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To: upanddown who wrote (165870)	3/20/2012 6:48:31 PM
From: katytrader	Read Replies (1) \| Respond to of 206209

Do Brent traders care about relative strength of the USD? katytrader

To: upanddown who wrote (165870)	3/20/2012 6:49:18 PM
From: Bearcatbob	1 Recommendation Read Replies (1) \| Respond to of 206209

I do not think we are supposed to respond to posts like that to insure we do not create a "right wing" political thread. Just saying' Bob

To: upanddown who wrote (165870)

3/20/2012 7:02:11 PM

From: teevee

1 Recommendation Respond to of 206209

A significant impact on the domestic price of oil is the internationalization of the RMB via the creation of offshore RMB bonds. This facilitates Chinese exports of higher value products ranging from bull dozers and loaders to telecom equipment; and the import of more oil, but paid for with RMB instead of US dollars. Needless to say, this reduces the amount of US treasuries needed to be held by China and its trading partners. Also diminished, is the US ability to finance debt by the sale of treasuries into a growing global economy.

From John Mauldins "Outside the Box":

investorsinsight.com

The internationalization of the RMBChina is now the centre of a growing percentage of both Asian, and emerging market trade (a decade ago China accounted for 2% of Brazil’s exports; today it is 18% and rising). As a result, China is increasingly asking its EM trade partners why their mutual trade should be settled in US dollars? After all, by trading in dollars, China and its EM trade partners are making themselves dependent on the willingness/ability of Western banks to finance their trade. And the realization has set in that this

menage à trois does not make much sense. Indeed, for China, the fact that Western banks are not reliable partners was the major lesson of 2008 and again of 2011.

As a result, China is now turning to countries like Korea, Brazil, South Africa and others and saying:“Let’s move more of our trade into

null from dollars” to which the typical answer is increasingly “Why not? This would diversify my earnings and make our business less reliant on Western banks. But if we are going to trade in RMB, we will need to keep some of our reserves in RMB. And for that to happen, you need to give us RMB assets that we can buy”. Hence the creation of the offshoreRMB bond market in Hong Kong, a development which may go down as the most important financial event of 2011.

Of course, for China to even marginally dent the dollar’s predominance as a trading currency, the

RMB will have to be seen as a credible currency—or at least as more credible than the alternatives. And here, the timing may be opportune for, today, outshining the euro, dollar, pound or even yen is increasingly a matter of being the tallest dwarf.

Still, China’s attempt to internationalize the RMB also means that Beijing cannot embark on fiscal and monetary stimulus at the first sign of a slowdown in the Chinese economy. Instead, the PBoC and Politburo have to be seen as keeping their nerve in the face of slowing Chinese growth. In short, for the RMB to internationalize successfully, the PBoChas to be seen as being more like the Bundesbank than like the Fed.

Following this Buba comparison, China has a genuine opportunity to establish the RMB as the dominant trade currency for its region, just as the deutsche mark did in the 1970sand 1980s. But interestingly, China seems to consider that its “region” is not just limited to Asia (where China now accounts for most of the marginal increase in growth—see chart) but encompasses the wider emerging markets. How else can we explain China’s new enthusiasm in granting PBoC swap lines to the likes of the Brazilian, Argentine, Turkish and Belorussian central banks?

China’s attempt to move more of its trade into RMB is interesting given the current shifts in China’s trade. Indeed, although the US and Europe are still China’s largest single trade partners, most of the growth in trade in recent years has occurred with emerging markets. And China’s trade with emerging markets is increasingly not in cheap consumer goods (toys, underwear, socks or shoes) but rather in capital goods (earth- moving equipment, telecom switches, road construction services, etc; see China Bulldozes a New Export Market). In short, yesterday China’s trade mostly took place with developed markets, was comprised of low-valued-added goods, and was priced in dollars. Tomorrow, China’s trade will be oriented towards emerging markets, focused on higher value-added goods, and priced in RMB.

This would mark a profound change from China’s old development model: keeping its currency undervalued, inviting foreign factories to relocate to the mainland, transforming 10-20mn farmers into factory workers each year, and triggering massive labor productivity gains—gains which the government captures through financial repression and redeploys intolarge-scale infrastructure projects. But China’s change in development model may be less a matter of choice than of necessity.

To: upanddown who wrote (165870)	3/20/2012 9:00:37 PM
From: profile_14	2 Recommendations Read Replies (1) \| Respond to of 206209

I believe in supply and demand, and the US monetary policy has trashed the dollar despite Benny holding rates (short-term) low. PADD oil may not be terribly fungible because of pipeline and transportation costs and logistics, but it is generally so in my opinion. Bakken crude at $70 because of transportation bottlenecks with a $50 differential to Brent is crazy IMO. Tar sands Calgary oil just above $100 equally so IMO. We consume a quarter of the oil in the world and our demand is just that, a quarter. The rest of the world is growing, evidenced by the number of cars owned and built in China, just to cite one example. The recent production gains in this country have helped, but demand has increased more so as other places have come off-line, such as Iraq, Lybia, and Africa from time-to-time, not to mention the GOM. Our boutique fuels are a problem for gasoline prices, with each refinery having its oligopoly of sorts. States through the Clean Air Act crafted their own requirements and the consumer paid the price. Here is one area where there has been zero leadership. Standardization would cost a fraction of building new capacity or drilling yet it is not pursued and it would drop prices quickly, with extra funds going to fund consumer discretionary items. Watch prices crash if China has a hard landing. Supply and demand do matter, and our printing of money, debasing it endlessly, makes a dollar-denominated commodity such as oil worth a lot more per unit. Don't believe me, look at the price of gold.