As Europe is on the brink of collapse, it is up to the GCC to show the road to a root-and-branch reform of the system. The GCC has the opportunity on Monday 08 June 2009 in Riyadh to declare that its (gold hiding in) oil reserves are the reserves of the Khaleeji.
German chancellor Angela Merkel warned on Tuesday 02 June 2009 about the expansive monetary policy run by the European Central Bank and wanted a return to common sense instead sowing the seeds of the next downturn by proceeding to credit expansion and agreeing under international pressure to buying bonds. (1)
I thought a central bank needs reserves in order to provide some value for the currency it administers.
Forex, foreign exchange, reserves would however appear to be a measure of a country’s ability to service obligations and engage in commercial transactions with the rest of the world.
I don’t understand that argument and I am unable to find an explanation. (help welcome!)
I am told that in trade between countries, payments are made through central banks, i.e., not between buyers and sellers, but between central banks.
While German chancellor Angela Merkel is calling upon our (European-) central-bank Masters to return to common sense,
the Gulf-Co-operation Council (GCC) cannot lay the groundwork for its Gulf Monetary Union (GMU). (2) (3)
Perhaps the GCC could return to the common sense of viewing its (gold hiding in) oil reserves
NOT as a measure of the GCC’s ability to service obligations and engage in commercial transactions with the rest of the world
BUT as the backing of the freely floating Khaleeji, the GCC single currency.
Since oil is the only commodity in the world that is large enough for gold to hide in, gold is hiding in there. Every increase in the price in the price of gold leads to an increase in the price of oil. If the GCC oil reserves are then the backing of the Khaleeji, every increase in the price of gold will lead to an increase in the value of the reserves of the Khaleeji and thus to an increase in the value of the Khaleeji itself.
This could prevent a situation like this week in Britain where theft by the party of labour results in sterling tumbling. (4)
Common sense could even dictate that GMU does not require a single currency.
As Europe is on the brink of collapse (5),
it is up the GCC to show the road to root-and-branch reform of the system (6)
And yes, the GCC minus two is meeting on Monday 08 June 2009 in Riyadh. (2) (3)
The GCC has the opportunity to do what it should do.
The GCC has the opportunity to declare that its (gold hiding in) oil reserves are the reserves of the Khaleeji.
Ivo Cerckel
honestmoney@maktoob.com
(1)
Merkel’s central bank bombshell sparks debt debate
By William Ickes – 8 hours ago
http://www.google.com/hostednews/afp/article/ALeqM5g31KKj_f1oIivXSqTDMc8I-snXdg
FRANKFURT (AFP) — German Chancellor Angela Merkel may have sought to score political points by slamming central banks last week, butshe also echoed fears over growing public debt and waning bank independence.
Merkel shocked financial markets when she said in Berlin: “We need to get back to an independent central bank policy and a policy of common sense.”
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Merkel and others in Germany feel that pushing up deficits to fight the economic crisis will fuel inflation and sow the seeds of the next crisis.
(2)
Currency union pact to be signed Monday
http://www.saudigazette.com.sa/index.cfm?method=home.regcon&contentID=2009060640072
SNIP
RIYADH – An accord on monetary union among four members of the six-nation Gulf Cooperation Council will be signed Monday, the Saudi Press Agency (SPA) quoted GCC Secretary General Abdurrahman Al-Attiyah as saying Friday.
On May 20 the United Arab Emirates pulled out of the proposed monetary union. Oman announced in 2007 that it would not join.
The signing had originally been planned for Sunday but will now take place during a meeting in Riyadh of GCC foreign ministers.
(3)
Gulf monetary union pact to be signed Monday
Jun 05, 2009 at 19:35
http://business.maktoob.com/20090000004769/Gulf_monetary_union_pact_to_be_signed_Monday/Article.htm
SNIP
An accord on monetary union among four members of the six-nation Gulf Cooperation Council will be signed on Monday, GCC chief Abdurrahman al-Attiyah said on Friday, the SPA news agency reported.
On May 20 the United Arab Emirates pulled out of the proposed monetary union in a major blow to plans to forge a single regional currency. Oman announced in 2007 that it would not join.
The remaining four members of the energy-rich GCC are Bahrain, Kuwait, Qatar and Saudi Arabia.
The signing had originally been planned for Sunday but will now take place during a meeting in Riyadh of GCC foreign ministers.
The UAE had expressed reservations over the monetary union after an informal GCC meeting in Saudi Arabia on May 5 decided that Riyadh, which is home to the GCC headquarters, would host the future banking authority.
The UAE, in particular Dubai, is a major financial and commercial hub and had harboured ambitions of doing so.
(4)
From The Times
June 6, 2009
Pound slides as Westminster’s woes weigh heavily
Gary Duncan, Economics Editor
http://business.timesonline.co.uk/tol/business/economics/article6440625.ece
The pound tumbled back below $1.60 yesterday, ending a rollercoaster week with a second day of steep losses, as the wave of resignations rocking Gordon Brown’s Government put the currency under heavy selling pressure.
(5)
From The Times
June 4, 2009
The great bailout – Europe’s best-kept secret
Germany is at the heart of a huge plan to prop up crippled EU economies – not that the German people would ever know
Anatole Kaletsky
http://www.timesonline.co.uk/tol/comment/columnists/anatole_kaletsky/article6426565.ece
Europe is now in the middle of a perfect storm – a confluence of three separate, but interconnected economic crises which threaten far greater devastation than Britain or America have suffered from the credit crunch: the collapse of German industry and employment, the impending bankruptcy of Central European homeowners and businesses; and the threat of government debt defaults from loss of monetary control by the Irish Republic, Greece and Portugal, for instance on the eurozone periphery.
(6)
We’re still waiting for a banking shake-up
So far, the punishment meted out to the banking sector does not fit the crime, suggests Edmund Conway.
By Edmund Conway
Published: 7:14PM BST 03 Jun 2009
http://www.telegraph.co.uk/finance/comment/edmundconway/5438638/Were-still-waiting-for-a-banking-shake-up.html
The amount of debt incurred by governments is enough to pay for a world war.
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Finance is both complex and essential for the world economy, but it is not a sacred cow. It does not have a monopoly on intelligence (who could claim otherwise, given the scale of its recent failures?). To suggest that we can get away without a root-and-branch reform of the system is simply wrong. We will need a far-reaching combination of smarter regulation and smarter banking laws. I hope that in the wake of the expenses scandal, and in the dying light of this Government, we don’t forget this lesson.