Currency Markets & Inflation

[RE]

New topic to cover what's going on in the currency markets.

Rising Inflation has been a problem here in the FSoA, but compared to what's ongoing in the 3rd world right now, the Dollar is still comparatively a rock of stability.  That could change at any time of course, since these valuations are all mainly based on confidence and little else.  Any big enough disruption to a systemically important bank or country can set the whole house of cards tumbling at any time.

Several Central and South American countries have had to "dollarize" their economies as confidence in their own local currencies have plummeted.  This because their ability to borrow money and sell bonds denominated in their own currency has dropped to Junk status.  The problem with dollarizing is having enough of them around to do any transactions at all inside the country.

Back when I lived in Rio, this was occuring in Brazil as they defaulted on some loans they had been issued by my dad and other banksters, at which time Chase picked up ownership of a couple of Brazilian Banks and basically took over ownership of the country.  Locally, when I arrived the currency was the Cruuzeiro, a couple of zeros were knocked off and it was transformed into the Cruzado,  and then later again to the Real.

This action is now occuring in Zimbabwe as inflation has topped 50%, and they're making a last ditch attempt to keep from dollarizing.  Unless they can get a big bank like Chase to buy them out, this is unlikely to succeed.

The more of these economies that crash happen, the more unstable the whole edifice becomes.  So here in this thread, we can keep track of the global currency collapses.

https://apnews.com/article/zimbabwe-new-currency-inflation-us-dollar-06a656260462d9651112e394e125c5e6

Zimbabwe introduces new currency as depreciation and rising inflation stoke economic turmoil

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[RE]

This is the most effective way to use the BRICS currency group I have heard thusfar as a means to assist the smaller nations with maintaing their ability t function once they start depreciating rapidly against the dollar and start to hyperinflate.  Once they become unable to secure more loans denominated in dollars from the IMF, they can effectively use China's credit and vast reservoir of USTs as a means to inject more of their local currency into their own market without the prices on goods shooting up so fast.

The main problem is how this ends up affecting the value of the renminby if a lot of them need the help at the same time.  That would force a depreciation of the renminby, which they would export as deflationary pressure on the price of Chinese goods on the FSoA market.  Good for the FSoA consumer, but terrible for Da Fed, because they would not be able to control the deflation by further lowering interest rates.  Right now they're trying to hike interest rates back up.

In other words, the blowback is that it would further destabilize international currency swaps as the BRICS and Renminby compete against the dollar for hegemony over inteernational trade.  If the Chinese even come close to winning this baattle, all hell will break loose and I can see no other greater risk for a direct military conflict between the FSoA and the Chinese than this.  The FSoA simply cannot allow the Dollar to lose its power as the Reserve Currency for global trade.  Tariffs and embargoes of Chinese goods would be instituted, they would be accused of dumping cheap merchandise on the markets and basically driving out of business all their competitors.

This is economic warfare at the highest level and something we need to follow closely.  Although most of us believe that even TPTB are not so stupid as to push the button on Gobal Thermonuclear War, a tiger backed into a corner doesn't react using common fucking sense, it lashes out.

Shall we play a game?

 

https://watcher.guru/news/brics-china-makes-major-financial-announcement

BRICS: China Makes Major Financial Announcement

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[RE]

There are so many measures of inflation and the data is manipulated in so many different ways it's almost impossible to ever figure out what's really going on, other than what you see for yourself when you got to the store to buy groceries or a restaurant to buy a meal.

I know that when I last went to Fred Meyer and bought a 6 pack of 16oz Coke, the price had jumped from $6.99 to $8.99.  That's a 30% increase.  I read a story where Mickey Ds raised their price on a "Deal Meal" in CA to $25.  $25 for a fast food meal?  Come on!  They attribute it to the new $20/hr Min Wage for fast food workers in CA.  Right.

Seems to me Da Fed is losing control of the printing press.

https://www.cnbc.com/2024/04/10/the-supercore-inflation-measure-shows-fed-may-have-a-real-problem-on-its-hands.html

The 'supercore' inflation measure shows Fed may have a real problem on its hands

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[RE]

The pounding of the drums gets louder and ask not for which currency the Bell Tolls, it tolls for the dollar in its supreme role as world reserve currency.

Be advised, though the pattern of financial settlements are changing, the vast majority of world assets are denominated in dolllars, so it behooves noone, not even the Chinese to crash the dollar too soon.  The danger lies more in sentiment and in PANIC, which might occur in the case of a major geopoltical shock.  Something like a Ruskie retaliation against theUK with an attack on North Sea Oil platforms.  Or the the Houthis getting hold of a hypersonic missile capable of sinking an aircraft carrier.

The Chinese are just laying the foundation to be able to survive such a shock on the financial level, and hopefully gain an advantage from it.



https://oilprice.com/Energy/Energy-General/The-Start-Of-De-Dollarization-Chinas-Move-Away-From-The-USD.html

The Start Of De-Dollarization: China's Move Away From The USD

RE

[RE]

What goes round, comes round.  In order to run huge deficits, the FSoA broke thee Bretton Woods agreement and went off Gold in the 1970s.  Ft Knox was bleeding gold as the French wanted to be paid in gold at the time.  The Petrodollar was born soon after.

Fast forward 50 years, the deficit spending is out of control and counries would rather be paidin Gold again.  USTs don't look so safe anymore.  The BRICS load up on gold to back a new currency and kill the dollar.  Fun. 

Definitely getting closer to currency collapse.  The problem with gold is no matter how much they've collected up, it's not enough to handle global trade without the value skyrocketing to ridiculous values.  Like an ounce would buy a house.

Load up on barter items.

https://watcher.guru/news/brics-gold-will-displace-the-u-s-dollar-says-top-analyst

BRICS: Gold Will Displace the U.S. Dollar, Says Top Analyst

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[K-Dog]

Ft Knox was bleeding gold as the French wanted to be paid in gold at the time.

And now the chief frog wants to start a war.

[K-Dog]

Ft Knox was bleeding gold as the French wanted to be paid in gold at the time.

And now the chief frog wants to start a war.

It is a good thing the she-Trump did so well in the Hexagone election.  Now the Macrononi has other things to think about besides killing more Ukrainians.

EU elections seems to have sent a message to the current leaders.  Milquetoast performance kissing the American vegetable president ass has something to do with it in my opinion.  My opinion, and not worth much.  But all the American proxy war has done for Europe is drive up prices.  Do economics affect elections?

The possibility exists.

[RE]

Ft Knox was bleeding gold as the French wanted to be paid in gold at the time.

And now the chief frog wants to start a war.

It is a good thing the she-Trump did so well in the Hexagone election.  Now the Macrononi has other things to think about besides killing more Ukrainians.

EU elections seems to have sent a message to the current leaders.  Milquetoast performance kissing the American vegetable president ass has something to do with it in my opinion.  My opinion, and not worth much.  But all the American proxy war has done for Europe is drive up prices.  Do economics affect elections?

The possibility exists.

It would be quite interesting to see how France would function with a hard right president.  Imagine Trump trying to run a country with strong unions and a lively Communist party that loves to strike.

The issue that the right wing parties agree on and their support comes from is the anti-immigration movement.  The 21st century Frog pond however has a huge population from their former colony of Algieria and from Morocco.  Remember of course the film Casablanca, with the frog cop who was Bogey's best buddy.

Viva la France! lol.

Economically, all of the EU is in the toilet and it's hard to see how the National Rally and Reconquest parties can do much about it, even if they could get cheap energy from Vlad the Impaler.

I forsee a fairly chaotic goobermint and a lot of entertaining street action coming from the Lilly Pads on the Ponds of Paris.  The frogs will be hopping.

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[RE]

This shouldn't be much of a surprise after all the Hoopla about the BRICS separating from the dollar in cross currency transactions, as well as readying to launch a BRICS currency backed by Gold.  The FSoA response tightens the sanctions, so the Ruble exchange rate tanks.

The question is how much will this affect the Ruskies in their trade with China and what the Renminby-Ruble exchange rate will end up at.  There has been talk of China devaluing the renminby anyhow, this may force it.  If that happens Chinese toys at Walmart will drop, good newz on inflation, bad newz for manufacturing.  This might force expansion of even more and bigger tariffs.  A self reinforcing positive feedback loop.

Dark clouds on the horizon.  Barometers gettin' low.  According to all sources, down the toilet we will go.

https://www.newsweek.com/moscow-stock-exchange-trade-halted-ruble-collapse-sanctions-1912161

Russians Line Up To Buy US Dollars As Ruble Plummets After New Sanctions

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[TDoS]

Dark clouds on the horizon.  Barometers gettin' low.  According to all sources, down the toilet we will go.
RE

Again.

Planet X and the Mayan Calendar get my vote for cooler event windups than run of the mill recessions and whatnot. Boo Hoo China. Again. Some of those bird flu hysterics maybe? Covid was bad but hardly a decent doom beyond the economic side effects. The US debt load has a nice windup for something real, that has to impact standards of living, benefits, military size, giving away freebies to Europe and Ukraine, sooner rather than later.

 

[RE]

Now we know why the BRICS chose this moment in time to announce their intention to launch a new currency backed with Gold and a new cross currency transaction clearing system for trade.  Apparently, the agreement forged in 1973 between the FSoA and the House of Saud to price Oil in Dollars expired a week ago on June 9th.  That is a big fucking deal and I am quite surprised this is the first time I have heard this mentioned.

It was that agreement that stabilized the Dollar after reneging on the Bretton Woods accords after WWII which pegged the Dollar to Gold.  It was the Birth of the "Petrodollar" and solidified the Dollar as World Reserve Currency.  As of June 9th, this is No More.

Now, there are so many dollars sprinkled around the world and so many assets priced in dollars that it doesn't help anyone to crash the dollar overnight, but the future demand for dollars is vastly diminished.  Other countries no longer need to borrow dollars to buy Oil.  They can borrow Rubles or Renminby instead.  Thic almost certainly will lead to lower demand for USTs at the treasury auction, which is going to make it even harder to finance the federal deficit.  The next few treasury auctions could prove very interesting.  Interest rates could skyrocket, bringing on an lmost intant recession.  It could dry up liquidity also, locking up the markets. It's a clusterfuck waiting to happen.

https://www.fxstreet.com/analysis/the-petrodollar-is-dead-and-thats-a-big-deal-202406141938

The petrodollar is dead and that's a big deal

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[TDoS]

The petrodollar is dead and that's a big deal
RE

Reddit had some random commentary on it before it happened, couple weeks ago I think. But no big deal to them. Probably scared of looking like idiots again, dangling that close to another oil topic.

The world's largest oil producer and related companies won't mind too much. Nor will the world's largest natural gas producer, or world's largest LNG exporter.

But markets...well....money changers are just money changers....

[RE]

One would expect FSoA producers will still accept dollars for oil, the question is how few of them will they take for a barrel?  Will they sell at $60/bl?  $50?  What's the break even point, on average?  Whats the range limits on production cost from FSoA wells lowest/highest?  You should know those figures.

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[RE]

Well, it didn't take long for the shorts to jump.

Commodity analysts at Standard Chartered pointed out that the price undershooting was the consequence of a combination of several factors including extreme macroeconomic pessimism, speculative shorts and over-enthusiastic algorithmic trading that crowded out more fundamentally-based traders. Consequently, oil futures markets flipped to a net short position in Brent, compared with a net long position at the end of the previous week.

It's only 2024!  lol.  2029 is still 5 years away!

Joining the Saudis to go to the mat with the shorts, StanChart is predicting a supply deficit by the end of the year.

StanChart has reiterated its previous assessment that not only can the markets absorb the extra barrels by OPEC+ producers but that a deficit is likely to appear in the latter part of the current year and carry over to 2025.

Today' snapshot:

77.77 USD −0.28 (0.36%)
today
Jun 17, 12:35 AM EDT •

The last time we got down to $70 was the beginning of 2023.  $60 in April 2021.  Bottom a year earlier at $21 at the height of COVID.

I'll update periodically.  When it breaks into the $60s, we'll see how much the frackers still wanna sell.

The Saudis may be trying to do what they did to the Ruskies.  They can't flood the market anymore, but they still can under price pretty much everyone except the Ruskies or  some other Towel Heads.  If the deficit StanChart predicts doesn't turn up, they can undersell to gain market share.  It's a big version of two gas stations having a price war.  Unless the station across the street can sell at the same price, everyone will shop there.  Only if there are still buyers for the higher price gas can they keep selling.  How low can they go, for how long and keep selling?  How elastic is the demand?  How will the economy react?

I think the currency traders smell blood.  Anyone who sees recession coming is going to short oil.  Very entertaining.   

https://oilprice.com/Energy/Crude-Oil/Standard-Chartered-Oil-Markets-Will-Soon-Face-Significant-Supply-Deficits.html

RE

[TDoS]

One would expect FSoA producers will still accept dollars for oil, the question is how few of them will they take for a barrel?  Will they sell at $60/bl?  $50?  What's the break even point, on average?

The only publically available work I've found at the formation level was here, in August 2022.
The change in economically recoverability was substantial between $40-$100/bbl.They do not mention work on other formations, but anyone who can put together one of these hard to find constructs, probably has others. The commercial information houses have these types of analytics as well, but they aren't publically available.

Whats the range limits on production cost from FSoA wells lowest/highest?  You should know those figures.
RE

Only experts might know the answer to that, and they aren't allowed to post here as just their expertise along is grounds for censoring the answer.