Updated March 15, 2022
Saudi Arabia is in active talks with Beijing to price some of its oil sales to China in yuan, people familiar with the matter said, a move that would dent the U.S. dollar’s dominance of the global petroleum market and mark another shift by the world’s top crude exporter toward Asia.
The talks with China over yuan-priced oil contracts have been off and on for six years but have accelerated this year as the Saudis have grown increasingly unhappy with decades-old U.S. security commitments to defend the kingdom, the people said.
The Saudis are angry over the U.S.’s lack of support for their intervention in the Yemen civil war, and over the Biden administration’s attempt to strike a deal with Iran over its nuclear program. Saudi officials have said they were shocked by the precipitous U.S. withdrawal from Afghanistan last year.
China buys more than 25% of the oil that Saudi Arabia exports. If priced in yuan, those sales would boost the standing of China’s currency. The Saudis are also considering including yuan-denominated futures contracts, known as the petroyuan, in the pricing model of Saudi Arabian Oil Co. , known as Aramco.
It would be a profound shift for Saudi Arabia to price even some of its roughly 6.2 million barrels of day of crude exports in anything other than dollars. The majority of global oil sales—around 80%—are done in dollars, and the Saudis have traded oil exclusively in dollars since 1974, in a deal with the Nixon administration that included security guarantees for the kingdom.
China introduced yuan-priced oil contracts in 2018 as part of its efforts to make its currency tradable across the world, but they haven’t made a dent in the dollar’s dominance of the oil market. For China, using dollars has become a hazard highlighted by U.S. sanctions on Iran over its nuclear program and on Russia in response to the Ukraine invasion.
China has stepped up its courtship of the Saudi kingdom. In recent years, China has helped Saudi Arabia build its own ballistic missiles, consulted on a nuclear program and begun investing in Crown Prince Mohammed bin Salman’s pet projects, such as Neom, a futuristic new city. Saudi Arabia has invited Chinese President Xi Jinping to visit later this year.
PHOTO: ANONYMOUS/ASSOCIATED PRESS
Meanwhile the Saudi relationship with the U.S. has deteriorated under President Biden, who said in the 2020 campaign that the kingdom should be a “pariah” for the killing of Saudi journalist Jamal Khashoggi in 2018. Prince Mohammed, who U.S. intelligence authorities say ordered Mr. Khashoggi’s killing, refused to sit in on a call between Mr. Biden and the Saudi ruler, King Salman, last month.
VIDEO – VICTOR DAVIS HANSON
Victor Davis Hanson is a classicist and historian at the Hoover Institution, Stanford University, and the author of “The Second World Wars: How the First Global Conflict Was Fought and Won,” from Basic Books.
The Democratically controlled Senate spends thousands of collective hours conducting an impeachment trial against a president who is no longer president.
The acquittal is predetermined, as in the first impeachment effort a year ago — and known to be so to the Democratic prosecutors.
The Democratically controlled House of Representatives is busy ferreting out purportedly extremist Republican House members. For the first time in memory, one party now removes committee members of the other.
Yet for each Republican outlier, there is a corresponding Democratic firebrand member who has either called for violence or voiced anti-Semitic slurs — and yet will not be removed from House committees.
So the asymmetrical tit-for-tat continues.
The subtext to this madness is that the Democratic Congress, the new administration, the administrative state and the political left are obsessed with dismembering the presidential corpse of now-citizen Donald Trump.
Apparently they fear that one day he will rise from the infernal regions to wreak his revenge.
Meanwhile, life in America goes on.
Congratulations to the President-elect, whoever you are, because you’re going to need it. Our deadline arrived Tuesday before we knew the election outcome, but not before we can say with confidence that President Obama is leaving his successor a large and growing federal budget problem.
That’s the message in the Congressional Budget Office’s summary, released Monday, of the fiscal year that closed in September. Though the subject barely came up in the campaign—little policy substance did—the federal fisc is once again heading for trouble. There are some lessons in this for the next President, who will quickly realize that Mr. Obama’s fiscal luck has finally run out—on his successor’s watch.
Are the Clintons the Real Housing-Crash Villains?Let’s revisit this piece of financial history, before Hillary rewrites it.
We are going to reveal the grand secret to getting rich by investing. It’s a simple formula that has worked for Warren Buffett, Carl Icahn, and all the great investment gurus over the years. Ready?
Buy low, sell high.
It turns out that Donald Trump has been very, very good at buying low and selling high, which helps account for his amazing business success.
But now Hillary Clinton seems to think it’s a crime. Campaigning in California last week she wailed that Trump “actually said he was hoping for the crash that caused hard-working families in California and across America to lose their homes, all because he thought he could take advantage of it to make some money for himself.”
So she’s assailing Trump for being a good businessman — something she would know almost nothing about because she’s never actually run a business (though she did miraculously turn $1,000 into $1 million in the cattle-futures market).
Hillary’s new TV ads say Trump predicted the real-estate crash in 2006 (good call) and then bought real estate at low prices when the housing crash that few others foresaw arrived in 2008. Many builders went out of business during the crash, but Trump read the market perfectly.
What is so hypocritical about this Clinton attack is that it wasn’t Trump, but Hillary, her husband, and many of her biggest supporters who were the real culprits. Before Hillary is able to rewrite this history, let’s look at the many ways the Clintons and their cronies contributed to the housing implosion and Great Recession.
Both acts were revolutionary, the first agenda item on each president’s to-do list, no matter that after 1912, when President Woodrow Wilson was elected, a major economic slump punctuated the economy. The Federal Reserve bill, like Obamacare, was intensely partisan. Wilson’s liberal Democrats, who held both houses
of Congress, wanted a completely government-controlled system for a central bank and currency, whereas Republicans favored mostly private regulation.
Democrats prevailed, jamming the measure through the Senate by a divided vote of 54 to 34 on Dec. 19, 1913. A conference committee approved it on Dec. 22, followed by a House vote of 298 to 60, with 76 not voting. The Senate passed the conference report on Dec. 23 by 43 to 25, with 27 not voting and one vacancy. Not a single Senate Democrat opposed the conference report, only two in the House, and the president signed it the same day. (more…)
Peter J. Wallison
American Enterprise Institute
PETER J. WALLISON holds the Arthur F. Burns Chair in Financial Policy Studies at the American Enterprise Institute. Previously he practiced banking, corporate, and financial law at Gibson, Dunn & Crutcher in Washington, D.C., and in New York. He also served as White House Counsel in the Reagan Administration. A graduate of Harvard College, Mr. Wallison received his law degree from Harvard Law School and is a regular contributor to the Wall Street Journal, among many other publications. He is the editor, co-editor, author, or co-author of numerous books, including Ronald Reagan: The Power of Conviction and the Success of His Presidency and Bad History, Worse Policy: How a False Narrative about the Financial Crisis Led to the Dodd-Frank Act.
The following is adapted from a speech delivered at Hillsdale College on November 5, 2013, during a conference entitled “Dodd-Frank: A Law Like No Other,” co-sponsored by the Center for Constructive Alternatives and the Ludwig Von Mises Lecture Series.
The 2008 financial crisis was a major event, equivalent in its initial scope—if not its duration—to the Great Depression of the 1930s. At the time, many commentators said that we were witnessing a crisis of capitalism, proof that the free market system was inherently unstable. Government officials who participated in efforts to mitigate its effects claim that their actions prevented a complete meltdown of the world’s financial system, an idea that has found acceptance among academic and other observers, particularly the media. These views culminated in the enactment of the Dodd-Frank Act that is founded on the notion that the financial system is inherently unstable and must be controlled by government regulation.
We will never know, of course, what would have happened if these emergency actions had not been taken, but it is possible to gain an understanding of why they were considered necessary—that is, the causes of the crisis.
Why is it important at this point to examine the causes of the crisis? After all, it was five years ago, and Congress and financial regulators have acted, or are acting, to prevent a recurrence. Even if we can’t pinpoint the exact cause of the crisis, some will argue that the new regulations now being put in place under Dodd-Frank will make a repetition unlikely. Perhaps. But these new regulations have almost certainly slowed economic growth and the recovery from the post-crisis recession, and they will continue to do so in the future. If regulations this pervasive were really necessary to prevent a recurrence of the financial crisis, then we might be facing a legitimate trade-off in which we are obliged to sacrifice economic freedom and growth for the sake of financial stability. But if the crisis did not stem from a lack of regulation, we have needlessly restricted what most Americans want for themselves and their children.
It is not at all clear that what happened in 2008 was the result of insufficient regulation or an economic system that is inherently unstable. On the contrary, there is compelling evidence that the financial crisis was the result of the government’s own housing policies. These in turn, as we will see, were based on an idea—still popular on the political left—that underwriting standards in housing finance are discriminatory and unnecessary. In today’s vernacular, it’s called “opening the credit box.” These policies, as I will describe them, were what caused the insolvency of the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, and ultimately the financial crisis. They are driven ideologically by the left, but the political muscle in Washington is supplied by what we should call the Government Mortgage Complex—the realtors, the homebuilders, and the banks—for whom freely available government-backed mortgage money is a source of great profit.
The Federal Housing Administration, or FHA, established in 1934, was authorized to insure mortgages up to 100 percent, but it required a 20 percent down payment and operated with very few delinquencies for 25 years. However, in the serious recession of 1957, Congress loosened these standards to stimulate the growth of housing, moving down payments to three percent between 1957 and 1961. Predictably, this resulted in a boom in FHA insured mortgages and a bust in the late ’60s. The pattern keeps recurring, and no one seems to remember the earlier mistakes. We loosen mortgage standards, there’s a bubble, and then there’s a crash. Other than the taxpayers, who have to cover the government’s losses, most of the people who are hurt are those who bought in the bubble years, and found—when the bubble deflated—that they couldn’t afford their homes. (more…)
By Brett M. Decker– Brett M. Decker, former Editorial Page Editor for The Washington Times, was an editorial page writer and editor for the Wall Street Journal in Hong Kong, Senior Vice President of the Export-Import Bank, Senior Vice President of Pentagon Federal Credit Union, speechwriter to then-House Majority Whip (later Majority Leader) Tom DeLay and reporter and television producer for the legendary Robert
Friday, May 11, 2012
Decker: You told me you couldn’t create your company in today’s environment. That’s quite a startling statement about such a successful business. Why not?
Allison: BB&T grew through local decision-making and personalized service focused on small businesses and the middle market. The current regulatory environment not only imposes extraordinary cost on smaller financial institutions, it makes it difficult to treat each customer as a special individual. Personalized service is now considered by the regulators to be “disparate” treatment. Small-business lending is part science and part art. It is extraordinarily difficult to execute a personalized value proposition with bank examiners micromanaging every decision.
Decker: Banks are used as whipping boys to impute blame for the collapse of the housing market, but government played a central role in the mortgage crisis. Can you explain how Washington intervention manipulated the market with such disastrous results?
Allison: Government policy is the primary cause of the financial crisis. The Federal Reserve “printed” too much money in the early 2000s to avoid a mild recession, which led to a massive misinvestment. The misinvestment was focused in the housing market due to the affordable housing (subprime) lending policies imposed by Congress on the giant Government Sponsored Enterprises (Freddie Mac and Fannie Mae), which would never have existed in a free market. When Freddie and Fannie failed, they owed $5.5 trillion and had $2 trillion in subprime loans. Because Freddie/Fannie had such a dominate share of home-mortgage lending in the United States (75 percent), they drove down the lending standards for the whole industry. (more…)
