An accident? Recall that a few weeks ago the king commented publicly that the Saudis could have prevented the London Tube bombings if the British had paid attention to them. Then a week later Prince Bandar (Bush) made similar comments about 911. Subtle warnings from restive but sly allies? About what? American policies in general or perhaps just the insanity of attacking Iran, which would screw things up good for everybody in that region? (Winner of the Socrates Award for the most question marks in a comment post.)

The statements are causing much impact bc this is partly old news for something like the currency markets, which tend to really stay ahead of the curve.

There has been discussion in those markets since the Iraq invasion about the ultimate impact vis a vis the dollar and going into this fall it was crystalizing that some of the ME props for the dollar were not favorably inclined towards continuing to take the currency hits they were getting by staying linked to the dollar.

From earlier this month, a summary of nations (including the Saudis) looking beyond the dollar:

http://www.currencytrading.net…..-it-means/

OT, and a ”consider the source” caveat, but here’s a rawstory/quoting NYDailyNews on the FBI/CIA agent Prouty.

http://rawstory.com/news/2007/….._1116.html

Prouty did such a good job with the CIA that some in the agency want her back, reports James Gordon Meek.

Apparently, that ”good job” included (see spec on your earlier thread about participation in interrogation) breaking down captured al Qaeda ”high-value targets.”

Makes me wonder, in particular, about the reports of CIA involvement, working with local terrorists, in the ”questioning” of the Iraqi general, including the horrible beatings – prior to that general being further beaten and smothered to death in a sleeping bag. Some of the finger pointing that resulted in the soldier involved directly in the suffocation killing only being given a 60 day green zone detention were the obligue and/or redacted references to the shape the general had been left in by his CIA directed interrogations being not completely known when the military started its torture back up.

And did anyone ever decide what happened to all those Iraqis that the US had originally had on its deck of cards, but who were subsequnetly given passage to – was it Jordan?

Anyway, there were reports that there was a woman CIA agent who attended KSMs waterboarding and torture sessions. So you just wonder about the use of the word choice ”breaking down” those targets, especially with the notable lack of success we had for years in Iraq and for longer years in Afghanistan and tracking down Bin Laden.

So some in the CIA are trying to spin her as definitely not a Hezbollah mole, while others are of the ”well, DUH” approach, that she did searches for information on herself, her sister and her BIL and her sister and BIL’s strong ties with Hezbollah (of course, Hezbollah was probably, like Syria, a nifty tool for awhile – until the Lebanon conflict. Enemy of my enemy stuff.

Bushco may be able to keep the Iraq war going on long enough to hand it off to his putative Democratic successor in January 2009, but I don’t think that they will be able to delay a 1980-81 style recession until then – one of my fears was that they would be able to keep enough money in the system with big defence spending and earmarks to keep things going forward on vapours until 2009, and then ”Carterize” the new Democratic incumbent with poor economic prospects and a foreign policy situation with many problems and few levers of American power that had not yet been exhausted, whether military or financial or diplomatic. Just like everybody pretended Nixon/Ford never existed in 1980, nobody would think about Bushco in 2012. But this is a perfect storm for the American economy – an oil shock, a doubling of the national debt in the Bush years, a massive run up in military spending, the increased use of labour arbitraging/outsourcing to China as a way to stay competitive, and what I think is the most dangerous, the undercapitalization of American banks that is increasingly apparent with the subprime crisis – in order to get their capital levels back to a point where they can start lending again, it will likely take about 2 years of write-offs, during which there will be very little lending not in the form of credit cards, because the banks are already too leveraged, so there will be entire areas of the country that are completely red-lined for lending for the next couple of years, no matter how low the Fed rate goes. Let’s get it over with, it wont be any better if we wait. From a Canadian and world perspective though, we are much less exposed to US woes than in previous recessions, which means we have less incentive to help you pull your way out of it – even Canada is down to about 70% GDP in US related trade, from mid 80% 20 years ago.

Hmm…

We haven’t heard of anybody losing a hand (or some more essential body part) over this accident, so I would assume this incident represents a Saudi message they wanted to send while maintaining what we would call plausible deniability.

Nothing in what was said is likely to be a shock to anyone who matters to the Saudis. At one level, the Saudis are simply limiting their own options, i.e. their negotiating position is publicly known. This could be for internal reasons (it is not uncommon for the various factions inside the royal family to hold substantially different views).

On the other hand, this could be a Saudi attempt to control the news cycle. Rather than let the Iranians or Venezuelans make news at the gathering of heads of state, the Saudis let their own foreign minister ”accidentally” make the news.

My guess is that it’s a bit of both. If I’m right, it’s a pretty clever move. They clearly signal their long-term intentions, undercut any domestic loose cannons, keep the OPEC hotheads out of the spotlight, and don’t have to take responsibility for any of it.

emptywheel,

perhaps it was an accident?

There is little perfection in this world.

The Bloomberg story is from Friday. The FT story is dated today, Sunday 11/18.

Perhaps the reason there hasn’t been a more violent financial reaction is because the markets are closed. Should be interesting to see what the Hang Seng does tonight.

and darling Jodi- the motivation for the disclosure doesn’t matter nearly as much as the fact that it’s out there… and lots of ”mistakes” are allowed to happen. If you’re driving the car, you don’t have to cut the brake lines to cause an accident.

one more: the bbc seems to have picked it up. EW, I think you’re out in front of the awareness curve on this… watch for it to be front page on Monday.

And get your trades in early, if you’re making any. Anybody for Euro to $1.80?

Canuck Stuck in Muck said:
”It’s more likely that the Saudis are using their significant economic clout to bring Bush and his boys to heel viz a viz getting the hell out of Iraq and leaving Iran alone (engagement with which would almost certainly mean a pan-Middle-Eastern conflict).”

My bold.

I’d would differ a bit regarding the Saudis’ desire wrt to Iran. Though there are wide differences of opinion held by Saudis, they have been known for decades to be the ”primary” Islamic and Arab counterweight toward Iranian regional, economic, religious and political ambitions.

That is not to say that the Saudis are founding members of the ”Bomb Iran” club, but it is certainly a truism that they would prefer Iran to be subordinate to the House of Saud’s areas of leadership in the ME.

EW, in regard to the main subject of your post of ”whither the dollar vis a vis the Euro or currency baskets”, one rationale perhaps for the Saudi’s ”hedging” (pun intended *g*), is that they view any other currency or basket of currencies as inherently less stable and less predictable over the long term than the US dollar.

After all, who’d bet on the Japanese yen given its tanking over the last 2 decades, and who’d want to bet their fortunes on the Chinese yuan?

And the Euro is but a virtual basket of currencies of European states that have slipped and fallen off the cliff on numerous occasions over the last decades if not centuries.

No, the folks who are pushing against the dollar, are in the view of the Saudis, like ”day traders” with their typical shortsightedness. A ”vision” with an expiration date of next Tuesday.

No, the Saudis are not anxious to change today because it might also mean they’d again have to change tomorrow.

Brad Setser, who tracks foreign exchange movements and policies, thinks there’s some disagreements among the Gulf countries about just when and how far to move. He remarks in passing on one reason it’s always so hard to read meetings like this:

I understand the need for the Gulf countries to try reach consensus so they can move together, but I am not sure that countries with open capital markets can announce that they are considering a revaluation on a fixed data without effectively being forced to revalue.

My bold. The point being that the minute traders get the idea that they know what a new policy will be, they tend to get ahead of it. In this case, Setser says they might bid up the Gulf currencies to the point that the countries can’t defend the dollar peg at the old rate, so that a revaluation that might have been future or hypothetical, becomes a reality. Of course, the leak would tend to work in just the direction of forcing the GCC hand.

NB: Setser does not seem to think that any of the countries wants to dump the dollar; that wouldn’t get them anywhere, even financially, as they’d only get less in exchange than they would just by being patient enough to effect an orderly unwind, which could take weeks or months. However, some might want to move sooner than do the Saudis toward some kind of market basket policy, i.e. holding reserves and pricing their own currencies against an average of several, rather than just the dollar. That would constitute an abandonment of the peg, or the fixing of their exchange rates to the dollar, but would not be implemented by a dump.

Setser suggests that the source of a difference of opinion might be in the countries’ domestic economic positions, as much or more than in their policies toward the U.S. (Just possibly, it’s not always about us, though where the Gulf is concerned, skepticism on that point is justified.)

Here’s an article that Setser links to, with some more reporting from the GCC meeting and more recent history of countries that have moved away from the dollar. I personally am not yet convinced that this issue is more serious than our domestic credit market problems and the tremendous reputational hit as a source of expert and reasonably honest financial management we’re taking because of it, not to mention a host of real economy and public sector vultures coming home to roost, but we’ll see.

The Pat’s offense is a horrifying thing this year. NE 42 BUF 7 early 3rd. The NE starting offense might not have to punt in this game.

Pas de quoi, ew. My int fin prof was from Argentina and UofC, a strange combination when you think about it. He used to remark to us how the vast mathematical armamentarium of the field really represented a Big Bertha aimed at a tiny little flea, and that the thing never to lose sight of was the ”real” economy, i.e. what gets made where and by whom, and who gets the income. As an economic matter right he was, I’ve decided.

However, I don’t think it’s at all misplaced politically to notice some of the machinations around these currency meetings and the like, especially considering the not-necessarily-forward-thinking of the current occupants here. What with falafel-eating as the mark of terrorists, who knows? Sabre-rattling over a currency board would be downright sensible by comparison.

—-
I’d sure love to hear some of the banter between Brady and Cassell.

Come to think of it, it’s probably just banter from Brady to Cassell, or within Cassell’s earshot, or something … kind of like Jordan, ice bags on his knees, glowering from the bench ”All right now, don’t make me have to come back in …”

Rayne

Though note that first article is a misinterpretation of what Faisal said. He didn’t say he wouldn’t consider it–he only said he wouldn’t do so publicly. I’m seeing this mistake in many places now.

As to Frum and Shrub–that may be one of the fwe times I’ve heard Bush address energy like that. Interesting.

EW — yeah, I noted that ”mistake”…and I think in a mag like Bloomberg, that means they put on their blinkers. I don’t think they are sweeping it under the rug as much as they are incapable of digesting this. Were this WSJ, Barron’s or Investor’s News Daily, I’d be sure it was covering up.

Just realized I’ve not checked CNBC to see if they are also pulling the sheets over their heads this morning.

I’ve read that this deflation of the dollar will lead to great inflation later on.

So, what I want to know now is how the MSM are going to treat the inflation our next president (presumably a Dem) is going to face. Are they going to blame unforseen circumstances, Bush or the Dem prez?

Somehow I’m guessing the latter, because they are soooo responsible our media.

Re: Frum & Bush conversation

Bush actually spoke so someone could understand him and he said something intelligible? I doubt it ever occurred.