Interesting post on Roubini's RGE monitor

By Someone named 'reality check':

My friends, a few weeks ago, Germany's finance minister stood before parliament to proclaim the death of the world financial order.

"The US will lose its status as the superpower of the world financial system. This world will become multi-polar with the emergence of stronger, better capitalised centres in Asia and Europe"

That's what Peer Steinbruck said and he was spot on. The global markets right now isnt just a recession...its not even just the biggest recession in decades.

What we are witnessing is nothing less than a massive realignment of global economic power. Economic and financial power is shifting eastwards faster than almost anyone could have imagined and its causing huge disruption in the finacial markets. We are about to see the biggest transfer wealth in history. By 2010 the Western economies will be in irreverisble decline. The Oil-rich Arab countries and Asian industrial powerhouses will move to the centre of the global economic universe.

By 2010 Oil production by Non-OPEC countries will be in decline and this is terrifying for oil-dependent Western countries. It leaves OPEC in total power and Western leaders know this. Soemthing even more frightening is happening and mainstream media has kept quiet about the coming financial tsunami.

On September 18th the Gulf Co-operation Council took the first steps towards setting up a common Gulf currency. They have been talking about this for some time. A few weeks ago GCC finance ministers approved a draft agreement on the general structure of the monetary union. They are now discussing the location of a central bank. Bit like the eurozone. A final agreement is meant to be signed the end of this year. The target date for the new Gulf currency could be around 2010. This will have an enormous impact on the world economy. The reason??

You can bet the Gulf countries are going to price their oil in their own common currency. THE NAIL IN THE DOLLAR'S COFFIN. The almighty dollar receives a huge ammount of support from being the standard currency for international trade. Oil is prices in dollars, bought and sold. Consider the impact on the dollar when when those countries say they don't want to be paid in dollars anymore? It looks like the dollar will have its legs kicked out from under it in the next couple of years.

The great money merry go round has broken down. One of the clearest signs of that shift of power are the buy-outs and strategic investments that the Arabs and Asians have been making in Western assets recently. Nomura has snapped up Lehmans for $2.00 (yes just two dollars!) The Gulf state of Qatar is the biggest shareholder in Sainsbury's and Barclays. Citigroup had to go to the Arabs and Asians to keep operating, the list goes on and on. All that money drains out of the West and undermines the economy. This trend has been gathering speed for a long time. But the smart chaps in Washington, Wall Street, London were able to ignore it for a long time. The reason? because a lot of that money made its way back to Western countries through the all powerful financial industry that has just collapsed.

The US & UK governments whine about how the "global credit crunch" is at the heart of the problem but that is a flat lie. There isn't a global credit crunch, this is just a Western problem. The Gulf is awash with capital. The banks are still lending in Asia. What about HSBC?? Their economies are growing and their profits are rising.

When the dust settles and unless the West comes up with an answer... there will be a NEW EASTERN ECONOMIC ORDER.

"The Yellow Rose Street Beat" is for informational purposes only. It does not give investment advice.