My post from another thread:
The value of the dollar is very high compared to the economic activity of the US.
Why? Because the fact that oil is traded in USD and most foreign trade is conducted in USD, the demand for USD worldwide is much higher than the demand for USD in the US (the total of world trade not connected directly to the US conducted in dollars is higher than the foreign and internal trade connected to the US)
This means that if oil was not traded in USD but in EUR the USD value would plunge down and if this was accompanied (as expected) by a international change from USD to EUR as the "international" currency, it could cause a downward spiral in the USD. Remember that the demand for USD would fall to less than half and I read a study indicating that the USD price could fall more than 30%, if this happened, in just one week.
Fast depreciations of a currency tend to lead to inflationary surges (a dollar is worth less, so the same thing costs more dollars) and a fall this high (and fast) could lead to a spiral of inflation that could throw the US in the biggest recession of its history.
Some say that the constant but slow fall of the dollar is a way to prevent the damage done by this possibility and that the fact that Saddam (Iraq is the country with the largest oil reserves) wanted to trade oil in Euros was the real motivations for this war.
It's curious that Syria also claimed this and shortly after, they were included in the famous axis-of-evil. Why Syria? That's one explanation...
(note that if this happened, a fast increase in the Euro would also be damaging, unless the ECB printed a lot more Euros to counter the increase in demand which could also help hinder the USD/EUR rate fall. Consider the revenue that is printing money when the demand for it increases, the US gain a lot by being the world currency)
The question is why this doesn't get any attention at all in the US media.
Any body any ideas ?
Of course Kerry knows about this. Why hasn't he adressed this point ?
What's Ralph Nader's opinion on this ? Never heard him talk about it ?
If the Euro is going to replace the dollar as the petro currency then this would have serious consequenses for the domineering position the US holds in the world. It could even mean an economic collapse in the US.
What's the opinion of the lefties and the righties about this issue ? C'mon guys .....
Originally posted by ivanhoewould that mean we'd actually have to manufacture stuff in the US again?
The question is why this doesn't get any attention at all in the US media.
Any body any ideas ?
Of course Kerry knows about this. Why hasn't he adressed this point ?
What's Ralph Nader's opinion on this ? Never heard him talk about it ?
If the Euro is going to replace the dollar as the petro currency then this would have serious consequ ...[text shortened]... What's the opinion of the lefties and the righties about this issue ? C'mon guys .....
It is very interesting post on a very complicated issue.
I think oil definatly does keep the dollar value high but theres plenty of other factors..
For a start how many countries actually also use the dollar as well as there local currency.. Cambodia, vietnam, equador, mexico.. surely lots more but they're the ones i know about..
Also the dollar is the defacto currency of the black market with billions traded outside the US every year on drugs, weapons etc, mainly because of its high denomination..
The 500 euro note might start impacting that "market share" sometime in the near future tho..
Also the fact that china has its yuan pegged with the dollar must affect its worth too..
Just some other points to consider but anyone with a brain in their heads can see that this war in Iraq was about pure unadulterated greed and finishing what Daddy started.
http://news.bbc.co.uk/2/hi/business/3981455.stm
Dollar at record low against euro
The dollar fell to a record low against the euro on Friday, with analysts forecasting more declines to come.
Meanwhile, oil prices moved in the opposite direction, with a barrel of US light crude ending up 79 cents to $49.70 on fresh Iraqi security concerns.
With the US forces stepping up the pressure on Iraqi rebels in Falluja, Brent crude also finished up in London, gaining 41 cents to close on $46.42.
Analysts believe the US will keep the dollar weak to add exports.
Some also said the large size of the US budget deficit could drive down the dollar even further.
Brushed off
The drop in the dollar came despite positive jobs data from the US Labor Office on Friday.
"What this shows is that the structural problems in the US economy are completely dominating the positive cyclical news that we had today from payrolls [unemployment figures]," said Aziz McMahon, a strategist at ABN Amro in London.
"It seems now that the longer-term investors like pension funds and perhaps monetary authorities are either hedging their dollar risk or moving assets out of the United States.
"It looks like the dollar has further to fall," Mr McMahon said.
The US currency dropped as low as $1.2962 against the euro on Friday.
"The price action today is nothing short of stunning," said Richard Franulovich of Westpac Banking. "This is a pretty good guide at just how entrenched negative sentiment is toward the dollar."