Ghana plans to buy oil with gold instead of dollars

https://www.aljazeera.com/economy/2022/11/24/ghana-plans-to-buy-oil-with-gold-instead-of-dollars

by quyleanh • 4 years ago

179 383 4 years ago

aa-jv• 4 years ago

This is great news for the people of Ghana .. and I hope it serves as an example for many other nations to come. The era of enslavement to the petrodollar is over.

kaladin_1• 4 years ago

Interesting the pressure is increasing. More and more countries questioning why they need to base their foreign transaction on the US Dollar. Could this mounting unrest be as a result of the seeming inability of the US Federal bank in checking inflation of the US Dollar.

Also, some of these Nations can no longer determine what benefit it is to them is using the US Dollar as their reserve currency and trading currency. Some nations might have alternative properties/currencies that would favour their external trade but yet they are stock with the Dollar and must defer to the US in all that concerns it.

I would really love someone more knowledgeable to make a prediction as to where all these could be going.

Do you see a country like Saudi going off the USD? Do you think the West-African countries relying on CFA will turn away from that any time soon? Is there a case to be made why these nations should maintain the status quo?

qikInNdOutReply• 4 years ago

Could this lead to a chain reactions, were countries abandon the dollar and the dollar looses in value, in return leading to more countries abandon it? A world were the most stabilizing region and its currency become temporary hegemon?

Isinlor2• 4 years ago

Ghana GDP is 77.59 billion USD. That's almost 2 Twitters :) .

Ghana is not triggering any chain reactions.

hdhdxkfchsk• 4 years ago

saudi? no. they are the only elites not tied to petrodollar by force but by financial incentives.

all the others probably no as they will see the new gana embargo :(

the terms first world and second world were originally coined to means country under petrodollar and countries under ussr. third world was a term that meant free for all to the to two powers.

ur-whale5• 4 years ago

Do you see a country like Saudi going off the USD?

Going off, certainly not (why would they?)

But exchanging their oil for other currencies, absolutely.

What will be interesting is how long the Sauds will remain in power once they agree to exchange their oil against other currencies.

Historically, all regimes that made that decision were or are in the process of being taken down either directly by the US or a combo of their close allies (see: Khadafi, Saddam Hussein, Vlad Putin, etc...)

pjc506• 4 years ago

Russia's sanctions were as a result of their invasion of Ukraine and they'd still be a part of the normal financial system otherwise. It's nothing to do with petrodollars.

spaceman_20202• 4 years ago

If you look at the actual numbers, you'll find that USD dominance is still unchallenged.

BUT, there is definitely way more chatter about alternative payment options, including from well-placed government sources and central banks in important non-west allied countries.

It's now a matter of "when", not "if" when an alternative currency pops up, maybe a BRICS currency.

UltraViolence6• 4 years ago

I believe the war in Ukraine has permanently damaged the USD's dominance in the medium to long term.

The use of a supposedly neutral financial network (SWIFT) as a sanction weapon will make other nations who aren't on good terms with the U.S. and the West (and not just the "usual suspects" but many nations in Africa and South America too) seeking alternatives.

As previously mentioned, Bitcoin is a viable alternative. But there may be others. In any case I see nations ganging up to create an alternative to the SWIFT network, potentially undermining its usefulness.

ben_w6• 4 years ago

I'm only at the level of guessing for topics like this, but my guess is that a chain reaction is more likely to see a switch from USD to Renminbi than a switch to gold (or Euros).

China because of the potential assuming similar GDP/capita as the current USA.

Not soon because I expect as a prerequisite for change being the new winner's GDP to be dominant rather than just joint top 3 in a ranking system that changes their ordering depending on what you value most.

Not gold because the justifications given for why we all stopped using the gold standard in the fist place, still seem to apply.

tcbawo2• 4 years ago

Do you think GDP is the critical factor for determining a global reserve currency? IMO, respect for property ownership rights, legal/judicial recourse, ubiquity of US banks, and political stability are large contributing factors that few other countries can compete with. China has a pretty checkered past regarding ownership rights for citizens who are critical of its leadership.

ethbr03• 4 years ago

China might be able to force a switch to the Renminbi simply by virtue of their GDP. First as a medium of exchange (which they're doing), then as a reserve currency.

But having people willingly adopt it?

If people are unsatisfied with the USD in specific ways, how would those specific ways be better using the RMB?

It'd be pretty shortsighted to complain about US financial manipulation or use of currency to further political goals... and then jump in mainland China's pool!

matthewdgreen2• 4 years ago

Wouldn’t a switch to Renminbi as a global reserve currency be fundamentally incompatible with China’s currency control regime? This has always been the explanation I’ve been given for why such a switchover is improbable.

edwnj4• 4 years ago

Its definitely not a lack of confidence in USD or the feds. Relative to pretty much every noteworthy alternative, the feds have handled things a lot better.

- EU royally f'd with their stimulus & rates. Mind you, they were in a very precarious position to start with. - China has proven themselves to be a house of cards with zero covid, massive public/corporate debt bubbles and Ji becoming god emperor. - Russia is a glorified gas station with an economy the size of florida.

The reason for Ghana's action, Saudi looking to end petro dollar, China+Russia looking to form a block etc: US deep state ducking up big time.

The weaponised the dollar.. They've been ramping this up big time during the past few decades but the Ukraine War was a UUUUGE reveal the cards moment.

During the last 2 years, Russia was filling up their coffers with high oil prices. The US turned these foreign reserves into worthless numbers on a screen overnight with the press of a few buttons.

Now pretty much every country is looking at each other like "oh shit".

rich_sasha• 4 years ago

I think this take is somewhat over-reacting. I'm pretty sure you'll find that the price they agreed is really in USD, and only the medium of exchange is gold (even if the paperwork or agreement doesn't even reference USD). So really they are paying X USD's worth of gold - with both oil and gold price being fixed in USD somewhere abroad. USD is so incredibly ubiquitous, it won't easily go away.

Reserves are a little different, but even then, whenever something bad happens, the dollar strengthens as investors flock to it. When the 2008 crisis happened (and it was US-centric!) US and the dollar were still the safe haven everyone escaped to. Not the Rouble, not the Yuan, not so much EUR or CHF or, from memory, gold.

So we'll see people avoid the USD as a medium of exchange, maybe, even if the prices are fixed on USD-denominated prices. But also remember, gold is not a great medium of exchange. Will Ghana ship physical gold around the world (risky and expensive)? Or will they sign a piece of paper saying "gold held by in a safe by someone else and owned by me is now owned by someone else" - in which case there is similar counterparty risk, except perhaps not against the US government. But if you think the US is an evil octopus with long tentacles, surely they could get their hands on this gold. Where will this haven safe from US interference be?

If anything, I can more easily believe an alternative economy based on crypto. It's actually happening and working well, for all sorts of shady or illicit activity.

kibwen• 4 years ago

Or will they sign a piece of paper saying "gold held by in a safe by someone else and owned by me is now owned by someone else" - in which case there is similar counterparty risk, except perhaps not against the US government.

The US holds a quarter of all the known gold reserves in the world, and has more gold than the next three countries combined, so there's a decent chance that Ghana's gold is already in the US.

bobthepanda• 4 years ago

EUR is still not a great managed currency. The Euro crisis could, technically, happen again.

RUB backing economy is pretty much one major export.

JPY makes American debt look chaste in comparison

CHF does not want the job, primarily because its use as a basket currency already makes it too strong

CNY does not want the job, and their past history of capital controls make America look chaste

edwnj4• 4 years ago

As for what happens next: de-globalisation

I predict we'll see blocks forming up again, something like: - West (US+EU) - East (China+Russia) - India (India, Sri Lanka, Himalayan States, South China states) - Middle (Middle East+North Africa) - Latam (Central + South American States)

One wild card IMO would be the rise of the Indian sphere of influence. I'll leave some room for India's remarkable ability to snatch defeat form the jaws of victory. If they don't f this up, they have UUUGE tailwinds going for them.

Middle east is overrated IMO, its like an oasis with oil instead of water. When the oil money runs out, not gonna be fun any more.

Latam is probs the biggest wildcard, even bigger than India. They don't need a lot of things to be right to wildly outperform as a block. Just like the US, they are protected by two oceans so they can choose to not involve themselves in stuff.

Africa is highly overrated IMO, the entire continent is cursed in multiple ways. If u compare africa to another post colonial continent like Latam, africa is in a place where they need to get so many things right to just survive, let alone to catch up.

thisiscorrect3• 4 years ago

I agree with the general premise of your comment, that this is a small sign of the deglobalization which is _already_ under way.

But, what are the UUUGE tailwinds benefiting India? India, even more so than China, seems likely to "get old before it gets rich." Its TFR is already below replacement and falling rapidly.

dmitriid2• 4 years ago

East (China+Russia)

People that keep bunching Russia with China are deluding themselves that Russia is anywhere on China's radar except as a source of cheap resources (gas, oil, wood)

sys_64738• 4 years ago

You ultimately need to pay in some common currency so which common currency do you trust to be secure from inflationary pressures or government interference? Do you trust the Euro to not implode? Do you trust the Chinese Communists with their Yen manipulation? The US dollar is the last currency standing after all others are disqualified.

Spooky23• 4 years ago

Unlikely. Ghana happens to be a gold producer; they may see this as a better deal for them, and may get some other benefit from a country like China for rattling the cage.

colechristensen2• 4 years ago

What’s more likely is that Ghana is using monetary policy as a cover for acquiring locally produced gold at a lower price and selling it abroad for resources to make up for trade deficits.

norswap• 4 years ago

Could this mounting unrest be as a result of the seeming inability of the US Federal bank in checking inflation of the US Dollar.

This is completely backwards. The problem right now is that the dollar is too strong, meaning expensive wrt other currencies. In this context, inflation of the USD supply, leading to devaluation of the USD would actually help other countries that are suffering from the strong dollar.

I'm not saying it would be good for the US, but it certainly would be good for pretty much everybody else.

danielschonfeld6• 4 years ago

And there in lies the rub. To keep countries placated we need to create more debt, a metric ton of more debt and hence more broad currency. But doing so at the moment is political suicide as is proven by the left's efforts (deficit spending blah blah etc).

Triffin paradox predicted in the 60s at it's full glory.

It's also worth noting that at the moment both the Fed and the Treasury (obv) are mandated to be operating with an inward looking view only. Meaning we run a global reserve currency with no 'department' in charge of the global part.

0x4454422• 4 years ago

I think it’s more an issue of other countries seeing that the U.S. can just confiscate their dollar reserves if the US doesn’t agree with their sovereign actions. Those countries are choosing to divest from the mono world order which is crumbling. For a long but instructive discussion on current economic events check out this interview.

https://youtu.be/cD_UcRtljDU

KptMarchewa12• 4 years ago

US can confiscate your dollar reserves if you keep those dollars in the US, just as they can confiscate your gold reserves if you keep them in the Fort Knox.

sovereign actions

Nice euphemism for genocidal, imperialist war.

Hayvok3• 4 years ago

“Mono world order” is a fun euphemism for “boo hoo we’re not allowed to run around the planet conquering other people”.

You’re free to “divest” as you put it… But you’re still expected to behave & play nicely with your neighbors.

UltraViolence6• 4 years ago

Saudi Arabia isn't going off the USD. That would seriously undermine their relation with the U.S. and could even have them branded an antagonistic nation.

The dominance of the USD is EXTREMELY important to the U.S. and I can assure you that Washington is even willing to wage war over it.

But I believe the ball has already started rolling with Bitcoin and Russia's demand for payment in Rubles.

pirate787• 4 years ago

LOL Bitcoin is a joke, its down 65% against the dollar this year

luciusdomitius7• 4 years ago

S. Arabia was already labeled a pariah nation by the senile old man. Just before they refused to increase production. So, no leverage there.

Zigurd• 4 years ago

The reason US$ denominate most trade is that without what is broadly referred to as "The West" global trade would not move. Trade would not be protected by a web of alliances among developed nations. If that goes away, ships would not be insured. Uninsured ships would be lost to pirates and rogue nations. Prices would jump sharply. Supply chains would have to go back to warehousing enough supply to withstand disruptions. Warehoused parts would become stranded assets when products change. Growth would be choked off.

This is not an excuse for imperialism and crony capitalism that exploits developing nations. Especially in how multinational oil companies corrupt entire nations. Working toward the end of fossil fuels will hasten them losing their power. But the lesson of this year is that those dull bureaucratic things like NATO and the EU are what keeps fascistic autocrats contained and gives aggressor nations the thrashing they deserve.

Even the Tories are realizing they got played by Putin's plan to divide the nations that could hold him back.

luciusdomitius7• 4 years ago

The petrodollar is a really weird thing. According to its critics, it is a global monopoly on violence and pure extortion, to its implementors - merely a conspiracy theory. Please, before you clinge to the conspiracy theory label, check how many great people such as de Gaulle have whined against it and what is Privilege l'exorbitant in French political science.

In reality, global trade is not in USD purely because it is backed by carriers and they can invade anyone, but because this navy also protects shipping lanes and offers international rule of law. Remember when the US took a break in the gulf of Aden and it took us Europeans (+Russia and token help from US!!) years to agree and secure it. So, things are not black and white.

Anyway, this system is collapsing from within and will be replacing. The success of the S.Arabia pivot is going to merely decide if it happens in 10 or 20 years time. Btw does anyone know how did the MBS-Xi meating go?

imtringued4• 4 years ago

The exorbitant privilege thing is kind of strange when countries voluntarily demand more dollars or even borrow dollars. The "privilege" is only exorbitant if you are the only survivor of a world war.

eunos• 4 years ago

Petrodollar Is rather remnant of the past. FYI I think half of world forex reserve is held in the 5 entities in East Asia (CN, JP,KR,TW,HK). Whatever dollar the Petrostate get (sans Russia) they recycled it to various goods and services mostly sourced from East Asia.
Btw does anyone know how did the MBS-Xi meating go?

Will commence in December, previously rumored didn't happen

jonnybgood2• 4 years ago

Ghana isn’t questioning anything. They’re just running out of USD.

SuoDuanDao2• 4 years ago

Somewhere in my comment history I made the prediction "It will be possible to buy large amounts of oil without USD by 2024" - so I think I've got a decent track record on this subject.

I'm much less confident in these predictions than that one, but I'll predict Saudi Arabia won't go off the USD because they depend on US military support in a pretty warlike part of the world and the CFA will be replaced by 2027 as currently planned without any major interference from the European powers.

As for a case for maintaining the status quo - The example made of Ghaddafi comes to mind.

snovv_crash• 4 years ago

CFA? What are you referring to here, not the financial certification institution I'm guessing?

nivenkos2• 4 years ago

The US is exploiting it to the maximum with the Inflation Reduction Act, etc.

The rest of the world will react eventually, the Zelenksy-Putin puppet show will only distract them for so long.

dehrmann• 4 years ago

More and more countries questioning why they need to base their foreign transaction on the US Dollar.

For spot transactions, it doesn't really matter beyond giving the buyer and seller a common language to negotiate in. For contracts sometime in the future, if you're Argentina, no one wants to bet on where the Peso will be in 6 months.

GoOnThenDoTell• 4 years ago

Im curious about the mechanics of how this helps, could they not sell the gold for dollars to buy the oil?

4pkjai• 4 years ago

I think the reason they want to avoid the US dollar is so that they do not need to obey US sanctions.

From what I understand, if you send US dollars around the world, they need to go through a US bank. All US banks must obey US government sanctions.

pjc506• 4 years ago

Ghana are not subject to sanctions?

fmajid• 4 years ago

They don't want to avoid the dollar, far from it, they want to keep the few dollars they still have and pay with something else instead.

Now, if I were the Chinese with an overabundance of dollars (or worse, US Treasury bonds), I'd be trying to convert them into something else ASAP. They tried to buy companies, agricultural land and other things with intrinsic value, but were blocked by CFIUS and the EU is setting up its equivalent.

fuzzfactor• 4 years ago

Right now dollars are skyrocketing in value compared to their own currency.

For them dollars earn much more being held rather than being invested in most other things within reach.

They can dig up more gold from their own mines which they're always doing anyway regardless of its prevailing price.

ur-whale5• 4 years ago

At some point in their history, the US unilaterally decided that any transaction occuring in dollars in any parts of the world was subject to US law.

In other words, they suddenly had granted themselves legitimacy to enforce US law anywhere on the planet as long as a single dollar changed hands.

As the US perceives itself as an empire, it makes complete sense from their POV.

But mayyybeeee, if you're in Ghana, you still cherish delusions of being a sovereign nation ...

pjc506• 4 years ago

This. People seem very exercised about using the dollar specifically to buy oil, but .. currencies are fungible? You can trade them on international markets? Also, where does the gold come from? Is it just their central bank reserve?

No, it seems that Ghana is experiencing the classic forex problem of not being able to export enough valuable production in order to afford its imports, and it's very hard to reduce imports of fuel without drastic drops in either lifestyle or production capacity. And if you can't afford fuel to produce exports, then you have a death spiral.

squaresmile• 4 years ago

Yeah, it's pretty disappointing that most comments focus on the ideological aspect and celebrate the move while the picture is pretty bleak for Ghana.

Unfortunately, this story is not unique to Ghana and if the situation does not improve, I fear for how next year will look.

ksidudwbw• 4 years ago

Can always bring in investors

3pt14159• 4 years ago

All the mechanics in the world won't help you if the fundamentals are broken.

At some point, when push comes to shove, someone has to take delivery of something. This comes down to a matter of efficiency and faith. Who do you have more faith in? A random bank claiming to having a certain amount of gold on deposit? Your own central bank taking in tons of gold for delivery of a good?

This is silliness. If the USD is inflating too much (or if you perceive American sanctions as too onerous) then use a different currency like the Swiss Franc or the Euro.

None of this really matters. What matters is international settlements, agreements, and force. If you're on the wrong side of the WTO your economy is cooked anyway. Besides, if Ghana were some stalwart of anti-corruption then this may mean something, but it isn't. It's middle of the pack. Well behind Canada, Europe, Japan, and The United States; all countries or blocks that are perfectly fine selling and buying in USD.

ur-whale5• 4 years ago

The hegemony of the dollar as a reserve currency is finally coming to an end, and while many will disagree with my opinion, I believe it's a very good thing for the world.

The US has been allowed by the rest of the world to use the dollar as a weapon since the end of WWII, specifically using it to impose unilateral economic sanctions on anyone they don't like, thereby flouting or downright ignoring other countries sovereignty in the process.

The have also used the privileged status of the dollar to gain systematic, unfair and generally undeserved economic advantage in international markets.

They have also used this advantage to create a completely unsustainable amount of debt which the US will never be able to repay now that the dollar is becoming just another currency.

Picasso was famous for writing checks, knowing fully well that they would never get cashed out because, bearing his signature, there was an intrinsic demand for them and the thing would be kept as is by the owner.

US dollars are very similar to Picasso's checks in the sense that foreign country all keep large amounts of US currency reserve and debt instrument, but they never "cash them out" (exchange them for US-based hard assets such as land and businesses).

The world has allowed this to happen for near 70-ish years because the for the longest time, the US was perceived by a large part of the world as a force for good.

That ship has sailed though, and in 2022 it's getting pretty hard to find folks outside of the US that view it as a force for good anymore (or just don't downright hate their guts with a passion).

To be a useful tool, a currency should be, among other things:

    a) managed in a sane manner (as in: the amount issued should be on a fixed schedule, as per Milton Friedman)

    b) not used to tilt the playing field

    c) essentially politically neutral, and in particular managed by an entity not in any way controllable by the government.

The US dollar doesn't meet any of these criteria, and the chicken are now coming home to roost and the dollar will slowly lose it's privileged status among world currencies, slowly being replaced by a bunch of other.

Good riddance.

dragonelite2• 4 years ago

Wondering what will replace it, maybe the Brics coin a basket of currencies and commodities. A bit like Keynes Bancor concept if i'm not mistaken time will tell what sort of currencies the Russians and Chinese will introduce for BRICS, SCO and BRI nations.

ur-whale5• 4 years ago

The Chinese Renminbi (Yuan) is a good candidate to quickly get on par with the USD.

If they manage it properly that is, as in: not print mountains of it, and not using it to enforce their political aims.

They're currently actively busy making the Renminbi reserve and default trading currency in much of Asia.

And, as a last resort, there's always Bitcoin and gold, although, as Ghana will discover (unless they make the mistake of using a 3rd-party custodian) gold is very tricky to move about.

creakingstairs• 4 years ago

The hegemony of the dollar as a reserve currency is finally coming to an end, and while many will disagree with my opinion, I believe it's a very good thing for the world.

Yeah ideally, I agree that some competition might be good to keep US in check. Chinese Yuan seems most likely at this point.

But I think the world would be in a “worse” place when the break happens. Purely due to geopolitical instability and all the second order effects that is bound to happen when US hegemony ends.

llampx• 4 years ago

Regime change in 3... 2...

jerkstate• 4 years ago

Don't necessarily even need to plan for a new regime. Libya tried this and now they are a failed state with open air slave markets.

luciusdomitius7• 4 years ago

https://www.theguardian.com/business/2003/feb/16/iraq.theeur... :D

rightbyte• 4 years ago

Ye ... It would not surprise me even a little bit.

pwm• 4 years ago

I know a lot of people dislike bitcoin here but I'm wondering (with the huge assumption that its value stabilises over time) would it not actually be a better solution? Not just from an obvious logistical but also from an environmental perspective? I'd imagine gold mining to be much more destructive (both to nature and to human life).

fendy3002• 4 years ago

I wonder if they can use it? As a noob I see that crypto value is very volatile and don't have intrinsic value, unlike gold that somehow is accepted universally as valuable.

tremarley2• 4 years ago

It has intrinsic value as it requires work to mine it. It is impossible to generate more whenever you want.

You can spend bitcoin in every country, it's valuable everywhere.

senectus1• 4 years ago

The crypto market (including btc) is incredibly fragile.

It's also got way too shallow a gene pool (meaning too few hold too much).

Until it gets spread further and wider it can't be relied on for much.

Ekaros4• 4 years ago

And why give all that wealth away to current holders? Nothing actually make bitcoin inherently valuable on nation-state level.

Gold is fine for now and maybe in future some new agreed upon commodity-current basket currency.

tremarley2• 4 years ago

It would be a lot easier. Many countries currently keep bitcoin in their reserves such as Russia, USA & China.

Eventually Bitcoin or a similar style coin will be used for global trade

imtringued4• 4 years ago

Honestly hell would freeze over before that happens. It would be more likely that IMF SDRs will be used as an alternative to dollars than Bitcoin.

peter-m80• 4 years ago

Honest question: Can someone explain me why using gold instead of dollars to buy oil isn't the same as sell gold for dollars and use those dollars to buy oil?

Ekaros4• 4 years ago

For two parties to transact in dollars they need either to physically hold large amounts of dollars. Or have access to some shared ledger that is accounting system where transactions can happen.

Say A, B, C account. A sells gold and get dollars from account B to account A. And now they can buy oil from owner of account C.

But who owns and runs these accounts or the transactions between them? One option is SWIFT system. Which Russia got excluded in some capacity from. As such it is clear that system cannot be trusted. Value of dollars there are very unlikely to be good for long term. And same applies to any accounts in banks in western influence sphere.

Thus directly transacting is better option in long run. For any country that wants to keep their economy stable.

giaour7• 4 years ago

One option is SWIFT system. Which Russia got excluded in some capacity from. As such it is clear that system cannot be trusted.

That is quite a leap. Russia was also excluded from the NY stock exchange due to the ongoing sanctions; does that mean we can no longer trust stocks bought and sold there?

sbaiddn3• 4 years ago

"One option is SWIFT system. Which Russia got excluded in some capacity from. As such it is clear that system cannot be trusted. "

Ya, kicking them off SWIFT was pretty stupid. The spooks and the economists were super pissed.

RedBeetDeadpool• 4 years ago

Because there are no dollars involved. If they do as you suggest, at the start:

A holds gold.

B holds dollars.

C holds oil.

A trades B, gold for dollars. A holds dollars, B holds gold.

A trades C, dollars for oil. A holds oil, C holds dollars.

After your suggested trade result:

A holds oil.

B holds gold.

C holds dollars.

If there is no "middle man", party A gets oil, party C gets gold. Party B keeps their dollars. End result:

A holds oil.

B holds dollars.

C holds gold.

Assuming "B" is USA, USA doesn't get to export its inflation/funding for stimulus checks/student debt/pension crisis/(or in trump era - a wall that does nothing) away to "C", whoever that ends up being, meanwhile, Ghana gets the oil it wants, and "C" gets currency without having to pay for the choices of politicians they have no control over.

nickdothutton2• 4 years ago

The US export of inflation via engineered demand for petrodollars (and one could say enforcement via aircraft carrier groups) is an under appreciated effect.

happyjack7• 4 years ago

This! This is the answer! Trading in dollars creates micro transactions where the USA can export inflation and much of its problems.

elzbardico3• 4 years ago

Decoupling from the western financial system and having a higher level of resilience from sanctions. You never know if the US will decide tomorrow you're not behaving as expected under the internal rules-based order.

robertlagrant• 4 years ago

Why would the US be able to stop them buying oil using their dollars?

dismantlethesun• 4 years ago

Transactions in Ghana cannot directly be in dollars, so when a USD price is quoted for a foreign sale behind the scenes what happens is cedis are brought in, converted to dollars, then given to the foreign party.

This creates a demand for dollars in Ghana, that puts downward pressure on the cedis.

So this avoids that, hopefully reduces inflation.

simple-thoughts5• 4 years ago

Only half of the story is quoted here. The other half is Ghana is forcing gold refiners to sell 20% to the Ghanan central bank in “cedis at spot prices with no discounts”[1]. So they are minting cedis to buy gold, then trade that gold for oil instead of dollars. If the trade was instead to sell for dollars, it’s more politically obvious that the policy is a tax on gold miners and refiners.

[1] https://www.reuters.com/markets/commodities/ghana-orders-min...

gpsx2• 4 years ago

I don't think it is different, apart from any issues with timing of the buying and selling and price changes in between. I think this is more a question that the government doesn't have the gold and buying it from the miners is how they will get it. I don't think they are giving the miners a bad deal, other than forcing them to accept Cedis. I believe the net effect is that fewer Cedis are put on the market for dollars and this prevents a price drop in Cedis.

gpsx2• 4 years ago

I'm not sure why this was downvoted. I did leave out one thing - I think the Ghana government is making a statement that they don't want to transact in dollars. That is an important difference, but it is not related to the monetary dynamics.

yxhuvud• 4 years ago

Because of changes of the relative values between gold, dollars and oil over time has implications. If they have a more reliable source of gold than of dollars then it may make sense from their point of view. It is of course up to the oil producers if they want to be on the other side of that risk.

sbaiddn3• 4 years ago

1. Because, realistically, you have to hold relatively large amounts of USD. Transactions take time, they cost money, they're volatile, US currency markets might be 12 time zones away -> Reserves aren't just economic insurance for bad weather, they're also buffers.

The big difference:

2. Since you need large reserves (see 1), why hold USD and see it inflate away? No one holds USD. What they hold and trade are treasuries. The return is small, but if you have 10 billion in reserves, 100 million isn't spare change This is the real lynchpin:

- the massive market for treasuries significantly lowers the cost of the US' deficit. The US can debt finance itself artificially lowering taxes or inflation.

- To maintain this position, "dollars" have to available -> the US must run a deficit. If there were no more deficits, the debt would wither, there would be a global monetary contraction.

- Effectively this is a way of exporting inflation: the treasury issues debt -to finance government -> the t-bills are treated as equal to USD -> the excess currency is soaked up by 8 billion people instead of 330 million

- unlike cash, the treasury can wake up one day and wipe (I mean "freeze") your account if you've been naughty. Imagine PayPal writ large.

In the short run it works great for the US, but in the long run it makes exports more expensive therefore eroding US industry. Short term gain for long term pain? Politicians love it!

ashwagary• 4 years ago

The first is a direct transaction, the other props up the US economy by creating demand for dollars and a taxable point for US companies. Ghana should only trade in gold...adding useless American middlemen to these transactions is idiotic.

freddealmeida• 4 years ago

It won't happen.

tiahura• 4 years ago

To all opining about the ongoing demise of the dollar, please take a look at a 10 year DXY chart.

Executive summary: It’s stronger than ever.

hmate92• 4 years ago

1) it was much stronger in 1985

2) just because it’s strong now doesn’t mean it cannot ever fail. Ray Dalio’s new book might interest you as he breaks down past world powers and how their currencies (which were global reserve currencies at the time) collapsed

Rexxar• 4 years ago

Higher price and higher usage are not the same thing, a less used dollar would not necessarily have lower value. The evolution of foreign exchange market turnover would be a better indicator to look at : https://en.wikipedia.org/wiki/Currency_pair#Base_currency // https://www.bis.org/statistics/rpfx22_fx.pdf

(it's also increasing in the 3 last years)

simple-thoughts5• 4 years ago

For people saying that this is a sign of the dollar dominance ending consider this.

Gold is valued in dollars. Oil is valued in dollars. Any gold for oil exchange will be decided by the going dollar rate of each. Counter parties and middlemen assisting this trade will be hedging their positions with dollar settled derivatives traded on deep and liquid dollar markets.

hmate92• 4 years ago

Gold isn’t valued in dollars. You can sell gold for any currency.

Oil is primarily transacted with dollars because it’s the worlds reserve currency. But if that were to change to whatever, you can still sell your oil and gold for whatever the new dominant currency is. Meanwhile your dollar is (presumably in this case) worth way less in terms of buying power than when you first bought it.

simple-thoughts5• 4 years ago

You can always barter anything for anything else, but how do you decide the rate to barter at? It’s determined by the rate for the most liquid markets for the two sides, because the price of an asset in the most liquid market is the price all other markets will follow. There just aren’t gold based markets that are even remotely comparable to usd ones, so the ratio of gold to oil is set by their respective rates in usd.

To see an actual switch from usd to gold for valuing oil, you’d need to see the market liquidity migrate from usd/oil pairs to gold/oil pairs. Ghana making a political statement isn’t that.

themihai6• 4 years ago

> Gold is valued in dollars. Oil is valued in dollars.

If a long term contract is signed it protects you from dollar's inflation/volatility as the contract used gold as currency. I think this is important as tomorrow Fed's decision is no longer that important for your energy costs.

The more important part is that if enough contracts are signed in gold(highly unlikely given U.S's oil exports) then the dollar is no longer relevant to the oil price.

thaumasiotes3• 4 years ago

I think this is important as tomorrow Fed's decision is no longer that important for your energy costs.

The Fed decision wasn't important to energy costs anyway, though. Oil is priced in dollars, but the price changes minute-to-minute. Whatever the Fed decides about the value of a dollar, the oil price will reflect that.

If you're involved in a long-term contract involving the exchange of oil for dollars, then the Fed's decision can have a big impact on you. But that's true of all long-term contracts involving dollars; there's nothing special about the other side of the contract being oil.

simple-thoughts5• 4 years ago

Most dollars are created by offshore banks and are not backed by deposits at the federal reserve. The federal reserve only indirectly affects the value of dollars through manipulating inflation expectations. If people think the fed is easing, they buy assets which pumps the collateral of offshore banks which then have larger balance sheet capacity to issue new dollars backed by that collateral.

So even if you are signing contracts in gold/oil pairs, effects of fed decisions can impact your trade in ways that you are protected from in usd/oil pairs as gold is usually viewed as a safety asset - so when animal spirits take off due to fed statements gold can go down while oil takes off. This has in fact happened several times over the last decades.

thisiscorrect3• 4 years ago

It's obviously possible to buy gold in non-USD currencies. So I think the gist of your comment applies to the dominance the US has over oil markets. So while the "petrodollar" era is still ongoing but its day seem numbered, e.g. by pushing Russia to seek other export markets besides the West, by the increasingly cool perception of the US by OPEC nations [1], etc.

[1] https://www.forbes.com/sites/rrapier/2022/10/05/opec-thumbs-...

simple-thoughts5• 4 years ago

Not just oil markets- usd dominates gold markets as well. Russia will be selling oil to other countries at a “discount” but to what? The price of oil in usd which is why some counterparties consider the trade. If usd was losing dominance, countries would be offering a premium to purchase oil for something other than usd.

chewz• 4 years ago

Exactly... People confuse eurodollar market with dollars...

What Ghana is doing is a symptom of global liquidity crisis not a dollar crisis... Ghana cannot print dollars... It is short dollars and would rather have more then less of dollars. So this situation makes dollar more wanted not less.

Michaell Howell is an expert on Global Liquidity and does good job at explaing it.

https://hiddenforces.io/podcasts/global-liquidity-matters-no...

rsync4• 4 years ago

"For people saying that this is a sign of the dollar dominance ending consider this ..."

I think you are mistaken.

The technical fungibility of dollars/gold/oil is irrelevant.

The requirement to sell other assets to buy dollars in order to settle oil is not a minor detail - it's the whole point ...

... and it would, indeed, be a sign of an erosion of US currency and trade dominance ... which is why it's not going to happen.

Ghana will either not go through with this plan or they will proceed and pay an enormous economic and political price ... or worse.

happyjack7• 4 years ago

You're indeed 100% right. I think a lot of HN programmer bros miss this point ... that being forced to settle in dollars is not a formality ... it's the whole point!

kumarvvr• 4 years ago

Realistically, how much gold does Ghana have to actually sustain this long term?

Would they be trading in Gold for other exports?

missedthecue• 4 years ago

The are the 6th largest gold producer globally

fernandohur• 4 years ago

Small reminder: ghana's consumption of oil is 0.1% of the worlds total oil consumption (Source: https://www.worldometers.info/oil/ghana-oil/), essentially a rounding error. Take this into account before making any statements about the ending dominance of the dollar.

SQueeeeeL• 4 years ago

Ahh yes, small changes never preclude larger shifts in large geopolitical entities.

But also if anyone tells you they know the future, they're probably trying to sell you something. If I were in charge of Ghana's finances, I'd be pretty cautious of standing in front of any windows for the next few years.

notahacker4• 4 years ago

Small changes preclude absolutely nothing happening far more often, and the imminent demise of the petrodollar has been forecast for fifty years involving some much more seismic events than a country with gold mines and a severe dollar reserve shortage and debt problem proposing that gold might solve their problem.

At least the half dozen "gold dinar" projects had a bit of global ambition and a theoretical rationale for the religion of much of the world's oil exporting economies to participate.

imtringued4• 4 years ago

Brexit was supposed to be the end of the EU.

UltraViolence6• 4 years ago

We'll see the dominance of the USD erode in the next three decades is my prediction.

Look at how successful Putin was in demanding payment for Russian oil in Rubles. It has propped up the Ruble enormously and its predicted collapse hasn't occurred. In fact it has rallied.

I assure you that other nations have taken note and will take similar steps in the future. Other commodities may well be priced in local currencies of the producing nations. Think gold, diamond, gas, oil, timber, wheat.

oj2828• 4 years ago

Russia had to raise interest rates to 20% to achieve the recent appreciation. Russia is giving up economic growth for the foreseeable future to prop up its currency. I doubt many countries are eyeing a similar move

somenameforme2• 4 years ago

They raised them to 20% for one month in the face of a nuclear economic strike. Their rates are down to 7.5% which are close to nominal for them. Remaining effects are a 3% GDP decline and a 12% inflation rate trending downward from a peak of 18% following the attack.

The overall impact seems to be fading to zero relatively quickly, excepting a much stronger ruble. Future growth numbers will be interesting to follow. Much could shift radically one way or the other depending on oil prices, but the US seems to have a declining level of influence with OPEC+.

nirimda3• 4 years ago

Most countries and business want to do something with their earnings. If you get paid in rubles for your oil, then you can only buy things denominated in rubles. If your general trade is collapsing, this isn't such a bad thing - you need to make an increasing proportion of your consumption. But if you retain an economy that wants to do general trade, you will probably want something other countries accept.

So although it is possible that "we'll see the dominance of the USD erode in the next three decades", it is much less likely that "commodities [in general would] be priced in local currencies of the producing nations [following the example of Putin's Russia]". The problem with your prediction though is that it's boring - it's too easy to be true as phrased. For instance, if we see a new cold war divide into a China-focused world and a US-focused world, then the growth of whatever currency the China-focused world uses will necessarily result in decreased USD dominance. Or if not China, then India. Or who knows who. Or maybe the US will descend into civil war and someone else will pick up the mantle of world hegemon. Or the US will amicably divorce, and the Floridollar will dominate international trades.

So it's more likely that you'll be right for the wrong reason, than that you'll be right for the reasoning established in your post.

UltraViolence6• 4 years ago

AFAIK you can still exchange Rubles for USD or EUR, so buying stuff shouldn't be too much trouble.

The problem Russia has is that it can't buy anything from the West no matter how much money it's willing to pay because of trade sanctions.

The sanctions will eventually be lifted since Russia will almost certainly demand this for stopping the war.

KptMarchewa12• 4 years ago

The "prop up the ruble" effect was negative to russia. It happened because export to russia totally stalled. So, russia still exported oil and gas, but could not buy anything for earned currency. For example, in August German export to russia dropped 45.8%, while imports dropped only 6.7% - and that only due to gas price increase. Now they import 0 gas.

I assure you that other nations have taken note and will take similar steps in the future.

Why would any country do that if they don't plan similar genocidal war?

jacooper3• 4 years ago

Why would any country do that if they don't plan similar genocidal war?

Because not everybody likes to be controlled by the US?

jonnybgood2• 4 years ago

This has nothing to do with USD dominance as many are suggesting. Ghana is running out of USD reserves and has to resort to buying with gold. Nothing suggests they wouldn’t use USD if they had it.

luciusdomitius7• 4 years ago

What prevents them exchanging gold for $ like all other gold producers are doing? This is probably what they themselves were doing beforehands?

notahacker4• 4 years ago

This sibling comment has the answer to that: it helps disguise the margin the government makes on gold it compulsory purchases from local miners in local currency https://news.ycombinator.com/item?id=33742853

Also helps to look like you're doing something about a debt crisis even if the net effect is minimal or negative...

notahacker4• 4 years ago

It's also a country once known as the "Gold Coast" whose largest export is gold. I don't think they'd be proposing to acquire it otherwise...

danielschonfeld6• 4 years ago

It has everything to do with USD dominance. Ghana is shouting out loud I can’t get my hands on USD. They’re echoing what the global market in general has been pricing.

Now true, having your product be a hot commodity everybody wants is good for business but there’s only so much of that before your competitor starts offering a more readily available product.

Pepper that with some morally objectionable stances the US has taken over the past 22 years and suddenly your ultra safe and liquid commodity while still good and desirable for this present crisis might not be as desirable for the post crisis era. Where one crack starts many others can possibly form.

gtirloni2• 4 years ago

Are you advocating for printing more USD?

edit: not sure why I'm being downvoted for asking a relevant question

ars2• 4 years ago

Ghana is shouting out loud I can’t get my hands on USD.

That doesn't make sense - just take some gold, and buy USD. Is there some physical shortage of paper or something?

onlyrealcuzzo• 4 years ago

Why can't they get dollars?

I was under the impression that you can buy dollars much easier than oil.

jkepler4• 4 years ago

Doesn't help that the US seems set on destroying the world's confidence in the US dollar: first the 2008 financial crises and monetary creation (I.e. devaluation) in response; then much more recently they hammered nails in the coffin of Breton Woods 2 (I.e. the post-1971 monetary status quo of floating fiat currencies) by confiscating the Afghan Central Bank's reserves (which included private individuals' deposits, and they gave the money to families of September 11th victims) and by freezing the assets of the Russian Central Bank. inter-Central Bank settlements were supposed to be apolitical. All that in the context of multiple hot wars (Iran in 2003 and then Libya, perhaps?) and military actions that appear to be in defense of US dollar dominance: https://bitcoinmagazine.com/culture/the-hidden-costs-of-the-....

enkid2• 4 years ago

Wouldn't any attempt to alleviate demand make inflation worse, when it already at levels not seen in decades?

immibis6• 4 years ago

If getting its hands on USD is hard, where's it going to get gold...?

bjornsing4• 4 years ago

Ghana is shouting out loud I can’t get my hands on USD.

If you have gold but can’t get your hands on USD then something is very wrong, but I doubt that is the case.

RC_ITR4• 4 years ago

Lol I thought the problem was the US created too many dollars?

I guess inflation is a lot more complex than the comments section here would have you believe.

factorialboy• 4 years ago

It has everything to do with USD dominance.

Countries have resources thus commodities. Commodities have value. Real value.

Trade in local currencies can be backed by these commodities.

Necessity will force countries to find USD alternatives.

jkepler4• 4 years ago

Add to this that the US Federal government has conducted numerous hot wars to protect USD dominance. Remember when Saddam Hussain and then Kadafi in Libya each started selling dollars for euros? War. https://bitcoinmagazine.com/markets/petrodollar-deep-dive-wi...

But now the US is even destroying confidence in the dollar, through its confiscation of the Afgan central bank reserves (which included private citizens' deposit accounts) and distributing the money to families of Sept 11th victims; or freezing the Russian central bank reserves, even though the international settlement system was meant to be apolitical.

pakitan2• 4 years ago

Necessity will force countries to find USD alternatives.

You're misunderstanding the fundamental problem. It's not about a "shortage" of USD for Ghana, where they ran out of USD suppliers and no one is willing to sell them USD so they will need to switch to RUB.

You get USD by exporting stuff and you can import stuff when you spend USD. The fundamental problem for Ghana is that they need to import valuable stuff but they are running out of valuable stuff to export in exchange, hence their USD reserves are dwindling. You can't solve that problem by changing the currency. If someone is to give you their RUB, they'll still want valuable stuff in exchange.

Guthur• 4 years ago

Gold is real, it exists. The USD is a figment of imagination.

Kukumber• 4 years ago

Let's not forget:

Iraq nets handsome profit by dumping dollar for euro (2003)

https://www.theguardian.com/business/2003/feb/16/iraq.theeur...

boringg• 4 years ago

Saves them conversion fees for converting gold to USD then to Oil.

RadixDLT• 4 years ago

good thing bush is not president this time

latchkey• 4 years ago

Ghana produces crude oil, but it has relied on imports for refined oil products since its only refinery shut down after an explosion in 2017.

Sounds like South Sudan, which Indigo Traveller recently visited... tl'dr: it is a huge mess.

https://www.youtube.com/channel/UCXulruMI7BHj3kGyosNa0jA/vid...

avidphantasm2• 4 years ago

Cue US invasion of Ghana…

andsoitis2• 4 years ago

Why do you suppose the US would want to do that?

avidphantasm2• 4 years ago

Why did we invade Libya?

Andrew_nenakhov• 4 years ago

So that's why they received that penalty in recent game vs Portugal. It was a warning.

bell-cot2• 4 years ago

Suggested Thought Experiment:

For folks getting really excited here about the US, the US Dollar, etc. - imagine that, for some weird reason, the world's reserve currency was the Tongan paʻanga ( https://en.wikipedia.org/wiki/Tongan_pa%CA%BBanga ). And that (similar to what the the story notes, for USD) Ghana's reserve of paʻanga was running low, so they were looking to buy oil with gold instead of paʻanga, to (as others have noted) put a smokescreen in front of a big new tax on local gold producers in Ghana. (Gold was ~50% of Ghana's exports in 2019, so there's plenty of income to tax there.)

How differently would you view this situation and story, if "US" and "USD" were replaced with (presumably emotionally neutral) "Tonga" and "paʻanga"?

jdmoreira• 4 years ago

Bypass the petrodollar? Very risky business. What a great way to end up suffering from a three letter agency triggered coup d'etat

max51• 4 years ago

three letter agency triggered coup d'etat

that's if ghana is lucky and they don't try to liberate them from [insert lies] with bombing and boots on the ground.

jeffbee• 4 years ago

"tehran oil bourse" is one of the older kooky internet theories about how the whole US dollar system is supported by oil. I honestly don't know why these kinds of stories and theories are so appealing to a certain kind of internet guy.

shyn33• 4 years ago

Dear Ghana. See Libya. R.I.P Ghana.

shyn33• 4 years ago

Not sure why the reply got downvoted. Ghadafi tried to switch to the gold standard. America isn't backed by gold so it's a threat.

happyjack7• 4 years ago

It is really interesting that the folks running the show in the USA are able to export a lot of the problems with the $ to the rest of the world. Caribbean nations know this first hand, and have given in to the peg.

I worked in oil, and now work in an industry where I sell parts worldwide. I'm not a trained economist, but deal with currency and transfer pricing with labor and goods.

Couple things: what a lot of people don't know or understand is that pretty much all transactions worldwide are intermediate by USD. Meaning, if a company in Sweden wants to buy something in Cameroon, the banks don't swap currency. They buy dollars with krona and then buy francs with the dollar.

This may seem "academic" on paper, but the world essentially has to deal with the dollar and the USA fed and its people with every transaction countries do! They're getting taxes each time they want to trade. Switzerland has purposely devalued its currency because the opposite happened: people were buying Swiss francs as a "safe" investment and not trading or circulating them. I digress ...

The only country I see that could actually disrupt the petro dollar is Russia. Russia is doing this on a small scale by forcing Europe to purchase energy in rubbles. Ghana? They may be seeing a three letter agency from the USA very soon ...

China? They do too much contract manufacturing for America, and no one wants yen or a currency from a dictatorship. Europe? Too much debt, and they would have to centralize spending (trying to do this with EU commission).

edgyquant5• 4 years ago

They may be seeing a three letter agency from the USA very soon

Yeah this shows how little your credibility is. Idiotic meme that was never true

happyjack7• 4 years ago

You realize that the CIA exist to keep international interests in line, and the FBI exists for domestic tranquility?

zizee2• 4 years ago

You think that the USA has never employed it's three letter agencies to protect its interests?

themihai6• 4 years ago

Indeed, right? Funny fact: Wikileaks is blocked my ISP (in Europe).

https://en.m.wikipedia.org/wiki/1954_Guatemalan_coup_d%27éta...

sbaiddn3• 4 years ago

When was it not true?

And, frankly, thats their bloody job.

Gustomaximus3• 4 years ago

2 points.

1) Please keep this site as a place for discussion and throw information rather than insults.

2) A three letter agency seems believable to me. Do you remember what happened in Libya 2011? It is believed this was in a large part due to their planned move to an afro dollar.

https://theecologist.org/2016/mar/14/why-qaddafi-had-go-afri...

bilbo0s• 4 years ago

Ghana? They may be seeing a three letter agency from the USA very soon

This is sad precisely because it's so true. I wish poor countries were free to make trades on terms that were more fair. But that's not the world we live in.

In any case, I applaud Ghana for trying.

I really do wish them luck, but I'd advise them to ready their internal security services. (I suspect there will be a lot of unrest there in the very near future.) And I'd also advise beefing up the quality of their healthcare facilities. Because I think they may see a rise in cancer diagnoses among leaders in their steward classes over the next few years.

ShivShankaran5• 4 years ago

Most likely their current president will be ousted and a new puppet sympathetic to US will be installed like what happened to pakistan.

Remind me in 60 days!

jkepler4• 4 years ago

China? They do too much contract manufacturing for America, and no one wants yen or a currency from a dictatorship.

Yen is Japanese currency; yuan is China's money.

happyjack7• 4 years ago

I vote using Renminbi instead of yuan. I mentally swap it with yen too often.

yogthos• 4 years ago

no one wants yen or a currency from a dictatorship

meanwhile in the real world https://www.tbsnews.net/world/china-more-democratic-america-...

AlbertCory• 4 years ago

Naive question, but: since they do have crude oil, could they swap that for refined oil products?

lizardactivist• 4 years ago

The world needs to get off the blood currency that is the U.S Dollar.

But I hope the U.S doesn't do to Ghana what they did to Libya, the last country to try something along those lines: forment revolt and overthrow the government, then literally sack the country and leave with billions in gold bars, and say they gave the country freedom and democracy.

spookycrisp• 4 years ago

how you gonna pay for the gold? ;)

devnulll• 4 years ago

Ghana produces crude oil, but it has relied on imports for refined oil products since its only refinery shut down after an explosion in 2017

This seems like the core of the story. Nearly 6 years after that incident, Ghana has been unable to repair the factory and refine it's own oil. My assumption is the tale behind that is tragic and timeless corruption.

blumomo• 4 years ago

Very similar story in Cameroon. Sole refinery broken since 2019 [0].

Now it’s been imported again…

[0] https://www.reuters.com/article/cameroon-refinery-idUSL8N23A...

funstuff007• 4 years ago

How does Ghana have access to gold and not have access to USD? Is there some reason why they cannot convert their gold to USD?

Dah00n• 4 years ago

Is this any different than what Muammar Gaddafi tried to do at one point?

anonymous344• 4 years ago

oh ghana you silly little..! accidental pepsies coming your way..

thoughtstheseus• 4 years ago

If you find this article and comments thought provoking I recommend you read Central Banking 101 by Joseph Wang.

Ghana plans to buy oil with gold instead of dollars

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