THE DEMISE OF THE DOLLAR

These are two back to back articles that represent the some of the potential strategies designed to topple the dollar. When they surfaced in world wide media this week they jolted the worlds gold markets.

The issue I see is not only the immediate situation that the dollar finds itself in but that the world has just taken a very major step from what was openly discussed among world leaders as well as the the enclave of international finance people to the very public arena where its almost table talk. And that table talk is how long before the dollar will be replaced.

The Demise of the Dollar

Arab states have launched secret moves

with China, Russia and France

to stop using the US currency for oil trading.

By Robert Fisk Tuesday, 6 October 2009

In the most profound financial change in recent Middle East history, Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.

Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars.

The plans, confirmed to The Independent by both Gulf Arab and Chinese banking sources in Hong Kong, may help to explain the sudden rise in gold prices, but it also augurs an extraordinary transition from dollar markets within nine years. The Americans, who are aware the meetings have taken place – although they have not discovered the details – are sure to fight this international cabal which will include hitherto loyal allies Japan and the Gulf Arabs. Against the background to these currency meetings, Sun Bigan, China's former special envoy to the Middle East, has warned there is a risk of deepening divisions between China and the US over influence and oil in the Middle East. "Bilateral quarrels and clashes are unavoidable," he told the Asia and Africa Review. "We cannot lower vigilance against hostility in the Middle East over energy interests and security."

This sounds like a dangerous prediction of a future economic war between the US and China over Middle East oil – yet again turning the region's conflicts into a battle for great power supremacy. China uses more oil incrementally than the US because its growth is less energy efficient. The transitional currency in the move away from dollars, according to Chinese banking sources, may well be gold. An indication of the huge amounts involved can be gained from the wealth of Abu Dhabi, Saudi Arabia, Kuwait and Qatar who together hold an estimated $2.1 trillion in dollar reserves.

The decline of American economic power linked to the current global recession was implicitly acknowledged by the World Bank president Robert Zoellick. "One of the legacies of this crisis may be a recognition of changed economic power relations," he said in Istanbul ahead of meetings this week of the IMF and World Bank. But it is China's extraordinary new financial power – along with past anger among oil-producing and oil-consuming nations at America's power to interfere in the international financial system – which has prompted the latest discussions involving the Gulf states.

Brazil has shown interest in collaborating in non-dollar oil payments, along with India. Indeed, China appears to be the most enthusiastic of all the financial powers involved, not least because of its enormous trade with the Middle East.

China imports 60 per cent of its oil, much of it from the Middle East and Russia. The Chinese have oil production concessions in Iraq – blocked by the US until this year – and since 2008 have held an $8bn agreement with Iran to develop refining capacity and gas resources. China has oil deals in Sudan (where it has substituted for US interests) and has been negotiating for oil concessions with Libya, where all such contracts are joint ventures.

Furthermore, Chinese exports to the region now account for no fewer than 10 per cent of the imports of every country in the Middle East, including a huge range of products from cars to weapon systems, food, clothes, even dolls. In a clear sign of China's growing financial muscle, the president of the European Central Bank, Jean-Claude Trichet, yesterday pleaded with Beijing to let the yuan appreciate against a sliding dollar and, by extension, loosen China's reliance on US monetary policy, to help rebalance the world economy and ease upward pressure on the euro.

Ever since the Bretton Woods agreements – the accords after the Second World War which bequeathed the architecture for the modern international financial system – America's trading partners have been left to cope with the impact of Washington's control and, in more recent years, the hegemony of the dollar as the dominant global reserve currency.

The Chinese believe, for example, that the Americans persuaded Britain to stay out of the euro in order to prevent an earlier move away from the dollar. But Chinese banking sources say their discussions have gone too far to be blocked now. "The Russians will eventually bring in the rouble to the basket of currencies," a prominent Hong Kong broker told The Independent. "The Brits are stuck in the middle and will come into the euro. They have no choice because they won't be able to use the US dollar."

Chinese financial sources believe President Barack Obama is too busy fixing the US economy to concentrate on the extraordinary implications of the transition from the dollar in nine years' time. The current deadline for the currency transition is 2018.

The US discussed the trend briefly at the G20 summit in Pittsburgh; the Chinese Central Bank governor and other officials have been worrying aloud about the dollar for years. Their problem is that much of their national wealth is tied up in dollar assets.

"These plans will change the face of international financial transactions," one Chinese banker said. "America and Britain must be very worried. You will know how worried by the thunder of denials this news will generate."

Iran announced late last month that its foreign currency reserves

would henceforth be held in euros rather than dollars.

Bankers remember, of course, what happened to the last

Middle East oil producer to sell its oil in euros rather than dollars.

A few months after Saddam Hussein trumpeted his decision,

the Americans and British invaded Iraq.

The End of the Dollar

Spells the Rise of a New Order

The Independent October 6^th. A British Newspaper

Last autumn's global financial crisis set off an economic earthquake. And we are still feeling the tremors. The latest sign of the ground shifting beneath our feet is our report today of plans by Gulf states, China, Russia, France and Japan to end their practice of conducting oil deals in US dollars, switching instead to a diverse basket of currencies.

It is not hard to see the motivation for oil exporters to move away from the dollar. The value of the US currency has fallen sharply since last year's meltdown. And fears are growing, in the light of a spiraling US government deficit, that a further depreciation is likely. They do not want to sell their wares in return for a currency with an uncertain future.

It is also easy to see why China would like a world trading system that is underpinned by other currencies as well as the dollar. For the past decade Beijing has been recycling the proceeds of its giant national trade surplus into purchases of US government bonds and other dollar-denominated assets. China too stands to make a significant loss if the value of the dollar falls. For China, however, the timing is much more sensitive. Beijing needs to reduce its dollar holdings, but if it does so too quickly it will bring about the very devaluation it fears. This explains why Chinese officials appear to want this transition to take place gradually over the next decade.

But the significance of this development goes much further. Since the end of the Second World War the dollar has been the bedrock of world trade. The pre-eminence of the American currency flowed naturally from the economic dominance of the US. Virtually everyone traded with America so it made sense to use their currency.

But the US is not the dominant power that it once was. The financial crisis has left it hobbled with significant government and household debts and sharply reduced prospects for growth. Developing nations such as China, Brazil and India, on the other hand, have weathered the economic storm significantly better. So while this latest proposal is born of financial calculation, it is also a reflection of a new economic world order.

We should not be sentimental for the dollar. It makes economic sense for world trade to be conducted in a variety of currencies. Relying on one only has the advantage of clarity, but it also creates instability if the economy that underpins it faces uncertain prospects.

Yet we need to understand that exchange rate volatility is a symptom, rather than a cause, of what truly ails the world economy. The biggest driver of global economic instability in recent years has been the determination of China to boost its export sector at all costs. Beijing's persistently large trade surpluses and manipulation to prevent its own currency from appreciating have effectively forced Western nations into running persistently large trade deficits. It was this pressure that blew up various asset bubbles that burst with such disastrous effect last year.

A gradual move away from the dollar makes sense. But without a commitment from world governments – both in the rich and developing world – to reduce these destabilizing global trade imbalances we will enter an uncertain new era; and one that could yet make us pine for the days of the dominant greenback.

THE DEEPENING IRAN CRISIS

This is good overall thought on what is a very real perspective concerning Iran the the under the table developments.

 Two Leaks and the Deepening Iran Crisis 

Stratfor Global Intellegence. October 5^th 2009 By George Friedman.

In the first, The New York Times published an article reporting that staff at the International Atomic Energy Agency (IAEA), the U.N.nuclear oversight group, had produced an unreleased report saying that Iran was much more advanced in its nuclear program than the IAEA had thought previously. According to the report, Iran now has all the data needed to design a nuclear weapon. The New York Times article added that U.S. intelligence was re-examining the National Intelligence Estimate (NIE) of 2007, which had stated that Iran was not actively pursuing a nuclear weapon.

The second leak occurred in the British daily The Times, which reported that the purpose of Israeli Prime Minister Benjamin Netanyahu’s highly publicized secret visit to Moscow on Sept. 7 was to provide the Russians with a list of Russian scientists and engineers working on Iran’s nuclear weapons program.

The second revelation was directly tied to the first. There were many, including STRATFOR, who felt that Iran did not have the non-nuclear disciplines needed for rapid progress toward a nuclear device. Putting the two pieces together, the presence of Russian personnel in Iran would mean that the Iranians had obtained the needed expertise from the Russians. It would also mean that the Russians were not merely a factor in whether there would be effective sanctions but also in whether and when the Iranians would obtain a nuclear weapon.

We would guess that the leak to The New York Times came from U.S. government sources, because that seems to be a prime vector of leaks from the Obama administration and because the article contained information on the NIE review. Given that National Security Adviser James Jones tended to dismiss the report on Sunday television, we would guess the report leaked from elsewhere in the administration. The Times leak could have come from multiple sources, but we have noted a tendency of the Israelis to leak through the British daily on national security issues. (The article contained substantial details on the visit and appeared written from the Israeli point of view.) Neither leak can be taken at face value, of course. But it is clear that these were deliberate leaks — people rarely risk felony charges leaking such highly classified material — and even if they were not coordinated, they delivered the same message, true or not.

The Iranian Time Frame and the Russian Role.

The message was twofold. First, previous assumptions on time frames on Iran are no longer valid, and worst-case assumptions must now be assumed. The Iranians are in fact moving rapidly toward a weapon; have been extremely effective at deceiving U.S. intelligence (read, they deceived the Bush administration, but the Obama administration has figured it out); and therefore, we are moving toward a decisive moment with Iran. Second, this situation is the direct responsibility of Russian nuclear expertise. Whether this expertise came from former employees of the Russian nuclear establishment now looking for work, Russian officials assigned to Iran or unemployed scientists sent to Iran by the Russians is immaterial. The Israelis — and the Obama administration — must hold the Russians responsible for the current state of Iran’s weapons program, and by extension, Moscow bears responsibility for any actions that Israel or the United States might take to solve the problem.

We would suspect that the leaks were coordinated. From the Israeli point of view, having said publicly that they are prepared to follow the American lead and allow this phase of diplomacy to play out, there clearly had to be more going on than just last week's Geneva talks. From the American point of view, while the Russians have indicated that participating in sanctions on gasoline imports by Iran is not out of the question, Russian President Dmitri Medveved did not clearly state that the Russians would cooperate, nor has anything been heard from Russian Prime Minister Vladimir Putin on the subject. The Russian leadership appears to be playing “good cop, bad cop” on the matter, and the credibility of anything they say on Iran has little weight in Washington.

It would seem to us that the United States and Israel decided to up the ante fairly dramatically in the wake of the Oct. 1 meeting with Iran in Geneva. As IAEA head Mohamed ElBaradei visits Iran, massive new urgency has now been added to the issue. But we must remember that Iran knows whether it has had help from Russian scientists; that is something that can’t be bluffed. Given that this specific charge has been made — and as of Monday not challenged by Iran or Russia — indicates to us more is going on than an attempt to bluff the Iranians into concessions. Unless the two leaks together are completely bogus, and we doubt that, the United States and Israel are leaking information already well known to the Iranians. They are telling Tehran that its deception campaign has been penetrated, and by extension are telling it that it faces military action — particularly if massive sanctions are impractical because of more Russian obstruction.

If Netanyahu went to Moscow to deliver this intelligence to the Russians, the only surprise would have been the degree to which the Israelis had penetrated the program, not that the Russians were there. The Russian intelligence services are superbly competent, and keep track of stray nuclear scientists carefully. They would not be surprised by the charge, only by Israel’s knowledge of it.

This, of course leaves open an enormous question. Certainly, the Russians appear to have worked with the Iranians on some security issues and have played with the idea of providing the Iranians more substantial military equipment. But deliberately aiding Iran in building a nuclear device seems beyond Russia’s interests in two ways. First, while Russia wants to goad the United States, it does not itself really want a nuclear Iran. Second, in goading the United States, the Russians know not to go too far; helping Iran build a nuclear weapon would clearly cross a redline, triggering reactions.

A number of possible explanations present themselves. The leak to The Times might be wrong. But The Times is not a careless newspaper: It accepts leaks only from certified sources. The Russian scientists might be private citizens accepting Iranian employment. But while this is possible, Moscow is very careful about what Russian nuclear engineers do with their time. Or the Russians might be providing enough help to goad the United States but not enough to ever complete the job. Whatever the explanation, the leaks paint the Russians as more reckless than they have appeared, assuming the leaks are true.

And whatever their veracity, the leaks — the content of which clearly was discussed in detail among the P-5+1 prior to and during the Geneva meetings, regardless of how long they have been known by Western intelligence — were made for two reasons. The first was to tell the Iranians that the nuclear situation is now about to get out of hand, and that attempting to manage the negotiations through endless delays will fail because the United Nations is aware of just how far Tehran has come with its weapons program. The second was to tell Moscow that the issue is no longer whether the Russians will cooperate on sanctions, but the consequence to Russia’s relations with the United States and at least the United Kingdom, France and, most important, possibly Germany. If these leaks are true, they are game changers.

We have focused on the Iranian situation not because it is significant in itself, but because it touches on a great number of other crucial international issues. It is now entangled in the Iraqi, Afghan, Israeli, Palestinian, Syrian and Lebanese issues, all of them high-stakes matters. It is entangled in Russian relations with Europe and the United States. It is entangled in U.S.-European relationships and with relationships within Europe. It touches on the U.S.-Chinese relationship. It even touches on U.S. relations with Venezuela and some other Latin American countries. It is becoming the Gordian knot of international relations.

STRATFOR first focused on the Russian connection with Iran in the wake of the Iranian elections and resulting unrest, when a crowd of supporters began chanting “death to Russia”, not one of the top-10 chants in Iran. That caused us to focus on the cooperation between Russia and Iranian President Mahmoud Ahmadinejad and Supreme Leader Ayatollah Ali Khamenei on security matters. We were aware of some degree of technical cooperation on military hardware, and of course on Russian involvement in Iran’s civilian nuclear program. We were also of the view that the Iranians were unlikely to progress quickly with their nuclear program. We were not aware that Russian scientists were directly involved in Iran’s military nuclear project, which is not surprising, given that such involvement would be Iran’s single-most important state secret — and Russia’s, too.

A Question of Timing.

But there is a mystery here as well. To have any impact, the Russian involvement must have been under way for years. The United States has tried to track rogue nuclear scientists and engineers — anyone who could contribute to nuclear proliferation — since the 1990s. The Israelis must have had their own program on this, too. Both countries, as well as European intelligence services, were focused on Iran’s program and the whereabouts of Russian scientists. It is hard to believe that they only just now found out. If we were to guess, we would say Russian involvement has been under way since just after the Orange Revolution in Ukraine, when the Russians decided that the United States was a direct threat to its national security.

Therefore, the decision suddenly to confront the Russians, and suddenly to leak U.N. reports — much more valuable than U.S. reports, which are easier for the Europeans to ignore — cannot simply be because the United States and Israel just obtained this information. The IAEA, hostile to the United States since the invasion of Iraq and very much under the influence of the Europeans, must have decided to shift its evaluation of Iran. But far more significant is the willingness of the Israelis first to confront the Russians and then leak about Russian involvement, something that obviously compromises Israeli sources and methods. And that means the Israelis no longer consider the preservation of their intelligence operation in Iran (or wherever it was carried out) as of the essence.

Two Conclusions Can Be Drawn.

First, the Israelis no longer need to add to their knowledge of Russian involvement; they know what they need to know. And second, the Israelis do not expect Iranian development to continue much longer; otherwise, maintaining the intelligence capability would take precedence over anything else.

It follows from this that the use of this intelligence in diplomatic confrontations with Russians and in a British newspaper serves a greater purpose than the integrity of the source system. And that means that the Israelis expect a resolution in the very near future — the only reason they would have blown their penetration of the Russian Iranian system.

Possible Outcomes

There are two possible outcomes here. The first is that having revealed the extent of the Iranian program and having revealed the Russian role in a credible British newspaper, the Israelis and the Americans (whose own leak in The New York Times underlined the growing urgency of action) are hoping that the Iranians realize that they are facing war and that the Russians realize that they are facing a massive crisis in their relations with the West. If that happens, then the Russians might pull their scientists and engineers, join in the sanctions and force the Iranians to abandon their program.

The second possibility is that the Russians will continue to play the spoiler on sanctions and will insist that they are not giving support to the Iranians. This leaves the military option, which would mean broad-based action, primarily by the United States, against Iran’s nuclear facilities. Any military operation would involve keeping the Strait of Hormuz clear, meaning naval action, and we now know that there are more nuclear facilities than previously discussed. So while the war for the most part would be confined to the air and sea, it would be extensive nonetheless.

Sanctions or war remain the two options, and which one is chosen depends on Moscow’s actions. The leaks this weekend have made clear that the United States and Israel have positioned themselves such that not much time remains. We have now moved from a view of Iran as a long-term threat to Iran as a much more immediate threat thanks to the Russians.

The least that can be said about this is that the Obama administration and Israel are trying to reshape the negotiations with the Iranians and Russians. The most that can be said is that the Americans and Israelis are preparing the public for war. Polls now indicate that more than 60 percent of the U.S. public now favors military action against Iran. From a political point of view, it has become easier for U.S. President Barack Obama to act than to not act. This, too, is being transmitted to the Iranians and Russians.

It is not clear to us that the Russians or Iranians are getting the message yet. They have convinced themselves that Obama is unlikely to act because he is weak at home and already has too many issues to juggle. This is a case where a reputation for being conciliatory actually increases the chances for war. But the leaks this weekend have strikingly limited the options and timelines of the United States and Israel. They also have put the spotlight on Obama  at a time when he already is struggling with health care and Afghanistan. History is rarely considerate of presidential plans, and in this case, the leaks have started to force Obama’s hand.

BEING A FRIEND OF GOD IN TMES OF JUDGEMENT

* “That I may know Him and the power of His resurrections and the fellowship of His sufferings…” - Philippians 3: 10

It is natural for us to desire to be filled with the power of the resurrection but what does it mean to share in His sufferings? Does it merely refer to the trials we endure in this life or could it point to such a level of intimacy with God that we are called into a fellowship with Him that is so close that He feels free to share with us His sufferings yet to come?

Some times in our quest to know the Father more intimately we see His largeness on a scale that breaks the boundaries of our comfortable perspective on who He is. During these times we are called to a place of identification with Him where we see more from His perspective than we do our own or more from heaven’s perspective than from earth’s. 

Occasionally when we see Him as a sovereign God we can begin to see and touch His great joy of offering salvation to the world but also the pain of the eventual inevitability of His judgments. Most of us, when we truly live a lifestyle that is after His presence at any cost, will find ourselves thrown off balance as we start to enter this place. When we have become accustomed to just pushing for spiritual bliss in His presence and the fullness of serving man, this new picture seems too intense, even too negative. Out natural response is to pull back, thinking this cannot be God when in reality it is, it’s just a fuller understanding of who He really is.

Abraham, the friend of God, was honored with a calling that opened a way for countless generations of history. But included in this journey was spiritual reality that yielded pain as well as victory. When Abraham was walking with the three strangers, one said, “Shall I hide from Abraham what I am about to do?” (Gen. 18:17), referring to the massive destruction of Sodom and Gomorrah. There is something about true intimacy with God that allows Him to entrust us with the revelation of His whole heart and His burden. This can only be given to the one who TRULY wants to know God.

Imagine the scene. The Lord and Abraham are walking with the two angels who are about to bring about a destruction that will deeply unsettle Abraham. Is the Lord PONDERING… “Just how close is Abraham to me? Is he one who can accept Me in all that I am? Does he need to be kept comfortable, safe, and blessed? Can I show him, and will he understand, that there is a part of Me that cannot abide sin? What will he do when he sees the real price that people must pay for their sin? However, if he is really going to follow Me and raise his generations after Me then HE MUST KNOW ME IN MY ENTIRETY”. God decides to tell Abraham that the two cities will be burned with fire and that every man, woman, and child will die. Abraham’s response was the same as ours would be: “OH NO, GOD, IT CANNOT BE!” I BELIEVE THIS IS A RIGHT RESPONSE. We need to do what Abraham did and seek God for an extension of mercy. Sometimes, however, there is no room left for mercy. 

At those times,

we need great courage to be a friend of God

amidst His anguish when He needs to punish sin and bring judgment.

What will we do when the Lord brings us close to Him – so close that He lets us in on His world and all that the future will bring? We must do as Abraham did. In the days to come, when we will see great suffering, we first will need to a be friend of God, interceding for mercy, but willing to share in the fellowship of His sufferings, then we will need to demonstrate our loyalty to that friendship in standing with Him as the judgments are released. 

I have been impacted with the vision of Moses on Sinai, with the earth quaking, thunder crashing, and lightning flashing, climbing steadily upward toward the consuming fire at the mountain’s peak. Here was one who had seen the Lord in His loving kindness and compassion as well as His anger, and still loved Him with all his heart. And so without hesitating or looking back, he climbed higher and higher, toward the Consuming Presence (Exodus 19:16-20). This same Moses, after devoting his final 40 years to bringing the people to the Promised Land, was shown the potential curses that would come upon them and to the land if they turned away from following the Lord. (Deut. 28:15–68, 29:22–30:1, 31:15–22). He was also told that he could not enter the land toward which he had labored all those years. Did he turn back? NO. Intimacy – deep, mature, prophet-type intimacy with God requires sharing His heart, not only in its blessing and power but also in its suffering. 

We would all like to receive the accreditation that Samuel received in his later life that NOT ONE OF HIS WORDS FELL TO THE GROUND. But are we willing to pay the cost of such a blessing? Samuel, at a young age, was given his first revelation when he slept in the tabernacle (1 Sam. 3:10-14). In this very first encounter with God, he as a very young boy heard the audible voice of God speak to him about judgment. He was told of the judgment of the man who had raised him from his childhood and of judgment on his household. He was entrusted with hard truth about his entire religious world, at such a tender age – imagine that!!! Intimacy with God required that Samuel, even as a young boy, walk in a reality that was painful. For Samuel the “higher” place was a costly place. 

Consider Isaiah who so loved the Messiah and His people. He may be the prophet most endeared to us today because of his tender, poetic love for Israel and the Messiah. Who has not been enveloped with God by the Spirit moving through his words? Yet at times Isaiah walked in such anguish of soul that his heart-wrenching plea was, “Turn your eyes away from me: let me weep bitterly. Do not try to comfort me concerning the destruction of the daughter of my people. For the Lord has a day of panic, subjugation, and confusion in the valley of vision…” (Isa. 22:4).

Jeremiah said, “My sorrow is beyond healing, my heart is faint within me! Behold, listen! The cry of the daughter of my people from a distant land… Oh that my head were waters, and my eyes a fountain of tears, that I might weep day and night…” (Jer. 8:18-9:1).

Even Mary, the “favored of the Lord”, 

was told, with her infant son of promise

 lying tenderly and innocently in her arms, 

"a sword will pierce even your own soul – “ (Luke 2:35).

Daniel, a man so greatly esteemed 

was given such revelation of darkness well as victory

 that he was sick for days. 

But this did not deter him

 from his hungry pursuit of the face of the Lord.

All these, having drawn so near to the heart of the Lord, were shown more of the picture, both highly exhilarating and deeply devastating. We in the church so love the presence of God. Yet, how many really enter His counsel. Too often, we want blessings, we want encounters, but beyond that, do we tend to draw back? We must realize that the higher we go, the more we will encounter of His world with all of its vast dimensions.

Loving God in the end will require courage – before God and in higher places of warfare, as well as courage before men. Above all else, let us be true to Him. Let us be true lovers, lovers of truth, loyal and true to God in all that is to come.