{"id":11604,"date":"2015-08-29T20:03:30","date_gmt":"2015-08-30T01:03:30","guid":{"rendered":"http:\/\/olduvai.ca\/?p=11604"},"modified":"2015-08-29T20:03:30","modified_gmt":"2015-08-30T01:03:30","slug":"why-the-great-petrodollar-unwind-could-be-2-5-trillion-larger-than-anyone-thinks","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=11604","title":{"rendered":"Why The Great Petrodollar Unwind Could Be $2.5 Trillion Larger Than Anyone Thinks"},"content":{"rendered":"

Why The Great Petrodollar Unwind Could Be $2.5 Trillion Larger Than Anyone Thinks<\/a><\/h3>\n

Last weekend, we explained\u00a0why it really all comes down<\/a>\u00a0to the death of the petrodollar.<\/p>\n

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China\u2019s transition to a new currency regime was supposed to represent a move towards a greater role for the market in determining the exchange rate for the yuan. That\u2019s not exactly what happened. As BNP\u2019s Mole Hau hilariously described it last week, “whereas the daily fix was previously used to fix the spot rate, the PBoC now seemingly fixes the spot rate to determine the daily fix,\u00a0[thus] the role of the market in determining the exchange rate has, if anything, been reduced in the short term.”\u00a0<\/strong>Of course a reduced role for the market means a greater role for the PBoC and that, in turn, means FX reserve liquidation or, more simply, the sale ofUS Treasurys<\/a>\u00a0on a massive scale.<\/p>\n

The liquidation of hundreds of billions in US paper made national headlines this week, as the world suddenly became aware of what it actually means when countries begin to draw down their FX reserves. But in order to truly comprehend what\u2019s going on here, one needs to look at China\u2019s UST liquidation in the context of the epochal shift that began to unfold 10 months ago. When it became clear late last year that Saudi Arabia was determined to use crude prices to bankrupt US shale producers and secure other “ancillary diplomatic benefits<\/a>” (think leverage over Russia), it ushered in a new era for producing nations. Suddenly, the flow of petrodollars began to dry up as prices plummeted.\u00a0These were dollars that for years had been recycled into USD assets in a virtuous loop for everyone involved.\u00a0The demise of that system meant that the flow of exported petrodollar capital (i.e. USD recycling) suddenly turned negative for the first time in decades, as countries like Saudi Arabia looked to their stash of FX reserves to shore up their finances in the face of plunging crude.<\/strong>\u00a0<\/span><\/p>\n

…click on the above link to read the rest of the article…<\/p>\n

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 <\/p>\n","protected":false},"excerpt":{"rendered":"

Why The Great Petrodollar Unwind Could Be $2.5 Trillion Larger Than Anyone Thinks Last weekend, we explained\u00a0why it really all comes down\u00a0to the death of the petrodollar. China\u2019s transition to a new currency regime was supposed to represent a move towards a greater role for the market in determining the exchange rate for the yuan. […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2,3],"tags":[130,951,1721,588,2914,2615,626,701,839,4318],"class_list":["post-11604","post","type-post","status-publish","format-standard","hentry","category-economics","category-energy-2","tag-china","tag-currency","tag-fx-reserves","tag-oil","tag-pboc","tag-peoples-bank-of-china","tag-petrodollar","tag-saudi-arabia","tag-us-dollar","tag-zerohedge"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/11604","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=11604"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/11604\/revisions"}],"predecessor-version":[{"id":11605,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/11604\/revisions\/11605"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=11604"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=11604"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=11604"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}