Quoted: This just in: Chavez threatens to cut off oil to US

This could get interesting...I think that it is all bluster, however. Where is he going to find a buyer to take over the HUGE supplies that he sends to the US? China is about the only nation that could absorb that much oil? I could see that kind of backstab move by China leading to a trade war between the US and China.

Like I said, this could get interesting.

Quoted: Quoted: The US currency was doomed when it left the gold standard, pretty simply. Not at all. The dollar is not a true fiat currency because it went from being backed by gold to being backed by oil. That is why this potential petrodollar to petroeuro transition is so important.

Still not the whole picture really.

The big problem with the dollar is that it's a debt instrument.

Debt as legal tender in payment of debt.

The gold standard failed because an essentially unlimited supply of credit collided with a limited supply of money (Gold) We now call that period the great depression.

Bretton woods failed for the same reason.

The oil standard will fail for the same reason.

(Answering several points made by different posters here)

There can be no successful "backing" for a fiat currency under a central banking system such as we have.

As for economics being a valid reason for war, perhaps it is, but it's pretty difficult to argue a moral rationale for using military action to force other nations to support our economy.

That is, by the way, essentially what the Roman empire did, and it didn't work out so well for them.

I'm sure there were libertarians in Rome too, saying much what we're saying today, that the direction they were going would eventually lead them to ruin, and for centuries they were mocked, but eventually  they were proven right.

Debt money, loaned into existence at interest, creates debt that cannot be repaid, as the debt incurred is greater than the money created once interest begins to accrue, so the debt burden in the economy must continue to grow, faster and faster, forever.

It's a great engine for growth, no doubt, but not all growth is good,sometimes growth is cancer.

A system requiring continuous, exponential growth operating in a finite environment= Just a matter of time before something bad happens.

If we'd listened to them 30 years ago we'd be better off, the problems were managable then.

Quoted: Not at all. The dollar is not a true fiat currency because it went from being backed by gold to being backed by oil. That is why this potential petrodollar to petroeuro transition is so important.

The US currency was taken of the gold standard so that the currency could be freely inflated, and that inflation has been going on ever since.

If all the OPEC countries decided to switch currencies, could the US attack them all? Because at some point it's not going to be beneficial for them to deal in US dollars when there are other more stable currencies. And those stable currencies are in non-Arab countries that are currently considered the US's allies.
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Quoted: Quoted: This just in: Chavez threatens to cut off oil to US This could get interesting...I think that it is all bluster, however. Where is he going to find a buyer to take over the HUGE supplies that he sends to the US? China is about the only nation that could absorb that much oil? I could see that kind of backstab move by China leading to a trade war between the US and China. Like I said, this could get interesting.

it wouldn't matter much.  oil is a fungible commodity.  if chavez doesn't sell oil to the US, then it will be bought by china or someone else, reducing their demand for oil from other sources, which will then be bought by the US at the same price as the venezuelan oil which chavez wouldn't sell us.  the world oil markets are extremely efficient in this way.

now if chavez decided to significantly reduce his oil output, or to only sell it at a higher price which would drive prices up worldwide because the supply situation is so tight, that could have a significant negative effect on the US economy.

Quoted: So what happens to the average Joe? making less than $60K a year. Just able to get by as it is. How will it effect commuters that travel 30 to 60 miles one way to work. How many business suffer when gas cost twice as much? Eating out slows, clothing fads aren't kept up with, cars aren't replaced with the next bigger size ( certain death to our big three?), consumer discresionary(sp) money is being spent on gas. How does this affect you business? I know alot of you have stock piles of stuff but what happens when it's not a complete SHTF or TEOTHWAWKI. What will the sheeple going to do when they don't have open range to hunt and supplment food supplies. What will ,gov do when you have and the sheeple don't have? Besides going down shooting.......they get all you stuff then anyhow. How do we handle a constant creep in prices. When do you pull out of it and live of the land, so to speak, if that is even possible. Does anyone have a plan of what to do when the oil price goes to $6.00 a gallon. And milk is 5.oo a gallon, food is double its current price, etc. Does anyone have honest serious answers? Iknow some will have silly answers  I wonder if anyone has serious answers or links to a possible answer.

Same way it's always been done.   Decrease demand.

Quoted: if chavez doesn't sell oil to the US, then it will be bought by china or someone else, reducing their demand for oil from other sources, which will then be bought by the US at the same price as the venezuelan oil which chavez wouldn't sell us.  the world oil markets are extremely efficient in this way.

But what if the oil is purchased above and beyond demand for it. For example, what if China saw this as an opportunity to both increase its strategic reserve and to stick it to the US. Chinese demand would still be the same because the oil is not being used to satisfy demand. That oil would be purchased against the supply side of the equation, so, to the market, it would appear that Chavez cut supply. Oil prices go up, Chavez gets richer, and the US economy takes a tank.

The free market only works when everyone plays fair.

Of course, this would eventually backfire on the Chinese because their citizens would either have to pay higher prices, or the government would have to release of the stored oil (driving down demand and prices). But it could be a cute little show of force while it lasted.

Yes conspiracy theorists/liberatarians, you are absolutely right.  Oil traders will abandon the NYMEX and British mercantile exchanges (don't forget Chicago too) to trade on an Iranian exchange.  I'm sure that is likely to happen.  BTW, Russia has talked about selling oil in euros for a while now, it still hasn't happened.  

Next, if you look at the historical value of the currencies that were folded into the euro, the aggregate average comes out to around 1.15, close to the current EUR/USD level.  The euro was initially undervalued to a significant degree when first introduced due to both the booming US economy in 2000 and uncertainty over its future.  When investors and traders saw that the currency would be supported by Europe, and the US economy was hammered by the tech meltdown and 9/11, the dollar took a nosedive.  It's since recovered back to normal trading ranges.  

Now lets talk about interest rates.  US rates are currently 2 % higher than the euro and the gap is likely to widen a bit further.  Thus from a pure interest rate perspective it makes little sense to move US dollar holdings into Euros since you would be cutting interest rate gains nearly in half.  

Second, we are currently in what we call an inverted yield curve - where long-term (30 year) interest rates are actually lower than short-term (1-10 yr) rates.  Traditional economic theory would say that investors are forecasting a recession when this occurs.  Given the current US growth and economic strength, that explanation doesn't work.  What seems to be occurring is that overseas investors are putting their surplus funds into the US economy rather than there own, the large supply of funds keeping interest rates lower than they would normally be at this point in the economic cycle.   Investors aren't "hoarding" dollars, they are recycling them back to the US through both equity and bond purchasing.  They don't have to, they choose to do so since they get a better and safer rate of return than investments in other nations.

I could keep on with this, but I realize that I will never convince the hard-core libertarian/gold-standard folks.  For others, if you have questions I'll be happy to answer what I can.