There are a lot of conflicting forces expected to impact currency markets this week. The first was the meeting of oil-producing nations in Doha that analysts believe ended in failure. Beforehand, there was talk of a production cut that would have supported oil prices. Instead, there was no agreement and oil prices fell immediately. If oil weakness holds, the dollar should strengthen reflexively. Amazingly, however, that may not be the largest story of the week.
There is a rumor that China is planning to move on the dollar on the 19th, supported by Russia. There have been similar rumors with date-certain outcomes that came and went without incident. This one could be similar.
There are two factors that make it a little more intriguing, however. First, Saudi Arabia has made a direct threat against the dollar. They have made it known that they are willing to dump $750 billion worth of Treasury bonds, which many believe would destroy the Petrodollar. Their next move would be to begin accepting another currency, other than the dollar, in exchange for oil sales. Would this include a gold-backed Yuan? Why would Saudi Arabia threaten this? They said they would do so IF we allowed lawsuits against the Saudis for 9/11. The Saudis know that there are 28 pages of the 9/11 Report that reportedly implicate Saudi officials and have been withheld from the American people.
How real is this threat? It comes from the highest levels. The Saudis can point to a historical precedent where we threatened to dump British bonds if the British and French attempted to retake the Suez Canal from Nasser’s Egypt. In addition, this threat happens at the same time the Russians and Saudis have been negotiating a possible cut in oil production to boost prices. The Russians have been pushing for the world to dump dollars for some time. They persuaded the Chinese in 2013 and China has sharply reduced their Treasury holdings. Now, are they influencing the Saudis? There should be little doubt that they have been trying to get the Saudis into their orbit. Using the 9/11 revelations and possible lawsuits as leverage is exactly the kind of thing they would do. And they have become more threatening with their military in recent days. Don’t forget that even our Secretary of State, John Kerry, warned that sanctioning Iran could lead to the dollar losing reserve currency status.
We do see China expanding a commitment to gold, which is a big part of the speculation behind the April 19 fear. It is true that there is a Chinese Yuan/gold fix that will take place April 19. It was once a rumor but is now confirmed. But is this a market evolution rather than a direct attack on the dollar? The motive and outcome are hard to determine. It is clear that China is making massive economic changes, injecting over $1 trillion worth of money internally.
IF both Saudi Arabia and China turned against the dollar at the same time, it would have an impact. These are two major players in the global economy that have accumulated massive reserves.
The bottom line is that we are already involved in a global economic war. There are threats to the U.S. dollar and some believe the current week is critical. Time will tell whether or not that is the case. Something to watch for, especially this week.
Full article: The Coming Week Could Be Critical for the Dollar (Global Economic Warfare)