too few but too much demand for gold. Due to the high demand, 10 to 14,000 metric tonnes of paper gold contracts have been signed since 1980. Those contract are concluded by gold mines with the bullion banks, among others, the prominent US banks J.P. Morgan, Goldman Sachs, Credit Suisse/First Boston and Republic, in order to secure their future income. The contracts are being guaranteed by the central banks. They are in fact wagers upon the future price of gold as it will be determined by the buying and selling of the traders of physical gold. The contracts are sold by the bullion banks to the oil producers and by the gold mines to the hedge funds. Every increase in the price of gold leads to problems for the gold mines (cq the hedge funds) which must then sell gold below the market price. And what's the risk for the hedge funds if the realise that they cannot reimburse their loans because the necessary gold will only be mined in 10 years time? Hence, the recent problems for the whole financial sector and especially for the quoted banks and thus for the dollar in connection with the fiasco's of Ashanti Goldmines and Long Term Capital Management (LTCM).

The existence of this paper gold market is being threatened just as the dollar was threatened in 1933 and 1971. Because this market is "expressed" in dollars and because there is now competition for the US dollar, this dollar is also being threatened. What now? Will the euro replace the dollar as the reserve currency in international trade? This euro is being backed by 15 percent of gold reserves. Because the trade balance euroland is, in contradistinction to the American trade balance, positive, a rising price of gold will support the value of the reserves of the euro and thus the euro itself.

On September 26, 1999, 15 European central banks signed the Washington Agreement, during an IMF meeting. This agreement recognised that gold will remain an important part of global monetary reserves and that the involved central banks will, apart from the sales which have already be decided, not sell gold in the next five years.

On December 06, 1999, the Dutch central bank announced that it would sell the first 100 tonnes of the 300 tonnes provided for in the Washington Agreement, through the Bank for International Settlements (BIS) and thus not through the London market. The BIS can sell or place gold without influencing the price of paper gold. This announcement by the Dutch central bank is the first step of euroland which confirms its direction. Part of these 100 tonnes have in the meantime been placed in brackets/pieces through the BIS. Switzerland is also considering to sell through the BIS.

On Tuesday January 25, 2000, the Bank of England proceeded to a sale of 25 metric tonnes of gold through a 'private' auction whereby demand exceeded offer by a factor of 4.3. The price at which the gold was sold was only 3 dollar more than the spot price of $ 286 for paper gold on the London market that day. However, it is now clear that there exist two prices of gold, one for paper gold and one for metal gold. The hour of truth comes when the ECB will buy gold on the market with the dollars in its reserves. This will increase the value of the euro. The dollar will be confronted with the fact that the dollars circulating abroad will be repatriated which could perhaps lead to inflation in the US.

Ivo Cerckel



This is the update from 05 October 2005
http://www.usagold.com/cpmForum/archives/5200510/default.html

968 (10/5/05; 11:34:38MT - usagold.com msg#: 136659)
Consolidated financial statement of the Eurosystem as at 30 September 2005
http://www.ecb.int/press/pr/wfs/2005/html/fs051005.en.html
Gold : 149,88 billion euros
Foreign exchange reserves : 165,40 billion euros

Since the introduction of the euro in 1999, the forex reserves of the ECB have decreased from ca 231,00 billion euros to 165,40 billion euros now.
In contrast, the valuation of their goldreserves increased from 99,00 billion euros to 149,88 billion euros.
So, it seems that the ECB uses the increase in the POG as a legitimation to decrease their forex reserves.
It seems that some CB's aren't afraid of a high goldprice.

Randy, Belgian, any thoughts


Belgian (10/5/05; 12:32:21MT - usagold.com msg#: 136665)
@ 986
The thoughts about the ECB's rising goldreserve value versus its declining forex ($ fiat reserves) value, remain extremely simple and straithforward : On the road to FREE PRICED GOLD as RESERVE in Euro(welfare)land !

No need to emphasize again that this is a FACT and not a theory (dream)!

But who cares about this brand new MTM gold-fundamental...with the precious exception of Sir Strauss, of course !?


TownCrier (10/5/05; 14:21:41MT - usagold.com msg#: 136673)
968 and Belgian, it is the simplest-possible demonstration of fact over theory
Amen.

And having the benefit of first-hand dialogues, I assuredly know you can add Miner49er's name to the short list.

R.


Belgian (10/5/05; 15:01:07MT - usagold.com msg#: 136678)
Indeed Sir Towncrier...
And btw...in that same ECB financial statement, we learn that gold-reserve-coins moved from one bank of the ESCB to Another bank of the ESCB. Shall we cautiously call this...re-dis-tri-bu-tion...shall we !? Perhaps...maybe... with a very particular little purpose...or is it only an innocent pass time ?

Ivo Cerckel said...

Caradoc (usagold.com 15March2008; 2:12)
FOA’s words from 1999

Now that we’ve seen POG at $1,000 and now that Sinclair has been dropping hints that $1,650 isn’t an upper limit, allow me to hark back to what FOA told us as far back as 1999 about where gold is going…
***text follows***
The thousands and thousands of contract derivatives that now are outstanding today, cannot possibly be covered now with delivered gold at any price. This situation is going to “seriously” escalate.

When people say that they will gladly sell gold at $5,000, I counter that they must have never experienced war, “up front and personal”. Remember, battles don’t become “HOT” because everyone is “gladly” selling their “now in demand weapons” to the highest bidder! Gold will cross $1,000 because everyone is buying it at $1,000 and asking for more. Trust me, when your neighbours are buying 1/32 ounce wafers with whatever money is in the house, you won’t be unloading bars to buy a new house. Nor will any strong spirit trader be selling short a ten lot on comex ! Believe it!

This same dynamic is not lost on the human controllers at the CBs. Yes, they breath and feel the same media vibrations you take in. During the events directly before us, any and all contracts will be swept along on this raging river of economic turmoil. Be they contracts for, gold, currencies, bonds, stocks or commerce, all of them will lose credibility as the worlds massive trade settlements shifts from one medium to the next. Just as in Greenspan’s line of thinking, when the armies invade the grab the rare coins, art work and gold. Forget the currency!

As these events progress real assets don’t devalue. No, just your ability to profit from their ownership comes into question. Like this: If a forest fire suggests that all forest owners may be at risk, then any gold miner will share the risk of his “rooted gold” being burned also. The currency that is at risk of change today is the dollar. Therefore we can be assured that any company that owns what has become a “currency war weapon” (gold) will own “questionable assets”, especially US assets.
***end of text***

A bit cryptic, maybe, but long before Warren Buffet described derivatives as “financial weapons of mass destruction,” FOA’s warning against them was posted on this forum. True, FOA apparently expected paper promises to lose credibility long before 2008, but that just means he didn’t foresee how the tech bubble and the real estate bubble would keep us so busy chasing after dollars that we wouldn’t be looking too closely at why they were supposedly worth the chasing. We’re now being offered a “green bubble” with the prospect of solar and alternative energy stocks repeating the performance of Internet stocks during 1999, but my hunch is that even Joe Sixpack won’t fall for a third bubble within a decade and, besides, Joe has tapped out all his house equity; he’s using credit cards to buy groceries and gasoline, and he can’t afford to buy into another bubble even if he believed in it. Instead, “…all contracts will be swept along on this raging river of economic turmoil.”

Regards to all,

Caradoc

Nikolay Kryachkov said...

Is my understanding correct (?):

1. Freegold backed euro means - no matter how big the price of gold is (if to buy gold with usage of other currency), but stable price: 1 bottle of milk = EUR 1 matters.

2. ECB should have a monopoly on gold reserves/money emission and keep them safe in the EU.

3. Freegold concept saves debt nature of modern money because any derivative has the same piece of gold behind it (see #1).

4. OPEC members should choose EUR as a reserve currency.

5. Exporters outside the EU are forced to sell commodities in EUR/Freegold and keep earnings in the EU.

6. If you want to share a part of the EUR "print-shop" you should ask a permission to join the EU.

Ivo Cerckel said...

Nikolay asked:
Is my understanding correct (?):

PROVISIONAL ANSWERS – TO BE COMPLETED LATER
(some may even be contradicted later)

1. Freegold backed euro means - no matter how much the price of gold is (if to buy gold with usage of other currency), but stable price: 1 bottle of milk = EUR 1 matters.
No, Freegold means a free-floating price of gold. The price of the euro depends on the price of gold in reserve. The price of the euro will then increase both in the case of an increase in the price of gold as in the case of an increase of the amount of gold in reserve.
(see also the last sentence of my attempt to answer to question 3.)

2. ECB should have a monopoly on gold reserves/money emission and keep them safe in the EU.
No, you can pay with gold directly if you want.
Anybody can emit money.
Of course, Gresham said that “bad money runs out good money” (More on Gresham’s law in my attempt to answer to question 3.)

3. Freegold concept saves debt nature of modern money because any derivative has the same piece of gold behind it (see #1).
What is the debt nature of money?
What do you mean by “a derivative of money”?
Murray N. Rothbard has somewhere a paper “The Case for a 100 Percent Gold Dollar”
http://www.mises.org/story/1829
But that was an attempt to re-introduce something like the old gold standard.
Freegold is something else
As I said in my Kuala Lumpur paper, Freegold must be wringed out the dollar-International Financial and Monetary System dollar-IFMS) to prevent the operation of Gresham’s law as long as gold continues to be a dollar-derivative.

(But I just asked you, Nikolay, what you mean by “a derivative of money”.
Perhaps I don’t know what I am writing about.
I said that gold is now a derivative of the dollar.
Your question, as I understand it, concerns derivatives of Freegold.
That’s a different question.
Well, perhaps I am not contradicting myself.)

I continued my Kuala Lumpur paper as follows:
This will make it possible that the ruble will NOT, LIKE THE OLD GOLD STANDARD, be defined as a certain quantity of gold, but that gold in reserve will be used as a free-trading financial reserve.
Each increase in the price of gold will then bring about an increase in the value of the ruble’s reserves and thus an increase in the value of the ruble itself.

4. OPEC members should choose EUR as a reserve currency.
Or gold or any gold-backed currency like the ruble, the dinar, the ringgit or the rupee.

5. Exporters outside the EU are forced to sell commodities in EUR/Freegold and keep earnings in the EU.
Who’s going to force them? Legal tender laws?
And keep their earnings in the EU? And no possibility to enjoy one’s earnings at home?

6. If you want to share a part of the EUR "print-shop" you should ask a permission to join the EU.
No, EU should be abolished, so the ruble can “join” Freegold/the euro.
But if there are no legal tender laws, that may not even be necessary.

AS I SAID,
IT IS POSSIBLE THAT I WILL LATER CONTRADICT SOME OF THESE PROVISIONAL ANSWERS

Ivo Cerckel

Nikolay Kryachkov said...

1.

>No, Freegold means a free-floating price of gold.

Price in what currency?

Also you said:

"By co-determining the value of the ringgit, BNM’s gold reserves will prevent the operation of Gresham’s law, will prevent that the ringgit runs out the Islamic
Gold Dinar, will prevent that the Dinar will be hoarded because the value of the physical unit of gold, which the Dinar is, would be higher than its exchange-value to the ringgit".

I can't understand this:

"The price of the euro will then increase ... in the case of an increase of the amount of gold in reserve".

2.

Do you have statistics how gold is distributed?

3.

>What is the debt nature of money?

Money emission for interest/debt.

>What do you mean by "a derivative of money"?

An interest/debt chain started after money emission for interest/debt - a pyramid scheme.

4.

>Or gold or any gold-backed currency like the ruble, the dinar, the ringgit or the rupee.

If some of the OPEC members don't have gold to reserve their currency, they will be dependent on those who has gold or gold backed currency, or can store gold (Switzerland). Metal gold trading has some space limitations - gold's buyers and sellers prefer Europe for physical presence of gold.

5.

>Who’s going to force them?

See # 4.

6.

>No, EU should be abolished, so the ruble can “join” Freegold/the euro.

I don't see a difference. EU is a form, EUR is an essence, I think.

Ivo Cerckel said...

1.
Price in any currency.
In Malaysia, in the Islamic Gold Dinar, i.e., in gold.

2.
I don’t have any statistics about gold.

3.
I think we can agree that the present monetary system is a pyramid scheme.

4.
OPEC is selling oil.
OPEC is thus receiving something, possibly money, in exchange for it.
It doesn’t matter whether OPEC has gold in reserve.

5.
It’s not because OPEC wouldn’t have gold (money) in reserve (at home),
that OPEC couldn’t spend gold (money) at home.

6.
The EU is a union of people.
It has substantive legal provisions which, so we are told, will create a European nation, euhr union, formerly (or still also) a community.

The euro is a medium of exchange.

In Chapter 4 of Book Zeta his “Metaphysics”, Aristotle defines substance as the essence of the thing whose substance is sought, the what-it-was-to-be-that-thing. This expression, which uses a phrase in this way in the grammatical role of a noun, is as unnatural in Greek as in English. The key to the meaning of the expression seems to lie in the puzzling past tense embedded in it. It suggests the idea of what something was all along going to, destined to, become.

It is the question of substance and essence that solves the problem at the heart of Aristotle's entire system by reintegrating the being of the world with our need to comprehend it. (Hugh Lawson-Tancred, “Introduction”, in: Aristotle, “The Metaphysics”, Penguin Books, 1998 and 2004, xi, pp. xxx-xxxi)

You are arguing that the euro is the essence/substance of the EU, the union of people.

This essence/substance, the euro, is, thus according to you, what-it-was-to-be-the-EU, what the EU was all along going to, destined to, become.

Okay, the euro has now been achieved.
The EU is now what it was along along destined to become.
So we can abolish the EU and keep the euro, quod erat demonstrandum (what had to be proven.)

Now we can show to the world why the EU should be abolished and the euro should stay.

Ivo Cerckel

Homo non intelligendo fit omnia (G. Vico) – man has become all he is without understanding what happened
-some facts are only known to some individuals
(quoted by Friedrich August von Hayek,
“The confusion of language in political thought with some suggestions for remedying it”,
London, Institute of Economic Affairs, Occasional Paper 20, 1968, p. 9)

Nikolay Kryachkov said...

Why do you think that at least (except Lyndon LaRouche, for instance) both Islamic World and OPEC will not recognize that through gold/freegold euro they will touch usury (pyramid scheme) (?), because you said:

"Yet, on the other hand, we all must borrow in this modern world and currencies will be the only avenue for this. Creating a demand (and added value) for them in addition to general use demand".

and just because banks remain banks in your freegold euro concept.

Oil exporters can sell oil for national currency even it is not gold/freegold euro backed. Because oil is in demand. Thus they can separate themselves from usury (if they want) in the situation of non-transparent ownership on gold and get (through national currency) needed amount for spending abroad. It's a question who controls whom.

I suppose that oil & gas money might "simplify" this:

oil/national resources - freegold euro - goods & services

And what will be with poor EU members like Baltic countries if EU will be abolished?

Ivo Cerckel said...

Nikolay

First of all, I am happy to inform you that my advisers tell me my outline is not totally wrong
In my message of Sunday, March 16, 2008 3:52:00 AM , I said that it was possible that I would later contradict some of these provisional answers. This will thus NOT be the case.
Ough, I respected the principle of non-contradiction.

It’s now eight years that I no longer live in Europe. It’s very difficult for me to appraise the situation. You are asking what will be with poor EU members like Baltic countries if EU will be abolished. Do Baltic countries at present receive hand-outs from Brussels?

As I said, I understand from a lecture “The building blocks of the dinar economy” by Dr Ibrahim Vadillo delivered at a Conference on the Gold Dinar Economy in Kuala Lumpur in July 2007
http://www.allconferences.com/conferences/20070702034852/
that Islamic banking is haram-haram (unlawful and prohibited by Allah),
that this is by far their biggest crime
and that Islamic banking cannot be made good (according to Islamic standards).

If usury means excessive interest, then I can understand why some people and even religions, maybe even Christianity prohibit it. (As Von Mises indicates, the prohibition of usury is anterior to Christianity).

Most Muslims seem however to understand usury (riba) as the prohibition of ALL interest.
I don’t understand how trade can survive without interest.
As you are saying, all must borrow in this modern world.
Maybe that‘s why Dr Vadillo said that Islamic banking is haram-haram.

I understand this as meaning that under Islam, banking is not possible.
Islamic banking thus violates the principle of non-contradiction
(It is impossible to Islamic banking to be halal
and not to be halal at the same time and in the same respect
- halal = lawful and permitted by Allah.)

There is thus no way, OPEC can extricate itself from usury
(hence, no way Freegold will ever openly be accepted by OPEC?)

It’s interesting you bring up Lyndon Larouche
Two days ago I received on my Gold Rupee blog at blogs.siliconindia.com the following reaction to my message
“ Bear Stearns – the end of the dollar-regime”
Comments(2) | Category : Business | Posted on 14th Mar 2008
http://blogs.siliconindia.com/goldrupee/s80ZNuD241503993 :

Regarding the economy, Lyndon Larouche, U.S economist has predicted the current collaspe many years ago. He developed a chart that has preceded and predicted exactly what is happening now. If we are to prevent the collaspe of the world financial system, then there are certain things which we as a species must cooperate together to acheive. Please may I refer you to larouchepac.com. Once there please view the webcast from Washington D.C on January, 17 2008 "The greatest financial crash ever". and also webcast, March 12, 2008 "Averting doom". The simple proposal that Mr. Larouche suggest, refering to Franklin Roosevelt and the great depression of 1933, is the begining of the Solution to bring the world economy together again. Put aside your doubt and denial, and open your mind . We still have time to solve this crisis together.
Posted by garyis jensenen on 15th Mar 2008 | delete

To which I replied:
The system is pervert.
The system must thus be abolished and replaced by Freegold.
The crisis will do that.
I don’t want to solve or prevent the crisis.
Quite to the contrary, I hope that the crisis has its full effects.
The problem is that worthless piece of paper called the dollar.
I will do everything I can to prevent to coming into existence of a new FDR.
Socialism collapsed last century.
Time is up for the imbeciles who think they are stronger than reality.
Reality is an objective fact which has to be taken in account. Socialists think that whatever they decree can be implemented. I hope reality will now force them to suffer the consequences of their views.
Posted by Ivo Cerckel on 15th Mar 2008 | delete

The ECB is providing the European markets with … dollars.
Isn’t this an elegant way to get rid of its Eurodollars?

PRESS RELEASE
11 MARCH 2008 - SPECIFIC MEASURES TO ADDRESS LIQUIDITY PRESSURES IN FUNDING MARKETS
http://www.ecb.int/press/pr/date/2008/html/pr080311.en.html
Since the co-ordinated actions taken in December 2007, the G10 central banks have continued to work together closely and to consult regularly on liquidity pressures in funding markets. Pressures in some of these markets have recently increased again. We all continue to work together and will take appropriate steps to address those liquidity pressures.
To that end, today the Bank of Canada, the Bank of England, the European Central Bank (ECB), the Federal Reserve and the Swiss National Bank are announcing specific measures.
ECB DECISIONS
Today, the Governing Council of the ECB has decided, in conjunction with the Federal Reserve and in the context of the Term Auction Facility (TAF), TO OFFER US DOLLAR FUNDING TO EUROSYSTEM COUNTERPARTIES AS IT DID IN DECEMBER 2007 AND IN JANUARY 2008. It is intended TO CONTINUE THE PROVISION OF USD LIQUIDITY for as long as the Governing Council considers it to be needed in view of the prevailing market conditions.
The next operation will be conducted according to the same procedures as those carried out in December 2007 and January 2008. The submission of bids will take place on 25 March 2008 for settlement on 27 March 2008, with a maturity of 28 days and for an amount of up to USD 15 billion. The operational details will be available via the ECB’s Website [see annex on the right side].

==

In the meantime,
gold crossed the 1020 dollar line this Asian morning.

Ivo Cerckel said...

US is debasing coinage,
hence Gulf urged to depeg

US losing confidence vote as investors flee
By Ambrose Evans-Pritchard, International Business Editor
The Daily Telegraph 12:31am GMT 17/03/2008
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/03/17/ccview117.xml
SNIP
Rightly or wrongly, a view has taken hold that Washington is cynically DEBASING the COINAGE, hoping to export its day of reckoning through beggar-thy-neighbour policies.

Gulf urged to cut links with falling dollar
By Sonia Verma in Doha
The Times, March 17, 2008
http://business.timesonline.co.uk/tol/business/economics/article3564014.ece
SNIP
Central banks in the Gulf are being urged to fight inflation by SEVERING the LINK between their currencies and the DOLLAR.

Nikolay Kryachkov said...

>Do Baltic countries at present receive hand-outs from Brussels?

Yes, as far as I know.

>As you are saying, all must borrow in this modern world.

Ivo, I mentioned your statement. I personally don't borrow, but I am not religious.

>I don’t understand how trade can survive without interest.

I think, the problem is not trade at all, but money and money derivative trade.

Ivo, since you state:

"Reality is an objective fact which has to be taken in account. Socialists think that whatever they decree can be implemented. I hope reality will now force them to suffer the consequences of their views".

do you think that current monetary system was created by socialists?

In that case socialism = capitalism.

Maybe it's true, because the functions of money in these systems was almost the same, but the Soviet system was more centralized.

Did you watch this movie.

>Now we can show to the world why the EU should be abolished and the euro should stay.

Why EU is a problem and should be abolished? How you can do that?

>No, EU should be abolished, so the ruble can “join” Freegold/the euro.

How it can?

Ivo Cerckel said...

Nikolay,

The present monetary system results from Nixon’s August 15, 1971 abolition of the Bretton Woods system and thus of the raison d’etre of the IMF.

"Reality is an objective fact which has to be taken in account. Socialists think that whatever they decree can be implemented. I hope reality will now force them to suffer the consequences of their views".

The achievement of the euro takes also the raison d’etre of the EU away.

How to abolish the EU?
Bureaucracies have a tendency to perpetuate themselves. (see the IMF)
Revolution can come in bureaucracies’ way.
I am still hoping that the upcoming Greater Depression will be very instrumental in eliminating bureaucracies (temporarily, the bastards will unfortunately find a way to come back) without the need for revolution.

Nikolay Kryachkov said...

Ivo, what you want will not occur, I think.

Do you know why?

Because banking (even within the freegold standard) is impossible without the state - the EU in your statements. Therefore your suggestion for ruble ""joining" freegold/the euro" without the EU has no logic (is contradictive).

Oil & gas money is religion neutral and is not about banking, crisis and depression. There is no need in abolishing the states with their banking to use oil & gas money.

FOFOA said...

I believe that Freegold has a high probability in light of recent events.

Nikolay Kryachkov said...

When it will be used?

Ivo Cerckel said...

Gold is already being used as a currency.

Ambrose Evans-Pritchard said in yesterday's Daily Telegraph that gold is now a super currency.

Financial Crisis: Who is going to bail out the euro?
Europe must pull together if it is to avoid further financial disaster, argues Ambrose Evans- Pritchard.
By Ambrose Evans-Pritchard
Last Updated: 10:56PM BST 08 Oct 2008
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/3161588/Financial-Crisis-Who-is-going-to-bail-out-the-euro.html

Hence, Gulf Central Banks are buying gold.

Gulf central banks look to gold as uncertainty rises
By Cleofe Maceda, Staff Reporter
Published: October 07, 2008, 23:26
http://www.gulfnews.com/business/Commodities/10250412.html
SNIP
Dubai: Central banks in the Gulf and elsewhere in the world will likely turn to gold as the global banking crisis boosts the metal’s appeal as a buffer against dire economic conditions, industry sources said on Tuesday.

(Note how this article given a nice description of the wealth value of gold. This means that gold is not hedge, nor … money.)

Ivo
http://blogs.zawya.com/goldiswealth/

FOFOA said...

Nikolay,

I wouldn't say that Freegold will be "used". It's more like it will "happen". I believe the process is already underway. As Ivo points out, thought regarding gold is changing before our eyes.

The signs of this happening are everywhere. One trigger for the birth of Freegold would be a major default on COMEX. And one way to see that coming a couple months ahead of time is "basis" and "backwardation", as explained brilliantly by A. E. Fekete.

And just today Tom Szabo points out that the basis of gold is falling and the trend is toward backwardation. I think we could see a major default in the paper gold market in December.

Another trigger would be a shift in the way the Middle Eastern oil producing nations price their oil. If "oil were to bid for gold", that would cause the birth of Freegold. And as Ivo points out, those thoughts are already underway.

Another trigger for the birth of Freegold would be the death of the dollar as the world reserve currency brought about in certain ways. The Euro is already positioned to benefit from a high gold price. Russia is heading that direction. China and the oil producers value gold. So the stage is set and the dollar is crumbling. Sure the USDX rises right now, but that is actually a sign of the birth of freegold. Since the dollar sees gold as an enemy, when gold and the dollar are seen to rise together it is supposed to be a sign that the end is near.

Anyway, the point of all of this is that with Freegold's emergence, there will be a massive transfer of wealth from paper holders to gold holders. So to buy some gold coins right now could be the investment opportunity of the century. Perhaps even better than getting in on the Microsoft or Google ipo's.

Ivo, I will take a look at your blog. It sounds interesting.

FOFOA

Nikolay Kryachkov said...

Clear. Thank you.

Ivo Cerckel said...

Further elaborating?

http://georgewashington2.blogspot.com/2009/04/fiat-currencies-may-be-replaced-by-gold.html

see my comment at the URL

Nikolay Kryachkov said...

Maybe this will do?

"As I had predicted - Thailand can use rice as international currency reserves"

I have left the issue without care.

The roots are in ideology.

"Bankers, loans and networks in knowledge economy"

Ivo Cerckel said...

Nikolay,

You are saying:
In the age of networks and transparency people can connect each other and form local and global projects. It means instead of purchasing what is needed for projects and going to bankers for loans people can use natural investments (materials, equipment and knowledge) and share results according to agreement.
(Bankers, loans and networks in knowledge economy
http://groups.google.com/group/KnowledgePersons/browse_thread/thread/df96abe04e9643be )

Ivo:
This comes close to Islamic banking where lender and borrower share the risk.

Islamic banking is a system which incorporates adherence to the principle of riba, usury. It is an important Islamic principle that there should be equality of risk. From a banking point of view this means that the risks and rewards should be shared between borrower, bank and depositor.
(Ruqaiyyah Waris Maqsood, “A Basic Dictionary of Islam”, New Delhi, Goodword Books, 1998 (2002 reprint), verbo “Islamic banking”)

In Islam, money has intrinsic value.

Islamic finance denies however intrinsic value to money.

Islamic financial tools ‘key to address crisis’
http://www.saudigazette.com.sa/index.cfm?method=home.regcon&contentID=2009041134727
1 Comments have been posted. Post Your Comments
Hadith in Sahih Muslim
Money in Islam must have intrinsic value. Do not sell gold for gold, except like for like, and don’t increase something of it upon something; and don’t sell silver unless like for like, and don’t increase some thing of it upon something, and do not sell for ready money something to be given later. (Sahih Muslim). But in Jean-Paul Laramee’s 2008 book La finance islamique a la francaise, Abdel Maoula Chaar writes that Islamic finance denies any intrinsic value to money. END OF QUOTE

Here’s the full text of the Hadith of Prophet Muhammed (Peace and Prayers Be Upon Him) in the Sahih Muslim:
“Abu Said Al Khudri reported Allah’s messenger as saying: “gold for gold, silver for silver, wheat for wheat, barley for barley, dates for dates, and salt for salt. (When a transaction is) like for like, payment being made on the spot, then, if anyone gives more or asks more, he has dealt in riba (usury), the receiver and the giver being equally guilty.”

This Hadith of Prophet Muhammed establishes two things:
ONE ‘money’ in Islam is either precious metals such as gold and silver, or commodities such as wheat, barley, dates and salt.
TWO when gold, silver, wheat, barley, dates and salt were used as money, their value was ‘inside’ and not outside’ the money. Hence, it is established that ‘money’ in Islam must possess intrinsic value.
(Imran N. Hosein, “Explaining the Disappearance of Money with Intrinsic Value”, paper delivered at the International Conference on the Gold Dinar Economy, held in Kuala Lumpur on 24 and 25 July 2007, p. 1)

Here’s the full reference to Abdel Maoula Chaar:
Abdel Maoula Chaar, “Chari’a et institutions financières islamiques”, in : Jean-Paul Laramée, éd., “La finance islamique à la française : Un moteur pour l'économie, une alternative éthique”, Paris, Secure Finance, November 2008, 53, pp. 54-55 :
la finance islamique dénie toute valeur intrinsèque à la monnaie.

You are saying above:
The secret to all of this is in the "Legal Tender laws". Allowing gold to be used as a Legal Tender,,,, "for the settlement of all debts public and private",, but changing international law such that no form of debt can force it's payment in gold! This opens a one way street for gold and a two way street in fiat currencies.
(Only USD or EUR - oil relationship?
Thursday, March 13, 2008
http://knowledgeperson.blogspot.com/2008/03/only-usd-or-eur-oil-relationship.html )

How does one in your proposal determine the value of a fiat currency?

Best regards,
Ivo

Nikolay Kryachkov said...

Ivo, I was not saying about borrower, bank and depositor for that kind of project economy. This can also come close to project economy, described in "Germany 2020", but I do not think that it is the same.

Any fiat currency can be used for project economy.

"No usury" is not Islamic invention and was in Christianity, as far as I know.

Regarding your question - "How does one in your proposal determine the value of a fiat currency?" - I can say that there are 2 obstacles:

1. All the historically given variants of currency constructions were used but have reached their limitations;

2. A problem to stop and replace the current fiat currencies by something better, which looks impossible.

Also we know that in 1913 the private bankers used the state - the USA for legal tender.

I would ask another question - is there a need to use any fiat currency only for exchange of goods?

I consulted Russian civil law and found the reasons not to use the concepts of "currency" and "legal tender" for that at all. Therefore "natural "money"" (based on oil & gas, rice etc., but not gold) without usury can be started beyond banking regulations 100% legally. This kind of exchange can be taxed within Russian tax law.

It is about freedom of choice - USD, EUR, RBL ... or "natural "money"".

There is no need to change international law.

Ivo Cerckel said...

Nikolay,

1.
Gold is wealth.
Oil is the only commodity in the world that is large enough for gold to hide in.
http://bphouse.com/honest_money/gold-and-oil/

Oil, hiding gold, is thus money to the same “extent”, or in the same “respect", as gold.

This means that

IF
currencies based on rice are natural money

AND IF
a currency based on gold is not natural money

THEN
a currency based on oil is not natural money,
just like a currency based on gold (hiding in oil) is not natural money.


2.
IF
copper is a monetary metal,
or rather if copper is NOT a monetary metal,

THEN
the “natural money” could be the copper currency,

In other words,
the “fiat” currency could THEN be the copper currency whose value would be determined by the value of copper.

A 'Copper Standard' for the world's currency system?
Hard money enthusiasts have long watched for signs that China is switching its foreign reserves from US Treasury bonds into gold bullion. They may have been eyeing the wrong metal.
By Ambrose Evans-Pritchard
Last Updated: 6:54PM BST 15 Apr 2009
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/5160120/A-Copper-Standard-for-the-worlds-currency-system.html
SNIPS
Zhou Xiaochuan, the central bank governor, piqued the interest of metal buffs last month by calling for a world currency modelled on the "Bancor," floated by John Maynard Keynes at Bretton Woods in 1944.
The Bancor was to be anchored on 30 commodities -- a broader base than the gold standard, which had caused so much grief in the 1930s. Mr Zhou said such a currency would prevent the sort of "credit-based" excess that has brought the global finance to its knees
+
Beijing may yet buy gold as well, although it has not done so yet. The gold share of reserves has fallen to 1 percent, far below the historic norm in Asia. But if a metal-based currency ever emerges to end the reign of fiat paper, it is just as likely to be a copper standard as a gold standard. UNSNIP

Ivo: I just found this column by Ambrose Evans-Pritchard. I need some time to reflect on it, but I give my first impressions.

Ivo

Ivo Cerckel said...

Yes, gold is also an industrial metal, but only slightly. Gold is mostly a monetary metal.
Copper, like wheat, is just another commodity.
(Harry Browne, “The Economic Time Bomb”, New York, St Martin’s Press, 1989, p. 188)

I, Ivo, thought
that copper has no monetary qualities, no qualities which make it suitable as money,
and that it is only an industrial metal
but I may have been wrong.

Ivo Cerckel said...

A currency based on copper would then be natural money
like a currency based on rice.

A currency based on gold (hiding in oil),
and thus a currency based on oil,
would then not be natural money.

Ivo Cerckel said...

From a friend - Re: Ambrose’s copper standard article

Copper-prices are strongly rising. The dollar-financial industry continues to organise speculation on everything they can "liquidify".

The money-masters play ...

Ambrose gives it a nice explanation (justification). All speculation must be accompanied with a smokescreen of gentle talk as a cover for the financial brutalities.

For Ambrose (the dollar-financial industry), a nice opportunity to bash gold in one single go.

Many people are slowly but certainly getting fed up with this raw (absurd) dollar-monetarism... (read : constant leverage)

Ivo Cerckel said...

Maybe the Union of Arab Banks will address the causes of the crisis next week in Dubai.

Arab bankers to discuss global financial crisis
By Shakir Husain, Staff Reporter
Published: April 15, 2009, 23:07
http://www.gulfnews.com/business/Banking_and_Finance/10304531.html
SNIP
Dubai: Representatives of more than 300 Arab banks will gather in Dubai next week to take stock of the global financial crisis and discuss how financial institutions in the region can overcome its impact.
Sulaiman Hamid Al Mazroui, Emirates NBD Group general manager for marketing and corporate communications who represents the UAE on the board of the Union of Arab Banks, said the discussions will cover topics such as THE CAUSES OF THE FINANCIAL CRISIS, its impact on Arab economies and strategies to ward off similar problems in the future. UNSNIP

These causes are
irredeemable digital liquidity
and
fractional-reserve banking,

both of which are fraudulent.
http://bphouse.com/honest_money/worthless-digital-liquidity-and-fractional-reserve-banking-are-fraudulent-%E2%80%93-let-the-system-collapse-now/

Nikolay Kryachkov said...

Ivo, I am not against fiat currency, gold, even usury. Let it be and go where it goes.

But:

Gold is not wealth. It is fetish - an object to which one is excessively devoted.

"If no other instruments are safe at this hour, perhaps it is a good idea to explore the possibility of using rice as international reserves. Rice has value in itself. People have to eat rice every day"".The same is with oil and gas, I think.

I do not know about copper. I know from Russian history that export of grain in exchange of gold 120 years ago caused hunger of peasants, terror and resulted in revolution in 1917.

The main question is usury. An interesting article about Philippines - "US-UK Tandem In Mindanao":

"Meanwhile, our apology for the slip-up in last Monday’s column; something got lost in the transmission. We touched on two of the four measures of Barack Obama and Gordon Brown in the recent G20 summit. These were: 1) a $1.1 trillion for the IMF, and 2) a re-regulation of the financial sector. The first is just to ensure continued flow of Third World (including Eastern Europe) debt with many strings attached. The second, meanwhile, remains useless for as long as Usury is the name of the game. As what American artist Jim Kirwan, in Usury Remains Untouched, argues: “We have dismantled the most ancient of human laws, the law against usury… We have not focused enough on the big deregulation… (on) the amount of interest that banks can get… (And today,) banks can charge 17, 18, 19, 30, 35 percent, not to mention payday lenders charging 200, 300, 400 percent in states like Illinois (and) California.”

The main point against re-regulation sans de-institutionalizi ng usury is: "If you’re able to charge 30 percent... You (will) want people to go into debt… This addicted the financial sector to very, very, very high rates of return compared to what investors were used getting in the real economy, the manufacturing sector, General Motors…""
and about climate change and other nonsense aimed to tax everything and back usury, isn't it?

Usury supporters go against global trend and lose time.

Ivo Cerckel said...

Dear Nikolay,

You are saying:
Gold is not wealth. It is fetish - an object to which one is excessively devoted. - end of quote

What do you want me to reply to that?

There are no more standards, aren’t there?

Video which I received yesterday, Sunday:
Thalidomide drug used by Nazis (Today It’s Used as Chemotherapy)
http://newstoday.smashits.com/video/51hhHb3upWo/thalidomide-drug-used-by-nazis-today-it-s-used-as-chemotherapy-.html

Warmest regards,
Ivo

Nikolay Kryachkov said...

By the way - "standard" - 6. A Song that has remained popular for many years.

"Popular" - 2. Liked by a particular person or group.

Did you read this book "WALL STREET AND THE RISE OF HITLER" By Antony C. Sutton?Russians won a victory over nazis, as you know.

I like this song :)