Russia Dumps 20% Of Its Treasury Holdings As Mystery "Belgium" Buyer Adds Another Whopping $40 Billion

The projected devaluation of the US $ is about to start and c35% is looming. Welcome to the reality of Third World America.

Let's ponder the magnitude of the looming devaluation, consider the following table (from BP's 2013 World Energy Review.)

The world trade in other commodities, merchandise and goods and services is roughly in balance, i.e., demand/supply for USD is neutral.

Domestic production and consumption is irrelevant, and will always occur in the domestic currency of the country. (In other words, rough 32M brls of world oil production/day is totally irrelevant to the currency issue)

If we say payment for 50% of Middle East, Asia Pacific and Former Soviet Union, and all of Angola (1800K brls/day) exports switch to another currency. i.e., ((8597 + 6419 + 19699) / 2 + 1800) / 55314, then demand for USD will drop by 34.6%.

I'd suggest that the devaluation almost certainly will reach 35% in the short term until some sort of stability returns to the markets at around 25-30% in the long-term. Now, how many people are ready for this kind of shock. And yes, one can call it a reset. One imagines the London forex markets are about to have a field day.

Now you can see a currency war being reported and the events of the Ukraine make sense given the US punishes anyone not selling oil in dollars. So what happens next week when Russia announces their Gasprom gas deal in a currency other than the dollar. As one notes there are 23 odd countries with swap arrangements with China so this adds major fuel to a fire.

Zero Hedge
By Tyler Durden
15 May 2014

Back in mid-March, there was a brief scare after the start of the Ukraine conflict, when Fed custody holdings plunged by a record $104.5 billion (if promptly bouncing back the following week), leading many to believe that Russia may have dumped its Treasurys, or at least change its bond custodian. We noted that we wouldn't have a definitive answer until the May TIC number came out to know for sure how much Russia had sold, or if indeed, anything. Moments ago the May TIC numbers did come out, and as expected, Russia indeed dumped a record $26 billion, or some 20% of all of its holdings, bringing its post-March total to just over $100 billion - the lowest since the Lehman crisis.

But as shocking as this largely pre-telegraphed dump was, it pales in comparison with what Zero Hedge first observed, is the country that has quietly and quite rapidly become the third largest holder of US paper: Belgium. Or rather, "Belgium" because it is quite clear that it is not the country of Begium who is engaging in this unprecedented buying spree of US paper, but some account acting through Belgian custody.

read more

No comments:

Post a Comment