“Our” bankers are still not realising that their undercapitalised institutions which daily commit the crime of fractional-reserve banking are slowly dying from dollar poison.

Here’s a Khaleej Times article of today, 10 December 2008, which quotes a report by Abu Dhabi Commercial Bank (ADCB) arguing that the UAE will be able to tide over the global economic melt-down as the country is well-positioned to maintain fiscal surplus in 2008 and 2009 since it has the lowest “break-even oil price” in the GCC of $23 (Dh84.48) per barrel against the IMF’s baseline petroleum price projection of $68 per barrel for 2009. (1)

Look, the article mentions the oil price also in dirham. Why is that?

The very large volume of hysteria which has been raised predicting a coming “recession” is probably the clearest indication that the USA central bank, the Fed, is going to go insane in the opposite direction. Think about it. The Fed doubled the [USA] money supply during the decade of the 1980s. Here in 12 weeks, the Fed has multiplied Federal Reserve Credit by 2.5, times with Dallas Fed chief Richard Fischer predicting a triple by the end of December.
So, if you have one ounce of common sense, you know that the “error” the Fed makes this time will be the same “error” they make every time: TOO MUCH MONEY. (2)

This means inflation. This means a rising gold price, thus a rising price of the reserves of the Khaleej dinar, thus a rising value of the Khaleej dinar.

The recession hysteria will lead our Masters to hyper-inflate their currencies.

This is what reflation is about.

Will this lead to an economic crash?

What will happen after that?

As a first step, the Khaleej Times article which I quoted above mentions the price of oil in dirham.

Ivo Cerckel

NOTES

(1)
UAE Can Maintain Fiscal Surplus at $23 Oil
Khaleej Times 10 December 2008
http://www.zawya.com/Story.cfm/sidZAWYA20081210042914/
DUBAI - UAE will be able to tide over the the global economic melt-down as the country is well-positioned to maintain fiscal surplus in 2008 and 2009 since it has the lowest “break-even oil price” in the GCC of $23 (Dh84.48) per barrel against the IMF’s baseline petroleum price projection of $68 per barrel for 2009, a report by Abu Dhabi Commercial Bank (ADCB) said.

(2)
Gold - on the Cusp
By Howard Katz
Dec 8 2008 11:26AM
http://www.kitco.com/ind/katz/dec082008.html

The way forward for Kuwait to achieve decent oil prices.

Kuwait will take precautionary measures to counter the present economic crisis following the Eid holidays. (1)

In view of the current worldwide economic situation, especially concerning oil prices, Kuwait will formulate a financial plan that will help insulate the country against any instances of recession due to the fall in oil prices.  (1, again)

The current worldwide economic situation is due to the phenomena of unbacked paper money (the metaphor of “printing” money is still being used for worthless digital liquidity representing “money”) and fractional-reserve banking.

The solution to this problem is that the 29 and 30 December 2008 Muscat, GCC Summit, where the 2009 Gulf Monetary Council (GMC), a precursor to the 2010 Gulf Central Bank (GCB), will be set up, will pool the GCC gold reserves, make this pool the reserves of the Khaleej dinar and periodically mark these reserves to market (-price).

In that case, every increase in the price of gold, will lead to an increase in the value (of the reserves) of the Khaleej dinar.

Gold is hiding in oil because oil is the only commodity in the world that is large enough for gold to hide in.

If the Muscat GCC Summit decides to pool the GCC gold reserves, make this pool the reserves of the Khaleej dinar and periodically mark these reserves to market (-price),
then every increase in the price of gold will automatically lead to an increase in the price of oil.

By same token, the present indecently low USA dollar-denominated oil prices will immediately come to an end.

Ivo Cerckel

(1)
Kuwait: Emergency financial steps after Eid
Kuwait Times
08 December 2008
http://www.zawya.com/Story.cfm/sidZAWYA20081210051151/Emergency%20financial%20steps%20in%20Kuwait%20after%20Eid

There are signs that the nine-day holiday that started on December 2 was a good breather for United Arab Emirates (UAE) investors. The UAE markets are poised to open on a positive note when trading resumes tomorrow, Thursday, helped by several governments around the world announcing stimulus packages, says Gaurav Ghose, Financial Features Editor at Gulf News. (1)

The Organisation for Economic Co-operation and Development (OECD) says that the USA economy is still facing “sharp downside risks” to growth and that another fiscal stimulus could be needed if things get worse. The big rate cuts by the USA central bank, the Fed, “appear to be roughly appropriate in light of the adverse effect on real activity” of the credit squeeze, and “monetary policy should remain highly accommodative for quite some time to support the economy and the financial system”, says the OECD. (2)

Gulf News says that the stimulus packages have helped the mood of investors.

The OECD says that another fiscal stimulus could be needed if things get worse.

But once the USA economy would revive as a result of the stimuli, the Fed will have to raise interest rates in order to curb inflation.

At the same time, the USA government will have to take steps to reduce public debt.

How will that circle be squared?

Ivo Cerckel

NOTES

(1)
Investors ready to trade as nine-day breather ends
By Gaurav Ghose, Financial Features Editor
Published: December 09, 2008, 23:38
http://www.gulfnews.com/business/Markets/10266012.html

(2)
US faces deep problems, OECD says
By Steve Schifferes, Economics reporter, BBC News
Page last updated at 10:53 GMT, Tuesday, 9 December 2008
http://news.bbc.co.uk/2/hi/business/7772794.stm