ECON How could trillions of dollars be laundered from the Wash DC regime to Saudi Arabia?

[kittyluvr]

From Ann Barnhardt. She has an interesting theory on the Saudi Oil price reduction.

How could trillions of dollars be laundered from the Wash DC regime to Saudi Arabia? Why, through Citigroup, of course.

A clever reader with probably more knowledge of the Middle East than they would care to have put before me a very interesting question. Is the US laundering money to Saudi Arabia through Citigroup in order to “hedge” against, or compensate Saudi Arabia for the drop in oil prices?

Well, it sure as hell looks like it.

I recently tweeted the reportage on the massive derivatives position being accumulated by Citigroup (the parent Holding Company) and Citibank (the bank held by Citigroup HoldCo) – $135 TRILLION. Citi is adding roughly $10 TRILLION PER QUARTER, and the bank is now holding MORE derivatives than the parent HoldCo, which is unprecedented and shocking. Even worse, the bank – the derivatives holdings of which are now “guaranteed” by the FDIC, which is to say the US TAXPAYERS, thanks to the Cromnibus bill – is where the exposure is being added – $9 TRILLION was added to the Citibank portfolio within the third quarter of 2014 alone – the latest available data. Citi is the only big bank that is INCREASING its derivatives position, all the other big banks have modestly reduced their derivatives exposure in the same time period. But Citi is piling it on as hard and fast as it can – NINE TRILLION $ IN ONE QUARTER!!

Do you know who the largest private shareholder of Citigroup is?

Prince Alwaleed Bin Talal Bin Abdulaziz Alsaud. Mister Saudi Arabia.

So, I’m going to indulge in a little dot connecting here. I don’t think this is terribly far-fetched.

I hypothesize that the Washington DC regime is providing Saudi Arabia with a “laundered short hedge” on oil prices through Citi. Citi “borrows” money from the Federal Reserve at next to zero percent, plows it into swaps (a form of highly leveraged derivative wherein cashflows, not assets, are the underlying “commodity”) at this stunning clip because all swaps are held “off balance sheet”. Remember that term from MF Global?

The position is such that it makes money when oil prices drop, thus “hedging” Saudi Arabia. If the poop hits the fan, thanks to the Cromnibus, 100% of Citibank’s derivatives portfolio is now under the umbrella of the FDIC, which we all know means the Federal Reserve printing dollars to bail out their friends. The FDIC is only sitting on a few billion in assets. It’s a joke.

So, the Washington DC regime has essentially posted YOU AND SEVERAL GENERATIONS OF YOUR PROGENY as the collateral guaranteeing a short hedge on oil prices that it is providing for Saudi Arabia through its ownership of Citigroup. In other words, MONEY LAUNDERING, EXCEPT ON A MULTI-GENERATIONAL, CIVILIZATIONAL SCALE.

Lee Greenwood could not be reached for comment.

*”Short” means “to sell” or “is sold”. A short position is one that appreciates in value if the price of the underlying commodity goes DOWN. The opposite is “Long”, which means “to buy” or “is bought”.

http://www.barnhardt.biz/2015/01/09...saudi-arabia-why-through-citigroup-of-course/

 

[Dozdoats]

How could trillions of dollars be laundered from the Wash DC regime to Saudi Arabia?

ANY WAY THEY WANT ...

 

[Publius]

Millions and billions of dollars have disappeared in Iraq and Afghanistan and the bozo in the white house is giving millions to muslim people and organizations that should not be getting anything at our expense.

 

[Hacker]

This makes a lot of sense. And it's simple to follow . . .

 

[Kook]

"Alice, just how far down does this rabbit hole go anyway?"

 

[BREWER]

Greetings, kittyluvr: I always enjoy Ann's articles. No BS allowed. I think after reading this I'm feeling a little sick. Thanks for posting this article. Take care. BREWER

 

[shoddy61]

You can bet Bams and his Friends are not keeping it in dollars at Citibank. They have less than two years to expand the grandkids tax debt to 23 Trillion when he leaves office. Hitlery and "at this point who cares" friends then can refill their pockets over the following 4 years. PROJECTION, 32 trillion US debt by 2020.
sonny

 

[imaginative]

I hypothesize that the Washington DC regime is providing Saudi Arabia with a “laundered short hedge” on oil prices through Citi. Citi “borrows” money from the Federal Reserve at next to zero percent, plows it into swaps (a form of highly leveraged derivative wherein cashflows, not assets, are the underlying “commodity”) at this stunning clip because all swaps are held “off balance sheet”. Remember that term from MF Global?

The position is such that it makes money when oil prices drop, thus “hedging” Saudi Arabia. If the poop hits the fan, thanks to the Cromnibus, 100% of Citibank’s derivatives portfolio is now under the umbrella of the FDIC, which we all know means the Federal Reserve printing dollars to bail out their friends. The FDIC is only sitting on a few billion in assets. It’s a joke.

So, the Washington DC regime has essentially posted YOU AND SEVERAL GENERATIONS OF YOUR PROGENY as the collateral guaranteeing a short hedge on oil prices that it is providing for Saudi Arabia through its ownership of Citigroup. In other words, MONEY LAUNDERING, EXCEPT ON A MULTI-GENERATIONAL, CIVILIZATIONAL SCALE.

Interesting & plausible theory



How OPEC Weaponized the Price of Oil Against U.S. Drillers

If there ever was doubt about the strategy of the Organization of Petroleum Exporting Countries, its wealthiest members are putting that issue to rest.

Representatives of Saudi Arabia, the United Arab Emirates and Kuwait stressed a dozen times in the past six weeks that the group won’t curb output to halt the biggest drop in crude since 2008. Qatar’s estimate for the global oversupply is among the biggest of any producing country. These countries actually want -- and are achieving -- further price declines as part of an attempt to hasten cutbacks by U.S. shale drillers, according to Barclays Plc and Commerzbank AG.

Crude fell 48 percent last year and has declined 35 percent since OPEC affirmed its output target on Nov. 27. That decision, while squeezing revenues for OPEC members in 2015, aims at preserving their market share for years to come.

Oil Prices

“The faster you bring the price down, the quicker you will have a response from U.S. production -- that is the expectation and the hope,” said Jamie Webster, an analyst at consultants IHS Inc. in Washington. “I cannot recall a time when several members were actively pushing the price down in both word and deed.”

Holding Out

U.S. crude production totaled 9.13 million barrels a day last week, up about 1 million barrels from a year ago and 49,000 from the OPEC meeting in November. Horizontal drilling and hydraulic fracturing in underground shale rock have boosted output by 66 percent over the past five years. Exports, still limited by law, reached a record 502,000 barrels a day in November, according to the Energy Information Administration.

The group will stand by its decision not to cut output even if prices fall and wait at... Read More

The four Middle East OPEC members are counting on combined reserve assets estimated by the International Monetary Fund at $826.4 billion to withstand the plunge in prices. Petroleum represents 63 percent of their exports. At least 10 calls and several e-mails to the oil ministries of all four countries on Jan. 7 and yesterday weren’t answered.

The price decline will cost all 12 OPEC members a total of $257 billion in lost revenue this year, according to the EIA. Venezuela has a 93 percent chance of defaulting on its debt over the next five years, according to CMA, a data provider owned by McGraw Hill Financial Inc. President Nicolas Maduro said Dec. 13 that “there is no possibility of default” and on Jan. 7 that the country has “the capacity to obtain the financing” it needs.

Maintain Course

OPEC won’t reverse course even if oil prices fall as low as $20 a barrel or non-OPEC countries offer to help with production cuts, Saudi Arabian Oil Minister Ali Al-Naimi said in an interview with the Middle East Economic Survey on Dec. 21. The kingdom may even bolster output if non-OPEC nations do so, he said. The global oversupply is 2 million barrels a day, or 6.7 percent of OPEC output, Qatar estimates.

The group will stand by its decision not to cut output even if prices fall and wait at least three months before considering an emergency meeting, U.A.E. Energy Minister Suhail Al-Mazrouei said Dec. 14. He said clearing the surplus may take years, Abu Dhabi-based newspaper The National reported Jan. 6.

OPEC has no plans to meet before its next scheduled conference in June, Kuwaiti Oil Minister Ali al-Omair said on Dec. 16. Prices will recover in the second half as oil producers with the highest costs are compelled to scale back operations, he said.

‘Swift Fall’

It wouldn’t be the first time U.S. drillers are caught up in an OPEC battle for market share. In 1986, Saudi Arabia opened its taps and sparked a four-month, 67 percent plunge that left oil just above $10 a barrel. The U.S. industry collapsed, triggering almost a quarter-century of production declines, and the Saudis regained their leading role in the world’s oil market.

“It seems in their interest to have a swift fall rather than a slow, grinding fall,” Miswin Mahesh, an analyst at Barclays in London, said by phone. “A swift drop in prices would bring more changes to non-OPEC supply,” while a more gradual decline would let companies in other oil nations “merge and become more efficient.”

Not all share this view. UBS Group AG analysts said that hastening a price slump isn’t a practical strategy because oil demand and supply respond too slowly to price changes.

Undermine Prices

“I doubt that they target a lower price,” Giovanni Staunovo, an analyst at UBS in Zurich, said by e-mail on Jan. 5. “Supply and demand are quite inelastic in the short-term.”

Brent for February settlement decreased 85 cents, or 1.7 percent, to $50.11 a barrel on the London-based ICE Futures Europe exchange. It’s the lowest close since April 28, 2009.

Saudi Arabian oil ministers sought to undermine prices in the 1980s and 1990s with their public comments, according to Amy Myers Jaffe, executive director of energy and sustainability at the University of California-Davis. The tactic was used to pressure other OPEC members into agreeing to quota changes, she said.

There are signs that OPEC’s approach is starting to work. Rigs targeting oil in the U.S. declined for the sixth time in seven weeks, by 17 to 1,482 last week, Baker Hughes Inc. said on its website on Jan. 5. There will be a serious decline in U.S. shale oil investment in 2015, Fatih Birol, chief economist of the International Energy Agency in Paris, said on Dec. 22.

“Some OPEC countries, most specifically Gulf states, obviously think that it’s best to get unpleasant things over and done with,” Eugen Weinberg, head of commodities research at Commerzbank AG, said by e-mail from Frankfurt. “The recent wordings showed they are still firm about this strategy.”

http://www.bloomberg.com/news/2015-01-09/why-opec-is-talking-oil-down-not-up-after-48-selloff.html

 

[Plain Jane]

I remember Zero Hedge first describing these derivative holdings by Citi a few weeks ago. I wondered at how they double down on this kind of risk, even with the Cromnibus. But this theory makes sense and it is mind-boggling!