Warning

 

Close

Confirm Action

Are you sure you wish to do this?

Confirm Cancel
Member Login
Site Notices
Arrow Left Previous Page
Page / 2
Posted: 2/16/2006 2:24:17 PM EDT
www.house.gov/paul/congrec/congrec2006/cr021506.htm

i don't agree with everything he says, particularly about Iraq, but I do think that he does a good job of explaining the precarious situation the government has gotten our economy into.

some key points, much more history and information at the link:


The 1944 Bretton Woods agreement solidified the dollar as the preeminent world reserve currency, replacing the British pound. Due to our political and military muscle, and because we had a huge amount of physical gold, the world readily accepted our dollar (defined as 1/35th of an ounce of gold) as the world’s reserve currency. The dollar was said to be “as good as gold,” and convertible to all foreign central banks at that rate. For American citizens, however, it remained illegal to own. This was a gold-exchange standard that from inception was doomed to fail.




The U.S. did exactly what many predicted she would do. She printed more dollars for which there was no gold backing. But the world was content to accept those dollars for more than 25 years with little question-- until the French and others in the late 1960s demanded we fulfill our promise to pay one ounce of gold for each $35 they delivered to the U.S. Treasury. This resulted in a huge gold drain that brought an end to a very poorly devised pseudo-gold standard.

It all ended on August 15, 1971, when Nixon closed the gold window and refused to pay out any of our remaining 280 million ounces of gold. In essence, we declared our insolvency and everyone recognized some other monetary system had to be devised in order to bring stability to the markets.

Amazingly, a new system was devised which allowed the U.S. to operate the printing presses for the world reserve currency with no restraints placed on it-- not even a pretense of gold convertibility, none whatsoever! Though the new policy was even more deeply flawed, it nevertheless opened the door for dollar hegemony to spread.

Realizing the world was embarking on something new and mind boggling, elite money managers, with especially strong support from U.S. authorities, struck an agreement with OPEC to price oil in U.S. dollars exclusively for all worldwide transactions. This gave the dollar a special place among world currencies and in essence “backed” the dollar with oil. In return, the U.S. promised to protect the various oil-rich kingdoms in the Persian Gulf against threat of invasion or domestic coup. This arrangement helped ignite the radical Islamic movement among those who resented our influence in the region. The arrangement gave the dollar artificial strength, with tremendous financial benefits for the United States. It allowed us to export our monetary inflation by buying oil and other goods at a great discount as dollar influence flourished.





n the short run, the issuer of a fiat reserve currency can accrue great economic benefits. In the long run, it poses a threat to the country issuing the world currency. In this case that’s the United States. As long as foreign countries take our dollars in return for real goods, we come out ahead. This is a benefit many in Congress fail to recognize, as they bash China for maintaining a positive trade balance with us. But this leads to a loss of manufacturing jobs to overseas markets, as we become more dependent on others and less self-sufficient. Foreign countries accumulate our dollars due to their high savings rates, and graciously loan them back to us at low interest rates to finance our excessive consumption.

It sounds like a great deal for everyone, except the time will come when our dollars-- due to their depreciation-- will be received less enthusiastically or even be rejected by foreign countries. That could create a whole new ballgame and force us to pay a price for living beyond our means and our production. The shift in sentiment regarding the dollar has already started, but the worst is yet to come.

The agreement with OPEC in the 1970s to price oil in dollars has provided tremendous artificial strength to the dollar as the preeminent reserve currency. This has created a universal demand for the dollar, and soaks up the huge number of new dollars generated each year. Last year alone M3 increased over $700 billion.

The artificial demand for our dollar, along with our military might, places us in the unique position to “rule” the world without productive work or savings, and without limits on consumer spending or deficits. The problem is, it can’t last.

Price inflation is raising its ugly head, and the NASDAQ bubble-- generated by easy money-- has burst. The housing bubble likewise created is deflating. Gold prices have doubled, and federal spending is out of sight with zero political will to rein it in. The trade deficit last year was over $728 billion. A $2 trillion war is raging, and plans are being laid to expand the war into Iran and possibly Syria. The only restraining force will be the world’s rejection of the dollar. It’s bound to come and create conditions worse than 1979-1980, which required 21% interest rates to correct. But everything possible will be done to protect the dollar in the meantime. We have a shared interest with those who hold our dollars to keep the whole charade going.





In November 2000 Saddam Hussein demanded Euros for his oil. His arrogance was a threat to the dollar; his lack of any military might was never a threat. At the first cabinet meeting with the new administration in 2001, as reported by Treasury Secretary Paul O’Neill, the major topic was how we would get rid of Saddam Hussein-- though there was no evidence whatsoever he posed a threat to us. This deep concern for Saddam Hussein surprised and shocked O’Neill.

It now is common knowledge that the immediate reaction of the administration after 9/11 revolved around how they could connect Saddam Hussein to the attacks, to justify an invasion and overthrow of his government. Even with no evidence of any connection to 9/11, or evidence of weapons of mass destruction, public and congressional support was generated through distortions and flat out misrepresentation of the facts to justify overthrowing Saddam Hussein.

There was no public talk of removing Saddam Hussein because of his attack on the integrity of the dollar as a reserve currency by selling oil in Euros. Many believe this was the real reason for our obsession with Iraq. I doubt it was the only reason, but it may well have played a significant role in our motivation to wage war. Within a very short period after the military victory, all Iraqi oil sales were carried out in dollars. The Euro was abandoned.

Link Posted: 2/16/2006 2:34:17 PM EDT
[Last Edit: 2/16/2006 2:35:06 PM EDT by motown_steve]
Someitmes Ron Paul comes off sounding like a loon.

US invaded Iraq to keep Saddam from demanding Euros.
Link Posted: 2/16/2006 2:34:30 PM EDT
Tag.
There were lots of good reasons for going after Saddam. Selling oil in Euros was a one. There are lots of good reasons for going after Iran. The Euro-denominated oil bourse opeing there in March is a big one. The U.S. dollar loosing its reserve currancy status is a MUCH bigger threat to American prosperity and way of life than getting a city or two nuked. Imagine the mass starvation if the U.S. dollar lost 30% of its value? What about 50%? In that situation, the anarchy, unrest and mass starvtion would make a nuke attack on NYC or LA pale by comparrision.
Link Posted: 2/16/2006 2:40:53 PM EDT

Originally Posted By motown_steve:
Someitmes Ron Paul comes off sounding like a loon.

US invaded Iraq to keep Saddam from demanding Euros.



I'm sure that it was a consideration. It would have st a dangerous precident if Saddam got EUros for his oil. Not because Saddam exported much oil, but because it would have undermined the strength of the dollar, and therefore America's place in the world.

Like I said, there were lots of good reasons to go after him. The revelations about WMDs and terrorism that have come out in the last few weeks confirm the fact the he needed to go. The Euro thing, whilst seeming insignificant was actually more dangerous.
Link Posted: 2/16/2006 2:46:27 PM EDT
[Last Edit: 2/16/2006 2:47:33 PM EDT by vito113]
Link Posted: 2/16/2006 2:57:39 PM EDT
From my understanding the dollar had approximately 13 times the purchasing power in 1946 than 2006. Imagine if that dollar lost its value another 3 or 10 times over night. (25% - 90%)

Vito's > $2 gallon gas would be $6 to $20 a gallon!

This Dollar - Gold Standard > Oil Standard is one of the stealth topics no one wants to speaks about.


So I agree... good read.. already am aware... so what is the solution?

The guy sounds like a Dem who just found out a problem to bitch about; but has no plan.
Link Posted: 2/16/2006 2:57:54 PM EDT

Originally Posted By vito113:
BINGO!

The USA's amazing wealth and high standard of living is underpinned by a safe and steady supply of cheap oil.

If the 'cheap' oil goes away and the US has to buy at the same store as everyone else it's going to hurt, and hurt bad. The Europeans are streets ahead of the US in energy efficiency and living with expensive oil. The going rate for a gallon of gas in the EU is about $6 a gallon and is an 'acceptable price, the US is hurting dealing with $2 a gallon. How would the US economy cope with gas at even $4 a gallon, let alone $6?

ANdy



umm.. All glory is fleeting?
Link Posted: 2/16/2006 2:59:27 PM EDT

Originally Posted By motown_steve:
Someitmes Ron Paul comes off sounding like a loon.

US invaded Iraq to keep Saddam from demanding Euros.



Forbes magazine actually said that too, a little over a year ago.
Link Posted: 2/16/2006 3:15:51 PM EDT

Originally Posted By NODDAH:
From my understanding the dollar had approximately 13 times the purchasing power in 1946 than 2006. Imagine if that dollar lost its value another 3 or 10 times over night. (25% - 90%)

Vito's > $2 gallon gas would be $6 to $20 a gallon!

This Dollar - Gold Standard > Oil Standard is one of the stealth topics no one wants to speaks about.


So I agree... good read.. already am aware... so what is the solution?

The guy sounds like a Dem who just found out a problem to bitch about; but has no plan.



idk, got any ideas? i think in the long run the economy as we know it is fooked, and a new one will arise based on the gold standard. it will be a VERY painful process however. i'll probably see it played out within my lifetime.
Link Posted: 2/16/2006 3:20:06 PM EDT
IBThePeopleWhoPutTheirFaithInPaperCurrency.

It could be considered unconstitutional for the Federal government to be printing money.
They only have the authority to coin money.
Link Posted: 2/16/2006 3:21:09 PM EDT
[Last Edit: 2/16/2006 3:48:27 PM EDT by rjroberts]
If the Euro becomes a reserve currency, and the new world trade currency, the European Central Bank will find out about a problem the Federal Reserve has been grappling with for many years: the Euro-dollar issue (they'll have to call those something else now becuase of confusion with the Euro as currency). There are about twice as many dollars floating around outside the US as within the US. The Federal Reserve has been unable to control these since the 1970s; whatever the Fed does affects only the internal workings of US banks. They are a major factor in the decline in exchange value of the dollar. The European central bank will have to deal with what I'll call World-Euros. The Euro as the ultimate fiat currency exists only because of treaties containing all sorts of percentages and agreements to maintain the appropriate ratios. Sure, the various banks have some gold, but nothing approaching a "standard." ANd, if the "emergencies" are stopped from going on forever, the national banks will have to sell gold to keep up their end of the treaties. If the Euro becomes a reserve/trade currency, the European Central bank will lose control a lot faster than the Fed.

So, oil will be 48- 50 euros a barrel. Makes no difference. The Europeans will pay the same price they do now, since they have to buy dollars with Euros. Of course, a drop in demand for dollars may depress the value of the dollar some, but that's happened before, it's temporary. One concrete concern has been alluded to by earlier posters, calling it prestige and position. I'll say "perception" which, in Economics and Finance can be self-fulfilling. But, where will everyone invest if , for example, they no longer invest in the US? In Europe? I doubt it.

Europe (meaning EU and their bureaucracy) isn't going to let go of any power. Will the Chinese feel any better supporting German or French social programs than ours? ANd, what about European industrial productivity, or lack thereof? Oh, sure, the former Eastern bloc/captive nations are coming up fast in terms of percentage increases. That fools kids with pocket calculators. I remember readin an article many years ago in the "Financial Times" about a Japanese car company closing a plant they were trying to run in a Central European nation. It didn't work. Not because the quality wasn't there, it was. But, the kind of stuff that worked in plants in JApan, and some plants in the US with varying degrees of opposition, did not work in the particular country. Company songs, organized PT sessions, regimentation and a caste structure which works in Japanes industry did not work with what the "Times" called "the most independence minded people in Europe." (remaining nameless to avoid tangents.

P.S. Watch the Russians. They HAVE gold. It would not surprise me if their puppets/moles in various places are part of a scheme to engineer a couple of currency collapses, which would allow a gold backed Ruble to buy up big pieces of the world.
Link Posted: 2/16/2006 3:21:57 PM EDT

Originally Posted By motown_steve:
US invaded Iraq to keep Saddam from demanding Euros.


Uh, how about doing some research, Steve?

Even wonder why the sabre rattling between the US and Iran is just now heating up? Here is a hint: it has very little to do with Iran's fledgling nuclear program.
Link Posted: 2/16/2006 6:22:25 PM EDT
From Iran's euro-denominated oil bourse to open in March: US Dollar Crisis on the Horizon


To date, one of the more difficult technical obstacles concerning a euro-based oil transaction trading system is the lack of a euro-denominated oil pricing standard, or oil 'marker' as it is referred to in the industry. The three current oil markers are US dollar denominated, which include the West Texas Intermediate crude (WTI), Norway Brent crude, and the UAE Dubai crude. However, since the summer of 2003, Iran has required payments in the euro currency for its European and Asian/ACU exports ... although the oil pricing these trades was still denominated in the dollar.[13]

Therefore a potentially significant news story was reported in June 2004 announcing Iran's intentions to create of an Iranian oil bourse. This announcement portended competition would arise between the Iranian oil bourse and London's International Petroleum Exchange (IPE), as well as the New York Mercantile Exchange (NYMEX). [Both the IPE and NYMEX are owned by US consortium, and operated by an Atlanta-based corporation, IntercontinentalExchange, Inc.]

The macroeconomic implications of a successful Iranian bourse are noteworthy. Considering that in mid-2003 Iran switched its oil payments from EU and ACU customers to the euro, and thus it is logical to assume the proposed Iranian bourse will usher in a fourth crude oil marker -- denominated in the euro currency. This event would remove the main technical obstacle for a broad-based petroeuro system for international oil trades. From a purely economic and monetary perspective, a petroeuro system is a logical development given that the European Union imports more oil from OPEC producers than does the US, and the EU accounted for 45% of exports sold to the Middle East. (Following the May 2004 enlargement, this percentage likely increased).

Despite the complete absence of coverage from the five US corporate media conglomerates, these foreign news stories suggest one of the Federal Reserve's nightmares may begin to unfold in the spring of 2006, when it appears that international buyers will have a choice of buying a barrel of oil for US$60 on the NYMEX and IPE ... or purchase a barrel of oil for €45-€50 euros via the Iranian Bourse. This assumes the euro maintains its current 20-25% appreciated value relative to the dollar ... and assumes that some sort of US "intervention" is not launched against Iran. The upcoming bourse will introduce petrodollar versus petroeuro currency hedging, and fundamentally new dynamics to the biggest market in the world -- global oil and gas trades. In essence, the US will no longer be able to effortlessly expand credit via US Treasury bills, and the US$'s demand/liquidity value will fall.



If you ignore the rhetoric, the facts of the article are hard to dispute. The author obviously has an axe to grind against the administration, however the meat of the article is certainly verifiable. Food for though.
Link Posted: 2/16/2006 7:51:47 PM EDT

Originally Posted By vito113:

Originally Posted By Lert:
Tag.
There were lots of good reasons for going after Saddam. Selling oil in Euros was a one. There are lots of good reasons for going after Iran. The Euro-denominated oil bourse opeing there in March is a big one. The U.S. dollar loosing its reserve currancy status is a MUCH bigger threat to American prosperity and way of life than getting a city or two nuked. Imagine the mass starvation if the U.S. dollar lost 30% of its value? What about 50%? In that situation, the anarchy, unrest and mass starvtion would make a nuke attack on NYC or LA pale by comparrision.




BINGO!

The USA's amazing wealth and high standard of living is underpinned by a safe and steady supply of cheap oil.

If the 'cheap' oil goes away and the US has to buy at the same store as everyone else it's going to hurt, and hurt bad. The Europeans are streets ahead of the US in energy efficiency and living with expensive oil. The going rate for a gallon of gas in the EU is about $6 a gallon and is an 'acceptable price, the US is hurting dealing with $2 a gallon. How would the US economy cope with gas at even $4 a gallon, let alone $6?

ANdy



Err, maybe no BINGO.

Perhaps the reason Brits pay $6/gallon is because 75% of that is TAXES. We pay a 22% gasoline tax on average.

Link Posted: 2/16/2006 7:52:58 PM EDT
Ramsey Clark said the exact same thing as Paul 3 years ago.
Link Posted: 2/16/2006 11:15:52 PM EDT
Link Posted: 2/16/2006 11:28:38 PM EDT
I understand that, and note that this last round of high fuel prices promoted a rush on hybrids.

The point I was making is the high price of gas in the UK and other places has nothing to do with US petrodollar hegemony – it’s because your own governments are screwing you with high gasoline taxes.
Link Posted: 2/16/2006 11:28:42 PM EDT

Originally Posted By thedoctors308:
IBThePeopleWhoPutTheirFaithInPaperCurrenc­y.

It could be considered unconstitutional for the Federal government to be printing money.
They only have the authority to coin money.



Lucky for us the government doesn't print money the privately-owned Federal Reserve does.
Link Posted: 2/16/2006 11:43:46 PM EDT

Originally Posted By vito113:
The USA's amazing wealth and high standard of living is underpinned by a safe and steady supply of cheap oil.

If the 'cheap' oil goes away and the US has to buy at the same store as everyone else it's going to hurt, and hurt bad. The Europeans are streets ahead of the US in energy efficiency and living with expensive oil. The going rate for a gallon of gas in the EU is about $6 a gallon and is an 'acceptable price, the US is hurting dealing with $2 a gallon. How would the US economy cope with gas at even $4 a gallon, let alone $6?

ANdy


Er, sorry, not really close, no cylindrical smoking brown leaf thingie.

The U.S. is one of the world's most efficient economies when it comes to using energy. We get twice as much GDP out of a barrel of oil as China does. If the dollar collapses, it will hurt, but oil efficiency isn't going to be what kills us.

You're confusing the retail price of gasoline with how much oil and petroleum products cost for industry. Just because Britain taxes gasoline to death, it doesn't mean your SUV gets better gas mileage.
Link Posted: 2/17/2006 12:09:22 AM EDT
[Last Edit: 2/17/2006 12:15:47 AM EDT by iamblades]

Originally Posted By vito113:

Originally Posted By Lert:
Tag.
There were lots of good reasons for going after Saddam. Selling oil in Euros was a one. There are lots of good reasons for going after Iran. The Euro-denominated oil bourse opeing there in March is a big one. The U.S. dollar loosing its reserve currancy status is a MUCH bigger threat to American prosperity and way of life than getting a city or two nuked. Imagine the mass starvation if the U.S. dollar lost 30% of its value? What about 50%? In that situation, the anarchy, unrest and mass starvtion would make a nuke attack on NYC or LA pale by comparrision.




BINGO!

The USA's amazing wealth and high standard of living is underpinned by a safe and steady supply of cheap oil.

If the 'cheap' oil goes away and the US has to buy at the same store as everyone else it's going to hurt, and hurt bad. The Europeans are streets ahead of the US in energy efficiency and living with expensive oil. The going rate for a gallon of gas in the EU is about $6 a gallon and is an 'acceptable price, the US is hurting dealing with $2 a gallon. How would the US economy cope with gas at even $4 a gallon, let alone $6?

ANdy



Wrong.

the US values stability of supply over low price, which is why we buy most of our oil from canada, mexico, venezuela, etc. and not the cheaper providers like the middle eastern nations.

We already 'buy at the same store as everyone else', oil is a fungible commodity. Everyone pays the same price, doesn't really matter if it is denominated in dollars or euros. The difference is we don't add on nearly as much taxes and regulatory overhead. You are comparing things that are not directly comparable.

Also the US economy isn't really hurting at $2 prices, it is just that americans are used to lower prices and like to bitch alot.

Now, all this said, european economies may indeed have less of a shock when the price of oil goes up, as they can just ditch the taxes and regulations, and presto, the price is the same, but this has nothing to do with whether the price of oil is in dollars or euros, it's the exchange rate that matters. If the dollar goes down relative to the euro, then europeans will get cheaper oil relative to us regardless if the oil is priced in dollars or euros.

The strong dollar has been more of a handicap than a help to the US economy though, as it makes it hard to compete in the export market. a 30% drop in value is not all that drastic. Wouldn't be any mass starvation as we don't need to import food, don't NEED to import much at all really. That drop in value would cause an increase in exports that would more than outweigh the increased price of things that need to be imported, like oil.
Link Posted: 2/17/2006 12:39:34 AM EDT
Link Posted: 2/17/2006 4:48:37 AM EDT

Originally Posted By iamblades:
That drop in value would cause an increase in exports that would more than outweigh the increased price of things that need to be imported, like oil.


Our trade inbalance has not deminished at all with the recent "weak" dollar, in fact it has widened...Futhermore, if the dollar is no longer the reserve currency (hence, no longer artificially strong), we will not be able to sustain our trade deficit.
Link Posted: 2/17/2006 2:07:05 PM EDT

Originally Posted By iamblades:

Originally Posted By vito113:

Originally Posted By Lert:
Tag.
There were lots of good reasons for going after Saddam. Selling oil in Euros was a one. There are lots of good reasons for going after Iran. The Euro-denominated oil bourse opeing there in March is a big one. The U.S. dollar loosing its reserve currancy status is a MUCH bigger threat to American prosperity and way of life than getting a city or two nuked. Imagine the mass starvation if the U.S. dollar lost 30% of its value? What about 50%? In that situation, the anarchy, unrest and mass starvtion would make a nuke attack on NYC or LA pale by comparrision.




BINGO!

The USA's amazing wealth and high standard of living is underpinned by a safe and steady supply of cheap oil.

If the 'cheap' oil goes away and the US has to buy at the same store as everyone else it's going to hurt, and hurt bad. The Europeans are streets ahead of the US in energy efficiency and living with expensive oil. The going rate for a gallon of gas in the EU is about $6 a gallon and is an 'acceptable price, the US is hurting dealing with $2 a gallon. How would the US economy cope with gas at even $4 a gallon, let alone $6?

ANdy



Wrong.

the US values stability of supply over low price, which is why we buy most of our oil from canada, mexico, venezuela, etc. and not the cheaper providers like the middle eastern nations.

We already 'buy at the same store as everyone else', oil is a fungible commodity. Everyone pays the same price, doesn't really matter if it is denominated in dollars or euros. The difference is we don't add on nearly as much taxes and regulatory overhead. You are comparing things that are not directly comparable.

Also the US economy isn't really hurting at $2 prices, it is just that americans are used to lower prices and like to bitch alot.

Now, all this said, european economies may indeed have less of a shock when the price of oil goes up, as they can just ditch the taxes and regulations, and presto, the price is the same, but this has nothing to do with whether the price of oil is in dollars or euros, it's the exchange rate that matters. If the dollar goes down relative to the euro, then europeans will get cheaper oil relative to us regardless if the oil is priced in dollars or euros.

The strong dollar has been more of a handicap than a help to the US economy though, as it makes it hard to compete in the export market. a 30% drop in value is not all that drastic. Wouldn't be any mass starvation as we don't need to import food, don't NEED to import much at all really. That drop in value would cause an increase in exports that would more than outweigh the increased price of things that need to be imported, like oil.



Oil is the ONLY import that matters, at the end of the day. It is the basis of all production, including agriculture. If the world dumps dollars for Euros, and the value of the dollar collapses, then the US will pay alot more, comparitivly, for oil. That will lead to a huge inflationary spike in everything from food to clothing to computers. You don't import food, but you do import the oil and gas that makes the pesticides and fertilzier, and runs the farm machinery and trucks.

It really does matter what currency oil is denominated in. The US can generate so much debt because the rest of the world needs dollars to buy oil in. If the world does not need dollars, then the value of the dollar falls. The U.S. economy is built on debt, not on manufacturing, or services or anything like that. If the dollar stops being the only currency that oil can be bought in, then the dollar will sink to its "natural" level. This will mean that oil, and every other import, will cost comparativly more than before the fall, acting as a further brake on economic activity.

To put it another way, its a simple supply and demand issue. At the moment, the demand for the dollar is artificially high, as you need dollars to by oil. If you don't need dollars to by oil, demand drops, and so does the value of the dollar. Since the dollar isn't backed by anything tangible, such as gold, then the dollar will drop to the level that the market perceives its worth.

This situation gets really bad if too many dollar holders jumps ship too quickly. If that happens, then you get a run on the dollar, which would be a disaster for everyone. Such an event would plunge the world into a depression. This is why countries such as Japan and China hold such massive dollar reseves, far more than they actually need. It is in their best economic interests to keep the dollar stable. Both economies rely on selling consumer goods to the US. If the US is unable to purches them, or buys less of them, then the Chinese and Japanese economies tank.

The Iranian oil bourse is very, very bad news for the U.S.
Link Posted: 2/17/2006 2:25:22 PM EDT

Originally Posted By Lert:

Originally Posted By motown_steve:
Someitmes Ron Paul comes off sounding like a loon.

US invaded Iraq to keep Saddam from demanding Euros.



I'm sure that it was a consideration. It would have st a dangerous precident if Saddam got EUros for his oil. Not because Saddam exported much oil, but because it would have undermined the strength of the dollar, and therefore America's place in the world.

Like I said, there were lots of good reasons to go after him. The revelations about WMDs and terrorism that have come out in the last few weeks confirm the fact the he needed to go. The Euro thing, whilst seeming insignificant was actually more dangerous.



Considering that China is becoming a major consumer of oil itself, what if Saudi and South American producers decided to accept Yuen over Euro or Dollar? Sooner or later China will reach a critical mass where it can flex its economic muscle the way US has been.
Link Posted: 2/17/2006 2:48:16 PM EDT
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.
Link Posted: 2/17/2006 2:56:42 PM EDT

Originally Posted By Javak:

Originally Posted By Lert:

Originally Posted By motown_steve:
Someitmes Ron Paul comes off sounding like a loon.

US invaded Iraq to keep Saddam from demanding Euros.



I'm sure that it was a consideration. It would have st a dangerous precident if Saddam got EUros for his oil. Not because Saddam exported much oil, but because it would have undermined the strength of the dollar, and therefore America's place in the world.

Like I said, there were lots of good reasons to go after him. The revelations about WMDs and terrorism that have come out in the last few weeks confirm the fact the he needed to go. The Euro thing, whilst seeming insignificant was actually more dangerous.



Considering that China is becoming a major consumer of oil itself, what if Saudi and South American producers decided to accept Yuen over Euro or Dollar? Sooner or later China will reach a critical mass where it can flex its economic muscle the way US has been.



Would be true if the Yuan was actually worth something. China has peggged the Yuan to the USD artificially low so that their goods are artificially cheap. This allows them to run up massive current account surpluses that they then use to further modernise their economy, and of course by weapons. Essentially, every time you buy something stamped "Made in China" you're funding the rise of China in an unusually direct way. In order for OPEC to start accepting Yuan, the Chinese will have to float it, so that it rises to something representing the true value of the economy, which is just over half the of the US (US GDP: $ 11,750 billion; PRC GDP:$ 7,262 billion; Texas GSP:$924.55 billion) (Mind you, with 1.3B ppl, China's GDP per capita is still stupidly low)



Link Posted: 2/17/2006 3:04:34 PM EDT
I'm afraid the only real answer is to learn how to live within your means. In the Western world, we have become addicted to cheap credit. If we want it, we charge it. This is bad for a number of reasons, but mainly becuase, at some point, it all has to be paid back. If you can't then you get thrown out on the street.

The best advice is to live witin your means, save money for investment in tangibles, like gold and silver (because inflation diminishes the value of savings) and try to build a career in an indispensible field.

Also check out Survival Blog. Lots of good tips there.
Link Posted: 2/17/2006 3:07:57 PM EDT

Originally Posted By TheCynic:

Originally Posted By motown_steve:
US invaded Iraq to keep Saddam from demanding Euros.


Uh, how about doing some research, Steve?

Even wonder why the sabre rattling between the US and Iran is just now heating up? Here is a hint: it has very little to do with Iran's fledgling nuclear program.



So then Bush DID lie and we DID go to war over the oil?
Link Posted: 2/17/2006 3:18:46 PM EDT

Originally Posted By motown_steve:
So then Bush DID lie and we DID go to war over the oil?


You'll never hear me say it that way, but, with a VERY simplistic POV, yes. There are about half a dozen good reasons for that war; the WMD argument is just the sexiest. Try telling the American people that we need to start a war in order to prevent the dollar from losing its reserve status. Or, tell them that we need to start a war to secure FOBs in a friendly nation to allow for the removal of US troops from EU NATO bases and Saudi Arabia. Etc, etc... The WMD and human rights violations were reason enough to oust Saddamn, but they were not the most important nor them most pressing.
Link Posted: 2/17/2006 3:19:44 PM EDT

Originally Posted By NavajoGunOwner:
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.



Food for thought.
Link Posted: 2/17/2006 3:41:52 PM EDT

Originally Posted By TheCynic:

Originally Posted By motown_steve:
So then Bush DID lie and we DID go to war over the oil?


You'll never hear me say it that way, but, with a VERY simplistic POV, yes. There are about half a dozen good reasons for that war; the WMD argument is just the sexiest. Try telling the American people that we need to start a war in order to prevent the dollar from losing its reserve status. Or, tell them that we need to start a war to secure FOBs in a friendly nation to allow for the removal of US troops from EU NATO bases and Saudi Arabia. Etc, etc... The WMD and human rights violations were reason enough to oust Saddamn, but they were not the most important nor them most pressing.



+1 on that. They news over the last few weeks about Iraq's links to Terrorsim and WMDs has vindicated Bush et. al. on the reasons for the war. However, The decision to go to war is always complicated, and just terrorism and WMDs were not enough. The U.S. never invaded Lybiya, yet they were doing both. Ditto on Syria. There are countless other examples where the U.S. could have used terrorism and WMDs as a pretext for war. Therefore, there must have been other reasons as well. Protecting the U.S.D., and thus the safety and security of the U.S., seting up a police station in the most strategiclly important part of the world etc. are all important considerations. Lybia can't undermine U.S. security the way that oil-rich Iraq and Iran can. I'm not saying that any of this is immoral, or anything, just that its more complicated than White House Press Office soundbites portray it. In politics and marketing, you need to keep the msg simple.
Link Posted: 2/17/2006 3:50:59 PM EDT

Originally Posted By NavajoGunOwner:
So what happens to the average Joe? making less than $60K a year. Just able to get by as it is.



He's going to learn to do without Budweiser, Marlboro, McDonalds and his 'must-have' ATV.
Link Posted: 2/17/2006 4:23:24 PM EDT

Originally Posted By vito113:
Er maybe you are completely missing the point here.....

The cost of gas right across the EU is about $6 a gallon, the economies factor that price into the equation and it acts as a natural brake on consumption and spur to energy efficiency, most cars in Europe are in the 35-45mpg class.



And distances that Europeans drive are typically less than in the US. SUVs aren't the reason why the US consumes more oil than Europe.

Link Posted: 2/17/2006 4:26:48 PM EDT

Originally Posted By motown_steve:
Someitmes Ron Paul comes off sounding like a loon.

US invaded Iraq to keep Saddam from demanding Euros.



Worse yet, he makes it sound like supporting our economy is an illegimate reason to wage war. Does Ron need to see Americans starving in the street to be reminded of what happens when the economy collapses?

He should talk to my Depression-era parents and ask them to tell him what it was like to be hungry!
Link Posted: 2/17/2006 6:49:18 PM EDT
I love reading conspiracy theories about foreign currency. Always entertaining. Particularly the ongoing fascination with the gold standard among libertarians. Doom is just around the corner with these people, has been for 30 years as the US has become the wealthiest country in the world. By the way, for the guy that said a 30% decline in the dollar would devastate the US, I would ask where he has been living these past few years. The dollar fell over 40% versus the euro from 2002-2004, while the US economy was still growing, and in fact grew dramatically in 2004, the worst year for the dollar. But what would I know, I just do foreign exchange for a living...
Link Posted: 2/17/2006 6:56:58 PM EDT
Doesnt a week US dollar make US goods cheaper overseas?
Link Posted: 2/17/2006 7:06:24 PM EDT
Yup, weaker dollar increases US exports as goods are cheaper overseas. However, as the US is a net importer of goods, the increase in US exports is offset by the increased price of imported goods. Being the wealthiest country in the world, we can afford to buy much more than the countries we export to, leading to our current trade deficit situation.
Link Posted: 2/17/2006 7:42:40 PM EDT
Tag for a macro-economics lesson.

So how will this affect interest rates, if the SHTF and the dollar plummets?
Link Posted: 2/17/2006 7:47:33 PM EDT

Originally Posted By vito113:

Originally Posted By mattja:
I understand that, and note that this last round of high fuel prices promoted a rush on hybrids.

The point I was making is the high price of gas in the UK and other places has nothing to do with US petrodollar hegemony – it’s because your own governments are screwing you with high gasoline taxes.



You're right, they do, but.... When we see a hike in Oil prices the various EU .Govs can either hold any rises in fuel taxation, SOP for the British economy, and reduce the spend on social programs paid for using the fuel taxes, or there is the option to reduce the tax burden in extremis. The US by virtue of it's low tax rates on fuel does not really have much leeway to do that and the costs transfer straight to the consumer.

ANdy



That's a risk we're willing to talk.

However, I think in reality, neither government would offset high oil prices with a cut in the gasoline tax. They would both screw us in the end.
Link Posted: 2/17/2006 8:17:25 PM EDT

Originally Posted By TheFaz:
Being the wealthiest country in the world, we can afford to buy much more than the countries we export to, leading to our current trade deficit situation.


Question: How is the trade deficit financed? Answer: Foreign investment.

When the dollar loses favor and the US becomes a less attractive investment, interest rates must rise. How are we going to buy all of those expensive imported goods when the Fed is forced to raise interest rates in order to attract foreign investment? If the dollar is no longer the dominate reserve currency, how can we bully foreign governments into propping up the dollar as we've done in the past?
Link Posted: 2/17/2006 8:52:02 PM EDT

Originally Posted By Lert:
This situation gets really bad if too many dollar holders jumps ship too quickly. If that happens, then you get a run on the dollar, which would be a disaster for everyone. Such an event would plunge the world into a depression. This is why countries such as Japan and China hold such massive dollar reseves, far more than they actually need. It is in their best economic interests to keep the dollar stable. Both economies rely on selling consumer goods to the US. If the US is unable to purches them, or buys less of them, then the Chinese and Japanese economies tank.



So just how important is our economy to the economy of other countries? How much would they be willing to do to prevent that from happening, or at what point would they just say "fuck em?"
Link Posted: 2/17/2006 9:34:09 PM EDT

Originally Posted By TheFaz:
I love reading conspiracy theories about foreign currency. Always entertaining. Particularly the ongoing fascination with the gold standard among libertarians. Doom is just around the corner with these people, has been for 30 years as the US has become the wealthiest country in the world. By the way, for the guy that said a 30% decline in the dollar would devastate the US, I would ask where he has been living these past few years. The dollar fell over 40% versus the euro from 2002-2004, while the US economy was still growing, and in fact grew dramatically in 2004, the worst year for the dollar. But what would I know, I just do foreign exchange for a living...



Conspiracy theories? Nothing particularly conspiritorial here.
Oil IS denominated only in US dollars, isn't it? This DOES create an artificially high demand for USD, doesn't it? The Iranians ARE going to open a Euro-denominated oil bourse in March, aren't they? This WILL reduce demand for dollars as countries concerned about their massive dollar holdings diversify into euros because now they can and still buy oil, won't it? This drop in demand WILL reduce the value of the dollar when the bourse catches on, won't it?

I picked the 30% figure out of the air. Now I might be off base here, but didn't the value of the Euro rise wrt the dollar (rather than the USD fall wrt the Euro)due to the stabilisation and acceptance of the Euro as a serious currency? It certainly wasn't due to sparkling economic growth in the Euro-zone, and as you said, US growth was high.

What I'm talking about is the U.S.'s ability to purchase oil, which is at the foundation of the nation's economy. If the U.S. dollar devalues substantially, AND oil markets demand Euros, oil becomes much more expensive relative to before the devaluation. This increases inflation throughout the economy, both as a result of the the price of petrol rising, thereby affecting consumers directly and transport companies, but also due to the fact that petrochemicals represent a major input in every production industry from from agriculture to electronics. I don't actually know what devaluation coupled with inflation and its attendant interest rate rises it would take to devistate the US economy.

As for my suggestion to someone about investing in gold and silver, currently, we are in the middle of a resources boom. Between 2000 and 2005 gold has doubled in price Historical Gold Price. In addition, gold is forcast to hit between US$750 and US$1000/oz in the next few years www.finfacts.com/irelandbusinessnews/publish/article_10004068.shtml. On top of all this, gold, silver et. al prices all rise substantially during times of economic crisis (Great Depression, Oil Shocks of the late 70's and early 80's and the Wall St. Crash of '87 as examples). The coming conflict with Iran over WMDs will surely generate an oil crisis, which in turn will spark an economic crisis, just as oil crises have done in the past. Iran is threaten to close the Staits of Hormuz, which it has tried to do before during the Tanker War between Iran and Iraq in the '80s. If Iran is sanctioned, oil prices will also rise. If Iran decides to sell only to a select few countries for political reasons, the oil price will rise. The price of oil is intriniscally linked with economic performance- for example, the price hikes in the wake of Hurricanes Katrina and Rita are estimated to have knocked 1% off U.S. growth figures. Anyway you cut it, gold and silver provide security in times of economic trouble, which many, many economists say is coming.

Another Scenario:
Given that Chavez in Venezuala supplies most of the US's oil, AND he doesn't like you all very much, AND has made noises about selling his newly nationalised oil to other countries to spite the US, don't you think that demanding Euros for oil (now that he can) be a great way to stick it to America? Thats pure speculation, of course, but it seems reasonable. That will really hurt.
Link Posted: 2/17/2006 9:49:01 PM EDT

Originally Posted By SnoopisTDI:

Originally Posted By Lert:
This situation gets really bad if too many dollar holders jumps ship too quickly. If that happens, then you get a run on the dollar, which would be a disaster for everyone. Such an event would plunge the world into a depression. This is why countries such as Japan and China hold such massive dollar reseves, far more than they actually need. It is in their best economic interests to keep the dollar stable. Both economies rely on selling consumer goods to the US. If the US is unable to purches them, or buys less of them, then the Chinese and Japanese economies tank.



So just how important is our economy to the economy of other countries? How much would they be willing to do to prevent that from happening, or at what point would they just say "fuck em?"



The US economy is vital as its the biggest game in town. The US is both Japan and China's biggest markets. Japan and China will keep propping the US up until the have an alternative, or the whole thing falls over. What Europe does is provide an alternative market and reserve currency. The Euro is NOT a reserve currency but is working hard at becoming one. A Euro-denominated oil bourse would allow countries like Japan and China to diversify their dollar holdings into something as valuable as the dollar (both have been talking about it quietly), backed by a powerful (although somewhat stagnant) economy. If this diversification is done gradually, then the effects will be spread out. However, if, say, our good frinds in China felt the need to hurt the U.S., they could do so with much less damage to themselves than they could now.

I seriously doubt that they would just dump the dollar wholesale, unless there were some sort of panic, or there was some political reason to do so.

Link Posted: 2/17/2006 9:53:23 PM EDT

Originally Posted By fossil_fuel:

The 1944 Bretton Woods agreement solidified the dollar as the preeminent world reserve currency, replacing the British pound.



Link Posted: 2/18/2006 5:59:47 AM EDT

Originally Posted By pv74:
Doesnt a week US dollar make US goods cheaper overseas?



Problem is, what and how much goods are we actually exporting? textile? automobiles? electronic goods?
Link Posted: 2/18/2006 6:24:52 AM EDT
[Last Edit: 2/18/2006 6:25:12 AM EDT by Javak]
Link Posted: 2/18/2006 6:36:36 AM EDT
Link Posted: 2/18/2006 6:50:56 AM EDT
Link Posted: 2/18/2006 8:41:59 AM EDT
So if Iran dropped the nuclear weapon issue, we would still come up with a reason to invade because Iran is creating the petroeuro (IOB)?

How lucky for us that they are anti-semits and are building nuclear weapons otherwise we wouldn't have a reason to unlease the dogs of war upon them.

OR to say it another way.....

So if they dropped the retoric against Israel and stopped building towards nuclear weapons we would have to come up with a reason to destroy them because they plan on creating the petroeuro? How fortunate they have given us good reasons to bomb them.


Link Posted: 2/18/2006 11:03:30 AM EDT
The US currency was doomed when it left the gold standard, pretty simply.
It's just that no president wants it to fall on his watch, and no pres/congress wants to be the ones to deal with all the financial chickens coming home to roost. But that doesn't mean it isn't going to happen.

The US is the main driver of inflation worldwide, it can't continue forever.
~
Link Posted: 2/18/2006 11:17:02 AM EDT

Originally Posted By Floppy_833:
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.
Arrow Left Previous Page
Page / 2
Top Top