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I am no expert but it would seem foolish to accept the yuan.
Why would it be foolish? It would mean that they now have a bi lateral agreement to use each others currency for trade, and bypass the need to purchase FRN$'s (Federal Reserve Notes), which is an added cost.

Many of our key trading partners, including Japan, Australia, Britain, Canada, and South Korea already have bi lateral agreements with the Chinese to trade in local currencies for products.

Oil being sold by OPEC must use FRN$'s, according to our agreement with the Saudi's. It places an artificial demand for our currency which helps to retain it's position as the world's reserve currency, and also helps ensure that the majority of the inflation that we engage in via QE is exported rather than affect our local prices at full value.

If the Saudi's agree to accept other currencies, or yuan, or even gold for oil, it takes away the need for all those FRN$'s and they then come back to the US, bidding up prices for goods and services here at home. Additionally, it would be the final nail in our monetary coffin, and we would run the risk, a very real one, that no one would accept our FRN$ for trade anymore, and we would then have to come up with hard commodities or other currencies to pay for our imports.

It is a big deal, and the Saudi's hold the key. It's one of the reasons that we put up with things like Khobar Towers, 9/11/01, and other actions by them that seem detrimental to us as an "ally".

Besides, the Chinese have pegged their currency to the FRN$ at 6:1 last I checked, so it is factually a FRN$ derivative, and they also have the world's largest stash of gold, somewhere on the order of 10,000 tonnes according to estimates by Koos Jensen who diligently tracks these things, making them able to back their currency with something besides hot air should they choose to do so.

Foolish? Not hardly.
 

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It is the loss of reserve currency status

that is the trigger for our economic 'reset' imo.

The reset process will bring pain to savers (anyone with money or property) and the retired. This directly avoids angering the 'multitudes' (the tar and feather crowds) or the large part of the population who do not have any 'savings'. Everyone will continue to be ground by the millstone of inflation while those that save or own property get millstones of both inflation and taxation.

The reset will result in a new 'dollar' backed by not just US gold but a market basket comprised of gold (what the Fed has ((unaudited?)) and a claim on defined natural resources and assets of the US (think property, plant, and equipment or land, timber, minerals, fisheries, fresh water, radio spectrum..) plus the ability to tax the citizens of the US. That will be the new full faith and 'credit' of the US.

Who wouldn't find that new currency and-in-turn, the bonds issued attractive?

Debt is at 18 Trillion up over 70% in 6 years. That is not sustainable.
 

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Oil prices are a reflection of two or three things. The first is the decision by OPEC (read the Saudi's) to keep production levels high. This has two purposes, one is to kill the US shale boom, which is highly levered and only profitable with WTI above $80.bbl, and the other is to place pressure on Russia in order to make them less able to exert influence in Iran and Syria, especially the latter. Saudi and Qatar are desperate for regime change in Syria in order to run their pipeline to the Med.

Another reason for the drop in oil prices is a lack of demand globally, reflecting the economic downturn in China and the EU, but especially China. This has dragged the entire commodity complex into the dirt, as everything from crude to copper is lower in price and accelerating.

China is on the verge of an historic real estate bubble collapse, and their banking system is very exposed to RE loans, as well as other loans to core manufacturing concerns such as steel, coal, copper etc. When the loans begin to default, which has probably already started, the carnage will be huge. This also does not include their "shadow banking system" which are unofficial off the books loans to these same entities, and which will dry up liquidity, or make cash scarce, for the entire complex, resulting in large scale defaults and bankruptcies.

This will have effects far outside of China, as most of the resource oriented countries such as Australia, Canada, Russia etc will suffer from this as they have been the principle suppliers to Chinese manufacturers.

In essence, the world is on the verge of greater calamity than happened in 2008. As a matter of fact, it will be orders of magnitude worse, as governments are tapped out and will be unable to step in and "save the system" this time around, as all of the bad debts and financial scams that they covered up in '08 are just resurfacing with bigger numbers attached to them. How long it will take to reach our shores is anyone's guess, but given the interconnection between the world financial system, probably not long.

Very true........

Only other thing to add is that besides shale, fracking technology requires oil to be at $80 / barrel in order to be profitable. The Saudi's have intentionally driven down pricing via greater production in order to curb that technological competitive advantage.
 

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Oil being sold by OPEC must use FRN$'s, according to our agreement with the Saudi's. It places an artificial demand for our currency which helps to retain it's position as the world's reserve currency, and also helps ensure that the majority of the inflation that we engage in via QE is exported rather than affect our local prices at full value.

If the Saudi's agree to accept other currencies, or yuan, or even gold for oil, it takes away the need for all those FRN$'s and they then come back to the US, bidding up prices for goods and services here at home. Additionally, it would be the final nail in our monetary coffin, and we would run the risk, a very real one, that no one would accept our FRN$ for trade anymore, and we would then have to come up with hard commodities or other currencies to pay for our imports.

Is that where the Russians are finding themselves? I've seen guesstimations per bbl break-even after embeddeds that Canada needs $80+, Bakken $75-$80, Permian and Eagle Ford $70, Saudi Arabia $35. I haven't seen anything on Russia's costs-to-produce. Of course, it's a huge country, so regional differences are to be expected like in North America.
 

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Something must certainly be "In the Wind".
I retain partial mineral rights on 60 acres in Texas that I sold many years ago. About 2 months ago, an oil Co did much research just to locate me, and believe me, it took a lot of work on their part to do so in order for me to sign a contract leasing my rights to them. Since it was a good offer, I took the check (that's what I used to buy my Scout with) and took care of some other financial obligations. What really caused me to wonder was "Why the hurry" and why now?
There are already wells but they have not operated for many years and why would you reopen them when oil prices are dropping?
Guess I have more questions than I do answers and wish I understood the sudden need by these oil Companies.
 

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I'm watching closely. I work in oil and gas business segment and my retired parents have savings that are vulnerable. My retirement savings aren't that great but not zero either as are most if my peers.


Sent from my iPhone using Tapatalk
 

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Is that where the Russians are finding themselves? I've seen guesstimations per bbl break-even after embeddeds that Canada needs $80+, Bakken $75-$80, Permian and Eagle Ford $70, Saudi Arabia $35. I haven't seen anything on Russia's costs-to-produce. Of course, it's a huge country, so regional differences are to be expected like in North America.
The Russians have pretty low costs of production, on the order of $40/bbl as far as I can gather from EIA data, except in their offshore and arctic areas which shutdown during parts of the winter and have substantially higher costs; but what is hurting them is the actual reduction in cash flow. It is their primary source of cash reserves and 50% of their .gov budget, which they use to purchase gold and other currency reserves, plus fund their social welfare programs.

They actually have a very good balance sheet, with low debt levels, a positive trade balance, massive natural resources, and the proven ability to live close to the bone. Quite the opposite of our country. Should it come to who can withstand this price decline long term, they are in a better position than we. They are also able to back their currency with something other than hot air.

Here is an article by Alasdair MacLeod, who is very a well known analyst in metals circles, with a possible solution to Russia's ruble as a floating currency.

http://www.mining.com/web/russias-monetary-solution/

Just read an article in "The London Telegraph" where Ambrose Evans-Pritchard claims that the Russians budgetary break even costs are $105/bbl. If that is indeed the case, then the Russians may be hurt more by this than we are, but I still maintain that they are more able to handle the shock because they are used to living on next to nothing, and will likely do so without complaint in support of Putin, who is very popular.

http://www.telegraph.co.uk/finance/oilprices/11263851/Saudis-risk-playing-with-fire-in-shale-price-showdown-as-crude-crashes.html
 

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this is why you never listen to the internet.

Low oil prices are GOOD for the general population.

Rising oil prices made EVERYTHING more expensive, so lower oil prices will make everything cheaper.
Meaning your paycheck can buy more stuff.

In the mid 90"s oil was around $10 dollars a barrel.
Guess I missed that great recession and riots caused by the oil crash.

Fracking and shale will never go bust.
The technology is there, the oil is there, if the industry slows down because the prices dropped it will just start up again when/if the price rises.

Again AMERICAN ingenuity and technology have changed an industry and benefited the world.



It great to be an AMERICAN.
 

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this is why you never listen to the internet.

Low oil prices are GOOD for the general population.

Rising oil prices made EVERYTHING more expensive, so lower oil prices will make everything cheaper.
Meaning your paycheck can buy more stuff.

In the mid 90"s oil was around $10 dollars a barrel.
Guess I missed that great recession and riots caused by the oil crash.

Fracking and shale will never go bust.
The technology is there, the oil is there, if the industry slows down because the prices dropped it will just start up again when/if the price rises.

Again AMERICAN ingenuity and technology have changed an industry and benefited the world.

Peeing off big government types and liberal wienies in the process.

It great to be an AMERICAN.
Since a good 20% of total junk bond issuance are from fracking, shale oriented companies, that's not quite true. If they can't service their debt, they're done. Without free cash flow, they can't service their debt, and they default, end of story. The oil might be there, and the technology might be there, but the financing may not, especially if the derivatives dependent upon the underlying capital far exceed its worth.
 

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Since a good 20% of total junk bond issuance are from fracking, shale oriented companies, that's not quite true. If they can't service their debt, they're done. Without free cash flow, they can't service their debt, and they default, end of story. The oil might be there, and the technology might be there, but the financing may not, especially if the derivatives dependent upon the underlying capital far exceed its worth.
if some in the industry over leveraged then they will go bust.
Happens every day in every industry.

That doesn't mean the industry goes bust.

There have been several big name fracking companies that were mismanaged and went bust when the industry was on the way up.
Didn't effect the industry as a whole.
 

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if some in the industry over leveraged then they will go bust.
Happens every day in every industry.

That doesn't mean the industry goes bust.
Sure it does, if the entire industry relies on a certain break even price to have a going concern and can't get it. No one is going to loan money to an industry that can't make money, regardless of whether the product is there. If it can't be brought to market profitably, it won't be.
 

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Many in the industry don't need to borrow to produce. They have many types of fields- shale being one type. Free cash flows are sufficient to fund their shale plays. Those who go bust will have their assets bought by others
 

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Sure it does, if the entire industry relies on a certain break even price to have a going concern and can't get it. No one is going to loan money to an industry that can't make money, regardless of whether the product is there. If it can't be brought to market profitably, it won't be.
You are right.

But the product in fracking doesn't go away if you don't use it.
The technology doesn't go away.

The gas and oil is there.
It is this country's insurance policy against economic ruin.
It is the silver coins you have in your sock drawer.

If you never need the coins, you pass them to your heirs.

If oil is $10 a barrel, fracking will stop, FOR NOW. But even if all the current fracking companies go out of business, anytime it becomes profitable again they will start up again, with the industry infrastructure in place.


We have more oil than the Saudis and that is why they are panicking.
Let them drop the price all they want.
They are helping us get out of this big government mess.

Our fracking capabilities are an economic deterant to their high oil prices.
 

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With current prices, I'm putting premium in my truck for what I paid for regular 6 months ago. Enjoying it while it lasts - because it won't last long, IMHO.

Probably will buy several oil changes worth of motor oil by the end of the year. I'll eventually need it anyway, and can save a bit by buying in bulk while it's lower price. Then just buy as I usually do, and - if prices spike - I can tap into my reserve stash.
 

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this is why you never listen to the internet.

Low oil prices are GOOD for the general population.

Rising oil prices made EVERYTHING more expensive, so lower oil prices will make everything cheaper.
Meaning your paycheck can buy more stuff.

In the mid 90"s oil was around $10 dollars a barrel.
Guess I missed that great recession and riots caused by the oil crash.

Fracking and shale will never go bust.
The technology is there, the oil is there, if the industry slows down because the prices dropped it will just start up again when/if the price rises.

Again AMERICAN ingenuity and technology have changed an industry and benefited the world.

Peeing off big government types and liberal wienies in the process.

It great to be an AMERICAN.
For some projects, the break even point might be $80 a barrel. However, many will do OK even at $50 a barrel according to the financial press.

I LOVE seeing that cartel of dictatorships get creamed by the laws of supply and demand. OPEC got too greedy and WE figured out how to produce more and consume less at the same time.

And oil prices factor into so many other things we use so the benefits just keep coming.

Do you think that the Castros are happy about the decline in oil revenues for their puppets in Venezuela? No! But I am.

Now if you want to talk about leverage, please understand that just a 1% increase in interest rates would take a $180 BILLION bite out of our federal budget. Remember when the 10-year Treasury was over 10%? I sure do. It's at 2.25% today. That can't last forever. That's the economic bomb no one seems to want to talk about.
 
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