Bloomberg just went full Petro-yuan. There’s just one glaring omission. Here’s the details…
One of the main understandings a person gets when they wake up to gold and silver is the inevitable death of the Petro-dollar.
By now most in the precious metals space should be keen on the fact that China is the up-and-comer in the gold market.
From the Shanghai Gold Exchange roll-out last year, and the IMF SDR basket inclusion the year before, China has been rising with it’s role in global finance.
If there was a theme to China this year, it would be the highly polarizing rise of the Petro-yuan theme.
Today this theme has come front and center in the MSM.
Here’s Bloomberg just today:
China’s moves to set up trading oil in yuan have sparked enthusiasm about what could be a shift in the global financial system: a reduced role for the U.S. dollar. Players like Adam Levinson, founder of hedge fund Graticule Asset Management Asia, call it a “huge story” to come.
But with policy makers prioritizing market stability over internationalization, plans laid back in 2012 to start oil-futures trading priced in yuan or dollars in Shanghai that year are still pending. The latest from the city’s International Energy Exchange: it’s coming soon, with test trades scheduled this weekend.
Let’s stop there for a moment.
Notice the key words “market stability”.
Note to self: The Fed has a mandate for “price stability”. Interesting.
Secondly, they will begin test trades this weekend. Interesting.
As the world’s largest energy consumer and an increasing source of investment capital for oil-producing nations, China has an interest in using its own currency rather than that of a geopolitical competitor. One hurdle for setting up a rival to Brent or West Texas Intermediate: Overseas oil producers and traders would need to swallow China’s capital controls and penchant for occasional market interventions.
Hmmm: Overseas oil producers and traders will need to swallow ‘capital controls’ and ‘occasional market interventions’?
I’m sure oil producing countries would take those headaches and even losses eight days a week rather than having the war machine of the United States bombing their lands into the stone age all the while occupying their lands either before or after the fact.
The article continues:
“The dollar is so entrenched that it’s difficult to see that role diminishing,” said Shady Shaher, head of macro strategy at Dubai-based lender Emirates NBD PJSC. “It makes sense in the long-run to look at transactions in yuan, because China is a key market,” though it will take years to develop, he said.
Of course they would say that. The Dubai based Emirates NBD is full of a bunch of too-big-to fail “systemically important financial institutions” (specifically a bunch of Standard Chartered alumni) who will run the dollar until the dollar no longer serves them.
Will it take days, months, or “years to develop” as the banker claims?
We can be sure of one thing: If a too-big-too-fail banker is talking, they are either misdirecting at best, or lying at worst, so any timelines thrown out by big-shots in banking are to be taken with a grain of salt.
Most of the time, they are on the other side of the trade anyway, meaning they say one thing but mean another.
For example: “It could take years” could just as well mean “coming next month”.
But let’s save the best of the Bloomberg article for last:
“Chinese regulators have made it clear that they want stability in financial markets, including the new futures contracts to be listed” for oil, said Li Zhoulei, an analyst with Everbright Futures Co. in Shanghai. “It remains to be seen how the crude contract can gain influence and at the same time avoid excessive volatility.”
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