March 20th Iran switches to the PetroEuro: countdown to WWIII?

[ACougar]

Are you related to the President in any way?

No big deal. They're just numbers.

 

[jsn112]

Are you related to the President in any way?

Why? Do you think the deficit is hurting the US? Prove that it has.

 

[ACougar]

Why? Do you think the deficit is hurting the US? Prove that it has.

First ask yourself this... How can the U.S. afford to lose 1 Trillion dollars a year?

The article I posted explained that it was because the U.S. dollar was in theory backed by oil. The U.S. can simply print all the dollars it wants, everyone needs oil and the only way to buy it is with U.S. dollars. So long as there is a demand for dollars we can print as many as we want, all we have to do is make sure what we print doesn't exced demand or the value will freefall.

The Iranian Oil Borse has the potential to seriously reduce the international need and demand for oil. Which means that there will be a lot more dollars out there than people need. What this means is that were likely to see some pretty ugly hyper-inflation sometime in the near future... that or a very serious depresion. Hyper Inflation is less painful and probably more likely. I'm thinking 2-6 years at double digit inflation, I see no way to avoid it.

 

[jsn112]

First ask yourself this... How can the U.S. afford to lose 1 Trillion dollars a year?

The article I posted explained that it was because the U.S. dollar was in theory backed by oil. The U.S. can simply print all the dollars it wants, everyone needs oil and the only way to buy it is with U.S. dollars. So long as there is a demand for dollars we can print as many as we want, all we have to do is make sure what we print doesn't exced demand or the value will freefall.

The Iranian Oil Borse has the potential to seriously reduce the international need and demand for oil. Which means that there will be a lot more dollars out there than people need. What this means is that were likely to see some pretty ugly hyper-inflation sometime in the near future... that or a very serious depresion. Hyper Inflation is less painful and probably more likely. I'm thinking 2-6 years at double digit inflation, I see no way to avoid it.

Hasn't this type of talk being like this since Reagan? Until there's real proof, it's all political positioning. Also, I guess the US should start drilling Alaska for oil.

 

[ACougar]

Hasn't this type of talk being like this since Reagan? Until there's real proof, it's all political positioning. Also, I guess the US should start drilling Alaska for oil.

We've been getting away with irresponsible behavior since Reagan. At some point we will have to pay the piper.

Drilling Alaska isn't really a solution, it's at best a bandaid.

 

[jsn112]

We've been getting away with irresponsible behavior since Reagan. At some point we will have to pay the piper.

Until there is real proof...

Drilling Alaska isn't really a solution, it's at best a bandaid.

Alaska is more than a bandaid. It will ease our dependency on foreign oil.

 

[philosopherthales]

Think of America as a corporation. A corporation has things it buys and things it sells (imports and exports). If there is a trade deficit, it is like the corporation that is spends more than it makes. In this case, the corporation, following the trend indefinately, goes bankrupt.

A trade defiict hurts the US.

Now, how much of an effect? From my calculations taking into account that there are 100 million households and an average net worth of 60 thousand each - America has a net worth of 6 trillion dollars). With a trade deficit of the size of 800 billion, that net worth approaches zero in roughly 7.5 years. The current economic condition can not be sustained for long. A rude economic awakening will be the thing that snaps the US back into something sustainable (much lower standard of living) and this will occur within the next decade. The united states has been in a depression before, and another one will likely occur very soon. The manufacturing base already there will bring us out of it as American economic habits adapt to be sustainable, yet people won't find that adaptation period comfortable.

 

[ACougar]

Until there is real proof...


Alaska is more than a bandaid. It will ease our dependency on foreign oil.

What would constitute proof? Articles from a profesional journal? How about this:

http://www.cnn.com/CNN/Programs/presents/

It's on right now if you can catch it.

 

[Donkeytron]

[wiki]The treaty is often summarized as having three pillars: nonproliferation, disarmament, and the right to peacefully use nuclear technology.[/wiki]

Im gonna go ahead and say iran isnt too hot on points one, two, or three.

 

[susanann]

what would this mean in practical terms? would it crash the American economy? Cause a depression?

1. a lower standard of living for all americans

2. yes

3. yes

Continued huge deficits in foreign trade, and in our domestic spending, will cause inflation, and with the US dollar not being accepted as payment and a collapse in its value.

Any products, materials, goods, or services purchased from other countries (oil, gasoline, food, clothes, electronics, computers, televisions, tools, appliances, toys, etc) will have great increases in price, causing us to buy much less from other countries. Although products made in USA will also go up in price, foreign made goods will go up in price many times over.

Becuse foreign made products will become very expensive, we will buy less, and other countries that sell goods to the US will no longer have a market for their goods causing their economies to decline.

It will probably result in a greater depression in other countries, since whoever now is supplying products and manufactured goods will be the most effected when we stop buying, and since very few goods are manufactured in the USA, not many manufacturing jobs remain to be lost. Countries that used to sell a lot of goods to the USA will have severe recession and job loss because American demand for foreign goods will end.



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Falling Dollar, Rising Debt

By Jeff Faux

Our current account deficit now runs about $400 billion a year, and the Goldman Sachs number crunchers estimate that just to cut that in half, the dollar would have to fall an "astonishing" 43 percent against the currencies of countries we trade with.


A dollar devaluation by anything near that amount -- unless we arrange to make it happen gradually, over a very long period of time -- would drop us into a deep and prolonged recession. Interest rates would skyrocket as investors demanded steep premiums to compensate for the risk that the value of dollar-denominated bonds might decline further. At the same time, prices would rise in every domestic market -- from apparel to computers -- that's now dominated by imports. Indeed, many products (TVs, for example) are no longer produced here at all. Thus, even with a dramatically lower dollar, it would take at least a decade to expand U.S. industrial capacity enough to rebalance the trade deficit. And that's not all. Any reduction in the U.S. trade deficit means a reduction in the rest of the world's trade surplus with us. Given that economic growth in many countries now depends on sales to the U.S. market, it's hard to imagine that they would sit still for such a switch.

 

[k]

"If the denomination of these important imports, in particular oil, were to move away from the dollar, then rich countries would move their reserves into other currencies and consequently the dollar would lose a lot of its importance."
http://www.energybulletin.net/12463.html

It's a good read and explains just how pervasive the effects could be if Iran switches to euros. Many Americans are still completely ignorant of how quietly the Bush admin switched Iraq's oil back to USD.

 

[Donkeytron]

"If the denomination of these important imports, in particular oil, were to move away from the dollar, then rich countries would move their reserves into other currencies and consequently the dollar would lose a lot of its importance."
http://www.energybulletin.net/12463.html

It's a good read and explains just how pervasive the effects could be if Iran switches to euros. Many Americans are still completely ignorant of how quietly the Bush admin switched Iraq's oil back to USD.

The vast majority of americans havent the foggiest picture of the dynamics of international credit and commodities exchange. If every country started trading oil in euros, that would be problem. But Iran is, at best, a pain in the ass for the US.

 

[k]

The vast majority of americans havent the foggiest picture of the dynamics of international credit and commodities exchange. If every country started trading oil in euros, that would be problem. But Iran is, at best, a pain in the ass for the US.

If a certain guy or company started investing a certain way...pretty soon others start to follow for myriad reasons.

This is more than the slippery slope argument, it is a viable and plausible approach to what could happen in the next 20 years or less because people will go where the money is to be made and to hell with everything else. Sending our troops to Iraq is proof enough.

 

[ACougar]

Let's say I'm holding 4 Billion U.S. dollars in reserve primarily in order to purchase fuel. All of a sudden I can buy oil in Euroes instead of dollars. I'm going to diversify, which means I'll convert at least 1/4 of my monetary reserves to Euroes and ditch a considerable amount of my dollars. It's important that I do this quickly because if everyone beats me to it I'm not going to get a lot of Euroes for those dollars (basic supply and demand.) The value of the dollar drops, making the Euro look even more attractive, the cost of oil in dollars goes up because the value of the dollar is free falling. As the vaue of the dollar roses, prices go up. As prices go up the economy slows down, disposable income al but disapears when it starts costing $200. for a tank of gas.

There are still lots of variables, things our government or other governments might do in an attempt to control the situation. The only thing that would prevent such a thing from happening would be for our government or another to insure the Iranian Oil Borse doesn't ever become fully operational.

If a certain guy or company started investing a certain way...pretty soon others start to follow for myriad reasons.

This is more than the slippery slope argument, it is a viable and plausible approach to what could happen in the next 20 years or less because people will go where the money is to be made and to hell with everything else. Sending our troops to Iraq is proof enough.