Items of note from Harvey's blog.....

http://harveyorgan.blogspot.com/2012/04/greece-decides-to-thumb-their-nose-at.html

Gordon Chang: China will buy gold to pay for Iranian oil

Submitted by cpowell on Mon, 2012-04-23 02:39. Section: Daily Dispatches

The Best Reason in the World to Buy Gold

By Gordon Chang
Forbes.com
Sunday, April 22, 2012

http://www.forbes.com/sites/gordonchang/2012/04/22/the-best-reason-in-th...

Beijing is planning to avoid U.S. financial sanctions on Iran by paying for oil with gold. China's imports of the metal are already large, and you can guess what additional purchases are going to do to prices.

On the last day of 2011 President Obama signed the National Defense Authorization Act for Fiscal Year 2012. The NDAA, as it is called, attempts to reduce Iran's revenue from the sale of petroleum by imposing sanctions on foreign financial institutions conducting transactions with Iranian financial institutions in connection with those sales. This provision, which essentially cuts off sanctioned institutions from the U.S. financial system, takes effect on June 28.

The NDAA gives the president the power to waive the sanctions depending on the availability and price of supplies from non-Iranian sources. He can also exempt financial institutions from countries that have significantly cut back purchases of Iranian petroleum. Last month the State Department announced waivers for Japan and 10 European countries. China, which has received American waivers in the past under other Iran legislation, is now Tehran's largest oil customer and investor as well as its largest trading partner. Given the new mood in Washington, Beijing cannot count on getting more exceptions in the future.

As The Wall Street Journal noted in early January, the sanctions are "an attempt to force other countries to choose between buying oil from Iran or being blocked from any dealings with the U.S. economy." The strict measures put Chinese officials in a bind. They apparently believe their geopolitical interests align with those of Tehran, but their economy is becoming increasingly reliant on America's.

So how can Beijing keep both Iran’s ayatollahs and President Obama happy at the same time?

Simple, the Chinese can avoid the U.S. sanctions through barter. China has already been trading its produce for Iran's petroleum, but there is only so much gai lan and bok choy the Iranians can eat. That's why Iran is also accepting, among other goods, Chinese washing machines, refrigerators, toys, clothes, cosmetics, and toiletries.

The barter trade works, but Iran needs cash too. As it is being cut off from the global financial system, the next best thing is gold. So we should not be surprised that in late February the Iranian central bank said it would accept that metal as payment for oil. Last year China imported $21.7 billion in Iranian oil and exported $14.8 billion in goods and services. As the NDAA goes into effect, look for Beijing to ship gold to Iran to make up the difference.

Gold bugs, however, shouldn't get too happy about Iran's plight. There are five principal factors that will depress anticipated demand for gold used to buy Iranian oil. First, other countries will also be bartering agricultural and manufactured goods. Russia and Pakistan, for instance, will undoubtedly continue wheat-for-petroleum arrangements.

Second, Tehran, out of apparent desperation, in February said it would also accept local currencies, thereby avoiding the U.S. financial system. As a result the Indians announced in January that they would not request a waiver from the Obama administration, and they began opening rupee accounts to pay for as much as 45% of their oil purchases with their currency. In 2011 India exported only $2.7 billion to Iran while buying $9.5 billion in oil. Similarly, the Chinese, smelling blood in the water, will surely press the Iranians to accept the non-convertible renminbi.

Third, the result of sanctions is that Iran's oil exports could be cut by as much as 700,000 barrels a day. China, for instance, is increasing its oil purchases from Saudi Arabia, its largest foreign supplier. The Chinese are also buying more from the Persian Gulf emirates as well as Vietnam, Russia, and Africa. Of course, every drop of other crude decreases China's demand for Iran's.

Fourth, China and other countries are taking advantage of Iran's plight by negotiating large price reductions.

Fifth, if the Iranians are willing to accept wheat and non-tradable currencies in payment for oil, there is nothing to say they won't start agreeing to silver too.

But nothing shines like gold. And there is one other reason to be bullish on the yellow metal. "This isn’t the end of the road," noted an unnamed senior administration official to The Wall Street Journal days after the enactment of the NDAA. "There are many other sanctions we can put in place and that our multilateral partners around the world can put in place and will." As Washington tightens financial measures against Iran, the mullahs will have less access to hard currency and therefore more need for gold.

Unless, of course, they want to accumulate more Chinese washing machines.

Russia increased her reserves after a one month hiatus:

(courtesy Ed Steer)

As expected, The Central Bank of the Russian Federation updated their website with the March numbers...and they showed that they had purchased 500,000 ounces of gold to add to the 28.3 million ounces they already held.  I must admit that after seeing nothing added in January...and 100,000 ounces sold in February...I was relieved to see this number.  I thank Nick Laird for his wonderful chart below.

Russia Will Not Reopen: "The Situation Has Been Recognized As An Emergency"

Submitted by Tyler Durden on 04/23/2012 12:42 -0400

One temporary halt and three delay attempts later, and we get.... this.

Yes, this is the Russian stock market.

end

Russia Will Not Reopen: "The Situation Has Been Recognized As An Emergency"

Submitted by Tyler Durden on 04/23/2012 12:42 -0400

One temporary halt and three delay attempts later, and we get.... this.

Yes, this is the Russian stock market.

end




As the world rehypothecates over and over again existing collateral instead of replacing an aging asset base,
the globe now has trillions of imaginary collateral whose ultimate owner can never be tracked and the daisy chained bankrupt domino collapse will occur before one can track down the real official owner  e.g.  M.F. Global.
Spellman lays out the case for for the subtle, systemic manner in which gold is slowly creeping back into use by the banking system as an asset being used to back paper currencies and financing transactions. Those of us who study the precious metals markets on a daily basis, in the context of the overall global financial system, have been pointing to this dynamic for a while now. For instance, Spellman links the announcement in which the Basel Committee is studying making gold a Tier 1 banking asset. This was announced several months ago and remarked upon widely in the precious metals community. I doubt anyone's financial adviser called them up to point this out.

The market, along with the massive Central Bank accumulation of gold by China, Russia and several of China's strategic allies - like the other BRIC countries - is starting to force this transformation. I say "the market" because most of the collateral that has been pledged to secure paper financial transactions has been pledged/rehyopothecated (see MF Global, Lehman, Madoff). This is especially true in the repo market where sovereign paper/Treasuries was historically the only asset to be used. Now Central Banks have stretched the range of credibility and extended collateral status to everything except the Brooklyn Bridge (who knows how many times that's been rehypothecated...). The last man standing is gold and it is being forced by the market back into the system as a paper anchor by necessity. Eventually gold will remain as the bastion of "flight to safety" because of its ultimate utility for that purpose.

Everyone needs to read this essay and make sure they understand what is happening and why. Here's the LINK For me, this essay has "seminal" status because it was written by a former "insider" to elite circles - the elite circles which constantly denigrate and revile gold - and because it will likely expose a wider circle of market observers to a systemic dynamic that is taking place little or no acknowledgement by 99.5% of all market participantsAs the world rehypothecates over and over again existing collateral instead of replacing an aging asset base,
the globe now has trillions of imaginary collateral whose ultimate owner can never be tracked and the daisy chained bankrupt domino collapse will occur before one can track down the real official owner  e.g.  M.F. Global.