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Putting this all together I will ask some questions, however, there are no firm answers yet. Who is really behind this? Would the U.S. cut the legs out from under their own shale industry or is it more likely the Chinese wooed Saudi Arabia into aiding them in filling their reserves? If it is China rather than the U.S., what does this say about Saudi Arabia? Are they in the process of switching allegiances? Is this a case where they are abandoning the petrodollar? I obviously do not have the answer but I will ask another question or two. Is it possible China has swayed Saudi Arabia by promising to pay them with something real? Like gold? Could this even be possible? It is already rumored that Russia is trading oil for gold, maybe the Saudis have seen this and a light bulb went on for them?
Financially, yes I believe it is possible but not probable. Much more likely would be payment in yuan. Would Saudi Arabia accept the paper of another sovereign in the place of dollars? In my opinion they would …if they are able to see the writing on the wall. Has China let the Saudis in on their future plans for their currency? Maybe a gold backed yuan? A gold backed yuan which is backed by or one that is ratio pegged to gold? Does China have enough gold to do this? Let me say this, China very probably has as much gold (or much more) as the U.S. “claims to have.” Would this be enough gold? The answer of course depends entirely on what “price” they value or peg gold at. At “some price”, China can go to a 100% gold backed yuan, any country can …if they have gold and the international price is high enough.
This is much speculation on my part but it does make common sense. The U.S. may believe we can bankrupt Russia with low oil prices …and this is “our” plan, I don’t believe it is “the” plan. In fact, the argument can be made that not only does this hurt (destroy) our shale industry, crashing oil prices actually endangers our financial system. After six years of trying to reflate the system via outright monetization, would we really risk a wildfire of deflation? I don’t think so. I believe it is much more likely this is a Chinese/Saudi partnership play where they both “win” and the U.S. is left out in the cold. This would also be a terminal event for the U.S. petrodollar and a “polite” way for the Chinese to move center stage. If this is so, we will be watching the formation of a “new world order,” just not the one the Rockefellers had in mind!