Posted on 11/22/2007 9:14:37 AM PST by PRePublic
Will OPEC Dump the Dollar?
BusinessWeek
Iran is pushing OPEC to shift away from pricing oil in dollars and instead to a basket of currencies that could include the euro. ...
http://www.businessweek.com/globalbiz/content/nov2007/gb20071120_087338.htm?chan=globalbiz_europe+index+page_companies
(Excerpt) Read more at businessweek.com ...
lets not forget this happened with the yen in the 1980’s.
less buying power with the dollar hurts their ability to do harm in the world.
Also keep in mind the euro of the EU has never been able to “balance” in their accounting. In fact they have been rocked by two scandals and the second scandal was glossed over because the new laws enacted after the first accounting scandal were supposed to stop the second scandal. Essentially business as usual.
You also have to consider the USA is the ecconomy for business.
The USA is not number one by accident. In many other contries, a contract dispute never favors the foreign investor. They get hometowned routinely.
“Can anyone explain to me what on earth gave Bush the idea that the Suadi Arabians are our friends?”
It is the same nebulous thinking that makes him claim that Islam is a ROP. Get used to it.
Nations have no “friends.” They have alliances based on mutual interests and/or necessity. To give a nation human traits is childish.
“They have alliances based on mutual interests and/or necessity.”
Whose interests and whose necessities? The Saudis or ours? Ever since WWII we have only considered the interests of other nations and during the process given our nation away. And don’t tell me that we are stronger today than we were on August 14, 1945.
Looks like you read the first sentence of the first paragraph of a textbook for Introduction to International Relations.
Unfortunately, most others have not.
“as i said this will not happen. but not because
this could not be possible”
Anything can happen. But it usually doesn’t. Countries hold dollars because it is in their best interest. If you had a boat load of dollars would you sell them all cheap by trading for expensive euros? No. Those dollars will eventually come back to the US when dollar holders start buying dollar denominated assets that are priced cheap.(Remember when the Japanese were gobbling up U.S. real estate in the 80s?) That is why Dubai investors wanted the US ports and why they are buying banks now. In time the dollar will rise and the whole cycle will start over.
Whose interests and whose necessities? The Saudis or ours?
A) Again mutual interests.
B) Almost immediately following WWII the world entered into the Cold War. Do you believe that was a fight not worth fighting?
Never said we wouldn’t. However, I still support opening ANWR.
As always, when the world gets into trouble, the rich will look for an island of stability. The dollar has been overvalued for some time, particularly against the yuan.
What they think is trash today they will want tomorrow. This has happened before, no?
If ANWR was only the first step to the rest of NPRA, Bristol Bay, all of our coast lines, OCS followed by Oil Shale and coal-to-liquids, we wouldn't need to import from OPEC in our lifetime.
It was 15 Saudi hijackers....
But nonetheless, these rats are no friends of ours. See my tagline...
There is a huge difference with the dollar, it's not just another Yen or Mark to fluctuate up and down, with no permanent harm done. Underpinning the value of the dollar since the 1944 Bretton Woods agreement has been its status as the world's reserve currency. One major aspect has been that other nations have had to purchase oil in dollars, and this gives the USA a huge advantage over every other currency.
Imagine you are playing Monopoly, but you are also the sole banker for the game. You are allowed to grab as many $500 bills as you want, when you want, and put them into play on the board. The other players must accept these new dollars when they are introduced, but nobody else can just create new dollars. Only the banker. Slight advantage to the banker/player, wouldn't you say?
That has been the advantage the dollar has had since 1944. Once the dollar is no longer the world's currency (look for the gulf states and saudis to start selling oil for euros) there will be no "bottom" under the dollar. It can fall to undreamed of lows. It could "go Argentina." This is a very dangerous time.
“I’ve thought for quite a while that the United States should offer all European countries that are home to U.S. bases and/or troops the following deal: pay all expenses associated with the presence of our military in your countries (in a timely manner and without haggling or resentment), or else prepare to defend yourselves within one year.”
The US actually WANTS some of the bases in europe for its own logistical reasons.
“It can fall to undreamed of lows. It could “go Argentina.” This is a very dangerous time.”
It has already started, but I assume it is hoped that this would be a multi-year process as governments gradually hedge or unwind or whatever.
I am actively looking at good long-term hedge derivatives on the dollar for assets including the rather thin philly currency options (only 9 months out), and options on futures (we aren’t set up for this or any futures, something of a hassle).
Yup, but we’d be importing less of their oil. Keeping more of our money here in the US (and thus helping our trade deficit).
Such a horrible thing, right?
If OPEC drops the dollar and begins accepting the euro it will be a very bad thing for the US economy since the dollar in your pocket would likely devalue another 30 to 50%.
Note: this topic is from 11/22/2007. Some things just never go out of style.Thanks PRePublic.
OPEC Has Already Turned to the Euro...The source for the euro exchange rate is the Federal Reserve, and I have calculated the euro's average exchange rate to the dollar for each year based on daily data.
GoldMoney Alert
February 18, 2004
|
US Imports of Crude oil
|
|||||
|
(1)
|
(2)
|
(3)
|
(4)
|
(5)
|
(6)
|
|
Year
|
Quantity (thousands of barrels)
|
Value (thousands of US dollars)
|
Unit price (US dollars)
|
Average daily US$ per € exchange rate
|
Unit price (euros)
|
|
2001 |
3,471,066
|
74,292,894
|
21.40
|
0.8952
|
23.91
|
|
2002
|
3,418,021
|
77,283,329
|
22.61
|
0.9454
|
23.92
|
|
2003
|
3,673,596
|
99,094,675
|
26.97
|
1.1321
|
23.82
|
We can see from column (4) in the above table that in 2001, each barrel of imported crude oil cost $21.40 on average for that year. But by 2003 the average price of a barrel of crude oil had risen 26.0% to $26.97 per barrel. However, the important point is shown in column (6). Note that the price of crude oil in terms of euros is essentially unchanged throughout this 3-year period.
As the dollar has fallen, the dollar price of crude oil has risen. But the euro price of crude oil remains essentially unchanged throughout this 3-year period. It does not seem logical that this result is pure coincidence. It is more likely the result of purposeful design, namely, that OPEC is mindful of the dollar's decline and increases the dollar price of its crude oil by an amount that offsets the loss in purchasing power OPEC's members would otherwise incur. In short, OPEC is protecting its purchasing power as the dollar declines.
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