The Fascinating Story Of How The Petrodollar Was Born And Lived In Secrecy For Over 40 Years

Submitted by Tyler Durden on 05/31/2016 10:02 -0400
http://www.zerohedge.com/news/2016-05-31/secret-story-how-saudi-petrodollar-deal-was-born
For decades, the story of Saudi Arabia recycling petrodollars, i.e., funding the US deficit by buying US Treasuries with proceeds of its crude oil sales (mostly to the US), while the US sweetened the deal by providing the Saudis with military equipment and supplies, remained entirely in the conspiracy realm, with no confirmation or official statement from the US Treasury department.
Now, that particular "theory" becomes the latest fact, thanks to a fascinating story by Bloomberg which gives the background and details of secret meeting between then-US Treasury secretary William Simon and his deputy, Gerry Parsky, and members of the Saudi ruling elite, and lays out the history of how the petrodollar was born.
Here is the background:

It was July 1974. A steady predawn drizzle had given way to overcast skies when William Simon, newly appointed U.S. Treasury secretary, and his deputy, Gerry Parsky, stepped onto an 8 a.m. flight from Andrews Air Force Base. On board, the mood was tense. That year, the oil crisis had hit home. An embargo by OPEC’s Arab nations—payback for U.S. military aid to the Israelis during the Yom Kippur War—quadrupled oil prices. Inflation soared, the stock market crashed, and the U.S. economy was in a tailspin.

Officially, Simon’s two-week trip was billed as a tour of economic diplomacy across Europe and the Middle East, full of the customary meet-and-greets and evening banquets. But the real mission, kept in strict confidence within President Richard Nixon’s inner circle, would take place during a four-day layover in the coastal city of Jeddah, Saudi Arabia.

The goal: neutralize crude oil as an economic weapon and find a way to persuade a hostile kingdom to finance America’s widening deficit with its newfound petrodollar wealth. And according to Parsky, Nixon made clear there was simply no coming back empty-handed. Failure would not only jeopardize America’s financial health but could also give the Soviet Union an opening to make further inroads into the Arab world.

It “wasn’t a question of whether it could be done or it couldn’t be done,” said Parsky, 73, one of the few officials with Simon during the Saudi talks

As noted above, the framework of the required deal was simple: the U.S. would buy oil from Saudi Arabia and provide the kingdom military aid and equipment. In return, the Saudis would plow billions of their petrodollar revenue back into Treasuries and finance America’s spending.
The man leading the US negotiation, US Treasury Secretary William Simon, had just done a stint as Nixon’s energy czar, and "seemed ill-suited for such delicate diplomacy. Before being tapped by Nixon, the chain-smoking New Jersey native ran the vaunted Treasuries desk at Salomon Brothers. To career bureaucrats, the brash Wall Street bond trader—who once compared himself to Genghis Khan—had a temper and an outsize ego that was painfully out of step in Washington. Just a week before setting foot in Saudi Arabia, Simon publicly lambasted the Shah of Iran, a close regional ally at the time, calling him a “nut.”

But Simon, better than anyone else, understood the appeal of U.S. government debt and how to sell the Saudis on the idea that America was the safest place to park their petrodollars. With that knowledge, the administration hatched an unprecedented do-or-die plan that would come to influence just about every aspect of U.S.-Saudi relations over the next four decades (Simon died in 2000 at the age of 72).

In the beginning it wasn't easy: "it took several discreet follow-up meetings to iron out all the details, Parsky said."
But at the end of months of negotiations, Bloomberg writes, there remained one small, yet crucial, catch: King Faisal bin Abdulaziz Al Saud demanded the country’s Treasury purchases stay “strictly secret,” according to a diplomatic cable obtained by Bloomberg from the National Archives database."
The secret remains... until May 16 when the US Treasury for the first time ever revealed the full extent of Saudi TSY holdings.


Bloomberg adds that with a handful of Treasury and Federal Reserve officials, the secret was kept for more than four decades—until now. "In response to a Freedom-of-Information-Act request submitted by Bloomberg News, the Treasury broke out Saudi Arabia’s holdings for the first time this month after “concluding that it was consistent with transparency and the law to disclose the data,” according to spokeswoman Whitney Smith. The $117 billion trove makes the kingdom one of America’s largest foreign creditors."
The TIC data released later that day confirmed the FOIA response.
To be sure, as we commented in mid-May, it is very likely that the Treasury report is incomplete, and that the Saudis also own hundreds of billions in Treasurys held in custody with offshore trading centers such as Euroclear. After all, the current tally represents just 20 percent of its $587 billion of foreign reserves, well below the two-thirds that central banks typically keep in dollar assets
What’s more, the commitment to the decades-old policy of “interdependence” between the U.S. and Saudi Arabia, which arose from Simon’s debt deal and ultimately bound together two nations that share few common values, is showing signs of fraying. America has taken tentative steps toward a rapprochement with Iran, highlighted by President Barack Obama’s landmark nuclear deal last year. The U.S. shale boom has also made America far less reliant on Saudi oil.
Needless to say, the real total notional amount of Saudi holdings will eventually become known, especially if the middle-eastern nation follows through with its threat of liquidating some or all of them.  What is more notable, however, is that with the first disclosure of this data since the birth of the petrodollar, something appears to have changed:

What’s more, the commitment to the decades-old policy of “interdependence” between the U.S. and Saudi Arabia, which arose from Simon’s debt deal and ultimately bound together two nations that share few common values, is showing signs of fraying. America has taken tentative steps toward a rapprochement with Iran, highlighted by President Barack Obama’s landmark nuclear deal last year. The U.S. shale boom has also made America far less reliant on Saudi oil.

“Buying bonds and all that was a strategy to recycle petrodollars back into the U.S.,” said David Ottaway, a Middle East fellow at the Woodrow Wilson International Center in Washington. But politically, “it’s always been an ambiguous, constrained relationship.”

One thing that certainly changed is that in a world where central banks are ravenously buying up each others' (and their own) debt, the need for Petrodollar recyclers such as Saudi Arabia is no longer there. But that was not always the case:

[B]ack in 1974, forging that relationship (and the secrecy that it required) was a no-brainer, according to Parsky, who is now chairman of Aurora Capital Group, a private equity firm in Los Angeles. Many of America’s allies, including the U.K. and Japan, were also deeply dependent on Saudi oil and quietly vying to get the kingdom to reinvest money back into their own economies.

"Everyone—in the U.S., France, Britain, Japan—was trying to get their fingers in the Saudis’ pockets,” said Gordon S. Brown, an economic officer with the State Department at the U.S. embassy in Riyadh from 1976 to 1978. For the Saudis, politics played a big role in their insistence that all Treasury investments remain anonymous.

America's reliance on Saudi Arabia to fund its deficit - and obtain a cheap price for oil - meant that the kingdom would be granted Platinum status in every form of interaction with the US.

Tensions still flared 10 months after the Yom Kippur War, and throughout the Arab world, there was plenty of animosity toward the U.S. for its support of Israel. According to diplomatic cables, King Faisal’s biggest fear was the perception Saudi oil money would, “directly or indirectly,” end up in the hands of its biggest enemy in the form of additional U.S. assistance.

Treasury officials solved the dilemma by letting the Saudis in through the back door. In the first of many special arrangements, the U.S. allowed Saudi Arabia to bypass the normal competitive bidding process for buying Treasuries by creating “add-ons.” Those sales, which were excluded from the official auction totals, hid all traces of Saudi Arabia’s presence in the U.S. government debt market.

“When I arrived at the embassy, I was told by people there that this is Treasury’s business,” Brown said. “It was all handled very privately.”

* * *
Another exception was carved out for Saudi Arabia when the Treasury started releasing monthly country-by-country breakdowns of U.S. debt ownership. Instead of disclosing Saudi Arabia’s holdings, the Treasury grouped them with 14 other nations, such as Kuwait, the United Arab Emirates and Nigeria, under the generic heading “oil exporters”—a practice that continued for 41 years.

Meanwhile, Saudi Arabia continued buying: by 1977, Saudi Arabia had accumulated about 20 percent of all Treasuries held abroad, according to The Hidden Hand of American Hegemony: Petrodollar Recycling and International Markets by Columbia University’s David Spiro.

The deal led to assorted headaches: "an internal memo, dated October 1976, detailed how the U.S. inadvertently raised far more than the $800 million it intended to borrow at auction. At the time, two unidentified central banks used add-ons to buy an additional $400 million of Treasuries each. In the end, one bank was awarded its portion a day late to keep the U.S. from exceeding the limit.

Most of these maneuvers and hiccups were swept under the rug, and top Treasury officials went to great lengths to preserve the status quo and protect their Middle East allies as scrutiny of America’s biggest creditors increased.

Over the years, the Treasury repeatedly turned to the International Investment and Trade in Services Survey Act of 1976—which shields individuals in countries where Treasuries are narrowly held—as its first line of defense.

The strategy continued even after the Government Accountability Office, in a 1979 investigation, found “no statistical or legal basis” for the blackout. The GAO didn’t have power to force the Treasury to turn over the data, but it concluded the U.S. “made special commitments of financial confidentiality to Saudi Arabia” and possibly other OPEC nations.

Simon, who had by then returned to Wall Street, acknowledged in congressional testimony that “regional reporting was the only way in which Saudi Arabia would agree” to invest using the add-on system.

Ultimately, Saudi dominance in the US Treasury market meant they were untouchable. "It was clear the Treasury people weren’t going to cooperate at all,” said Stephen McSpadden, a former counsel to the congressional subcommittee that pressed for the GAO inquiries. “I’d been at the subcommittee for 17 years, and I’d never seen anything like that."
Today, Parsky says the secret arrangement with the Saudis should have been dismantled years ago and was surprised the Treasury kept it in place for so long. But even so, he has no regrets. Doing the deal “was a positive for America”, he says cited by Bloomberg.
And with that the story of how the Petrodollar was born is now public information, something which Saudi Arabia may not be too happy with. For the sake of the US, it better have its ducks in order because the release of this story simply means that the US Treasury is confident it will no longer have a strategic need for its long-time Saudi partner. The Fed, which has implicitly stepped into the Saudi role, better not disappoint.

In Its First Ever Bond Sale, A Cash-Starved Saudi Arabia Is Looking To Issue $15 Billion

Submitted by Tyler Durden on 05/31/2016 13:17 -0400


http://www.zerohedge.com/news/2016-05-31/its-first-ever-bond-sale-cash-starved-saudi-arabia-looking-issue-15-billion
Last week the bond market was stunned by the unprecedented demand for sovereign paper issued by the middle-eastern nation of Qatar, which announced it would issue $9 billion in Eurobonds (in three maturities), more than double what had been originally expected by the market, and well below the total demand for Qatar sovereign paper: according to Reuters, the issue was massively oversubscribed, with over $23 billion in soft orders.
Some were concerned that this massive bond issuance would "reprice" the local bond market and put on hold any new incremental issuance by Qatar's neighbors, most notably Saudi Arabia, which has been very vocal about its own intentions to sell debt in the coming weeks and which, in light of its surging budget deficit ballooning as a result of persistently low oil prices, desperately needs an outside cash infusion.
We said that these concerns were materially overblown as Qatar was merely the latest example of the scramble for yield in the current "risk on" environment, and if anything Qatar's sale demonstrated that any attempt by Saudi Arabia to fund its budget needs would be ridiculously easy.
Sure enough, this was confirmed just days later when earlier today Bloomberg reported that Saudi Arabia is considering the sale of as much as $15 billion of bonds this year, "encouraged by investor demand for Qatar’s recent issue" citing people with knowledge of the matter said.

The details: Saudi Arabia is weighing a sale of $10 billion to $15 billion after the end of Ramadan in July, adding no final decision has been made and the discussions are still at a preliminary stage. It would be Saudi Arabia’s first bond sale in international capital markets. We think that absent another global market swoon, the final notional amount issued will be well greater than "only" $15 billion.

While Saudi Arabia is still sitting on nearly $600 billion in foreign-exchange reserves, the country has burned through $140 billion in reserves since the end of 2014. And the IMF warned the Saudis could eventually run out of cash.
This is not Saudi Arabia's first recent approach to capital markets: in April the kingdom raised a $10 billion loan from a group of banks, its first loan in 25 years. Last year, the Saudis tapped the local bond market for the first time in eight years, raising at least $4 billion.
But this would be the first time Saudi Arabia has issued international bonds. And it will be a whopper.
CNN also quotes John Sfakianakis, a former official in Saudi Arabia's Ministry of Finance who said the sale would likely take place over the next several months. "There is a need to cover the fiscal gap," said Sfakianakis, who is currently director of economic research at the Gulf Research Center in Riyadh, Saudi Arabia. "It's better for this money to come from other sources than reserve assets because as they get depleted that places a bigger risk over the medium to long-term."
Bloomberg adds that Saudi Arabia has invited banks to arrange the bond sale. The country expects to issue a “significant” amount, the people said at the time, without giving more details.
Saudi Arabia's move is hardly a surprise: the country is merely taking advantage of an unprecedented bond bubble inflated by global central banks, where $9.9 trillion in sovereign paper is now trading with negative yields.
As a result, governments in the six-nation Gulf Cooperation Council, which includes the two-biggest Arab economies of Saudi Arabia and the United Arab Emirates, are turning to public markets to raise funds after a plunge in oil prices led to higher budget deficits. Qatar last week attracted $23 billion in orders for its $9 billion sale, the biggest-ever bond issue from the Middle East. Abu Dhabi raised $5 billion from the sale of five and 10 year securities in April.
Some more:

The debut bond will follow the country’s first loan in at least 15 years as it seeks to fill a budget hole estimated at about $100 billion this year. Saudi Arabia sealed a $10 billion facility in April, three people with knowledge of the matter said at the time.

The country also hired HSBC Holdings Plc banker Fahad Al Saif to start a debt management office that will be responsible for the international bond sale, two separate people with knowledge of the matter said this week. Al Saif joined the Ministry of Finance on an open-ended secondment from HSBC’s Saudi British Bank, the people said.

The country is undergoing its biggest-ever economic shakeup, led by Deputy Crown Prince Mohammed bin Salman, as it prepares for the post-oil era following the plunge in crude prices that started in 2014. One of the government’s biggest challenges will be navigating the worst economic slowdown since the global financial crisis as authorities cut spending to plug a budget deficit that reached about 15 percent of gross domestic product in 2015.

The biggest irony here is that while Saudi Arabia has been implicitly fighting the Fed (and other central banks), who have generously funded the US shale industry with hundreds of billions in junk bonds over the past decade, the same industry of "high cost producers" that Saudi Arabia is eager to put out of business indefinitely, it is the same Fed that is coming to Saudi's rescue now by stoking demand for any deficit-funding paper Saudi Arabia may and will issue.
The good news for Saudi Arabia is that the new debt funds will be promptly used to address gaping fiscal holes in the Saudi economy: Moody's recently warned of the social impact of policy reforms in Saudi Arabia and other Gulf countries where "governments are under pressure to continue redistributing oil revenues to their populations to avoid economic-related civil unrest."
But what the inevitable record bond issuance out of Saudi Arabia means, is that the deflationary pressure on oil will persist, as the largest crude oil exporter will not need to rationalize oil supply for the foreseeable future by cutting supply to boost prices. Instead, Saudi can simply fund its budget shortfall by appealing to the same bond investors who are keeping shale afloat, while maintaining its strategy of keeping the oil market continuously oversupplied.

De-Petrodollar-ization Esclates - China Imports Record Amount Of Russian Oil In April

Submitted by Tyler Durden on 05/23/2016 13:09 -0400
http://www.zerohedge.com/news/2016-05-23/de-petrodollar-ization-esclates-china-imports-record-amount-russian-oil-april
We have reported for years that Russia and China have been doing everything they can to displace the use (and influence) of the US dollar.
The US of course, either oblivious or too arrogant to care, has continued to bring Russia and China together by annoying both equally with its incessant meddling. Recall that recently both China and Russia have had to warn the US about its insistence on flying reconnaissance planes too close to their borders.
Of course, as the US has been playing geopolitical games, China and Russia have been working on strengthening their relationship with one another. At the end of 2015, China had become Russia's biggest oil customer, and as of April, Russian oil shipments to China hit a record high. Russia has also surpassed Saudi Arabia as the biggest crude exporter to China.

Russia Today has more

Beijing has ramped up imports of Russian oil by 52.4 percent last month compared to a year earlier. China's General Administration of Customs calculated a record 4.81 million tons.

In March, China bought 4.65 million tons of oil from Russia.

Russia, Saudi Arabia and Angola were China’s three major oil suppliers last month.

April imports from Saudi Arabia fell by 22 percent year-on-year to 4.12 million tons. In March, China imported 3.98 million tons of oil from the country.

China increased year-on-year oil imports from Angola last month by 39 percent to 3.98 million tons. Imports from Iran in April fell by 5.1 percent yoy to 2.76 million tons.

An International Energy Agency report showed that at the end of 2015 Russia overtook Saudi Arabia as the biggest crude exporter to China.

Russian exports to China have doubled over the past five years, and supply is expected to continue to be strong. Transneft's Vice-President Sergey Andropov said that China is expected to import 27 million tons of Russian crude this year via the Eastern Siberia-Pacific Ocean (ESPO) pipeline. The volume underscores the significance of contracts signed  in 2009 by Rosneft, Transneft, and China National Petroleum Corporation to have Russia supply oil to China through the ESPO.

Russian exports to China have more than doubled over the past five years, up by 550,000 barrels a day. Moscow and Beijing have significantly increased energy cooperation, with a wide range of multibillion dollar projects.

Russian oil transport monopoly Transneft’s Vice-President Sergey Andropov said in March that China is ready to import 27 million tons of Russian crude this year via the Eastern Siberia-Pacific Ocean (ESPO) pipeline. Supplies to China through the ESPO pipeline started in 2011 after Rosneft, Transneft and China National Petroleum Corporation (CNPC) signed contracts two years earlier. Currently five million tons of crude are supplied through the pipeline annually, and this is expected to rise to 15 million tons a year.

Experts say Chinese imports of Russian oil are likely to stay high over the coming years due to long-term crude supply contracts and rising demand from the world's second biggest oil consumer.

* * *
There is an underlying theme here that cannot be ignored.
Whatever the US has been focusing on, whether it's commissioning $4.4 billion warships, wargaming in the name of "regional stability", or arguing over LGBT rights and confederate flags, it is neither productive, nor helping its global economic standing. One day when the USD is no longer the reserve currency, and all of the games the Federal Reserve plays to allow fiscal policy to go unchecked are no longer an option, we suspect that it will wish it had done things quite differently.

Cheap Oil, the U.S. Dollar and the Deep State

Posted on March 10, 2016 by Charles Hugh Smith

http://www.washingtonsblog.com/2016/03/cheap-oil-u-s-dollar-deep-state.html

That oil fell off a cliff once the U.S. dollar (USD) began its liftoff in mid-2014 is, well, interesting. Causation, correlation or coincidence? There are a variety of opinions on this, as there should be. What we do know is the soaring USD blew up a bunch of carry trades that borrowed money denominated in USD and invested the cash in emerging markets paying much higher yields. Here’s WTIC oil:

And here’s the USD Index:

We also know the Saudis announced that the kingdom would pump every barrel it could “to maintain market share,” which is generally understood to mean crush competitors such as Russia and U.S. shale producers.

We also know that storage facilities are almost full up (Oil Fundamentals Could Cause Oil Prices To Fall, Fast!).

We also know that global growth is slowing, so demand could weaken sharply going forward.

And lastly, we know that many oil exporters are heavily dependent on oil revenues to fund their oligarchy/monarchy/ruling elites, their military and their vast social welfare programs, which keep the restive masses from overthrowing the oligarchy, etc.

Here is the U.S., heavily indebted producers must pump or die, as they need every dime of revenue to service their vast debts.

If we add all this up– carry trades blowing up, weakening demand and heavy pressures to maintain production–we get a perfect set-up for a continued decline in oil.

Many observers are expecting the Federal Reserve to pull out all the stops to weaken the dollar. They think this because a strong dollar hurts U.S. exports. If oil and the USD are indeed correlated, a weaker dollar would trigger a boost in oil prices–a welcome “saved by the bell” for indebted U.S. producers, and the bankers who lent tens of billions of dollars to them.

If you glance at the above chart of the dollar index, you’ll note the Bollinger Bands are tightening. This usually presages a big move up or down. We don’t know which way the USD will move, but since it’s in a Bull market, we might surmise the move will be a continuation of the current trend, i.e. up.

Technically, a 20% gain to the 120 level would be quite typical of a long-term uptrend.

What would an additional 20% gain in the USD do to oil? If the correlation holds (and perhaps it won’t–there are no guarantees), it would very likely crush oil to new and breathtaking lows. Analyst Art Berman recently suggested a target of $16.50/barrel, and this corresponds rather neatly with USD at 120 (a 20% gain).

Lower oil prices are not an unalloyed “win” for the U.S. The U.S. energy sector is getting pummeled, and soon its lenders will start booking staggering losses. The decline in petrodollars also means there is less demand for U.S. Treasuries from oil exporters.

Enter the U.S. Deep State, which is only marginally interested in Wall Street bankers’ losses or petrodollar recycling into Treasuries. Global hegemony ultimately rests on issuing the reserve currency in size, and the sheer magnitude of financial resources that can be brought to bear to do what is viewed as necessary.

The collapse in oil has led to an unprecedented transfer of wealth from producers to consumers. Oil exporters (the number of which is diminishing, as populations and domestic consumption levels soar throughout the oil-producing world) have far fewer USD to spend on military adventures, social welfare, the tallest buildings in the world, and so on.

If global bankers wise up (and they are smart gals/guys), lending to oil producers is about to dry up like the proverbial mist in Death Valley. Why loan money to someone with $35/barrel oil in the ground if oil is heading to $20 or lower?

Who goes broke/goes home/is overthrown at sustained $20/barrel oil? You can make your own list, but it pretty much includes every oil exporter.

So who wins in a scenario in which the USD gains another 20% and pins oil to new, sustained lows? Consumers, of course, but as Zero Hedge and others have explained, this windfall isn’t leading to robust consumer spending. Rather, households are saving the proceeds, hunkering down in the recessionary winds they see rising.

The U.S. oil sector will take some serious lumps, along with every other producer. We can anticipate huge writedowns of uncollectible debt, bankruptcies, and all the other collateral damage (pun intended) of a bust.

But who is left relatively unscathed in terms of financial power and hegemony? The U.S. Should the USD soar another 20%, China would be forced to devalue its currency, causing massive capital flows out of China and an immediate loss of trillions of dollars of purchasing power for all who hold yuan/RMB. Not much of a win there.

All this is to suggest that those expecting a major weakening in the USD to push oil higher shouldn’t hold their breath awaiting this outcome. Maybe the USD will weaken 20%, but why would it do so when every other central bank is weakening its currency? Wouldn’t it make much more sense to drain wealth and geopolitical leverage from oil exporters?

11-minute video: Ken O’Keefe discusses Syrian war, US petrodollar crash, Israel’s terrorism in broader wars for Empire

Posted on March 8, 2016 by Carl Herman

Luke Rudkowski of We Are Change’s insightful 11-minute video with former US Marine Ken O’Keefe:

Among hundreds in alternative media, I document illegal US/UK/Israel lie-started and illegal Wars of Aggression that continue hundreds of years of psychopathic would-be empires, now focused on Syriawith documented use of nuclear weapons by imperial forces (1-minute video):

We’ve documented and proven that US “officials” outrageously lie to demonize Russia (and here) acting at the request of Syria’s government for military operations within their own borders against rogue terrorists. These terrorists apparently are agents of the US/UK/Israel illegal Wars of Aggression for empire (also here, here, here).

Immediate escalation of war on Syria might be our .01%’s desperate last move to avoid final defeat and arrests. Global polling proves this end is near: the US is recognized as Earth’s greatest threat to peace; voted three times more dangerous than any other country.

The data confirm this recognition:

• Since WW2, Earth has had 248 armed conflicts. The US started 201 of them (81%).
• These US-started armed attacks have killed ~30 million and counting; 90% of these deaths are innocent children, the elderly and ordinary working civilian women and men.
• The US has war-murdered more than Hitler’s Nazis.
• US official reports now confirm all “reasons” the US told for current armed attacks were known to be false as they were told.
• These lie-started US wars are not even close to lawful.
• US wars and rhetoric for more wars continue a long history of lie-began US Wars of Aggression. Themost decorated US Marine general in his day warned all Americans of this fact of lie-started wars for 1% plunder.

The categories of crime include:

1. Wars of Aggression (the worst crime a nation can commit).
2. Likely treason for lying to US military, ordering unlawful attack and invasions of foreign lands, and causing thousands of US military deaths.
3. Crimes Against Humanity for ongoing intentional policy of poverty that’s killed over 400 million human beings just since 1995 (~75% children; more deaths than from all wars in Earth’s recorded history).

Such crimes OBVIOUSLY call for legal arrests of “leaders” in government and corporate media (for “covering” those crimes with easily verified outrageous lies).

These crimes annually cost millions killed, billions harmed, and trillions looted, with recent history continuing literal centuries of US lie-began Wars of Aggression that involved your families in two horrific global wars for colonial empire.

An arrest lawfully stops a crime in commission. We do this to stop public harm now, and avoid further harm from more criminal acts.

If critical mass of humanity do not demand arrests, millions more will be war-murdered; despite ongoing ridiculous Emperor’s New Clothes lies and crimes.

Can any human being call oneself an “educated adult” with failure to recognize and act upon arguably the one most important law: that trillions-funded massive military never ever ever ever attack unless under clearly defined “self-defense”?

Can any human being call oneself “loving” to not energize thoughts, words, and actions for logically a first and OBVIOUS response: demanding lawful arrests of those organized war-murderers?

Can any human being call oneself a “responsible citizen” to not call corporate media as liars and complicit War Criminals in failure to call these lie-started and illegal Wars of Aggression?

In just 90 seconds, former US Marine Ken O’Keefe powerfully states how you may choose to voice “very obvious solutions”: arrest the criminal leaders (video starts at 20:51, then finishes this episode of Cross Talk):

**

Note: I make all factual assertions as a National Board Certified Teacher of US Government, Economics, and History, with all economics factual claims receiving zero refutation since I began writing in 2008among Advanced Placement Macroeconomics teachers on our discussion board, public audiences of these articles, and international conferences. I invite readers to empower their civic voices with the strongest comprehensive facts most important to building a brighter future. I challenge professionals, academics, and citizens to add their voices for the benefit of all Earth’s inhabitants.

**

Carl Herman is a National Board Certified Teacher of US Government, Economics, and History; also credentialed in Mathematics. He worked with both US political parties over 18 years and two UN Summits with the citizen’s lobby, RESULTS, for US domestic and foreign policy to end poverty. He can be reached at Carl_Herman@post.harvard.edu

The 'Real' Price Of Oil Is Below $17

Submitted by Tyler Durden on 01/14/2016 18:00 -0500
http://www.zerohedge.com/news/2016-01-14/real-price-oil-below-17
"You see a big destruction in the income of the oil and commodity producers," exclaims on analyst but, as Bloomberg notes, while oil prices flashing across traders' terminals are at the lowest in a decade, in real terms the collapse is considerably deeper. Adjusted for inflation, WTI is its lowest since 2002 and worse still Saudi Light Crude is trading at below $17 (in 1998 dollar terms) - the lowest since the 1980s...
Slumping prices are a critical signal that the boom in lending in China is “unwinding,” according to Adair Turner, chairman of the Institute for New Economic Thinking.
In fact, while sub-$30 per barrel oil sounds very scary, Saudi prices would be less than $17 a barrel when converted into dollar levels for 1998, the year oil sank to its lowest since the 1980s.


Slowing investment and construction in China, the world’s biggest energy user, is “sending an enormous deflationary impetus through to the world, and that is a significant part of what’s happening in this oil-price collapse,” Turner, former chairman of the U.K. Financial Services Authority, said in an interview with Bloomberg Television.
*  *  *
So while prices are very low any description, never forget about inflation - The Fed won't!

Ron Paul Warns: "Watch The Petrodollar"

Submitted by Tyler Durden on 01/14/2016 21:10 -0500
http://www.zerohedge.com/news/2016-01-13/ron-paul-warns-watch-petrodollar
Submitted by Nick Giambruno via InternationalMan.com,

The chaos that one day will ensue from our 35-year experiment with worldwide fiat money will require a return to money of real value. We will know that day is approaching when oil-producing countries demand gold, or its equivalent, for their oil rather than dollars or euros. The sooner the better. - Ron Paul

Ron Paul is calling for the end of the petrodollar system. This system is one of the main reasons the U.S. dollar is the world’s premier reserve currency.
Essentially, Paul is saying that understanding the petrodollar system and the forces affecting it is the best way to predict when the U.S. dollar will collapse.
Paul and I discussed this extensively at one of the Casey Research Summits. He told me he stands by his assessment.

Nick Giambruno and Ron Paul
This is critically important. When the dollar loses its coveted status as the world’s reserve currency, the window of opportunity for Americans to protect their wealth from the U.S. government will definitively shut.
At that point, the U.S. government will implement the same destructive measures other desperate governments have used throughout history: overt capital controls, wealth confiscation, people controls, price and wage controls, pension nationalizations, etc.
The dollar’s demise will wipe out the wealth of a lot of people. But it will also trigger political and social consequences likely to be far more damaging than the financial fallout.
The two key takeaways are:

1. The U.S. dollar’s status as the premier reserve currency is tied to the petrodollar system.

1. The sustainability of the petrodollar system relies on volatile geopolitics in the Middle East (where I lived and worked for several years).

From Bretton Woods to the Petrodollar

The Bretton Woods international monetary system, which the Allied powers created in 1944, turned the dollar into the world’s premier reserve currency.
After WWII, the U.S. had by far the largest gold reserves in the world (around 706 million ounces). These large reserves - in addition to winning the war - allowed the U.S. to reconstruct the global monetary system around the dollar.
The Bretton Woods system tied virtually every country’s currency to the U.S. dollar through a fixed exchange rate. It also tied the U.S. dollar to gold at a fixed exchange rate.
Countries around the world stored dollars for international trade or to exchange with the U.S. government at the official rate for gold ($35 an ounce at the time).
By the late 1960s, excessive spending on welfare and warfare, combined with the Federal Reserve monetizing the deficits, drastically increased the number of dollars in circulation relative to the gold backing them.
Naturally, this made other countries exchange more dollars for gold at an increasing rate. This drained the U.S. gold supply. It dropped from 706 million ounces at the end of WWII to around 286 million ounces in 1971 (a figure supposedly held constant to this day).
To stop the drain, President Nixon ended the dollar’s convertibility for gold in 1971. This ended the Bretton Woods system.
In other words, the U.S. government defaulted on its promise to back the dollar with gold. This eliminated the main motivation for other countries to hold large U.S. dollar reserves and use the U.S. dollar for international trade.
With the dollar no longer convertible into gold, demand for dollars by foreign nations was sure to fall, and with it, the dollar’s purchasing power.
OPEC, a group of oil-producing countries, passed numerous resolutions after the end of Bretton Woods, stating its need to maintain the real value of its earnings. It even discussed accepting gold for oil. Ultimately, OPEC significantly increased the nominal dollar price of oil.
For the dollar to maintain its status as the world’s reserve currency, the U.S. would have to concoct a new arrangement that gave foreign countries a compelling reason to hold and use dollars.

The Petrodollar System

From 1972 to 1974, the U.S. government made a series of agreements with Saudi Arabia. These agreements created the petrodollar system.
The U.S. government chose Saudi Arabia because of its vast petroleum reserves, its dominant position in OPEC, and the (correct) perception that the Saudi royal family was corruptible.
In essence, the petrodollar system was an agreement that the U.S. would guarantee the survival of the House of Saud. In exchange, Saudi Arabia would:

1. Use its dominant position in OPEC to ensure that all oil transactions would happen in U.S. dollars.

1. Invest a large amount of its dollars from oil revenue in U.S. Treasury securities and use the interest payments from those securities to pay U.S. companies to modernize the infrastructure of Saudi Arabia.

1. Guarantee the price of oil within limits acceptable to the U.S. and prevent another oil embargo by other OPEC members.

Oil is the world’s most traded and most strategic commodity. Needing to use dollars for oil transactions is a very compelling reason for foreign countries to keep large U.S. dollar reserves.
For example, if Italy wants to buy oil from Kuwait, it has to purchase U.S. dollars on the foreign exchange market to pay for the oil first. This creates an artificial market for U.S. dollars that would not otherwise exist.
The demand is artificial because the U.S. dollar is just a middleman in a transaction that has nothing to do with a U.S. product or service. Ultimately, it translates into increased purchasing power and a deeper, more liquid market for the U.S. dollar and U.S. Treasuries.
Additionally, the U.S. has the unique privilege of not having to use foreign currency to buy imports, including oil. Instead, it gets to use its own currency, which it can print.
It’s hard to overstate how much the petrodollar system benefits the U.S. dollar. It’s allowed the U.S. government and many Americans to live beyond their means for decades.

What to Watch For

The geopolitical sands of the Middle East are rapidly shifting.
Saudi Arabia’s strategic regional position is weakening. Iran, which is notably not part of the petrodollar system, is on the rise. U.S. military interventions are failing. And the emerging BRICS countries are creating potential alternatives to U.S.-dominated economic/security arrangements. This all affects the sustainability of the petrodollar system.
I’m watching the deteriorating relationship between the U.S. and Saudi Arabia with a particularly close eye.
The Saudis are furious because they don’t think the U.S. is holding up its end of the petrodollar deal by more aggressively attacking their regional rivals.
This suggests that they might not uphold their part of the deal much longer, namely selling their oil exclusively in U.S. dollars.
The Saudis have even suggested a “major shift” is under way in their relationship with the U.S. To date, though, they haven’t matched their words with action, so it may just be a temper tantrum or a bluff.
The Saudis need an outside protector. So far, they haven’t found any suitable replacements for the U.S. In any case, they’re using truly unprecedented language.
This situation may reach a turning point when U.S. officials start expounding on the need to transform the monarchy in Saudi Arabia into a “democracy.” But don’t count on that happening as long as Saudi oil sells exclusively for U.S. dollars.
Regardless, the chances that the Kingdom might implode on its own are growing.
For the first time in decades, observers are calling into question the viability of the Saudi currency, the riyal. The Saudi central bank currently pegs the riyal at a rate of 3.75 riyals per U.S. dollar.
The Saudi government spends a ton of money on welfare to keep its citizens sedated. Lower oil prices plus the cost of their mischief in the region are cutting deep into government revenue. So there’s less money to spend on welfare.
There’s a serious crunch in the Saudi budget. They’ve only been able to stay afloat by draining their foreign exchange reserves. That threatens their currency peg.
Recently, Saudi officials have begun telling the media that the currency peg is fine and there’s nothing to worry about. That’s another clue that there’s trouble. Official government denial is almost always a sign of the opposite. It’s like the old saying: “Believe nothing until it has been officially denied.”
If there were a convenient way to short the Saudi riyal, I would do it in a heartbeat.

Timing the Collapse

Long before Nixon ended the Bretton Woods system in 1971, it was clear that a paradigm shift in the global monetary system was inevitable.
Today, another paradigm shift seems inevitable. As Ron Paul explained, there’s one sure way to know when that shift is imminent:

We will know that day is approaching when oil-producing countries demand gold, or its equivalent, for their oil rather than dollars or euros.

It’s very possible that, one day soon, Americans will wake up to a new reality, just as they did in 1971 when Nixon severed the dollar’s final link to gold.
The petrodollar system has allowed the U.S. government and many U.S. citizens to live way beyond their means for decades. It also gives the U.S. unchecked geopolitical leverage. The U.S. can exclude virtually any country from the U.S. dollar-based financial system…and, by extension, from the vast majority of international trade.
The U.S. takes this unique position for granted. But it will disappear once the dollar loses its premier status.
This will likely be the tipping point…
Afterward, the U.S. government will be desperate enough to implement capital controls, people controls, nationalization of retirement savings, and other forms of wealth confiscation.
I urge you to prepare for the economic and sociopolitical fallout while you still can. Expect bigger government, less freedom, shrinking prosperity…and possibly worse.
It’s probably not going to happen tomorrow. But it’s clear where the trend is headed.
Once the petrodollar system kicks the bucket and the dollar loses its status as the world’s premier reserve currency, you will have few, if any, options to protect yourself.
This is why it’s essential to act before that happens.
The sad truth is, most people have no idea how bad things could get, let alone how to prepare…
Yet there are straightforward steps you can start taking today to protect your savings and yourself from the financial and sociopolitical effects of the collapse of the petrodollar.
This recently released video will show you where to begin. Click here to watch it now.

World's Largest Miner Books Massive $7.2 Billion Writedown On US Shale "Assets"

Submitted by Tyler Durden on 01/15/2016 07:53 -0500
http://www.zerohedge.com/news/2016-01-15/worlds-largest-miner-books-massive-72-billion-writedown-us-shale-assets

Late last month, Freeport McMoRan co-founder and executive chairman James R. Moffett was shown the door.

Moffett, known as the “last of the old-time wildcatters”, was a legend in the industry but made a fatal mistake in 2013: he paid $2.1 billion for McMoRan Exploration Co (an oil-and-gas company the parent company had separated from in the 1990s), and $6.9 billion for Plains Plains Exploration & Production.

As WSJ put it, “the deals in part were a bet that oil prices would remain high.”

Well, they didn’t, and the gamble ended up increasing the combined entity’s debt fivefold and Carl Icahn is now pushing Freeport to dump the “high cost” assets.

Freeport wasn’t the only mining giant to make an ill-timed bet on US oil and gas assets. BHP Billiton, the world’s largest miner, spent $20 billion buying US assets in 2011, making it the largest overseas investor in US shale. Now, as “lower for longer” turns to “lower for longer-er”, the company is set to take a huge writedown on its US onshore portfolio.

How huge, you ask? $7.2 billion huge (or $4.9 billion after taxes) on assets the company was carrying at just over $20 billion. The company now values its US assets at $16 billion. “While we have made significant progress, the dramatic fall in prices has led to the disappointing write down announced today,” CEO Andrew Mackenzie said. “However, we remain confident in the long-term outlook and the quality of our acreage. We are well positioned to respond to a recovery.”

Mackenzie went on to say the company would cut the number of rigs operating in the US from 26 to just 5 by the end of the quarter.

"In addition to the purchase costs, BHP has committed more than $15bn of capital investment [to the US assets]", FT notes, underscoring just how expensive a bet this truly was. "The impairments announced on Friday mean BHP has now written off almost $13bn on the deals."

As noted above, the new carrying value is $16 billion, but that includes a $4 billion deferred tax liability, so it could be more like $12 billion and that $12 billion is itself above some sellside estimates of NAV. Amusingly, UBS values the assets at $8 billion - and that assumes "long-term" WTI at $65/bbl. "There's a risk of further write downs on possible revisions to BHP’s long term oil prices," the bank writes, dryly. BofA meanwhile, values the US onshore operation at $12.8 assuming long-term WTI at a whopping $75/bbl.

Here's a look at how the writedowns affect BofA's estimates in the new year and beyond:

Anyway, next on the chopping block: the dividend.

“In what’s probably a protracted period of lower commodity prices, there’s this writedown and probably other writedowns to come elsewhere in the portfolio,” Tim Schroeders, a Melbourne-based portfolio manager at Pengana Capital Ltd., told Bloomberg by phone. “They are getting close to having to come clean on the progressive dividend."

“At the moment, the biggest concern they have is can they fund their dividend, can they fund their capex plans?”, Citi adds.

And while the likes of Melbourne-based IG Ltd. analyst Angus Nicholson say that "all things considered, it's probably a bigger writedown than many had expected," other don't agree. “Yeah well, considering you’ve got a book value of $20 billion and you haven’t reported an operating EBIT gain in the last two years, I think they’ve been lucky to get away with such a modest amount and I think that’s because the forward curve is still pointing to a snapback in crude prices," Rob Brierley Patersons SEC Head of Research told CNBC in an interview. "If that [snapback] doesn’t occur, I think they’ll be having the same discussions with their auditors in July," he added.

Yes, they probably will, because with 500 million b/d of new Iranian supply set to hit the market, with the Saudis raiding the welfare state to ensure the prolongation of the kingdom's war of attrition with US shale, and with Russia and Iraq both pumping at record levels, the fundamentals for crude are simply abysmal. 

Additionally, expect the downturn in other commodities the company pulls out of the ground to continue unabated amid the global deflationary supply glut and China's acute overcapacity problem. 

And then there is of course the Samarco fiasco where a tailings dam at an operation jointly owned with Brazil's Vale collapsed sending a river of toxic mud into nearby villages. That mud has now reached the ocean and no one knows what BHP's liability will ultimately end up being.

So, in addition to the "discussions" Brierley says the company will likely be having in the not-so-distant future with the auditors, one wonders if BHP, like the two dozen US shale companies we highlighted earlier this month, will also be having a "discussion" with the company's bankers regarding the size of its credit facility.

But don't worry, Citi, Morgan, and probably several others have recently upgraded the shares because all of the above apparently bodes well going forward. 

We'll close with the following bit from Bloomberg which is just further evidence of the fact that when it comes to US shale, it's all starting to unravel:

Tokyo Gas Co said on Friday it expects to book 10.6 billion yen ($90 million) in impairment losses on its Texas shale gas development project in the October-December quarter, reflecting the recent steep declines in oil and gas prices. The company, Japan's biggest city gas supplier, said it was reassessing earnings projections for the business year ending March and would announce them as soon as that becomes available. 

Saudi Arabia: A Weak Kingdom On Its Knees?

Submitted by Tyler Durden on 01/15/2016 09:53 -0500
http://www.zerohedge.com/news/2016-01-15/saudi-arabia-weak-kingdom-its-knees
Submitted by Tom Kool via OilPrice.com,
The great Kingdom of Saudi Arabia - the long-time dictator of crude oil prices for the world - is struggling on all fronts.
The Saudis are losing their proxy wars in both Syria and Yemen; their OPEC leadership is under threat; they are not winning the crude oil price war; and its long-running alliance with the West is in question.
From Saudi Arabia’s perspective, Iran seems to be gaining ground everywhere. Saudi Arabia has several weaknesses that help explain the current anxiety emanating from Riyadh.
1. Saudi Arabia losing its leadership in the OPEC
Saudi Arabia has been the default leader of OPEC; however, despite Saudi insistence to the contrary, the U.S. shale boom, increased Russian oil production, and a very resolute Iran are challenging this leadership.
The result is that Saudi Arabia now finds itself powerless in supporting oil prices. Instead of the much-needed production cuts, during the 4 December 2015 meeting, the OPEC nations refused to adhere to any ceiling, which has been the practice for years.
2. Burning through reserves—fast

(Click to enlarge)
Source: www.tradingeconomics.com
Iran is waiting for the lifting of sanctions, expected sometime in 2016, to pump more oil to improve its economy, whereas the Saudi’s are losing they are burning through their cash reserves quickly. The above chart speaks for itself, depicting the kind of damage low oil prices are inflicting on Saudi reserves. By the most optimistic opinion, Saudi Arabia can survive low oil prices only for four years.
3. Iran has assumed a very significant leadership role among Shia Arabs
Both Iran and Saudi Arabia are currently locked in a bitter proxy war on two fronts: Syria and Yemen.
Iran has the support of Hezbollah in Lebanon, along with support from the majority of Shiites in Iraq. More to the point, Iran has even managed to grow its Shiite support base among Sunni-ruled nations. The execution of Shia Sheikh Nimr Al-Nimr by the Saudis is an indirect acceptance of the growing influence of Iran among the suppressed 15 percent Shiite population in Saudi Arabia. This shows that the Saudi leadership is feeling threatened on their own soil.
4. Saudi Arabia cannot defeat Iran in a direct war
Iran is a much larger nation than Saudi Arabia by population and has held its own in numerous long wars. By comparison, the Saudis have an army that is inexperienced, led by loyalists of the Royal family who occupy plum postings. These are not the war-hardened generals of Iran.
While Saudi Arabia has a nice arsenal with the latest weaponry, the kingdom is heavily dependent on the West for its use and maintenance. Its indecisive and ineffective handling of three conflict fronts—Iraq, Syria, and Yemen—give us no confidence in its ability to take on Iran.
5. Saudi Arabia knows it won't have U.S. support for a direct war with Iran
The painfully misguided wars in Iraq and Afghanistan are enough to deter the current U.S. administration from entering into full-fledged war in the Syrian and Yemen theaters. Washington's non-committal stance, along with efforts to broker a deal with Iran, should serve as very loud signals to Saudi Arabia. The message to the kingdom is this: Don't go to war with the hope that that U.S. will support you. And without the West, Saudi Arabia knows it stands no chance of winning a war against Iran. The royal family will probably not take the risk of losing power by indulging in such a war.
These relationships are anything but clear, and everything about balance. So the U.S. will continue to sell weapons to Saudi Arabia to allow it to maintain a bit of balance—with the latest deal approved in October—and Washington and Tehran will continue to play cat and mouse as they near a nuclear deal and a removal of sanctions. This is best illustrated by the recent detainment and then quick release of U.S. sailors for an incursion into Iranian waters, and the statement and then denial by Iran that it had completely closed off a key nuclear reactor that would have sealed the nuclear deal.
The Saudis are in a state of panic all around - from its OPEC status and dwindling reserves to its proxy wars that absolutely cannot turn into full-fledged wars and its growing friendlessness. The fact that oil fell briefly below $30 a barrel on Tuesday for the first time in 12 years won't have helped.
At the end of the day, Saudi Arabia has overextended itself, and overestimated its prowess and it does not have the clout that it once had to be able to do this effectively.
If you're wondering whether there will be an all-out war between Saudi Arabia and Iran, it's unlikely. At this point, the Saudis are likely to continue the proxy war and hope that the Iranians do something foolish to upset the nuclear deal with the West. Until then, Saudi Arabia will make a lot of noise and attempt subversive activities, but nothing more.

Dying Petrodollar Ripples Through Markets As Asset Managers Bemoan Loss Of Saudi Bid

Submitted by Tyler Durden on 09/28/2015 08:11 -0400

 http://www.zerohedge.com/news/2015-09-28/dying-petrodollar-ripples-through-markets-asset-managers-bemoan-loss-saudi-bid

One of the key things to understand about China’s liquidation of hundreds of billions in US paper is that far from being a country-specific phenomenon, it actually marks the continuation of something that’s been taking place in other emerging markets for some time.
As we outlined in “Why It Really All Comes Down To The Death Of The Petrodollar,” the forced sale of Beijing’s UST reserves is simply the most dramatic example of what Deutsche Bank has called “quantitative tightening.” For years, reserve managers in the world’s emerging economies worked to accumulate war chests of USD-denominated paper in an effort to ensure that in a crisis, they would have sufficient firepower to guard against speculative attacks on their currencies and/or accelerating capital outflows. Slumping commodity prices and the threat of a supposedly imminent Fed hike have conspired to put pressure on these reserves and outside of China, nowhere is this dynamic more apparent than in Saudi Arabia. Indeed it was the Saudis who dealt the deathblow to the great EM reserve accumulation.
By intentionally killing the petrodollar, Riyadh effectively ensured that the pressure on commodity currencies would continue unabated, but as we’ve documented exhaustively, that was and still is considered an acceptable outcome if it means bankrupting the US shale complex and securing market share. But for Saudi Arabia, this is all complicated by three things: 1) the necessity of preserving the lifestyle of everyday citizens, 2) spending associated with the proxy war in Yemen, and 3) defense of the riyal’s dollar peg. All of those factors have served to weigh heavily on the county’s already depleted petrodollar reserves, and if the “lower for longer” crude thesis plays out, Riyadh may see further pressure on its current and fiscal accounts which are now both squarely in the red.
Of course all of the above is a drag on global liquidity and as we warned nearly a year ago, the death of the petrodollar means oil exporters are set to become net sellers of assets for the first time in decades.

As FT reports, markets are beginning to feel the effects. Here’s more:

Saudi Arabia has withdrawn tens of billions of dollars from global asset managers as the oil-rich kingdom seeks to cut its widening deficit and reduce exposure to volatile equities markets amid the sustained slump in oil prices.

The Saudi Arabian Monetary Agency’s foreign reserves have slumped by nearly $73bn since oil prices started to decline last year as the kingdom keeps spending to sustain the economy and fund its military campaign in Yemen.

The central bank is also turning to domestic banks to finance a bond programme to offset the rapid decline in reserves.

This month, several managers were hit by a new wave of redemptions, which came on top of an initial round of withdrawals this year, people aware of the matter said.

“It was our Black Monday,” said one fund manager, referring to the large number of assets withdrawn by Saudi Arabia last week.

Institutions benefited from years of rising assets under management from oil-rich Gulf states, but are now feeling the pinch after oil prices collapsed last year.

Nigel Sillitoe, chief executive of financial services market intelligence company Insight Discovery, said fund managers estimate that Sama has pulled out $50bn-$70bn over the past six months.

“The big question is when will they come back, because managers have been really quite reliant on Sama for business in recent years,” he said.

BlackRock, which bankers describe as the manager handling the largest amount of Gulf funds, has already reported net outflows from Europe, the Middle East and Africa.

Its second-quarter financial results reported a net outflow of $24.1bn from Emea, as opposed to an inflow of $17.7bn in the first quarter.

Market participants say the outflow is in part explained by redemptions from Saudi Arabia and other Gulf sovereign funds, such as Abu Dhabi.

Of course, as indicated above, this isn't an isolated incident (i.e. it's not confined to the Gulf states and China). The worse things get for EM, the more likely it is that countries will continue to draw down their reserves and indeed, if the situation continues to deteriorate in Brazil, it looks increasingly likely that Copom will become a seller as well.
Make no mistake, this is now a key factor in the FOMC's decision making process, as EM reserve levels essentially serve as a proxy for trends in global liquidity and thus are one way of measuring the degree to which market conditions are poised to amplify a potential rate hike. We close with the following quote from Goldman, commenting on the above earlier this year:

We estimate that the new (lower) oil price equilibrium will reduce the supply of petrodollars by up to US$24 bn per month in the coming years, corresponding to around US$860 bn over the next three years. The ultimate impact, however, will depend on a number of key current account buffers (goods imports, net factor income and service imports).