The Demise of the Dollar

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In a graphic illustration of the new world order, Arab states have launched secret moves with China, Russia and France to stop using the US currency for oil trading

By Robert Fisk

Tuesday, 6 October 2009

In the most profound financial change in recent Middle East history, Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.

Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars.

The plans, confirmed to The Independent by both Gulf Arab and Chinese banking sources in Hong Kong, may help to explain the sudden rise in gold prices, but it also augurs an extraordinary transition from dollar markets within nine years.

The Americans, who are aware the meetings have taken place – although they have not discovered the details – are sure to fight this international cabal which will include hitherto loyal allies Japan and the Gulf Arabs. Against the background to these currency meetings, Sun Bigan, China's former special envoy to the Middle East, has warned there is a risk of deepening divisions between China and the US over influence and oil in the Middle East. "Bilateral quarrels and clashes are unavoidable," he told the Asia and Africa Review. "We cannot lower vigilance against hostility in the Middle East over energy interests and security."

This sounds like a dangerous prediction of a future economic war between the US and China over Middle East oil – yet again turning the region's conflicts into a battle for great power supremacy. China uses more oil incrementally than the US because its growth is less energy efficient. The transitional currency in the move away from dollars, according to Chinese banking sources, may well be gold. An indication of the huge amounts involved can be gained from the wealth of Abu Dhabi, Saudi Arabia, Kuwait and Qatar who together hold an estimated $2.1 trillion in dollar reserves.

The decline of American economic power linked to the current global recession was implicitly acknowledged by the World Bank president Robert Zoellick. "One of the legacies of this crisis may be a recognition of changed economic power relations," he said in Istanbul ahead of meetings this week of the IMF and World Bank. But it is China's extraordinary new financial power – along with past anger among oil-producing and oil-consuming nations at America's power to interfere in the international financial system – which has prompted the latest discussions involving the Gulf states.

Brazil has shown interest in collaborating in non-dollar oil payments, along with India. Indeed, China appears to be the most enthusiastic of all the financial powers involved, not least because of its enormous trade with the Middle East.

China imports 60 per cent of its oil, much of it from the Middle East and Russia. The Chinese have oil production concessions in Iraq – blocked by the US until this year – and since 2008 have held an $8bn agreement with Iran to develop refining capacity and gas resources. China has oil deals in Sudan (where it has substituted for US interests) and has been negotiating for oil concessions with Libya, where all such contracts are joint ventures.

Furthermore, Chinese exports to the region now account for no fewer than 10 per cent of the imports of every country in the Middle East, including a huge range of products from cars to weapon systems, food, clothes, even dolls. In a clear sign of China's growing financial muscle, the president of the European Central Bank, Jean-Claude Trichet, yesterday pleaded with Beijing to let the yuan appreciate against a sliding dollar and, by extension, loosen China's reliance on US monetary policy, to help rebalance the world economy and ease upward pressure on the euro.

Ever since the Bretton Woods agreements – the accords after the Second World War which bequeathed the architecture for the modern international financial system – America's trading partners have been left to cope with the impact of Washington's control and, in more recent years, the hegemony of the dollar as the dominant global reserve currency.

The Chinese believe, for example, that the Americans persuaded Britain to stay out of the euro in order to prevent an earlier move away from the dollar. But Chinese banking sources say their discussions have gone too far to be blocked now. "The Russians will eventually bring in the rouble to the basket of currencies," a prominent Hong Kong broker told The Independent. "The Brits are stuck in the middle and will come into the euro. They have no choice because they won't be able to use the US dollar."

Chinese financial sources believe President Barack Obama is too busy fixing the US economy to concentrate on the extraordinary implications of the transition from the dollar in nine years' time. The current deadline for the currency transition is 2018.

The US discussed the trend briefly at the G20 summit in Pittsburgh; the Chinese Central Bank governor and other officials have been worrying aloud about the dollar for years. Their problem is that much of their national wealth is tied up in dollar assets.

"These plans will change the face of international financial transactions," one Chinese banker said. "America and Britain must be very worried. You will know how worried by the thunder of denials this news will generate."

Iran announced late last month that its foreign currency reserves would henceforth be held in euros rather than dollars. Bankers remember, of course, what happened to the last Middle East oil producer to sell its oil in euros rather than dollars. A few months after Saddam Hussein trumpeted his decision, the Americans and British invaded Iraq.

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The Four Stages of a typical Twitter User

I was just reading this article on twitter as a social phenonmena and thought that it was worth sharing given how it's gaining so much tract on the blogosphere ;) :

Sanity Check : The Four Stages of a typical Twitter User

There’s a strange phenomenon that happens almost every time someone joins Twitter. They hate it. At least at first.

But many of the people who once hated Twitter — or at least, didn’t quite get it in the beginning — are now many of its most active users and raving fans. So what’s going on here?

There seems to be four natural stages that the average Twitter user goes through from the point of first trying it until the point of fully embracing it and making it a part of daily life. Obviously, not everyone sticks with it and becomes a Twitter devotee, but there’s definitely a growing cadre of people who believe that there’s some magic happening in the Twittosphere.

Because I think Twitter can be used as a valuable business tool, it’s worth talking about the four Twitter stages in order to help recognize users in these stages when you’re choosing who to follow and to keep new Twitter users from getting discouraged and missing the opportunities available on Twitter. So here they are:

1. Confusion and indignation

When a person first signs up for Twitter, the first challenge is figuring out who to follow. Twitter now has its “Suggested Users” feature to help people get started. I’ve put together a list of technology personalities worth following on Twitter to help new techies when they sign up for Twitter.

However, even when they find some people to follow, new Twitterers usually look at their Twitter stream and start wondering, “Why would I care what my colleagues are eating for lunch?” or “What’s interesting about a software engineer posting that she’s walking her dog?”

That experience usually leads people to shake their heads and not come back to Twitter for a few days, or even weeks or months.

2. The first “Aha!” moment

Eventually, the user comes back periodically to check Twitter out of pure curiosity. During those casual forays, the person often has a first “Aha!” moment, where they find something really interesting or timely on Twitter that wasn’t available from news, RSS feeds, or word of mouth from their friends.

This could be a piece of news that someone reported on Twitter before it actually hit the wires, it could be a rumor about something that a company like Apple is doing, or even something like NFL teams announcing their picks for the draft on Twitter before they even went up to the podium to make the official selection.

3. Remembering to tweet

After the first “Aha” moment, the user typically starts checking Twitter more often, but still tends to post very infrequently. The next stage of Twitter initiation comes when the user reads something useful online or makes a mental observation about something and then thinks, “I should post that Twitter!”

At this point, the user is still relying mostly on the twitter.com homepage to access Twitter but is starting to go there at least a couple times a day to check on the latest buzz, and has typically found a good mix of friends, news feeds, industry celebrities, and thought leaders to follow.

4. Thinking in 140 characters

Once the person becomes a daily Twitter user, it’s over. The person is almost always hooked, and is now on the path to becoming a power user. This is when most (though not all) users switch from using twitter.com to using a desktop Twitter client like Tweetdeck or Seesmic.

Meanwhile, the user also often has a mobile Twitter client like UberTwitter (for BlackBerry) or Tweetie (for iPhone) in order to stay connected to the Twitter stream on the go. Those that don’t have smartphone often use Twitter via SMS text messages.

At this point, the person is a Twitter power user who regularly adds new people and brands to follow and also regularly unfollows people who post too many inane messages about their meals or just doesn’t post enough useful stuff.

The power user also tends to regularly think about and look for things to post on Twitter throughout the day, to the point of self-editing thoughts for brevity in order to fit into Twitter’s 140 character limit.

Final word

The beauty of Twitter is in its simplicity of use and the direct connection it provides to people whose activities and opinions you care about.

Apple recently wrote a case study about Twitter because Twitter uses a lot of Apple products. In the article, Apple wrote, “Twitter’s meteoric rise to ubiquity is proof positive that the world, in all its complexity, is eager to embrace simplicity.”

As I’ve written before, I think Twitter can be an very useful tool for business and technology professionals.

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One reason why Islam bans interest

I was going to write a post defending the practice of not using interest and how had Islamic law been applied in Banks, properly, the current global credit crisis could have been averted. Of course being lazy and a bit tech savvy I found an article doing it for me, which I have pasted below. There is even another article describing the offering of sharia compliant banking services in Britain, Canada and Germany that some might find interesting. This last article also supports my opinion; but from an Islamic site, so opposers of sharia might find it too biased.

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Credit crisis gives Islamic finance a chance to shine
By Umesh Desai
Reuters
Tuesday, August 19, 2008

HONG KONG: The global credit crisis presents the $1 trillion Islamic finance industry with an opportunity to expand its appeal beyond Muslim investors, as a haven from speculative excess.

The message may have particular resonance in the West after the crumbling of the U.S. mortgage market left banks holding hundreds of billions of dollars of nearly worthless credit instruments tied to home loans by a web of complex structures.

While conventional banks worldwide are nursing losses of more than $400 billion from the credit crisis, Islamic banks are virtually unscathed. And they are playing up the contrast to scalded shareholders, bondholders and borrowers and fearful depositors.

"It's very much a return to old-fashioned conservative lending," said David Testa, chief executive of Gatehouse Bank, which began operations in April as the fifth Islamic bank in Britain.

"The current global market condition has given Islamic finance a great opportunity to show what it can do - help to fill the liquidity gap," he said.

Investors traumatized by the credit crisis could seek comfort from the stricter rules imposed on lending by Islamic law, which bans some of the structures and financing methods that quickly unraveled during the U.S. mortgage crisis.

Testa said that Islamic finance practices were more fiscally conservative, with direct participation by investors in plans that do not involve parking assets in off-balance-sheet vehicles.

Islamic finance is based on Shariah, or Islamic law. It requires that gains be derived from ethical and socially responsible investments and discourages interest-based banking and investments in sectors like pork, gambling and pornography.

The Asian Development Bank estimates that Islamic assets globally have a combined value of about $1 trillion, with annual growth of 10 percent to 15 percent a year. Al-Rajhi Bank of Saudi Arabia and Kuwait Finance House are the two biggest Islamic banks in the Gulf region. In Malaysia, the largest Islamic lender is Maybank Islamic, a subsidiary of Malayan Banking.

The jump in popularity of Islamic finance is drawing the interest of companies outside the Middle East.

City Developments, one of the largest developers in Southeast Asia, said last week that it could issue Islamic debt and sell hotels to enhance its ability to make acquisitions.

The Islamic finance industry, which was nearly nonexistent 30 years ago, has certain distinguishing features that make it less risky, analysts say.

Islamic bonds, or sukuk, replace coupons with payments backed by the performance of tangible assets. Islamic law prohibits the payment of interest and requires transactions to be linked to assets, thus deterring the kind of complexities prevalent in conventional financing operations.

Debashis Dey, the Dubai-based head of capital markets at the law firm Clifford Chance, said that although the Islamic finance industry was adapting conventional products to make them compliant with Shariah, it was a long way from sophisticated products like collateralized debt obligations.

But while Islamic products are coming into favor, analysts say market commentators and intermediaries may be too zealous in promoting the merits of Islamic finance as a safe product.

Mohamed Damak of Standard & Poor's cited the case of the boom in real estate financing in the Gulf mainly by Islamic banks in the past three years, amid soaring property prices.

"A correction of the real estate sector would impact Islamic banks involved in this business line. Islamic finance is not immune from risk," he said.

Even as experts are weighing the degree of insularity that Islamic financing provides, there are differences in the way accounts are prepared and in how Shariah law is interpreted.

Banks in Britain differ in their accounting operations from banks in Bahrain, for example, which in turn differ from banks in Malaysia and Indonesia.

Dey, at Clifford Chance, said the lack of standardization posed a hurdle to growth, but others said that a cookie-cutter approach was not desirable and that regional differences would remain.

"Complete standardization may not happen - there will always be variants," said Raj Maiden, managing director at Five Pillars in Singapore, who added that it was more important to tailor products according to the needs of each market.

While the debate rages on whether Islamic finance provides a safer bet or is merely a potential source of irrational exuberance, most agree the industry should make the most of the attention it is now receiving.

"If Islamic banks step up to the mark, then they will gain traction," said Testa, of Gatehouse.

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The Worlds most influential Libyan - updated

The Arab Business site Arabian Business has issued its 2008 list of most influential Arabs in the World, which only had one Libyan on it :-< . The guy they nominated, Abdalla El Badri, is the current head of the OPEC cartel that is responsible for the oil production of its members and controls nearly two thirds of the World's oil reserves, of course he was nominated to this position by the Libyan Government and has been holding the position of the chariman of the Libyan National Oil corporation on an off and on basis for probably more than 15 years now. It should be noted that this is the second time he holds the position of the OPEC secretary general.

Even though he was the only Libyan nominated, he has made it to the fourth place on the list, which I think makes up a little for the lack of Libyans on the list :P . The reason given for his nomination is his defiance in the face of first world countries to increase the oil output of the OPEC members, as a means of helping the global economy. Or as he is quoted in their piece :

"If there is a recession, it won't be because of the oil price. It will be caused by the subprime mortgage crisis in the United States and other financial market problems," he defiantly told German magazine, Spiegel.

Update :

The price of oil went up today as a result of OPEC's stance on oil productivity, which was expressed in El-Badri's recent comments :

"Oil supply to the market is enough and high oil prices are not due to a shortage of crude but rather it is because of the decrease in the dollar's value, shortage of refinery capacity and some political tensions in the world,"

(H/T Black Iris )

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XBox package for only £33.24

It seems that someone at Tesco made a mistake while he was tagging an XBox package they were offering online, so instead of pricing it at £332.40 the zero was omitted and it became £33.24 ( or at least thats the rumor :P).



Unfortunately for me I wasn't one of the lucky few who managed to place an order before the mistake was rectified, but according to the discussions going on on this blog it seems that even those who managed to place an order before the price was corrected weren't lucky enough for the order to go through. From what they say Tesco emailed the lucky unlucky purchasers to apologize for the mistake and inform them that their orders were canceled :(.

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حتى تصل إلى النجاح

I just go this in my email and I thought it was worth sharing ..... so i hope you enjoy it :). I also would like to apologize in advance for not providing a translation to my non-Arabic readers, especially ibeebarbie and rein :).

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The "new" World's Richest Man and July the 4th

Bill Gates has just lost the title of the worlds richest man, according to this report. Bill Gates was estimated to be worth $ 59.2 billion up until the end of the second quarter ( January 1st- March 31st ) , which was $8.6 billion less than the estimated worth of Carlos Slim . The increase in Slim's worth is attributed to a 27% increase in the shares of America Movil which is considered the largest cell phone company in both America's and of which Carlos Slim is the chairman. I remember reading a while back that IT and telecommunication companies are the most profitable form of investment and that the profit from them surpasses even that of the Arms and Drug trade, its no wonder then that the richest people in the World are investors in this field.

On another note, today is July the 4th ( or at least it should be by the time anyone reads this :p ) and no I'm not talking about Independence Day :p, I'm actually referring to the birthday of Amira, the daughter of a fellow blogger ( ibeebarbie ), so Happy 4th Birthday Amira :D .

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