Thread: Obama makes US third world country

If you sensed Obama wants this country to go down hard so he can remake it in his marxist image, you are right. He is working the social end with illegal amnesty and other policies, but the death blow will be from the debt and deficit. The Federal Reserve increases the money supply and keeps rates down to keep us afloat, but the long-term impact will turn US to a third-world country as this article shows:

Will the U.S. Dollar Be Replaced as the World’s Reserve Currency?

Foreign Exchange Reserves are foreign money held by International banks for use in international trade and in an effort to diversify their holdings and hedge against the inflation of their own currency. The most common items bought and sold with their foreign exchange reserves are oil and gold. Up until 1944 the asset of choice was gold and it was used as the medium of exchange between countries to settle their debts. But in July 1944, delegates from the 44 Allied nations gathered in Bretton Woods, New Hampshire., and made the U.S. dollar the reserve currency of the world. At that time, the dollar was pegged at $35 per ounce and thus rather than exchanging gold, the countries were able to exchange dollars, which at the time was considered “as good as gold”.

But because of its reserve status the U.S. was able to pretend that the Dollar was still worth $35 per ounce of gold while quietly inflating its currency and thus eventually France called the United States’ bluff and demanded gold at $35 per ounce and Nixon was forced to admit that the Dollar was no longer worth $35 per ounce and he “closed the gold window” and the last link between the dollar and gold was severed. But Nixon had another trick up his sleeve and he negotiated a deal with Saudi Arabia requiring that all oil sales be denominated in U.S. dollars, thus establishing a defacto world reserve currency because everyone needed to purchase oil and so they therefore needed dollars.

Why is being the World’s Reserve Currency Important?

Being used as a foreign exchange reserve currency sharply increases the value and usefulness of that currency. When a particular nation’s currency is the defacto reserve currency, that’s nations economic power and influence is automatically spread globally. Like any other commodity the value of the reserve currency is based on supply and demand by rigging an artificially high demand for its currency, the U.S. was able to print more dollars without sparking significant inflation at home. In effect it was able to export its inflation to other oil consuming countries because after it printed them and spent them those dollars went abroad and never returned home so they had no effect on domestic inflation.

Why Might the U.S. Dollar Lose Reserve Currency Status?

The U.S has been the primary world reserve currency since 1944. The nation is no longer the strongest economy and it is beginning to lose its grip on the world’s oil producers and so China and Brazil and other countries are beginning to negotiate oil and other commodity deals denominated in currencies other than the Dollar. This is partially because the value of the dollar has tumbled. The strength of a nation’s economy is primarily based on the relationship between GDP, or the sum of the value of all goods and services produced by the nation, and debt. Stronger economies have higher GDP and lower debt. Over the last few decades the American economy has been moving in the opposite direction, with a stagnant or declining GDP and ballooning debt. As the world’s reserve currency, countries expect it to retain its value, no one wants to be holding large sums of a currency which might suddenly (or slowly) become worthless.

China is also strategically positioning itself to become a stronger economy than the U.S. By hoarding vast amounts of gold, the nation may soon be able to back its currency, the yuan, with gold, thus skyrocketing the value of that currency. If China’s yuan were to become more valuable than the U.S. dollar it would automatically become the primarily sought form of reserve currency. If current trends continue, China’s economy may become stronger than America’s by all measures as early as 2016. [emphasis added--just in time for the completion of Obama's second term] See: Why (and How) China is Boosting the Price of Gold China is also setting itself up diplomatically to become an enticing foreign exchange reserve currency. No matter the strength of a nation’s economy, the key to its currency’s value is stability and how much inflating the country does to it’s money supply. China realizes this and has been putting the pieces in place to become the world’s reserve currency.

What Does Not Being a Foreign Exchange Reserve Mean for the U.S.?

A loss of reserve currency status is an economic disaster for the U.S. because if dollars are no longer needed to buy oil demand will fall and the value of the dollar will fall with it, that will further cripple the U.S. economy during a time of uncertain recovery. It will make international trade considerably more expensive for the nation, causing a rise in price of all imported goods. If the reserve currency status is lost to China, the economic detriment would be compounded by the fact that the majority of American consumer goods are imported from China. The cost of all Chinese imports would increase dramatically putting further pressure on the U.S. consumer economy.

What is "Foreign Exchange Reserves"? | InflationData.com

As part of his strategy, Obama doesn't want US to be a big oil producers, so...

Obama Underwrites Offshore Drilling in Brazil

You read that headline correctly. Unfortunately, the Obama Administration is financing oil exploration off Brazil.

The U.S. is going to lend billions of dollars to Brazil's state-owned oil company, Petrobras, to finance exploration of the huge offshore discovery in Brazil's Tupi oil field in the Santos Basin near Rio de Janeiro. Brazil's planning minister confirmed that White House National Security Adviser James Jones met this month with Brazilian officials to talk about the loan.

The U.S. Export-Import Bank tells us it has issued a "preliminary commitment" letter to Petrobras in the amount of $2 billion and has discussed with Brazil the possibility of increasing that amount. Ex-Im Bank says it has not decided whether the money will come in the form of a direct loan or loan guarantees. Either way, this corporate foreign aid may strike some readers as odd, given that the U.S. Treasury seems desperate for cash and Petrobras is one of the largest corporations in the Americas.

But look on the bright side. If President Obama has embraced offshore drilling in Brazil, why not in the old U.S.A.? The land of the sorta free and the home of the heavily indebted has enormous offshore oil deposits, and last year ahead of the November elections, with gasoline at $4 a gallon, Congress let a ban on offshore drilling expire.

The Bush Administration's five-year plan (2007-2012) to open the outer continental shelf to oil exploration included new lease sales in the Gulf of Mexico. But in 2007 environmentalists went to court to block drilling in Alaska and in April a federal court ruled in their favor. In May, Interior Secretary Ken Salazar said his department was unsure whether that ruling applied only to Alaska or all offshore drilling. So it asked an appeals court for clarification. Late last month the court said the earlier decision applied only to Alaska, opening the way for the sale of leases in the Gulf. Mr. Salazar now says the sales will go forward on August 19.

This is progress, however slow. But it still doesn't allow the U.S. to explore in Alaska or along the East and West Coasts, which could be our equivalent of the Tupi oil fields, which are set to make Brazil a leading oil exporter. Americans are right to wonder why Mr. Obama is underwriting in Brazil what he won't allow at home.

President Obama Finances Offshore Drilling in Brazil - WSJ.com

But wait, there's MORE!

China gets jump on U.S. for Brazil’s oil

BUENOS AIRES — Off the coast of Rio de Janeiro — below a mile of water and two miles of shifting rock, sand and salt — is an ultradeep sea of oil that could turn Brazil into the world’s fourth-largest oil producer, behind Russia, Saudi Arabia and the United States.

The country’s state-controlled oil company, Petrobras, expects to pump 4.9 million barrels a day from the country’s oil fields by 2020, with 40 percent of that coming from the seabed. One and a half million barrels will be bound for export markets.

The United States wants it, but China is getting it.

Less than a month after President Obama visited Brazil in March to make a pitch for oil, Brazilian President Dilma Rousseff was off to Beijing to sign oil contracts with two huge state-owned Chinese companies.

The deals are part of a growing oil relationship between the two countries that, thanks to a series of billion-dollar agreements, is giving China greater influence over Brazil’s oil frontier.

Chinese oil companies are pushing to meet mandatory expansion targets by inking deals across Africa and Latin America, but they are especially interested in Brazil.

“With the Lula and Carioca discoveries alone, Brazil added a possible 38 billion barrels of estimated recoverable oil,” said Luis Giusti, a former president of Venezuela’s state oil company, PDVSA, referring to the new Brazilian oil fields.

“That immediately changed the picture,” he said, adding that Brazil is on track to become “an oil giant.”

During Mrs. Rousseff’s visit to China, Brazil’s Petrobras signed a technology cooperation deal with the China Petroleum & Chemical Corp., or Sinopec. Petrobras also signed a memorandum of understanding with Sinochem, a massive state-owned company with interests in energy, real estate and agrichemicals.
The Sinochem deal aims to identify and build “business opportunities in the fields of exploration and production, oil commercialization and mature oil-field recovery,” according to Petrobras.

The relationship with China goes back to at least two years before Mr. Obama came to Brazil to applaud the oil discovery and tell Mrs. Rouseff:
“We want to work with you. We want to help with technology and support to develop these oil reserves safely, and, when you’re ready to start selling, we want to be one of your best customers.”

China rescued Petrobras in 2009, when the oil company was looking at tight credit markets to finance a record-setting $224 billion investment plan. China’s national development bank offered a $10 billion loan on the condition that Petrobras ship oil to China for 10 years.

A chunk of Brazil’s oil real estate appeared on China’s portfolio in 2010, when Sinopec agreed to pay $7.1 billion for 40 percent of Repsol-YPF of Brazil, which has stakes in the now internationally famous Santos Basin, and the Sapinhoa field, which has an estimated recoverable volume of 2.1 billion barrels. Statoil of Norway also agreed that year to sell 40 percent of the offshore Peregrino field to Sinochem.

Last year, Sinopec announced it would buy 30 percent of GALP of Brazil, a Portuguese company, for $3.5 billion. GALP has interests in the Santos Basin and a 10 percent stake in the massive Lula field.

“The $5.2 billion cash-in we will get from Sinopec is paramount for our strategy in Brazil,” GALP CEO Manuel Ferreira de Oliveira told Bloomberg News.
“It will give us a rock-solid capital base as we enter a decisive investment period at the Santos Basin. This operation values our existing Brazilian assets at $12.5 billion and is really a landmark for the company and for our shareholders.”

News reports in December said Sinopec is the current favorite to buy stakes in Brazilian oil owned by Britain’s BG Group, which also has interests in the massive fields of Carioca, Guara, Lula and Lara.

On Jan 8., the French company Perenco announced it was selling Sinochem a 10 percent stake in five offshore blocks located in the Espirito Santos Basin. Some of the transactions still await approval by Brazil’s government.

In December, Venezuelan Oil Minister Rafael Ramirez publicly reiterated his government’s commitment to an oil refinery joint venture with Petrobras.
That project reportedly is set to be funded by China’s national development bank. Some news reports have quoted the head of China’s development bank saying that new deals with Brazil are under consideration.

James Williams, an energy economist with the U.S. consulting group WTRG Economics, said the Chinese are taking on big risks with ultra-deep-water investments.
“But for them, the benefits are greater, as they become partners with companies that have better technology and expertise,” he said.

China gets jump on U.S. for Brazil's oil - Washington Times

I find it difficult to believe that Obama didn't know what he was doing with Brazil and was find with China getting the deal when he can so successfully screw Republicans in Congress.