Russia takes direct aim at all futures and derivatives manipulation based on the price of oil

Went to the self-serve gasoline stand this morning to put some gas in the car and paid ¥105 per liter thinking that the price of gasoline in Japan is going to continue to go down. Wondering why, decided to have a look around and went to my favorite researcher and writer on the topic, F. William Engdahl, to find out why. Russia and other countries including China, are going to be taking direct aim at “paper capitalism” that has passed for capitalism in the west by its manipulation of futures and derivatives (the derivatives market is gigantic, often estimated at more that $1.2 quadrillion) based on the price of oil. Russia is the largest producer of oil and by Russia creating a new benchmark on oil price this has huge implications. The west has been manipulating the price of goods and services through the manipulation of futures and derivatives based on oil. None of this has been based on the actual delivery of goods.

This is what I have been suggesting with Japan pumping out US$55 billion a month in QE which is not based on real production. The real economy and the paper economy are not going to remain as they are with Russia exposing the west’s “paper capitalism” on futures and derivatives manipulation. Watch Russia begin pointing out the huge discrepancies in the futures and derivatives numbers in the coming months. I also think Japan is going to become diplomatically a lot closer to Russia than they have been in the past. How much of Japan’s QE through its central bank has been invested in these futures and derivatives being pumped out by the west? There is ample proof that Japan’s QE is larger the than fed’s QE in the U.S., and that Japan’s central bank is what is keeping the futures and derivatives manipulation going in the west.

Source: New Eastern Outlook

Russia Breaking Wall St Oil Price Monopoly

January 9, 2015

by F. William Engdahl

RussiaRussia has just taken significant steps that will break the present Wall Street oil price monopoly, at least for a huge part of the world oil market. The move is part of a longer-term strategy of decoupling Russia’s economy and especially its very significant export of oil, from the US dollar, today the Achilles Heel of the Russian economy.

Later in November the Russian Energy Ministry has announced that it will begin test-trading of a new Russian oil benchmark. While this might sound like small beer to many, it’s huge. If successful, and there is no reason why it won’t be, the Russian crude oil benchmark futures contract traded on Russian exchanges, will price oil in rubles and no longer in US dollars. It is part of a de-dollarization move that Russia, China and a growing number of other countries have quietly begun.

The setting of an oil benchmark price is at the heart of the method used by major Wall Street banks to control world oil prices. Oil is the world’s largest commodity in dollar terms. Today, the price of Russian crude oil is referenced to what is called the Brent price. The problem is that the Brent field, along with other major North Sea oil fields is in major decline, meaning that Wall Street can use a vanishing benchmark to leverage control over vastly larger oil volumes. The other problem is that the Brent contract is controlled essentially by Wall Street and the derivatives manipulations of banks like Goldman Sachs, Morgan Stanley, JP MorganChase and Citibank.

The ‘Petrodollar’ demise

The sale of oil denominated in dollars is essential for the support of the US dollar. In turn, maintaining demand for dollars by world central banks for their currency reserves to back foreign trade of countries like China, Japan or Germany, is essential if the United States dollar is to remain the leading world reserve currency. That status as world’s leading reserve currency is one of two pillars of American hegemony since the end of World War II. The second pillar is world military supremacy.

US wars financed with others’ dollars

Because all other nations need to acquire dollars to buy imports of oil and most other commodities, a country such as Russia or China typically invests the trade surplus dollars its companies earn in the form of US government bonds or similar US government securities. The only other candidate large enough, the Euro, since the 2010 Greek crisis, is seen as more risky.

That leading reserve role of the US dollar, since August 1971 when the dollar broke from gold-backing, has essentially allowed the US Government to run seemingly endless budget deficits without having to worry about rising interest rates, like having a permanent overdraft credit at your bank.

That in effect has allowed Washington to create a record $18.6 trillion federal debt without major concern. Today the ratio of US government debt to GDP is 111%. In 2001 when George W. Bush took office and before trillions were spent on the Afghan and Iraq “War on Terror,” US debt to GDP was just half, or 55%. The glib expression in Washington is that “debt doesn’t matter,” as the assumption is that the world—Russia, China, Japan, India, Germany–will always buy US debt with their trade surplus dollars. The ability of Washington to hold the lead reserve currency role, a strategic priority for Washington and Wall Street, is vitally tied to how world oil prices are determined.

In the period up until the end of the 1980’s world oil prices were determined largely by real daily supply and demand. It was the province of oil buyers and oil sellers. Then Goldman Sachs decided to buy the small Wall Street commodity brokerage, J. Aron in the 1980’s. They had their eye set on transforming how oil is traded in world markets.

It was the advent of “paper oil,” oil traded in futures, contracts independent of delivery of physical crude, easier for the large banks to manipulate based on rumors and derivative market skullduggery, as a handful of Wall Street banks dominated oil futures trades and knew just who held what positions, a convenient insider role that is rarely mentioned inn polite company. It was the beginning of transforming oil trading into a casino where Goldman Sachs, Morgan Stanley, JP MorganChase and a few other giant Wall Street banks ran the crap tables.

Please go the the New Eastern Outlook website to read the entire article.