Posted on 10/06/2005 2:33:35 PM PDT by king of smears
It is not only possible, it is now likely. Iran has announced it will open an oil bourse in the coming months, with payment in Euros accepted. The significance of this for geopolitics cannot be overstated. The dollar enjoys its status as the world's reserve currency because currently every nation has to exchange its currency for dollars to buy oil. This creates an artificial demand for dollars. That demand helps to prop the dollar up.
China, Russia, and to a lesser extent, Europe, all want this to change. Some Arab nations also want it to change, because as the situation now stands they collect barrels of dollars, which puts their capital at risk should the dollar fall. It did fall for three years in a row, prompting folks like Warren Buffett and Bill Gates to convert millions of dollars to other investments. Then the dollar strengthened, for several reasons.
With the administration vowing to spend billions on the gulf coast; with a trade deficit of 600-700 billion; with a federal deficit previously projected in the 300-400 billion range; with an American savings rate that is now negative; with Americans borrowing 2.7-3 billion per day, which is about 80% of the rest of the world's savings, the dollar will almost certainly begin to fall again. Any conservative who does not plan accordingly is abnegating financial responsibility to himself and his family.
Foreign central banks, who buy about half of U.S. debt, have indicated their unwillingness to continue buying massive amounts of that debt. Government data show those banks are following through on those statements. The slack is currently being picked up by institutions in the Carribean, and Lord only knows where those folks are coming up with that kind of dough. With no domestic savings to fund increased deficit spending, the Fed likely will be forced to monetize that debt. That means printing more money. The fed will have to counter this inflationary action by continuing on its rate raisng venture to maintain a strong dollar. This means higher interest rates, with a corresponding rise in ARMs, which account for over 30% of home mortgages in the past year or so, 40% or more in areas where real estate has entered the bubble stage. As marginal homeowners get squeezed, they find themselves up against the new bankruptcy law, which raises their monthly credit card payment. In this environment we will find out whether the stock market is overvalued or not, and gold and silver or undervalued or not.
Not this Sh!t again!
I agree with you, this is very significant.
The Iranian parliament hesitated a long time before passing the legislation for this. They must be aware it puts them in a different era - it would only be done after Khatami left power, because he did not want confrontations whereas the new guy, he is willing to confront the US.
I spotted the logical flaw in about 3 seconds.
Did you know that the USA does not want the dollar to be as strong as possible? There is in fact a happy medium. An overly strong dollar cripples exports, and encourages wild trade imbalances.
Is this what burning troll smells like?
If you don't think conflicts happen quicker because of economics, then you're the newb.
Ya know Saddam was on the same plan to be executed March 2003 when the UN released sanctions against him. If you think our economy is stuggling now, imagine if Saddam wa still in power under Euros.
Listen to Bush's speech from this morning, listen to Blair's press conference with the Iraqi President.
That's why we'll be in Iran (and Syria)
Interesting post. We can't allow ourselves fear to paralyze us either, though. We need to begin tightening the budgets a bit, but the key is moderation, not desperation.
Even the best economists don't know whether we can sustain a happy balance.
The reason the U.S.A. is so succesful is because we are a hub for investment therefore we have money to borrow for low interest rates.
The Euro dollar will be a danger that we have never faced before. If everyone trades their dollars for Euros our exports will be worth nothing.
Ahhhhhhhh...here's your prozac, now drink the water slowly...ahhhh...all better now, right?
The euro bloc of nations is unstable and has very high unemployment and negative gdp growth. Not to mention them shooting down their constitution.
Funny, I don't think our economy is struggling now. But if you guys say it enough, maybe you will believe it.
Hey smart guy, couldn't say one inteligent thing before going to Big Brother?
What do you say about this statement...
"The dollar enjoys its status as the world's reserve currency because currently every nation has to exchange its currency for dollars to buy oil. This creates an artificial demand for dollars"
(Bush's Fault!)
That's an excellent point. Another one that works in our defence is that the euro is fundamentally unstable, since each different country in the E.U. has a different monetary policy.
He is a troll, but he has a point. We can't keep borrowing money from China, Japan, and Saudi Arabia.
Wow. Someone slept through High School Economics class didn't they?
Capt'n, ready to fire at will.......
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