Friday, April 4, 2014

Rickards says watch Saudia Arabia and Petrodollar

Here is another interview with Jim Rickards in Australia while on tour for his new book debut this month. He repeats many of his points in this interview, but I post it because he adds a very significant watch post for us for major monetary system change. That being if Saudi Arabia moves away from pricing oil sales in US dollars.

There are some keys to change we will watch here that we feel are significant. Some involve events within the IMF. Most notably the approval of the 2010 reforms as a first step towards a bigger more involved IMF. Any crisis which elevates the role of the IMF as a "global lender of last resort" would be another big key to watch. 

Change could be coming outside the IMF (from frustrated BRIC nations). Keys we watch are the value of the US dollar index as it trades against other currencies. And  a big key to US dollar dominance and stability has been the US petrodollar. The petrodollar is where most major global energy deals are done using the US dollar as the unit of exchange. This insures a huge ongoing demand for US dollars that keeps it from falling in value. If the bulk of world energy trading moves away from using the US dollar, that demand drops and a key support for the dollar goes with it. If Saudi Arabia were to move away from the US dollar, that would be a KEY signal that the days of US dollar dominance are running out. 

All these various trade deals we mention here around the world bypassing the dollar are part of a slow and steady erosion of dollar dominance. Energy deals are especially important due to their large size and the fact that they are essential to commerce. Nations have to have energy.

Our job here is it present what we think could lead to major monetary system changes in the future. Anything that  leads to a diminished role for the US dollar is a key to watch for. Change at the IMF is key to watch for. Russia and China setting up payment and banking systems that bypass the dollar are also keys to watch for. All these things are in progress so we have plenty to keep an eye on in the coming months.

One other commment on this interview: 

Notice how the interviewer wants Rickards to give a time frame for the coming big changes. He goes ahead and gives a 3-5 year window while stating that no one can give precise timing. 
This is important for readers here to remember. 

This change could happen rapidly at any time triggered by any one of many different events. But it could also just gradually play out over time (several years). This is impossible to predict. But it is possible to project that it is coming one way or another based on all the available evidence.

Therefore, it is important to stay engaged and stay informed. Don't let the passage of time keep you from staying alert and watchful for the signposts along the way. We'll cover it here whether we see major change in one month, one year or over several years. We don't feel a need to be bound by a specific date for the change. The date is not as important as understanding what is happening when the change takes place.

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