Dwindling dollar: World may sneeze on US cold

[OhioChick]

MUMBAI: On March 23, unnoticed by many, the US Federal Reserve quietly stopped publishing the quantum of broad money (referred to as M3) in the US economy.

Simply put, this meant the central bank will not reveal the amount of currency it pumps into the system each year. So, it will now be impossible to distinguish dollar inflows to US economy and new currency that the Fed would print.

So, the Fed, fear analysts, could covertly fund its near $800 billion budget deficit and $700 billion balance of payment deficit, which are more than India's GDP.

These fears have prompted the dollar to plummet to multi-month lows against euro and yen and could seriously impact confidence in the world's favourite currency.

http://timesofindia.indiatimes.com/articleshow/1506648.cms

[MGKrebs]

1. Yikes!

That sounds pretty childish. "Bush league" if you will.
So how can one avoid thinking that inflation is about to get much worse.

[Earth_First]

2. But yesterday Secretary Snow said that our economy was in a "sweet spot"

What gives? :sarcasm:

[0007]

11. Snow is a first class idiot! Bar none.

[WePurrsevere]

3. When in debt just print more money? Gee... why can't we all do that too?

Oh yeah... that's why... if an avg person did that they'd be thrown in JAIL.

How is this even vaguely the "party of fiscal responsibility" anymore? Apparently when they said that they didn't mean their (RepubliCON) government, their big corporate welfare hogs, their pork projects, etc. They just meant avg middle class and poor Americans who hit on hard times, messed up, got suckered into the lure of debt to pay bills and buy (sometimes even basic) stuff, etc. :grr:

[UpInArms]

8. It's called counterfeiting in the real world. ...... eom

[no_hypocrisy]

4. I'd better run down to the hardware store to get a wheelbarrow to take

all my soon-to-be worthless dollars to the store when I'll need a stick of butter . . . Welcome to the Weimar Republic, folks!

[sendero]

5. Buy..

.... gold and silver. Seriously. Take posession. It's not too late :)

[greekspeak]

6. Dad says this every time I talk to him. I get gold and silver prices

They are both SKYROCKETING. Not that long ago, silver was 4 bucks an ounce. Now it is 14 bucks an ounce. And going up. Gold is WAY up too. Something is terribly rotten in the state of Crawford.

[DavidMS]

21. IMHO get off shore securies...

or just make sure your portfolio has a large portion invested in ADRs or mutual funds that specialize in overseas investment.

Precious metals are considered speculative.

I am currently emphasizing investing overseas to reduce exposures to currency risk.

That said a mild deviation of the dollar is probably a good thing trade deficit wise an would encourage domestic manufacturing and generally stimulate economic growth. Anything more could cause a panic (which would be bad)

[liberalla]

31. Can you write more about this?

What are ADR's? I know about mutual funds. I am so squeamish about the stock market and our economy, that I have put everything in a money market fund. With the devaluation of the dollar I'd like to do something else with it, or at least a portion of it.

you write:
"I am currently emphasizing investing overseas to reduce exposures to currency risk."

Is this something that can be done through Smith Barney or similar financial business? If not, where do I go to learn more about this and how to do it?

This is a subject I am not fluent in, as you can tell. Can you explain a bit more to someone who wants to learn and understand? Or, direct me to a good resource? Are there any specific mutual funds that "specialize in overseas investment" that you care to name? I would, of course, go and do more research on them. Thanks in advance.

[On the Road]

44. You Can Invest in Indexes of Individual Countries

Go to any stock lookup site (like http://finance.yahoo.com/ or www.clearstation.com) and check out these symbols:

EWA (Australia)
EWG (Germany)
EWH (Hong Kong)
EWI (Italy)
EWJ (Japan)
EWL (Belgium)
EWM (Malaysia)
EWN (Netherlands)
EWO (Austria)
EWP(Spian)
EWQ (France)
EWS (Singapore)
EWU (UK)
EWW (Mexico)
EWC (Canada)
EWD (Sweden)
EWK (Belgium)

You can pretty much bet on an entire economy that way -- of course, it's tied in with how the currency does, too.

[DavidMS]

48. ADRs and investing abroad

IIRC, (from when I worked for a stockbroker and from some college classes) ADRs are a form of investment where a foreign company deposits shares in the US and the bank they are deposited in issue ADRs. This means that the bank and company are responsible for meeting SEC regs and simpler than listing on two markets simultaneously. Some foreign companies list on american exchanges and need to meet SEC and GAAP (Generally Accepted Accounting Principles).

Since I am not a financial professional and am not familiar with your specific needs, I cannot make recommendations. I suggest anyone interested find a qualified financial professional. There are books on the questions to ask.

Investing in broad global indexes and more specific global funds is a good way to manage risk exposure. However these funds are more expensive (cost ratio wise) because of things like translation expenses, currency transaction rates, etc. They are a good part of an overall balanced portfolio strategy.

Engaging in Precious metal, FOREX (foreign exchange) investing in intrinsically speculative unless done to hedge risk. I.E. I will be paid in euros in 6 months and the dollar/euro exchange rate is particularly attractive, I could lock in the currency rate to know how much I will be paid in dollars. Businesses that engage in international transactions typically make these transactions.

Keep in mind that foreign markets are typically not as heavily regulated as US markets. See: http://www.atimes.com/atimes/China_Business/HD28Cb01.html for an example.

If you are believing the dollar will fall you may wish to invest in something like the Merk hard currency fund (Very speculative).

Keep in mind I own efforts are to provide a little hedge aganst the dollar falling as opposed to speculating against it. Even investing in a large US company like GM has dollar downside protection because many of their markets are overseas and if the dollar declines their overseas opporations will generate more dollar revenue (if repatrated).

I hope all of this helps.

Remember to speak with a financial professional and YMMV.

[lumberjack_jeff]

45. Foreign denominated assets, especially precious metals

Vanguard Precious metals index fund is up 200% in three years, 85% in the last 12 months

Vanguard emerging markets index is up 220% in three years, and 57% this year

Paradoxically, this is a sign of a weak economy, the primary reason that these two funds are doing so well is because the dollar is losing value.

Sometimes it pays to be a pessimist.

[femmedem]

7. Important: M3 measures the amount of U.S. dollars held overseas.

And the refusal to publish the M3 may be a response to, rather than a cause of, the falling dollar. A way of forestalling panic.

Remember, the U.S. dollar used to be backed by gold. Since the early 70's, however, it's essentially been backed by oil. Oil is currently sold exclusively in dollars at the two big international oil exchanges, or bourses, in NY and London. Any country that wants to buy oil needs dollars to do it--therefore, all countries on earth hold large amounts of U.S. dollars in reserve.

Of course, when we need dollars for oil, we just print more. But everyone else needs to either trade for them or borrow. This--and the fact that WB and IMF loans are in dollars--keep our dollar from crashing through the floor.

But what if people could buy oil with euros rather than dollars? Countries wouldn't need so many dollars in reserve. They might dump what they've got, and trade them in for euros, sending the dollar plummetting. And guess what--Iran has been talking for several years about opening the world's third oil bourse, which would trade in euros.

The bourse was scheduled to open in March, the very month we stopped publishing the M3. The bourse didn't open as scheduled, and I don't know what its current status is. But I think all of this has a lot to do with the administration's current jones for war with Iran.

BTW: Saddam Hussein had begun selling oil for euros before the war. You can bet we stopped that as soon as we invaded. And Chavez has been accepting barters for oil. He sends oil to Cuba in exchange for doctors, for example. That's one of the reasons the U.S. is out for him, too.

You can read more at this excellent article, which posits that when oil is traded in euros, that will be the end of the American Empire.

http://www.energybulletin.net/12125.html

[RufusEarl]

9. Good post, right to the point!,

this has been discussed very little and it needs more attention. I've heard so many stories of why we went into Iraq, well IMHO this is the reason. And of course it had to deal with oil, but in a different way then i first realized.

This article has open my eyes, i now can say i have a better understanding about why this country and it's oil barron leaders are starting wars in the middle east. I'll recommend this article to the "greatest page" it should be required reading for all DUer's.

[DUHandle]

12. Excellent article

Thanks

[DBoon]

13. so the rising price of oil may reflect a devaluing dollar

it isn't just price manipulation, "supply and demand", or the war in Iraq?

[femmedem]

14. Ding! Ding! Ding! We have a winner!

At least I think so, although I'm by no means an economist.

You might like to read this article, too.

www.dailykos.com/storyonly/2005/12/27/115725/53 - 34k


I'll be offline for a while, now, because I have to leave for work, but I'll do my best to answer any more questions tonight or tomorrow.

In the meantime, I hope folks will K&R this thread!

[Robbien]

29. Thanks for the link to Soj's Kos diary

Other than the StockMarket thread here at DU, very little is being said on this.

Soj's website is also informative. I have alot of reading to do.

[femmedem]

25. However...(a continuation of my previous reply)

U.S. cost for oil is still way, way lower than it will be if anyone begins trading oil for euros.

[anotherdrew]

16. about that bourse. it was a scam / hoax / lie

not only did it not open, but Iran is like, "what bourse? we're not opening any such thing... never planned to even." It's looking like the whole thing was made up by some woman in switzerland. I'm really getting sick of not being able to believe a god damn thing I read. I mean, everyone's been talking about this god damned Iranian oil bourse for over a year. and what comes of it? Nothing.

[puerco-bellies]

20. An Iranian news agency said it is opening next week.

It is being discussed in another thread.
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=364&topic_id=1038532&mesg_id=1038532

[femmedem]

23. Interesting. Thanks for that link. I'd been having a tough time finding

any current info.

[Toucano]

33. Agreed. It's a scam or psych-ops.

All of Iran's major customers have too much invested in dollars to do anything to hinder the dollar.

China is Iran's largest customer. The U.S. consumer is fueling China's growing wealth. It isn't in their interest to see the dollar decline.

[femmedem]

41. China and India have both said they support the Iranian bourse.

See http://www.worldpress.org/Mideast/2314.cfm#down

Also,the Asian Development Bank recently warned that the dollar may fall 15-40%, and Asian countries should diversify their currency reserves.

[Toucano]

49. This is not adequate.

"Some of the major oil-producing countries such as Venezuela (which has boosted its economic ties to Iran) and a few of the larger oil consuming countries, most notably China and India, have already announced their support for the IOB. China and India, along with Russia, are powers that have at various times backed Iran's right to establish its own nuclear program."

Doesn't that strike you as more than a little vague?

"China and India have already announced their support..." You don't think we should know WHO and WHEN they "already" announced this?

All efforts to confirm this, link back to this article, which is almost exclusively cited as a source.

The Asian Development Bank called for diversification TO ASIAN CURRENCIES, to strengthen Asian currencies. Last time I checked, the Euro was not an Asian currency.

China has been INCREASING it's holdings of US Treasury notes, not decreasing as was recommended.


The most suspicious thing, however, is the circular citation of sources. Worldpress.org and the work of Niusha Boghrati are cited over and over again, and I smell a rat.

[femmedem]

43. Why China, Russia and oil-exporting countries might welcome the ability

to trade oil for euros, quoted from the energy bulletin link I posted above:

· The Chinese and the Japanese will be especially eager to adopt the new exchange, because it will allow them to drastically lower their enormous dollar reserves and diversify with Euros, thus protecting themselves against the depreciation of the dollar. One portion of their dollars they will still want to hold onto; a second portion of their dollar holdings they may decide to dump outright; a third portion of their dollars they will decide to use up for future payments without replenishing those dollar holdings, but building up instead their euro reserves.

· The Russians have inherent economic interest in adopting the Euro – the bulk of their trade is with European countries, with oil-exporting countries, with China, and with Japan. Adoption of the Euro will immediately take care of the first two blocs, and will over time facilitate trade with China and Japan. Also, the Russians seemingly detest holding depreciating dollars, for they have recently found a new religion with gold. Russians have also revived their nationalism, and if embracing the Euro will stab the Americans, they will gladly do it and smugly watch the Americans bleed.

· The Arab oil-exporting countries will eagerly adopt the Euro as a means of diversifying against rising mountains of depreciating dollars. Just like the Russians, their trade is mostly with European countries, and therefore will prefer the European currency both for its stability and for avoiding currency risk, not to mention their jihad against the Infidel Enemy.

[Toucano]

50. It may appeal to Russia, but not China.

What do you know about energybulletin.net? Where does it come from? Who owns it? Who writes for them? Why should you believe anything that appears there?

That analysis is myopic. The US is China's #1 customer. You don't go around advocating that your best customer take a big pay cut, especially if you're holding at least a 240 billion dollar mortgage note.

Japan and China are Iran's leading trading partners and both are heavily invested in the dollar. Iran's leading trading partners hold more than 900 billion is US Treasury notes. They won't just wake up and decide to do something to cut the value of their portfolio by even 10 percent.

It's a Lose-Lose for China.

"Arab oil-exporting countries...trade is mostly with European countries..." is only half true. Some, like Syria and Jordan trade mostly with Europe, but others like Saudi Arabia and Kuwait trade mostly with the U.S. Syria ranks 31 in world oil reserves and Jordan ranks 89. Saudia Arabia and Kuwait are 1 or 2 now (depending on who's counting) and Kuwait is 6. Saudi Arabia has about 100 times more oil than Syria.

I really think we should be questioning this whole story.

Who benefits from our believing this Oil Bourse story? Has spreading this bourse baloney caused oil prices to rise? Does that benefit Iran, Saudi Arabia, and Bush's oil buddies?

[femmedem]

54. Good questions.

And I have to admit, I don't know anything about energybulletin.net. Do you?

I know you're laying the dots out in a straight line, but I'm still having trouble connecting them:

"Who benefits from our believing this Oil Bourse story? Has spreading this bourse baloney caused oil prices to rise? Does that benefit Iran, Saudi Arabia, and Bush's oil buddies?"

If you have time, can you explain? I'm not being snotty. I'm interested and curious.

[Toucano]

61. Islamic fundamentalists and Neo-cons are two sides of the same coin.

Despite their cries to the contrary, they both benefit from increased oil prices.

Every time Iran's president says something about Israel being blow off the map, oil rises on "market jitters." That benefits Iran directly. It also benefits Bush's oil buddies directly. Their personal wealth GROWS (witness the record profits and CEO compensation packages).

Planting and repeating a story that proclaims the dollar is doomed causes the price of oil to rise, benefitting both Iran and Dick Cheney.

As I mention in an earlier response to another poster, Wimpole Consortium or Wimpole Consulting is the firm that is reported to be setting up the bourse. No record of this firm exists outside of articles discussing the bourse.

Please read here:

http://www.eurotrib.com/story/2006/2/24/7575/84230

"Crazy scenarios involving Iran's purported attempts to create an oil bourse to start selling oil in euros make the rounds regularly, and even get recommended with alacrity on DKos.

These things WILL NOT HAPPEN, and we have, as a supposedly reality-based community, to focus on real issues and not imaginary ones.

So let me explain why an Iranian oil bourse will not work for the foreseeable future. I hope that this diary can be used as a handy reference when this crops up again in the future."

More at link

[mmonk]

57. China's currency will probably rise

despite it's usual methodology of pegging to the dollar. Saudi Arabia is also meeting with the Chinese for oil deals. That plus increased foreign investment may force China into a new way of doing business.

[barb162]

52. Well I am glad I read your post here; I thought it was still

planned. How did you find out it was a phony story?

[Toucano]

62. It's my own theory.

The company reported to be setting up the bourse, Wimpole Consortium does't appear to exist outside of stories about the bourse. Can you find a telephone number for them? I can't. Shouldn't a firm contracted to do such an enormous and complicated task have a telephone?

All of the stories quote the same three or four people and reference each other as "evidence".

[54anickel]

55. Not sure where you got that from. The bourse is real, it's the hype

around it that is being debunked.

The notion that Iran will use it as a weapon against the US to bring the US and it's dollar down is a bit "out there"...We (the US) are doing a fine job of that all on our own - we don't need no stinkin' help. THAT, imho, is what one needs to keep in mind as the financial plans around the world come into play.

None of the various initiatives around the globe (Iranian Bourse, Asian Currency Unit, ASEA bond fund, IMF, etc.) and even here in the US, are being implemented to be used as weapons against the US. They are, again imo, being set up as hedges against the self-imposed implosion of the US dollar and its role as the world's reserve currency. It's a "just in case", "plan B", sort of thing. There's the risk that just the existence and wide spread use of these hedges might bring about the very crisis they are hedging against - but I don't believe that's the goal. That will depend on how much confidence in the US buck has actually waned.


'Asia must prepare for dollar collapse'
http://english.aljazeera.net/NR/exeres/50B0028B-B417-4FDE-866C-842CB3280A4F.htm

snip>

Masahiro Kawai, the ADB's head of regional economic integration, said on Tuesday: "Any shock hitting the US economy or the global market may change investors' perceptions given the existing global current account imbalance.

"Our suggestion to Asian countries is: Don't take this continuous financing of the US current account deficit as given. If something happens then East Asian economies have to be prepared."

He said because of the highly interdependent nature of East Asian economies, if countries worked together to allow their currencies to collectively appreciate against a tumbling dollar then the cost of adjustment would be spread.

"The possibility of a US dollar collapse or sharp decline may be small at this point but it would generate very significant turmoil so East Asian economies ... ought to be ready for that."


Citigroup to launch forex trading platform -- report
http://www.marketwatch.com/News/Story/Story.aspx?dist=newsfinder&siteid=mktw&guid=%7B3A500AAB-CB57-40EF-BBE4-672EEB72E12D%7D&symbol=

LONDON (MarketWatch) -- Lava Trading, a technology provider own by Citigroup Inc. (C), will Tuesday announce the luanch of a foreign exchange trading platform, the Financial Times reports.

The paper says that among its features will be a system that allows large banks to trade large amounts quietly among themselves.

The platform would be a rival to those operated by Reuters Group PLC's (RTRSY) and Icap PLC (IAP.LN).


Iran Oil Exchange
http://www.uruknet.info/?p=m22279&l=i&size=1&hd=0

snip>

Should the bourse open, most economists regard the idea that it could kill the dollar as preposterous. Currencies can easily be swapped on the financial markets, meaning one doesn't need a stockpile of greenbacks to buy oil, they say. And countries hold onto, or sell, dollars for many other reasons than to trade oil.

"There's a difference between the currency on the invoice and the currency that people actually want to hold," said Richard Lyons, executive associate dean of UC Berkeley's Haas School of Business.
The reason most economists think the ideas is preposterous is because it is a fucking preposterous idea! This is not a zero-sum game. It's a way for entities that do not want to put all their eggs in one basket to spread the risk. It's called hedging. Yes it will drain away some of the trade away from dollar-based exchanges, but even if the Iran bourse is wildly successful, it will only serve as an alternative way to reduce financial risk. That is why Chris Cook, the former director of London-based IPE (who as we've noted is elbow-deep in helping set up the Iran bourse) strikes such a cautious tone:
"The whole idea would be, in the medium or long term, to get into crude oil," he said. "But you understand how sensitive it is."
The world -- contrary to Iran's hyperbolic fervor -- works on an evolutionary pace, not a revolutionary one. Especially the world of financial markets. Mr. Baker confuses political rhetoric spouted by Iranian politicians (most likely for domestic consumption) for economic reality. As much as they'd like to 'destroy the USA,' the dollar's not going anywhere.

The Petrov article referred to by Baker, starts off as a cogent albeit hysterical ("The Iranian government has finally developed the ultimate 'nuclear' weapon that can swiftly destroy the financial system underpinning the American Empire.") look at the situation. It's a reasonable analysis until it gets to what the U.S. will do to stop the Iranian bourse, then it rapidly derails into tin-foil-hat territory:
Sabotaging the Exchange-this could be a computer virus, network, communications, or server attack, various server security breaches, or a 9-11-type attack on main and backup facilities.
Coup d'état-this is by far the best long-term strategy available to the Americans.
Negotiating Acceptable Terms & Limitations-this is another excellent solution to the Americans...
Joint U.N. War Resolution-...
Unilateral Nuclear Strike...
Unilateral Total War...
The scenario it doesn't list is what the U.S. may very well do (at least in the short-term)... which is nothing. As much as the U.S. has demonized the Iranian government, oil from Iran still flows into the oil markets and yes, some of it probably makes it one way or another into the U.S (via plastics in Chinese-made goods or synthetic textiles from Korea). So it's unlikely for the U.S. to want to mess with the supply (unless Dick Cheney's friends in the oil industry start itching for oil to hit $100/barrel).

The article finishes by mentioning The Dubai Mercantile Exchange but fails to mention that its oil trading effort was set up with the help of NYMEX or that it hasn't been successful because it trades in dollars and doesn't really add any value above what NYMEX and IPE offer.

It's worth repeating: this isn't a zero-sum game. Iran doesn't seem to be entering this venture in order to shut down the dollar but to offer an outlet for entities that don't want to be dependent on the U.S. currency. It's a classic hedge strategy, and it wouldn't be surprising at all if competitors to the U.S. global trade (you know who you are) enter into Euro-based exchanges in order to keep their downside covered -- just in case something happens and our trillion dollar IOUs come due.

[Toucano]

59. I'm unconvinced.

There are a lot of suspicious markers such as circular references in articles, the lack of a single main-line media report. I realize the corporate media is very powerful, but that doesn't stop credible, not corporate media from reporting things.

I can find no address or telephone number for "Wimpole Consortium" or "Wimpole Consulting", the firm that is reported to be setting up the bourse. Only a hotmail address for Chris Cook, reported to be a "principal".

Even so, the word "euro" doesn't appear in any of Chris Cooks'interviews.

Very good points that support the dubiousness of this bourse are made here: http://www.eurotrib.com/story/2006/2/24/7575/84230


So, say that Iran decides to sell its oil in euros. Fine. Both the Iranians and their clients will determine the price for the transaction in dollars, on one of the established markets, and will trade these dollars for euros for the actual payment operation. It will give banks active on the forex markets a little bit of income, but will change nothing to how oil is traded.

If they open a bourse, who will come? The answer is, no one, unless it is nothing more than the new place to buy oil from them and the transaction, whether in euros or in any other currency, will be negotiated in dollars, using existing market standards expressed in dollars, because there is no way that anybody will be able to express and clear the transaction in any other way.

[54anickel]

66. There is a lot of hype about it, but they've been working on this for

several years. I remember reading and posting about some of the plans back in '03 - long before the hype - it was just more "Stock Market News".

It was mentioned as a possibility in the 2000-2005 development plan. If I remember correctly it was a lower priority than meeting the privatization goals, but I believe it was "on the table" back then. Hard to remember any of the details, I was more interested in the privatization and stock market issues back then, the oil bourse had a lot of hurdles to overcome before it could even be considered.

I agree there's a lot of suspicious reporting these days, but I'm convinced that the "bourse" has been in the works for quite a while. May be a case of "a grain of truth" to the stories being circulated now. :shrug:

[fedsron2us]

68. There were mainstream media articles on this subject as far back as 2003

Here is one from the UK Observer

http://observer.guardian.co.uk/business/story/0,6903,900867,00.html

This is not just an issue under consideration by the Iranians. The Norwegians have also been mulling over the idea of pricing their oil in Euros. There are bits and pieces of circumstantial evidence to suggest that the UK government has been leaned on very heavily by Washington since the early 1990's not to join the Euro probably because the US government feared this might result in Brent crude being sold in that currency.

[54anickel]

69. Thanks fedsron2us. Yes the stability of the US$ has been weighing

on nearly everyone's mind the past few years. The point I was trying to make to the previous poster is that the idea of an Iranian Oil Bourse isn't anything new. It's been around for five years in one form or another. I remember reading about it in articles that also discussed the privatization of much of Iran's industry. The previous president of Iran was attempting to modernize their economy and there were MSM articles discussing that plan and they used the term bourse and likened it to the London Bourse. I should have saved or bookmarked some of those as they are nearly impossible to google up now that all the more "hyped" articles are out there.

My post was an attempt to address the previous poster's claim that the bourse is a scam. I don't believe that's true. But the truth is getting harder to find between some of the more "hyped up" stories out there. In the mean time, as the debate rages on about Iran using oil and it's oil bourse as a weapon, the Dubai Bourse gets no attention at all. Is a possible reason for Bushco's chumminess with UAE? So what was that big dip in the Saudi Markets last month really all about anyway? :shrug:


http://www.businessweek.com/magazine/content/05_40/b3953155.htm
A Bourse Is Born In Dubai

The International Financial Exchange could become a major Mideast player

Mohammed Bin Rashid al Maktoum, the Crown Prince of Dubai, is a man who is rarely denied. When the prince decided to plunge into horse racing, it was only a decade or so before his Godolphin stables came to dominate European tracks. When he decided to turn his sun-baked postage stamp of an emirate into a major regional tourism and business center, it wasn't long before the Dubai skyline sported some of the world's tallest towers -- and the Gulf was dotted with man-made islands shaped like palm trees.

And for the past three years, Sheikh Mo, as he is widely known, has been driving his aides and a team of international financial experts to build something even more ambitious: a Gulf bourse that will attract global investors and enhance Dubai's status as a commercial hub. On Sept. 26 this latest creation, the Dubai International Financial Exchange (DIFX), begins operations.

The new exchange's early days are likely to be modest -- maybe only a few trades will blip across screens linked to its computers. An exchange official says the DIFX will start trading as many as five index-linked equity products that are also traded elsewhere so their performance can be easily monitored. But the institutions that are likely to become members from the beginning, including Credit Suisse (CSR ), HSBC (HBC ), and Deutsche Bank (DB ), as well as regional players, have big ambitions for the DIFX. "It has taken many years and a lot of hard work, but we're very excited by the opportunities the DIFX offers investors in the region," says Michael Philipp, CEO of Credit Suisse for Europe, the Middle East, and Africa and a DIFX board member.

TIME OF TRANSITION
With oil prices hovering around $60 per barrel, the Middle East and the Gulf are awash in cash. The four regional big hitters -- Saudi Arabia, Iran, Kuwait, and the United Arab Emirates -- are likely to rake in a total of $276 billion in oil revenues this year, according to Washington-based researcher PFC Energy. The surplus money has supercharged the region's markets. Stocks in Kuwait are up 59% this year, while those in Egypt, Jordan, and Saudi Arabia have surged over 80%. If the DIFX takes off, it would give companies and investors a venue for initial public offerings and other deals that could attract both regional and global capital looking for an alternative to lackluster Western markets. "They are making every effort to become the New York Stock Exchange or London Stock Exchange of the region, and I believe they will succeed," says Jameel Akhrass, London-based head of Middle East investment banking for Morgan Stanley, which is planning to become a member of the DIFX.

snip>

COURTING GLOBAL PLAYERS
Bankers complain, however, that none of the regional exchanges is well-suited to listing companies that want an international following. Across the Middle East, local markets are too restrictive, too parochial, or insufficiently transparent for global investors. The market capitalization of the Riyadh exchange, for instance, is $550 billion -- larger than that of China's domestic exchanges. But foreigners can invest there only through bank-run mutual funds.

The DIFX looks as if it could be the solution to such problems. Investors from everywhere will be able to buy and sell easily through big member banks. The exchange will quote its listings in dollars, and regulations are modeled on those of Britain's Financial Services Authority, which regulates the London Stock Exchange. To further reassure investors, the exchange's board of directors includes international bankers as well as regional figures. And its own regulatory body will operate separately from the sometimes freewheeling financial institutions of the United Arab Emirates, of which Dubai is part. "What we are trying to do is cater to international institutional investors," says DIFX Chairman Jones. "We aren't trying to be just a market for Dubai or UAE products." Indeed, Jones hopes to attract listings from as far away as India and Pakistan. One reason that may happen is that many Dubai businesspeople and traders originally came from South Asia, and the emirate is a popular destination for Asian tourists.

more...

[mmonk]

58. I had heard the Bourse was to be delayed

until 2007. Then recently, I saw where people here were posting that it is to open soon. Therefore, its been harder to follow as of late. The Bourse is real I believe because I saw a question and answer session with the press on C-Span and the Iranian ambassador to the UN about it and it possibly being the cause for the US threats.

[Toucano]

60. Is the Iranian ambassador a credible source?

There's a very good reason the he might like to perpetuate the myth.

Every "scary" Iran story drives up the price of oil.

First reported in 2005, you now tell me that it's delayed until 2007 or next May or next October or some other non-specific time.

Now people say it will open this coming week.

We shall see.

[mmonk]

67. Actually I was mentioning it was out there.

The ambassador didn't answer the question and said such matters would have to addressed to the oil ministry, that he wasn't up to speed.

The person who said it might be delayed was an interview I caught the last of from a man that planned it and he was a Britt, not Iranian.

[cliss]

17. That was a very good post,

you're one of the few who mentions that Saddam had in fact started trading in Euros before we invaded. I read somewhere that he started trading in Euros, and made about $420 million in the currency appreciation. So yes - that was considered an urgent threat.

The US, by having Petrodollar hegemony, is in fact the loan shark of the world. Stan Goff wrote that we get SO much benefit from doing this, that we essentially get our oil for free.

And now? I think the winds are blowing in a different direction. We have a stagnant economy. Our manufacturing base is gone. We seem to be a country that's using free trade less and less and slowly becoming a dictatorship and a rogue -- willing and able to use nukes to get our way.

[daleo]

24. Good call.

There are all these oil bourses that will be using Euros soon...unless there is a war.

[Voltaire99]

36. Bravo, nice post (nt)

[psychopomp]

38. Interesting article on the IOB

Iran's oil bourse will fail
Mar 29, 2006
By Milton Ezrati , CSM

http://www.iranian.ws/iran_news/publish/article_14499.shtml

[RUMMYisFROSTED]

10. "Why am I a worthless dollar and what am I doing in this wheelbarrow?"

?

[AnneD]

15. It wasn't so unnoticed....

On DU's Stock Watch thread-we discussed the implications indepth. Let me put in a plug and a thanks to Ozy et al that make that thread happen every day. It is the best economic news around.:thumbsup:

This will hurt so many in ways we cannot as yet fully comprehend.

[NotGivingUp]

18. Can you provide a link, please?

[AnneD]

19. The Stock Market Watch thread is here on the DU...

it is started every day the market is onpen. Just go to late breaking news page and look for Stock Market Watch (and then the date). But I have to warn you, it's addictive.

[cosmicdot]

32. here's the link to today's Stock Market Watch

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=102x2250346

As AnneD mentioned, it can be found in this forum, Latest Breaking News, M-F, when the market is open for bizwax. Lots of posts keeps it bumped up for an EZ find.

[OKthatsIT]

22. Here we go...You guys....hang in, hang on, hang around!

We need to pull our assets out of the federal reserve banks NOW!

Why won't SOROS, or whoever, create a bank system...we need a bank for the people and by the people!

[SlipperySlope]

27. We had money for the people and by the people...

It was called GOLD and SILVER.

What we are seeing today is a result of putting the BANKERS in charge of our money.

[sweetheart]

28. not so expensive to form yourself

You can form a bank yourself:
http://www.lowtax.net/lowtax/html/stkitts_nevis/jnvobs.html

Then we can live in a world with 7 billion banks.

[AngryAmish]

64. And you shall not crucify mankind upon a cross of gold!!!!

[TexasLawyer]

26. some good background on M3

A Story About Oil You NEED To Hear
by Soj
Tue Dec 27, 2005 at 08:57:25 AM PDT
Some news stories are screamed in 100 headlines in 100 different newspapers and media outlets. This one however is so quiet it's almost a whisper, yet it may be one of the biggest stories next year.

Soj's diary :: ::
It all begins here, with a blurb so tiny that I'll reprint the entire thing. From the Federal Reserve's website, November 10, 2005:

On March 23, 2006, the Board of Governors of the Federal Reserve System will cease publication of the M3 monetary aggregate. The Board will also cease publishing the following components: large-denomination time deposits, repurchase agreements (RPs), and Eurodollars. The Board will continue to publish institutional money market mutual funds as a memorandum item in this release.

To fully understand how the "Federal Reserve" is neither federal nor a reserve of anything of value, see my full-length story here. But what is the M3? And how is it relevant? The Fed collects data on how much money is in circulation, where it's being stored (as cash, as stocks, etc) and prints these statistics on a quarterly basis. These are the "M" series of reports.

M0 (M Zero) is simply how much physical American money is in circulation, both coins and bank notes. M1 is M0 plus all the money that's in a bank that someone could withdraw immediately (usually known as "checking" accounts). M2 is M1 plus other types of accounts, including money markets and smaller CDs (under $100,000).

snip

http://www.dailykos.com/storyonly/2005/12/27/115725/53

[tuvor]

30. The Canadian dollar is at a 15-year high as of today

against the US dollar.

[godhatesrepublicans]

34. Holy Crud! I'm telling my boss to pay me in Euros tomorrow.

[jerry611]

35. And then in Yen 20 years from now...

Big economic analysts in Europe are starting to say the Euro will crash in less than 20 years.

In about 30 years, the world economy is going to be turned completely upside down.

[godhatesrepublicans]

37. You're kidding !?! when did that happen?

I usually catch those news stories! Guess I'd better brush up on my Mandarin.

[BooScout]

40. Really?

I haven't seen that and I watch the currency market pretty regularly. Got any links so I can peruse them? TIA

[jerry611]

63. Here's a link

http://www.thebusinessonline.co.uk/Stories.aspx?&StoryID=E320EDE4-BDCF-41BE-8D85-CDADD4F8BB41&SectionID=F3B76EF0-7991-4389-B72E-D07EB5AA1CEE

[Toucano]

51. That's Chicken Little poppy-cock!

The currency is completely independent of the political unity of the EU now.

Those analysts have been saying that same thing since before the euro was even launched.

[JCMach1]

39. Big Kick-- this is really scary....

Biggest story of the week even... :(

[Tripmann]

42. Forgive the ignorance

But how does one go about buying silver??

Thanks in advance

Tripmann

[ret5hd]

46. find a reputable local coin dealer

you can buy silver "rounds" (one ounce of .999 silver that looks about like a silver dollar) or silver "squares" (actually rectangles, again .999 silver) or even 100 oz ingots.

You will probably pay about $0.50 an ounce over spot price (currently $13.51) to buy, and will probably receive about $0.25 an ounce under spot price when you sell. That is my experience anyway.

[liberalla]

56. The lowest prices I've found are at CNI.

They have an 800# where you can ask all the questions you want. I spent hours going over their website--tons of good info, compared to others.

CNI daily prices: http://www.golddealer.com/bullionpage.html
Scroll down to silver (it goes gold, silver, platinum, palladium)

I've seen good recommendations for Kitco also. Neither CNI or Kitco are fly-by-night companies. Both have many years in the business and good reputations.

For up to the minute silver prices: http://www.kitco.com/charts/livesilver.html

I've never tried going to local coin dealers, but I'm curious to see what the have. I would like to pick up some silver coinage (pre 1965), when it was still 90% silver.

[katty]

47. The Fed could be printin' up banana republic $ right now...

but we'll never know.

[ProudDad]

53. Wait'll petroleum is traded in Euros!

[barb162]

65. Bush spends like a drunken sailor