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Do you want me to send you Cheney's 2001 map of how the oil fields were going to be split up? Seriously. It's one of the few documents that made it out of the energy task force meeting.
I would love to see that.
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jcd11235 0
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But don't take my word for it. Here is a Republican's thoughts on the subject, offered more recently, since you felt a two year old article was "old."
Interesting article. You realize this guy is advocating a return to the gold standard? And, there's not a lot of gold to go around in the world, anymore.
I agree with some of his points. US govt bonds, etc. are the benchmark securities for the world. Why? We are the most powerful militarily, and as long as we pay on the notes, then people (mainly govts and large corps) will feel comfortable converting whatever currency they have into US securities. That's the real power being discussed here. No financially savvy institution keeps US Dollars tucked away under their bed. They keep US securities tucked away under their bed, because they get a rate of return from those securities.
Right now, it does appear that we've been printing extra money for some time, thus the inflation concerns being expressed at the Fed. There is also a movement underfoot by several govts to decrease their exposure to US govt bonds (e.g., China).
I do understand the laws of supply and demand. My point here is it's not so much the demand for US Dollars as it is the demand for US securities that's going to be driving the shape of our world.
You keep bringing up how the US has the most powerful military in the world, but you keep ignoring the fact that we use that military might to make sure oil is traded in dollars.
Yes, Rep. Paul advocates a backed currency. Without backing, the only way to maintain the dollar's value against foreign currencies is to ensure international demand for dollars remains high. If demand wanes and dollars won't buy anything other than American goods, we cannot maintain a trade deficit.
No matter what the rate of return on US securities, if the demand for the dollar falls, so does the real value of those securities.
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SkyDekker 1,465
QuoteWe'll have a temporary blip in interest rates that will be correcting by the Federal Reserve absorbing the excess dollars. It won't cause any long lasting problems.
I think it will be much more than temporary.
Plus, retail prices in the US will soar.
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but you keep ignoring the fact that we use that military might to make sure oil is traded in dollars.
We'll have to agree to disagree on this point. What you're calling a fact is something I see as an opinion. While old-traded-in-dollars may be a concern to some of our leaders, the fact is we aren't going around conquering countries and claiming their resources as our government's own.
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Yes, Rep. Paul advocates a backed currency.
So, what happens when the world's gold supply runs out before the oil supply. Oil suppliers will have all the gold. Does that mean they'll stop selling their oil to non-gold owners? I doubt it. Gold backed currencies do not make sense in our world today. That's why every Central Bank in the world has moved away from it.
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No matter what the rate of return on US securities, if the demand for the dollar falls, so does the real value of those securities.
If the value of the dollar is adversely affected, then USD denominated securities will be adversely affected. That we're in agreement on.
The question is - what will it take for the USDollar to be negatively impacted for a prolonged period of time? If there's a surplus in USD on the world market, the Fed will absorb those dollars, thus negating the increase in supply. As SkyDekker notes in a later reply, he thinks that won't be enough to correct the price relative to other currencies. I don't know. Great Britain did not collapse when the world started using dollars over pounds.
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jcd11235 0
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but you keep ignoring the fact that we use that military might to make sure oil is traded in dollars.
We'll have to agree to disagree on this point. What you're calling a fact is something I see as an opinion. While old-traded-in-dollars may be a concern to some of our leaders, the fact is we aren't going around conquering countries and claiming their resources as our government's own.
So you are saying it is only my opinion that we have intervened militarily in the affairs of nations in an oil rich region? Sorry, but that isn't how opinions work.
We are not a socialist country, we are a capitalist country. We don't want the government to own own the oil. We want American (and to a lesser extent other western nations') companies to have easy access to the resources and markets that were previously dominated by Iraqi government and businesses.
QuoteSo, what happens when the world's gold supply runs out before the oil supply. Oil suppliers will have all the gold. Does that mean they'll stop selling their oil to non-gold owners? I doubt it. Gold backed currencies do not make sense in our world today. That's why every Central Bank in the world has moved away from it.
Where is the gold going? People do not consume gold in the same manner they consume oil. If you buy a gold ring, you are a consumer, but the gold still exists. OTOH, if you buy a gallon of gasoline, it is very unlikely you will have that same gallon of gas in a year.
If we have an unbacked currency, the government can (and does) print more money. This practice contributes to inflation, and is why you can no longer buy an ounce of gold with US$37.
QuoteIf the value of the dollar is adversely affected, then USD denominated securities will be adversely affected. That we're in agreement on.
What I am saying is that if oil is largely traded in currencies other than the dollar, the value of the dollar will[/be] be adversely affected.
QuoteGreat Britain did not collapse when the world started using dollars over pounds.
Who said anything about the US collapsing? I said we would not be able to maintain our trade deficit if the international demand for dollars falls significantly, as would likely be the case if the predominate currency used on the oil market becomes something other than the dollar.
Do you think it is a coincidence that the strongest western supporter of our Iraq invasion happens to also be an EU member that has not yet adopted the Euro? Or, is it coincidence that France and Germany have both adopted the Euro, and were very vocal in their opposition to our invasion? Is it a coincidence that only 4445 troops from countries using the Euro have been sent to Iraq, of which only Italy's 1800 remain, and they are scheduled to withdrawal next month? Put another way, at no time since the 2003 invasion have countries that have adopted the Euro contributed more than 1.4% of the total "coalition," and by January 2007, will make up none of the troops of the coalition.
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So you are saying it is only my opinion that we have intervened militarily in the affairs of nations in an oil rich region?
We didn't do it because we wanted their oil. That's my point.
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What I am saying is that if oil is largely traded in currencies other than the dollar, the value of the dollar will be adversely affected.
There's nothing stopping countries from trading dollars in Euros. If the suppliers will only accept Euros, then that is there perogative.
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billvon 3,120
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>There's nothing stopping countries from trading dollars in Euros.
Other than us.
In 2000, Iraq switched to the Euro valuation for their oil. It drove up the relative value of the Euro from .83 to $1.05. Needless to say, they are back on the dollar now.
In 2006, the UAE threatened to start selling oil in Euros. Shortly thereafter, they got a $7 billion contract providing US port security, and they stopped threatening to sell oil in Euros.
Both Venezuela and Iran have threatened to do the same. Hopefully we won't follow the Iraq plan for them as well.
Other than us.
In 2000, Iraq switched to the Euro valuation for their oil. It drove up the relative value of the Euro from .83 to $1.05. Needless to say, they are back on the dollar now.
In 2006, the UAE threatened to start selling oil in Euros. Shortly thereafter, they got a $7 billion contract providing US port security, and they stopped threatening to sell oil in Euros.
Both Venezuela and Iran have threatened to do the same. Hopefully we won't follow the Iraq plan for them as well.
jcd11235 0
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So you are saying it is only my opinion that we have intervened militarily in the affairs of nations in an oil rich region?
We didn't do it because we wanted their oil. That's my point.
I'll overlook the fact you ignored my question.
You said it was not about oil. It is about oil. That's my point.
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What I am saying is that if oil is largely traded in currencies other than the dollar, the value of the dollar will be adversely affected.
There's nothing stopping countries from trading dollars in Euros. If the suppliers will only accept Euros, then that is there perogative.
Except, when that happens the US tends to get very upset and do things like invade. Consequentially, OPEC countries are not as free to trade in Euros as you imply. The US uses military might (and abuses their power as a permanent member of the UNSC) to "persuade" countries to trade oil for dollars.
Didn't want to comment on the conspicuous absence of support for the Iraq war by countries in the Eurozone?
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Other than us.
Based upon the arguments being made in this thread, I don't doubt we have an interest in keeping demand for the USDollar high. I very much doubt the "threat" of Euro based oil trading is so high as to provoke military action on our part. Until I see further evidence, this may be a point we have to agree to disagree on.
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In 2000, Iraq switched to the Euro valuation for their oil. It drove up the relative value of the Euro from .83 to $1.05. Needless to say, they are back on the dollar now.
When did they switch back? After we invaded, or before?
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In 2006, the UAE threatened to start selling oil in Euros. Shortly thereafter, they got a $7 billion contract providing US port security, and they stopped threatening to sell oil in Euros.
So, there wasn't military intervention.
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Both Venezuela and Iran have threatened to do the same. Hopefully we won't follow the Iraq plan for them as well.
Chavez is a loose cannon. Why isn't he only taking payments in Euros? He's clearly not afraid of US military intervention.
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jcd11235 0
QuoteBased upon the arguments being made in this thread, I don't doubt we have an interest in keeping demand for the USDollar high.
Could you elaborate on the logic behind this statement? It seems to inconsistent with the arguments I have read in this thread.
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You said it was not about oil. It is about oil. That's my point.
As I have said several times now in this thread, it's about the free flow of oil in a free market system.
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Except, when that happens the US tends to get very upset and do things like invade.
The US has never invaded another country because that country wanted to trade oil in Euros.
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Consequentially, OPEC countries are not as free to trade in Euros as you imply.
During the 1970s, OPEC had no qualms what so ever putting the screws to our economy. And they did it in a much more effective way than trading oil in a non-USD currency. Our military advantage over their countries was as great then as it is now.
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Didn't want to comment on the conspicuous absence of support for the Iraq war by countries in the Eurozone?
I expect that their lack of support for the war would have been the same had oil been trading in Euros.
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Could you elaborate on the logic behind this statement? It seems to inconsistent with the arguments I have read in this thread.
Sure, I've learned some things in this thread that I didn't know prior to getting involved in it. That's one of the things I love about SC.
I don't agree with the statement that we'll use military intervention to keep a country from trading oil in Euros. The financial markets are very deep, and we would deal with that situation via free markets, if it does arise.
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billvon 3,120
>I very much doubt the "threat" of Euro based oil trading is so high as to
>provoke military action on our part.
It was not the only reason we invaded, and we definitely consider other actions to accomplish this goal. But it is something we do care about, and was almost certainly a consideration in the run-up to war.
>provoke military action on our part.
It was not the only reason we invaded, and we definitely consider other actions to accomplish this goal. But it is something we do care about, and was almost certainly a consideration in the run-up to war.
jcd11235 0
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You said it was not about oil. It is about oil. That's my point.
As I have said several times now in this thread, it's about the free flow of oil in a free market system.
So it is about the oil. I'm glad we can agree on that finally.
QuoteThe US has never invaded another country because they wanted to trade oil in Euros.
Let me guess-- you think the administration actually believed all the cherry picked intel claiming Saddam posed a significant threat to America, or that he had strong ties with al Quaeda. If not, can you share with us your thoughts regarding why we invaded Iraq?
I'm not claiming that trading oil for dollars was our only goal in Iraq, but it appears to have been pretty high on the list.
QuoteDuring the 1970s, OPEC had no qualms what so ever putting the screws to our economy. And they did it in a much more effective way than trading oil in a non-USD currency. Our military advantage over their countries was as great then as it is now.
What indication do you have that OPEC is a one trick pony? Why is it so hard for you to understand that OPEC members trading oil in non-US currencies is another way for them to "put the screws to our economy?"
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Didn't want to comment on the conspicuous absence of support for the Iraq war by countries in the Eurozone?
I expect that their lack of support for the war would have been the same had oil been trading in Euros.
Iraqi oil was being traded in Euros; that's the point.
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But it is something we do care about
Anything that impacts our effective interest rate is of great concern to us. China dumping all of its govt bonds on the open market is a real concern right now, though they'll ending up hurting themselves if they move too fast.
I may be missing something here, but saying that FX currency markets will have a dramatic long term impact on US based securities isn't something I've heard or read about.
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Let me guess-- you think the administration actually believed all the cherry picked intel claiming Saddam posed a significant threat to America, or that he had strong ties with al Quaeda. If not, can you share with us your thoughts regarding why we invaded Iraq?
I don't know, but I think Bush believed the people around him claiming that Saddam was a clear and present danger to the US. Personally, I wish he would have listened to Colin Powell rather than Rumsfeld and Cheney.
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I'm not claiming that trading oil for dollars was our only goal in Iraq, but it appears to have been pretty high on the list.
Again, we'll have to agree to disagree on this point.
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What indication do you have that OPEC is a one trick pony? Why is it so hard for you to understand that OPEC members trading oil in non-US currencies is another way for them to "put the screws to our economy?"
I'm not disputing that OPEC trading oil in non-USD currency would provide short term negative stimulus to our economy. They are free to do so. My understanding is you're claiming they won't because of fear of US military intervention. I disagree with that view.
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Iraqi oil was being traded in Euros; that's the point.
Is no one else on the planet trading oil in Euros? If there are other people trading oil in Euros, why haven't we invaded them?
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Just came back from a nice night out with old friends in NYC tonight. Grabbed a Wall Street Journal to read on the train ride back to my town. On page A6, 7-Nov-2006, there is a short blurb on "Embassies Try Euros As US Restricts Use Of Dollars in Cuba".
My point - we don't need to use military intervention to prevent Euro based transactions.
Check out the article. Unfortunately, the link to the article isn't a freebie.
My point - we don't need to use military intervention to prevent Euro based transactions.
Check out the article. Unfortunately, the link to the article isn't a freebie.
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jcd11235 0
QuoteJust came back from a nice night out with old friends in NYC tonight. Grabbed a Wall Street Journal to read on the train ride back to my town. On page A6, 7-Nov-2006, there is a short blurb on "Embassies Try Euros As US Restricts Use Of Dollars in Cuba".
My point - we don't need to use military intervention to prevent Euro based transactions.
Were they referring to transactions involving large amounts of oil? If not then your point is not relevant to the current discussion.
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Were they referring to transactions involving large amounts of oil? If not then your point is not relevant to the current discussion.
You're wrong. FX transactions ALWAYS flow through Central Banks.
I take it you didn't read the article.
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