The End of Dollar Hegemony

[Maximus Zeebra]

You really should extract your head from that sand pile you obviously have it inserted into. Or is it firmly planted up your rectum. It is a known fact that Iraq was seriously considering changing from the Dollar to the Euro when it came to all its oil dealings. It doesn't take a genius to grasp what sort of economic ramification that would have had for the US if he had been allowed to do it. So, to totally reject the notion that this was possibly a major factor in the decision to invade and occupy Iraq is completely delusional. Quite actually, Saddam had already been cutting oil deals in Euro's:
International Institute for Strategic Studies - July 1st - - Political Affairs - Iran: What the U.S. Isn't Telling

They actually did change to the Euro..

It will be a blast when Russia or Norway change to the Euro :alert

 

[Maximus Zeebra]

Venezuela, a country that we import 10% of our oil from (twice that of Iraq), has recently made the same motions that Saddam did. So, if that really was a major consideration in whether to invade Iraq, shouldn't we be readying 300,000 troops or so to go in to take out Chavez? Because by your logic, if Iraq was worth $2 trillion, we should be prepared to spend $4 trillion getting rid of Chavez.
Right?

Isnt this why the US is constantly trying to kill him? Isnt this the reason Venezuela will be the next target after Iran who were also telling about changing to the Euro and will do this shortly(already underway).

 

[RightinNYC]

Not saying its true or not, but there are some differences between Iraq and Venezuela.

First off Iraqs reserves are much larger than Venezuela's. So for a long term investment making Iraq friendly to the US is better.

Secondly what "excuse" would you use to invade Venezuela? At least with Saddam you could make up something half credible.. a tad harder with Chavez.

As for the dollar losing its dominance.. so what. Its not like its gonna happen overnight, and I see it only as health that other currencies are gaining popularity. If Iran or whoever wants only to accept Euros for payment in oil shipments, thats thier problem so to say.. if they want to sell on the world bourses then atm it has to be in dollars... but other than that, they can ask for anything in exchange for thier oil.

What is more dangerous for the dollar and the US economy is countries with large dollar reserves moving some over to other currency.. that is a clear sign of "not trusting" the dollar, the US economy and the US as a whole.. as it once was. But it still has some way to go before the US dollar is so called threatened.

You don't think we could come up with an excuse to invade Venezuela for $4 trillion dollars?

Listen, the fact of the matter is that this theory is on its face, completely false. The idea that preventing a switch from the dollar to the euro in iraq was so important that we invaded is absolutely foolish, and not one person has shown anything that would disprove that.

 

[RightinNYC]

Isnt this why the US is constantly trying to kill him? Isnt this the reason Venezuela will be the next target after Iran who were also telling about changing to the Euro and will do this shortly(already underway).

When we invade Iran and Venezuela, let me know.

 

[Maximus Zeebra]

When we invade Iran and Venezuela, let me know.

I will let you know when they invade Iran in the spring, then I will also predict when they invade Venezuela.

I supported the Iraq war before it, yes I was brainwashed too, but then they didnt find the WMDs and they said Saddam was the reason all of the sudden, and then i all of the sudden snapped out of the brainwashing and started thinking. A few months later I knew they were going to attack Iran, and a few months after I had determined it would be in 2007 or 2008.

I guess its unrealistic to think it will happen in the spring of 2007 with the US tied up in Iraq, so I would now estimate it will come between March and July 2008.

 

[PeteEU]

You don't think we could come up with an excuse to invade Venezuela for $4 trillion dollars?

not something off hand no. Saddam was an arab and a muslim and islamic terror was the "IN" thing.

With Chavez you have a 2 bit dictator, one of many in the world, and one that is no more dangerous than Cuba and Castro. You cant use the "Commie" fear tactic and that basicly leaves you with quite some time to build up a fake "issue".. maybe drugs or something like with Noregia.

 

[ashurbanipal]

So if your claim is true, then how come we haven't invaded Venezuela?

Because Venezuela does not trade nearly as much oil in other currencies than Iraq did. Nor do they have the potential to do so right now. Iran does. Venezuela will, for now, fly under the radar; they're selling only a few thousand barrels per day in currencies other than the dollar.

The cost of the war in Iraq could be approximately $2 trillion dollars. We get twice as much oil from Venezuela as Iraq. Therefore, if your claim is true, logically it should be worth $4 trillion dollars for us to get rid of Chavez. If that was the case, don't you think he'd be gone by now?

Please read this next bit very carefully:

It doesn't matter whether they're selling US the oil or not. It only matters if they're selling it to someone--anyone--in a currency other than dollars.

The reason why is also very simple: if all oil is traded in dollars, and we're the only country that prints dollars, everyone has to sell us their stuff for what is essentially nothing more than paper. We can print dollars with impugnity as long as everyone needs them (and everyone needs them to buy oil). We don't have to manufacture anything of value. We don't have to export anything of value. We can run huge deficits and debts, and it won't matter a bit. However, if someone makes an oil market in some other currency stick, then suddenly other countries don't need dollars any more. They will demand a lot more dollars for their stuff than they do now, if they will even take dollars at all. Virtually overnight, the dollar could lose half its value or more. That is why we cannot allow someone to open an oil bourse in euros or any other currency than dollars.

Oh, and PS, you still haven't shown how we are going to make $2 trillion back through Iraqi oil.

Which we do you mean? We, the American People, are too busy buying a bunch of garbage about weapons of mass destruction and Al-Qaeda and how America is the land of the free and the home of the brave, etc. etc. We, the American people, will never get the money back, because we don't understand where it's gone.

If, however, you mean the "we" that are directing the war and getting the profits, well, that's where the joke's on you. They won't get that money back either, but they don't care, because it was our money.

Think about it--assuming you were completely devoid of any moral scruples at all--would you spend $2 million of someone else's money to net yourself $50 thousand, provided that you never, ever, ever had to pay the $2 million back? Of course you would--the $2 million is nothing to you, you won't be the one holding that bag. You got the $50 thousand for free.

That is what the people directing this war are doing to us, only on a much grander and more complex scale.

 

[ashurbanipal]

Their problem isn't Iraq or Iran or Venezuela pricing their oil in euros. Have at it, won't change a thing. These guys are simply too insignificant in the grand scheme of things to change the world in this respect.

The danger isn't from one country alone doing this, provided that's all that ever happens. The danger comes when enough members of Opec (say) decide to start selling in Euros that Opec itself switches currencies.

An example from history ought to make the point clear: Once it became clear to Attilla that Rome didn't have the military strength it once had, he attacked, and very nearly succeeded in defeating them in a matter of just a few years. Even though he died young, enough other peoples saw that Rome was weak and they attacked.

Now, I don't think the exact same danger applies here. But if Iraq had been able to sell oil in Euros for a few years without any kind of reprisal, and then say Venezuela and Iran jumped on board as well without any kind of response from us, what then? That would be (just going off the top of my head here) about 5 mbpd in Euros. Then Russia switches, along with Nigeria, Norway, and the FSU stans, who might all want to anyway since they primarily sell to Europe. Now there's a substantial enough amount of oil on the market to cause a real issue for the dollar.

Now, if they are able to establish a bourse with depth of trading liquidity and the financial prowess, the confidence of traders, the confidence in the rules of law that enable confidence in commercial transactions, and several other significant criteria, they might have a chance. Realistically, can you believe that a bourse in Iran can satisfy all the criteria for a successful exchange? Of course not. Can you imagine the vested interests in the established exchanges permitting their market share to be eroded by such, without taking some form of marketing retaliation? Of course not.

I'm sure that would happen as well; but there are sound reasons to consider the Euro as the currency of choice over the dollar--it's rather more sound overall.

As one of the links you posted notes:

Csmonitor is going to be the most mainstream of any of the links I posted, but I think they have something of a point. Iranian oil production is on the downslope as we speak and it may collapse altogether by 2015. But if they get the bourse to stick, it's a symbolic act that would draw others to follow their lead--or that's the fear, anyway.

As for taking action against every country that has threatened to open a bourse in which crude is traded in euros, some researchers have shown a correlation between sunspots and the stock market, with a much bigger sample from which to draw their conclusions.

1) I would imagine that the relationship between sunspots and a lot of things is legitimate. Stock trading relies rather a lot on computers (to be simplistic, here), and sunspots affect both the speed and reliability thereof. So there are some non-hokey connections to be made and conclusions to be drawn.

2) In the case of both Iraq and Venezuela (if you believe we had anything to do with the 2002 coup), very little else is left to explain all that has come to light regarding our actions there. We now know via the Downing Street Memo and the recent DoD report that the Neocons were aware the WMD stories were not entirely solid, and that they were trying to figure out how to sell the war anyway. We know they had plans with western oil companies to figure out how to split up the oil once we did invade--military action seems to have been a foregone conclusion perhaps even before 9/11. Why?

 

[RightinNYC]

Venezuela will, for now, fly under the radar; they're selling only a few thousand barrels per day in currencies other than the dollar.

Source?

Please read this next bit very carefully:

It doesn't matter whether they're selling US the oil or not. It only matters if they're selling it to someone--anyone--in a currency other than dollars.

Yes, this is common sense, however you completely misconstrue its meaning.

The reason why is also very simple: if all oil is traded in dollars, and we're the only country that prints dollars, everyone has to sell us their stuff for what is essentially nothing more than paper. We can print dollars with impugnity as long as everyone needs them (and everyone needs them to buy oil). We don't have to manufacture anything of value. We don't have to export anything of value. We can run huge deficits and debts, and it won't matter a bit.

This is an incredibly simplistic view of the economy.

However, if someone makes an oil market in some other currency stick, then suddenly other countries don't need dollars any more. They will demand a lot more dollars for their stuff than they do now, if they will even take dollars at all. Virtually overnight, the dollar could lose half its value or more.

Please offer some actual statistical analysis to support your as yet unfounded claim that oil in and of itself is worth 50% of the global value of the dollar.

Which we do you mean? We, the American People, are too busy buying a bunch of garbage about weapons of mass destruction and Al-Qaeda and how America is the land of the free and the home of the brave, etc. etc. We, the American people, will never get the money back, because we don't understand where it's gone.

Thank god we have you and Maximus here to show us the way.

If, however, you mean the "we" that are directing the war and getting the profits, well, that's where the joke's on you. They won't get that money back either, but they don't care, because it was our money.

Think about it--assuming you were completely devoid of any moral scruples at all--would you spend $2 million of someone else's money to net yourself $50 thousand, provided that you never, ever, ever had to pay the $2 million back? Of course you would--the $2 million is nothing to you, you won't be the one holding that bag. You got the $50 thousand for free.

That is what the people directing this war are doing to us, only on a much grander and more complex scale.

So your belief is that the entire Bush administration, both houses of congress, and the military all conspired to spend $2 trillion in order to make a few oil companies 1/10000th of that?

So why are the democrats now opposed? Did exxon cut them out of the will?:lol:

Listen, you two can make all these fallacious claims all you want, but until you show a single reputable source that offers support for this claim, then it holds no water.

 

[Maximus Zeebra]

The dollar reign will end, its just a matter of time before the Euro overtake it and the dollar become equal part of a threesome, pound, dollar, yen..

In just six years, the Euro has overtaken the dollar in cash in the world, its the biggest cash currency, its the biggest investment currency, its the currency of the largest economy in the world, its the most popular black market currency(drugs, weapons etc).. Its just a matter of time before it overtakes the dollar as a reserve currency.. Hck, its only been six years, and it has already occupied about 30% of the market, while the dollar has declined to 60% and the rest have 10%..

When will this happen that the Euro overtake the dollar?
It can happen anytime, the most likely way is that the Euro becomes accepted currency for oil trade in either OPEC, Russia&Norway OR at the London Mercantile exchange. This could be a potential trigger, but until then the Euro will keep eating the dollar market until it pass it.

 

[ashurbanipal]

Source?

Seems like an odd bit to challenge me on, but if you wish--right now I don't have a source, this is just a bit of knowledge I've picked up studying oil markets for the past couple of years. I'll find something that confirms it in the next couple of days and post it. In the meantime, the articles I have already posted mention this in passing.

Yes, this is common sense, however you completely misconstrue its meaning.

In what way?

This is an incredibly simplistic view of the economy.

3 points:

1) It wasn't meant to be a "view" of the economy, or a complete summary.

2) However, sometimes simple "views" are correct--who manages to boil something down to the bare bones and show the structure that eluded everyone else is generally considered to be brilliant. Not that any of this originated with me; I read all the analyses available and decided this one was probably the best.

3) The fact that it's simplistic doesn't mean it's wrong. If you think it's wrong, why don't you try saying, specifically, why? Your criticism implies that I missed something of import. What would that be?

Please offer some actual statistical analysis to support your as yet unfounded claim that oil in and of itself is worth 50% of the global value of the dollar.

2 points:

1) It very clearly wouldn't have to be, so I don't even know what you're talking about.

2) If we assume that there's about a trillion barrels of accessible oil left (maybe a little on the conservative side), at 60 dollars a barrel, that beats the last M3 figure I saw by about 48 trillion dollars.

Thank god we have you and Maximus here to show us the way.

Your sarcasm is not warranted, and is indicative of the fact that you have no substantive reply. What you're experiencing right now is called cognitive dissonance, and such flippant answers are an avoidance of the truth you simply cannot face.

So your belief is that the entire Bush administration, both houses of congress, and the military all conspired to spend $2 trillion in order to make a few oil companies 1/10000th of that?

Of course not. Only a few people would have conspired, and found a way to get everyone else to go along for long enough to make it a fait accompli.

So why are the democrats now opposed? Did exxon cut them out of the will?

That would have to be figured out on a case by case basis. Some of them, yes. Some of them (most of them, along with most of the Republicans) would never have been aware of the real story anyway. They'd have bought the WMD story the same as everyone else.

Listen, you two can make all these fallacious claims all you want, but until you show a single reputable source that offers support for this claim, then it holds no water.

I've already offered a few.

 

[Synch]

If every American ceased purchasing products that are imported (primarily from the far east) and insisted on only purchasing goods 'Made in USA', this would bring down the trade deficit.

Just to chime in, this would never work, trade balance(Net Exports) is dictated in the long term by Net Capital Outflow, not the other way around, if American consumers were to develop a taste for American goods, that would drive up NX with short term decreases imports, increase the demand for the dollar in the foreign market(because the dollar is needed to purchase American goods from abroad) because net exports would temporarily rise, increasing demand for dollars, which makes the dollar appreciate, making things more expensive to foreigners, decreasing NX.

 

[Bergslagstroll]

So if your claim is true, then how come we haven't invaded Venezuela?

The cost of the war in Iraq could be approximately $2 trillion dollars. We get twice as much oil from Venezuela as Iraq. Therefore, if your claim is true, logically it should be worth $4 trillion dollars for us to get rid of Chavez. If that was the case, don't you think he'd be gone by now?

Oh, and PS, you still haven't shown how we are going to make $2 trillion back through Iraqi oil.

Sorry but I have to atack your logic, maybee a bit rude but still. If you look at peoples motivation you have to look at what they belive before their action not what the result was after the action. That yes the Iraqie war will end up costing extremly much but Rumsfeldt, Bush and the other "smart guys" that started the war never belived that the cost would be that big (if they did then they are guilty of another huge lie).

 

[RightinNYC]

Seems like an odd bit to challenge me on, but if you wish--right now I don't have a source, this is just a bit of knowledge I've picked up studying oil markets for the past couple of years. I'll find something that confirms it in the next couple of days and post it. In the meantime, the articles I have already posted mention this in passing.

That fact just didn't seem right to me, but I'll take your word for it.

In what way?

Because you make it seem more important than it is.

3 points:

1) It wasn't meant to be a "view" of the economy, or a complete summary.

2) However, sometimes simple "views" are correct--who manages to boil something down to the bare bones and show the structure that eluded everyone else is generally considered to be brilliant. Not that any of this originated with me; I read all the analyses available and decided this one was probably the best.

3) The fact that it's simplistic doesn't mean it's wrong. If you think it's wrong, why don't you try saying, specifically, why? Your criticism implies that I missed something of import. What would that be?

Fine, here's what's wrong with it. You said:

We don't have to manufacture anything of value. We don't have to export anything of value. We can run huge deficits and debts, and it won't matter a bit.

That is an incredibly overwrought statement, and is not supported by the facts. It matters quite a bit whether we run huge deficits.

2 points:

1) It very clearly wouldn't have to be, so I don't even know what you're talking about.

You claimed that the dollar would lose half its value or more if someone set up another oil market, and claimed that many countries would not even take dollars. You're going to need to provide a little backing for that.

2) If we assume that there's about a trillion barrels of accessible oil left (maybe a little on the conservative side), at 60 dollars a barrel, that beats the last M3 figure I saw by about 48 trillion dollars.

Perhaps over the next 100 years. Regardless, what bearing does this have on anything?

Your sarcasm is not warranted, and is indicative of the fact that you have no substantive reply. What you're experiencing right now is called cognitive dissonance, and such flippant answers are an avoidance of the truth you simply cannot face.

No, it's indicative of the fact that it's impossible to debate with someone who has views that are extremely outside the mainstream, who doesn't provide backing for their claims, and is convinced that they're right.

Of course not. Only a few people would have conspired, and found a way to get everyone else to go along for long enough to make it a fait accompli.

That would have to be figured out on a case by case basis. Some of them, yes. Some of them (most of them, along with most of the Republicans) would never have been aware of the real story anyway. They'd have bought the WMD story the same as everyone else.

I've already offered a few.

Like I said, please, please, offer a source for this ridiculous conspiracy theory of yours.

 

[ashurbanipal]

That fact just didn't seem right to me, but I'll take your word for it.

It seems unbelievable to you that Venezuela might be trading small amounts of oil to other South American countries via a barter system?

That is an incredibly overwrought statement, and is not supported by the facts. It matters quite a bit whether we run huge deficits.

I suppose if they were huge enough it would matter. However, currently, we have both huge debt and a huge deficit, and the economy has not collapsed. The Dow is soaring, and the Nasdaq isn't doing so bad. Any other country that had a national debt that was 75% of their GNP and nearly 60% of their money in circulation would be toast, metaphorically speaking.

You claimed that the dollar would lose half its value or more if someone set up another oil market, and claimed that many countries would not even take dollars. You're going to need to provide a little backing for that.

The "backing" is common knowledge--our current account deficit, our national debt, etc. etc. are outrageously high and we have way too many dollars in circulation. It's obvious that the dollar would lose value--indeed, that it ought already to have lost value. The only reason it hasn't lost a significant amount of value is that everyone needs dollars to buy oil.

Perhaps over the next 100 years. Regardless, what bearing does this have on anything?

1) What do you mean by "Perhaps over the next 100 years"?

2) I don't think it's got any more than tangential bearing on the matter at hand, but you're the one that asked the question, so me, being courteous, answered. I assumed that you were going to show the relevance since, again, you're the one that brought this relationship between extant oil and extant dollars up.

No, it's indicative of the fact that it's impossible to debate with someone who has views that are extremely outside the mainstream, who doesn't provide backing for their claims, and is convinced that they're right.

1) It is not impossible to debate me, it's only very difficult. I always acknowledge when someone else makes a valid point, and I always acknowledge when someone defeats my case (I can show examples extant on these boards, in fact). That said, I don't often arrive at my positions lightly, but only after a long time in research, examination, and contemplation.

That said, I repeat for the sake of clarity: if you had an actual point, you'd have made it rather than (or at least in addition to) making a sarcastic comment.

2) My views are outside the mainstream. So what? Mainstream views are often wrong. Indeed, if you understand history, they're usually wrong.

3) I have already provided sources that offer the same analysis as mine, though in more detail and with sources. Your continued insistence that I haven't provided backup sticks out like a sore thumb. But I can plaster you with links if you want, though they'll all say roughly what those other three said.

Like I said, please, please, offer a source for this ridiculous conspiracy theory of yours.

What, exactly is it you think lacks backup? I'll recap my argument, trying to put everything into distinct numbered statements, and list the backup I think I've already got. Maybe that will clear things up:

1) On paper, the dollar ought to be a distressed currency. The M3 money supply is at roughly 11 trillion or 12 trillion dollars while the GNP for the last few years has been running in the 8-10 trillion dollar range. The national debt is gaining on 9 trillion dollars. Backup--this is all relatively common knowledge. I can find you any number of sites that would back this up, but if you just google "American Economy Statistics" you will probably find all of this pretty easily.

2) However, the dollar remains a strong currency because everyone has to have dollars to buy oil. Currently no major oil market (and indeed, probably no oil market anywhere except for a minor amount from Venezuela) is selling oil in any currency other than dollars. Backup--I assume this should be common knowledge also, but the sources I posted mention this.

3) The United States alone has the right to print dollars. We print them by fiat; they are not pegged to a commodity. Backup--this also ought to be common knowledge; if you question this point, I'll see what I can find--but this really ought to be as obvious a fact as that the sky is blue.

4) Therefore, other countries must sell us their goods for our dollars in order to be able to buy oil, which they need. Backup--this is a consequence of items 1-3, and ought to be obvious.

5) However, if enough oil becomes available for purchase in euros, the dollar would not longer enjoy the position it has now. Other countries would have a choice of who to trade with, and many would probably opt to deal in euros. It's a much more sound currency since the Eurozone doesn't have the massive debt we have. Backup--this is partly a logical consequence of items 1-4, and partly common knowledge. Googling "Eurozone Economic Statistics" should find you all you need and more.

6) This would decrease the demand for dollars, and would probably result in fewer countries being willing to sell us their goods. Those that do would demand more dollars for their goods. Backup--this is a consequence of items 1 and 5.

7) Our leaders therefore have a vested interest in making sure that no one opens a bourse in any currency other than dollars. Backup--this is a logical consequence of items 1-6.

8) We have taken action against every country that has ever tried to sell significant quantities of oil in a currency other than the dollar. Backup--the only three countries to have done this or talked about it are: Iraq, Venezuela, and Iran. Iraq started to trade oil for euros in 2001. The dollar slid against the euro significantly, as the articles I posted point out. Venezuela started to do so in 2001, and we supported a coup there in 2002. We continue to support anti-Chavez groups in Venezuela. Now Iran is (and has been for about a year) talking about opening a bourse in Euros. We, in turn, have stepped up our war-against-Iran rhetoric. Again, I think all of this should be pretty common knowledge.

9) All other reasons so far offered for going to war in Iraq seem to have been disproven. We know that the current administration wanted to go to war with Iraq very soon after taking office. Backup--DoD report and Downing street memo show that we knew about the bad intel before using it--we were "fitting" intel to get the war we wanted for other reasons. The Kean commission report shows that there were no operational ties between Iraq and Al Qaeda. A simple process of elimination shows that we weren't really there to free a people and depose a ruthless dictator as, if this was our real motivation, we'd have started elsewhere first. There are substantially easier targets with far more psychotic guys running the show than Saddam ever was (Zimbabwe, Liberia, the DRC, East Timor, Togo, etc). If we wanted regime change to free people, places like those are where we would start.

10) So the only reasons remaining for war in Iraq are control of Iraqi oil (undoubtedly a reason to go there), and maintenance of dollar hegemony. Similar reasons exist for both Iran and Venezuela, or for anyone interested in selling large quantities of oil in euros. It's a good thing that Brent crude is traded on the London exchage, had it been Paris or Rome, they'd have switched a few years ago.

 

[Maximus Zeebra]

First Saddam change to Euro, then Iran says they will do the same, and now Venezuela..

Very strange that those countries are the ones in danger tof being invaded by the US...
First Iraq, now Iran(???), and then Venezuela(???).

The Euro will take over anyways, its impossible to stop, even for warmongering Americans.. The Euro has only been 6 years, the dollar hundreds of years, yet the Euro is the most cashed currency, most popular in everything now, except as reserve currency which is an important stage..

The Euro has about 30% of the reserve currency market already, this is extreamly successfull considering it has only been around 6 years, innit???