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Discussion in 'Politics, Religion, Social Issues' started by edesignuk, Nov 19, 2007.
Bless that crazy old boy
Oil priced in Euros soon?
It looks like a lot of commodities are considering the switch to trading in Euros. I keep seeing the idea popping up all over the press, from The Independent to The Economist.
I heard about that last week -- Get this sinking feeling that will be yet another major blow to the US dollar.
I heard of opposition over there though - because in doing this, it may destabilize and hurt the dollar even further - having the adverse impact of killing the value of their investments currently held with US dollars.
That makes no sense - but it did make a great deal when I heard it.
$2,998,308.31 a barrel
Yeah, or 12 AK 47s for fifteen dollars - and 12 angry villagers to attack and gain control of a refinery.
Given what happened shortly after Saddam floated the idea of pricing oil in Euros I hope those raising the idea now know the risks involved.
from crazy old boys to hot rich models
All through the dot-com bubble, I kept asking what was so wonderful about companies with no assets, no production and why were their share prices so high. Well, yeah, a lot of people made a lot of money on the way up to the peak of the bubble. Then, Pop! The dollar started down.
I kept asking as the housing bubble took off why people would pay hundreds of thousands of dollars or even millions for $100K houses. Even $100K was an inflated price. But, those who entered early and flipped before the peak did fine. Made money--but the declining dollar bought less.
Trouble is, when the dot-com bubble popped, some $8 trillion went Poof! Now, with the housing bubble going Poof! in even bigger fashion, derivative losses could cause the collapse of some of the largest credit corporations in this country and even in other countries.
And Bernanke, in an effort to save the world of credit, lowers the fed rate and the dollar heads downward even more steeply.
If you hold an asset which is declining in value, do you hold on until it goes back up, as some have done with their 1980-bought gold? Or do you bail out and reinvest in more profitable assets in an effort to recoup your losses? And don't you try to avoid involvement in losers?
Those who might be termed "counter culture" investment advisors have for some two to three years been saying to invest outside the U.S. These folks aren't rocket scientists; they're merely observant and know some economic history.
And sellers--like OPEC--want to be paid in a currency which holds its value. Right now, the choice seems to be the Euro.
The fly in all this ointment is that the U.S. is the world's largest market. A serious recession here clobbers the economies of many, many other countries. Their well-being depends in large part on our consumeritis. If less oil is bought, OPEC starts sucking buttermilk. Foreign manufacturing suffers. Chavez goes broker quicker. All manner of blowback...
What do you guys make of that?
Given the convertability of almost all currencies but for those of places like Zimbabwe, the conclusions about causal relationships in the article are foolish.
Aside from anything else, the dollar has been regarded as the safest currency in which to have one's assets denominated. That's a result of our economic superpower status as well as our military. Big money doesn't like risk, and the US economy has been a least-risk structure for investment--and the military aspect has maintained a business-friendly stability around the world.
We've coasted on what was created in the post-WW II period, on through Reagan. We had some amount of decline begin with the guns'n'butter of LBJ, but overall we've done well until we got into the negative balance of payments consumeritis of recent decades. With the popping of the dot-com bubble and now this subprime mess and the credit crunch, the dollar is no longer a safe haven. It has become a currency to be avoided.
If you've noticed in the news, there's an OPEC conference going on now in Dubai about what to do about the rapid decline of the dollar, vis-a-vis getting paid for their oil.
It's tinfoil hattery to tie Saddam's talk of demanding Euros instead of dollars to our invasion of Iraq. Corporationss with dollars could simply buy Euros first, and then use them to buy his oil. It's all electronic banking, anyway. The large corporations have multitudes of bank accounts in many different countries and currencies. "Multi-national" applies to a corporation's banking activities as well as its buying and selling.
My opinion: Greenspan and now Bernanke, with input from various movers and shakers, have played games with the Fed Funds rate to avoid recession or minimize the effects of recession or shorten the length of recession. the problem with that is that the marketplace can't really make a proper correction of malinvestment, and troubles are then deferred to a later date. The more you defer solving a problem, the harsher is the solution when it does occur.
Interest rates and terms of loans affect the public's investment behavior. Thus, low rates and subprime loans led to the housing bubble. Near-worthless mortgages were bundled and sold as though they had real value. There is now a huge correction occurring, and the Saturday night spree is being followed by Sunday Morning Coming Down.
This latest drop in the Fed Rate signalled that we're not serious about protecting the US dollar, nor serious about fighting inflation. This merely exacerbates the ongoing slide in the dollar's value.
I'm not sure if OPEC wants to peg their prices to the Euro, though. Mostly because France and Germany have a lot of economic problems, and that could cause the Euro to crash in due time. OPEC may peg their price to the value of gold, though.
The Euro is pretty solid at this point in time and due to the EU's requirement that individual countries keep their deficits low, the Euro is a much more stable currency than the dollar. You'll never see the spectacular and idiotic growth in Euroland that you see in the US because speculation is not viewed favourably by the courts.
Since the EU has a far lower need for oil, it's also less affected by massive spikes in the cost of oil.
The whole gold standard claim is also lame simply because there's not enough gold in the world and as a commodity it's more volatile than any currency would ever be.
What are those economic problems that Germany and France have?
France and Germany both have flourishing high-tech manufacturing economies. Both are far healthier than the USA, and now that the Eurozone's other big economy Italy appears to be coming out of a stagnant period the Euro is only going to strengthen over the next few years.
yeah, i just read that in the newspaper, Euro is beter
yet let I remind you that that the case may be right now that they have better economies it is not going to hold. With the US economy in trouble it going to take everyone else down with it. It is a world wide economy now and it easy to tell when everyone is going to go down. Last recession the US went though was thanks to Europe that started it. This one is going to be started by the USA so it a fair bet we are going to watch a lot of economies get into trouble.
The EU is pretty self-sufficient in that most of what it produces is consumed internally. Major imports come from China, Russia and the Middle East. Whilst a lot of economies in the Far East and Latin America will suffer if the US goes into recession, the Eurozone has a number of factors in place that will shield it from a US downturn, and it may even benefit the European economy as suppliers lose US customers and have to drop prices.
Why do you think all those investors are running to the Euro as the Dollar falls? It's the safest place to put your money at the moment and all the moneymen know it.
It is all tied together. It is a pipe dream thinking that the US down turn will not effect the EU. The EU still exports and imports a lot of items to the US.
Investors are running the the EU because it has gain strength compared to the dollar but that is a short term thing. It is a safe bet that it going to go back the other way and go back to it historical numbers.
dynamicv, here are the top ten exporting countries:
#1 Germany: $1,133,000,000,000.00
#2 United States: $1,024,000,000,000.00
#3 China: $974,000,000,000.00
#4 Hong Kong: $611,600,000,000.00
#5 Japan: $590,300,000,000.00
#6 France: $490,000,000,000.00
#7 United Kingdom: $468,800,000,000.00
#8 Italy: $450,100,000,000.00
#9 Netherlands: $413,800,000,000.00
#10 Canada: $405,000,000,000.00
I suggest that if recessionary pressures occur worldwide, Germany and the rest of the EU could be in deep doo-doo. Some 39% of Germany's GDP is from export.
Yes 'Rat, but the point I'm making is that nearly all of Germany's export goes to other EU countries. The UK is actually more at risk than Germany is, despite having much lower exports.
What's actually going on with Airbus is an attempt by management to force the unions in to accepting cuts in their conditions,the $ thing is a cover for this. Look forward to Airbus planes being assembled in the US and other low cost countries.
Airbus already said before that they were looking forward to making deals in Euro or currency baskets because of the weak dollar.
The point I am making is even if most of it goes to other EU when you started adding in the effects of the lost exports to the US it will then go in and hit exports inside the EU over time as well.
As previously posted, most of the EU countries trade primarily with each other. Check out the stats on your own CIA World Factbook if you don't believe me.
collapsing US dollar won't destroy the world
This is wrong (ish).
The coming collapse of the US dollar will of course affect other countries, but it likely won't "take everyone down" with it.
The issue is that the US has mismanaged their economy and thus the Emperor has no clothes and the smart money can see that now. Everyone knew it all along actually, but we were all pretending that somehow it would all work out. Perhaps it might have worked out without George Bush the (economically) disastrous Iraq war but most feel that it's too late now.
So while the trade relationships the US has with other nations means that some fairly bad stuff is going to happen if the US dollar fails, most of the other big Western nations have their financial houses in order sort of speak, and can survive on their own merits. They have strong, "real" value in their economies while the US has only credit.
Canada for instance has eliminated it's debt and almost eliminated it's deficit. We just finished the second round of lowering sales tax up here and have quite a huge safety net if anything happens down in the States. We have resources of real value, and a highly efficient credit system. The US on the other hand, has Trillions in debt and huge deficiencies in it's basic infrastructure.
All of Europe is also now using standard accounting and is more or less about 80% done on it's financial re-stabilisation efforts.
Bottom line is that all the other "Western" 1st world nations spent the 1990's attending to their economies, cutting out the fat, paying off the debt (that the US alerted the world to ironically), and basing their currency on real economic performance, whereas the US just crossed it's collective fingers and embarked on yet another round of overspending and debt. Add George Bush to the mix and you have the financial disaster the US is today.
Real, possible outcomes to a collapsing US dollar are things that will probably affect US citizens more than they will the rest of the world.
- Manufacturing will likely be in for another round of collapse and outsourcing.
- collapsing credit will mean a giant jump in poverty and another huge spending burden on the Federal Government.
- deteriorating infrastructure will mean the US will look like the old Soviet Union for a couple of decades with decaying highways, potholes everywhere etc.
This is the whole point of an economic collapse really. With one loud "bang" all the "fake" value disappears and what's left is the real actual value of the countries assets. It's what happened in the Soviet Union and it could happen in the US. If it's a big bang, like the Soviet Union, it will likely take a decade or two to recover.