Would China really buy yuan-denominationed Iranian oil?

The possibility of that is the claim by European Business Magazine, seen via The Bulwark.

A senior Iranian official has told CNN that Tehran is considering allowing a limited number of oil tankers through the Strait of Hormuz — but only if cargo is traded in Chinese yuan, not US dollars. The condition, if formalised, would represent the most significant challenge to the petrodollar system in its fifty-two-year history, striking at the financial architecture that underpins American global power rather than at US military assets.

Color me HIGHLY skeptical of China actually doing this. For 20 years now, it’s run like hell from any situation, event, or financial control or stipulation that would put the yuan “on the spot” as anything close to a backup global reserve currency. President Xi Jinping may be indulging the Iranians in talk but that is likely all.

It's true, per EBN, that sanctioned Russian oil is denominated in yuan when not in rubles, but that's the exception that doesn't challenge the rule.

On the other hand? This:

Since 28 February, between 11.7 and 16.5 million barrels of Iranian crude have transited the Strait to China via shadow fleet under IRGC protection while every other nation’s shipping is locked out. China pays in yuan. China’s tankers move freely. X The architecture for a parallel yuan-denominated energy corridor already exists and is already operating.

On the third hand, that's why Trump is talking about attacking Kharg Island. I doubt Xi wants directly involved in the middle of that.

In any case, EBN caveats the piece at the end by noting China's financial system isn't ready yet to fully eat this whale anyway. That said, though, if anything close to this happened? Or even if some version of the current situation continues — as we see now what the help is that Trump is begging for from Xi, and he doesn't get it? Yes, it would be the biggest dollar erosion since Vietnam and post-Vietnam inflation mingled with the US going off the gold standard.

Is the dollar about to lose its perch as world reserve currency?

The some kind of Socialist, some kind of Marxist economist Michael Hudson thinks so, seeing the Britain-France-Germany workaround on the American sanctions against Iran announced on Thursday being a kind of wedge.

I don't think so. Rather, I think this is as much wishful thinking, which he does from time to time, in my opinion.

OK, here's the skinny.

There's three currencies, two of them state-backed, that have the possibility. None of them will become an official, or even a strongly quasi-official, world reserve currency before 2040.

First, referencing those countries above, is the Euro.

From my understanding of the EU, this could only happen officially by vote of all EU members who use the euro. That's less likely in the next 20 years than herding cats successfully.

Second, the yuan. Nope. That would require it to be depegged from the dollar. Anybody who thinks that happens in the next 20 years, thinks Trump is a free-trader.

Besides, China is doing better, per N+One, halfway down or so, with the Asian Infrastructure Development Bank giving it leverage against the World Bank.

The third is the non-state collection of electronic ledgers known as crypotocurrency.

That ain't happening, either.

The way most bitcoin systems are structured, none individually are elastic enough to get anywhere near that big even as unofficial reserve currency.

Collectively? Dude, these are libertarian wet dreams. No chance they unite into one massive megacoin.

And, as an official reserve currency? It's part of their duty as nation-states for their governments to crush bitcoin precisely because it's stateless.

File 13 this idea, Michael.

If you were engaging in sardonic humor about Trump being a deliberate wrecker of the dollar as a reserve currency, it really didn't come off that way.

==

And, while you're at it, File 13 your love for Modern Monetary Theory. Go read some Doug Henwood on that. (I'm eventually going to have to do a separate piece on this.)

Doug's piece is actually very interesting. I didn't know that Hudson is NOT the No. 1 touter of MMT at Missouri-Kansas City, which Henwood calls the Vatican of MMT. I also didn't know that Yves Smith of Naked Capitalism is a fangirl.

In usual Henwood style, Doug can be scathing. (He can be when he's wrong, as well.):

MMTers extend this hubris about the precision and power of policymaking to the realm of interest rates, which they think the central bank is completely in control of and should be kept as close to zero as possible.

That right there is silly. I don't need Doug to tell me that:

Without higher interest rates to compensate for greater default risk or longer maturities, there will simply be no one willing to buy the bonds or issue the loans.

The MMTers answer is for the Fed to be the purchaser of last resort.

Gee, isn't that something quite similar to Quantitative Easing?

Otherwise, Doug's even better further in, when he criticizes the MMTers for being lackadaisical about inflation.

Then, tying this back to Hudson's thoughts on reserve currencies, Henwood notes other nations don't have the same degree of currency-printing freedom as does the US.

Henwood then notes that a jobs guarantee program is in no way dependent on MMT.

One last thought, per Henwood: If Stephanie Kelton truly believes that just following MMT will solve climate change, she's either a tremendous idiot or an incredible liar.

See more MMT refudiation here.

And, stuff like this on Twitter is laughable.

MMT is first and foremost just a description of how our monetary system works. So, in order to rein in FIRE it’s good to know how our monetary system works

— Kathryn Cannon (@katiecannon2) February 27, 2019

Geez. Back at you.

No #MMT is not "first and foremost just a description of how our monetary system works." It is not even second or third "just a description of how our monetary system works." We are getting into #Maoist Little Red Book territory, I do think. Bye!

— ATrealDonaldTrump 🚩🌻 (@AFCC_Esq) February 27, 2019

And, that's that.

Obama's dumb oil move

Tapping the Strategic Petroleum Reserve?

First, the amount it contains? 727 million barrels, per Wikipedia, is enough that it can't be tapped too often, too hard.

Wiki also says the current consumption per day is 21 million barrels so Obama's 30 million barrels actually lasts less than a day and a half (just over 1 day, 10 hours to specific), per fried Leo Lincourt.

So, add up A and B, and contra Salon's Andrew Leonard, it's possible this will NOT stop oil speculation. (I'm also assuming Saudi Arabia's talk about raising production is a lot of talk and not much else, given its recent unmothballing of a field that that had been in drydock for years.) The market remains relatively tight. It might take the sharpest edges off speculation, but that's about it. And, due to the realities of what the strategic reserve contains, commodities speculators know that.

Beyond that, Obama's never showed any real inclination to reign in speculators. If he had, he would have tighten commodity, commodity futures, and commodity derivatives legislation.

But, since many of those folks are the ones who were major bankrollers of the mythical Citizen Obama's 2008 presidential campaign, and whom he hopes will be the same in 2012, he's not going to regulate them in the future.

This was just about trying to give the economy enough of a nudge, without having to make any actually liberal political decisions, to boost his election chances.

But, this is about more than Obama. The International Energy Agency signed off on this too.

This is also in part about post-Fukushima Japan, worried about summer energy needs with some of its nuclear plants offline. Or so I'm guessing. It's about the EU, hoping this will take the mind off of bailout trauma in Greece and bailout payment trauma in Germany. And, it's about China hoping it can continue to keep its housing and other bubbles from bursting.

Well, I don't know what the answer is for Japan. For Greece, austerity won't address a culture of tax evasion and corruption that makes the legal-on-paper antics of folks like the Koch Bros. look like kindergarten, and cheap oil won't camouflage austerity. For China, as Paul Krugman wrote the other day, only an upward re-evaluation of the renmimbi (yuan) has a serious chance of deflating those bubbles without too much pain or destruction.

On Europe, as I learn more ... it's supposed to replace the missing Libyan oil, most of which went to Europe. So, I wasn't totally wrong there.

China? At least one market analyst in that area, as well as some in the U.S., suspect "coordination" with Fed chief Ben Bernanke's speech about a slowing economy, and that this will be the gateway for more "quantitative easing," but by different name and means. In fact, Forbes calls it QE2.5

Meanwhile, the Commodity Futures Trading Commission is investigating "suspicious" trades in oil just before the decision was announced. Getting back to lack of regulation - such insider trading isn't illegal in the commodities markets.

And, back to the "timing" issue, too. The story notes the Saudis had already announced a production increase.

So, many this was a bank shot against the non-Saudi members of OPEC, played in conjunction with Riyadh?

Hey Brazil, blame China on the currency crisis

Don't blame us. This is NOT an issue of U.S. economic imperialism.

Criticize China for not upvaluing the yuan; don't criticize the U.S. for depreciating the dollar. That said, here's where U.S. diplomacy needs to separate China from the other BRIC nations (and yet others, like Thailand, mentioned in the article).

Meanwhile, good luck to the G-20 in resolving this. Oh, and way to show "leadership," Brazil, by refusing to participate in key talks this weekend.

That said, the U.S. is still trying to peel Brazil away from China:

An anonymous U.S. official avoided criticizing Brazil, noting that Brazil had resisted political pressure to keep its currency, the real, from rising. “The Brazilians have really framed the debate that we need to have at the G-20,” the official said. Brazil and India, the official said, are “among these countries that have the greatest to gain” from the G-20 process because a surge of foreign capital has threatened the stability of their fast-growing economies.

The real issue is that the G-20 is even more toothless than the G-8. It's like the U.N. General Assembly vs. the U.N. Security Council.

Fisher-Price and China

Congress addressing Chinese currency manipulation is "nice," but, it's posturing compared to yet the latest made-in-China dangerous crap issue - Fisher-Price toys.

The US recall includes some 11 million toys. Isn't that enough for Congress to do something?

Meanwhile, showing the length and strength of China's export muscle (and the currency issue as a sidebar). the recall extends to India.

And, safe toy crusader Edward Swartz may have died last month, but it's Fisher-Price that will "die" on his organization's upcoming 2010 list of Top 10 worst toys.

In addition to addressing Chinese manipulation of the yuan, isn't it time we insisted on inspecting products made there, before they even get put on a ship?

No, it may not move many toy jobs back to the U.S. But, it might, just might, force some U.S. toy companies to lower top exec salaries here if they're going to keep importing crap, rather than backing such a measure.

Geithner fiddles while senators burn at China

The Senate is raking Treasury Secretary Lil Timmy Geithner over the coals, and rightfully so, for not doing more about Chinese currency issues. At the same time, Chris Dodd, D-Pompous, while noting that every administration from Reagan on has kowtowed to China, ignores that every Congress in same said time frame has willingly swallowed presidential administration lies about "action."

Meanwhile, the administration is taking action on two lesser issues; but, that's not enough. In that story, an economic analyst notes that getting China to revalue its currency could create 500K jobs here and cut our trade deficit in half.