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198 Comments
- transporter2, on 03/26/2009, -0/+50This is an old comment from a Slashdot comment, but spot on about what is going to happen if the world stops paying for its oil in dollars:
Until 15th August 1971, the US dollar was backed by gold. The US was fighting the Vietnam war and spent all the gold paying for the war. Nixon broke the link between the dollar and gold because they couldn't pay the bills in gold any more, they didn't have any.
http://en.wikipedia.org/wiki/Nixon_Shock [wikipedia.org]
The dollar was then simply being printed, unbacked by anything. This increases the supply of dollars and the value falls massively. Huge inflation.
1972-3 Nixon or someone went to the Saudis and "persuaded" them somehow to remain only US dollars in return for oil. No idea what they promised, but it was big. From that point, the US dollar is pretty much backed by OPEC oil. It was denominated in dollars before, but the dollar had been backed by gold, so basically the oil price was based on gold. Not so after 1971.
So. All oil all over the world has to be bought in US dollars... The demand for US dollars (not gold) rockets, all the central banks across the world have to keep reserves on hand so the countries can buy oil. Billions of them. Trillions in total.
Do you see what this does? It does 2 things.
1: America gets paid first for any oil which other countries want to buy. They have to get the requisite number of dollars. And they get paid simply for running a printing press.
2: It allows the USA to print and spend as many dollars as they want to. The demand from outside the country means that inflation can't take off. The entire world is subsidising the US economy.
Now... 35 years later, there are trillions of US dollars out there sitting in central banks waiting to be spent on mostly oil. If oil were to be available in Euros, the dollars would be useless. They would come back to the USA.
Ask yourself what a million dollars would be worth if everyone had a million. ok, imagine what a trillion dollars or so would do coming back into the country. The value of the dollar would fall and as the value of the currency falls, the price of everything else increases.
As to the size of the effect... who knows.
http://www.ccc.nps.navy.mil/si/nov03/middleEast.as ... [navy.mil]
--
Aahhh.... The pressure.... - transporter2, on 03/26/2009, -0/+34And as someone else pointed out:
You are absolutely dead on. Want to know something else?
What do Iran, Iraq, and Venezuela have in common? (besides being the subject of US animosity, chest-thumping, invasion, and a coup-attempt?)
They threatened to sell oil in Euros.
The reason Ron Paul is always talking about the Fed like he's some kind of nutcase is NOT because he's some kind of nutcase. It's because the Fed is the bouncer at "I want to run the planet" club. Want to go running all over the world invading countries? No problem when you can just print all the money you want with no accountability.
Once the dollar jumped off of the gold standard, the only thing propping up the dollar was the threat of military action by the US. That's very uncomfortable, so some folks wisely decided to use the world oil market as an intermediary. The dollar is supported by oil; oil is supported by military might. Any crack in US control of world oil is a crack in the dollar, and thus, the US economy.
The entire history of state-managed currency shows a steady trend of the ruling entity devaluing the currency to persue wars or other ambitions not generally related to the well being of society, with the obvious result that the citizenry become measurably worse off. - coasterswim, on 03/26/2009, -0/+33I wasn't concerned at first, but if even you wonder, then...
- V3n0M, on 03/26/2009, -7/+39How about gold? Maybe a currency based on it?
- kolding, on 03/26/2009, -8/+40I thought the Euro was a bigger currency today. Ohh well.
- borez, on 03/26/2009, -11/+28No. The US is Bankrupt company on the verge of self destruction, scrabbling at the last cheques in the cheque book, and printing a ( good) few fraudulent ones for measure... I'm sorry if you're from the US I don't mean it personally ( but I expect you'll digg me down regardless ) but it is. Period.
- homah, on 03/26/2009, -2/+18Gold can't be printed or typed on a computer.
- homah, on 03/26/2009, -0/+16How about beer?
- jsffive, on 03/26/2009, -2/+16It's not a coincidence, that the "axis of evil", Iran, Iraq, and North Korea, were threatening to switch their oil trade to the Euro as early as 2000.
- Nouman6, on 03/26/2009, -3/+17I take it china wants a new international language next
- Shazbuckle, on 03/26/2009, -0/+13Bottle caps :)
- beesaretasty, on 03/26/2009, -4/+17How about moon rock?
- jsffive, on 03/26/2009, -0/+13Surely, printing trillions of more dollars, thereby reducing it's buying power, will encourage the other nations to keep using it (he sarcastically said).
- inactive, on 03/26/2009, -0/+13"US Treasury Secretary Timothy Geithner said he was "quite open" to China's idea, triggering a plunge in the dollar.
But he then added that the dollar was likely to remain the world's reserve currency for a long time, helping the currency to recover. "
The hell? This is terrible writing. Based on that quote, I would assume the dollar plunged then recovered all within the time it took for Geithner to complete his sentence.
And we are holding up Jay-Z as evidence of the waning dollar? Please. He's holding euros because they are exotic to America. And Americans are easily confused into thinking exotic means luxurious. Just as J-Pop singers wear crosses and use English to emulate Madonna and American pop stars. - DiggsOnlyJew, on 03/26/2009, -7/+19Gold is backed by faith as well...
- AbelZhu, on 03/26/2009, -7/+19As long as oil is priced in dollars, the American consumer exists, and half the world currencies are pegged to the dollar, the dollar will remain king.
- borez, on 03/26/2009, -2/+14It doesn't take a PhD to see what's going on right in front of your eyes mate.
But.. If you must know, I'm an LSE employee, so I'd consider myself kinda informed. - jambus572, on 03/26/2009, -1/+13"As long as oil is priced in dollars" which won't be for long seeing as OPEC want to switch to the euro.
- inactive, on 03/26/2009, -1/+12I cant wait to use pesos to pay for tacos
- Edfrommars, on 03/26/2009, -5/+16Actually, it's the Pound Sterling. Euro is second, I think, followed by the US Dollar.
They aren't talking about the most valuable currency, however. They are talking about the global standard. - inactive, on 03/26/2009, -3/+14Note as long as it says "Federal Reserve Note". I do not understand how our monetary supply can be controlled by a private organization. Listen to Ron Paul talk about this. The man just makes too much since too be a politician.
- inactive, on 03/26/2009, -16/+27With all the Keynesian spending that Obama is engaging in,the dollar will be about as valuable as toilet paper. I don't see the dollar lasting much longer,wait till the commercial real-estate market collapses,were gonna need wheelbarrows full of cash to buy a loaf of bread.My advice??? Move all your assets to gold,move further into the woods, and avoid any major metropolitan areas because it is going to get ugly....
- inactive, on 03/26/2009, -0/+10even YOU?
- Hercules, on 03/26/2009, -1/+10If foreign countries reserves weren't all in USD then I guess there's an alternative. Unfortunately there's no easy way to float out your existing reserves in exchange for something more.... stable.
And in the meanwhile, we are using that fact to lower the economies of the WORLD by printing more money and giving it to idiots who ran companies into the ground. And the talented people who can actually manage that huge injection of cash (ie, the BAILOUTS) are quitting en masse because they aren't getting paid properly.
It's a vicious circle, and we would be best advised to let everything fail and see what we can muster back up after the dust settles. - pstroll, on 03/26/2009, -3/+12America is finished. The future belongs to the Asian economies.
- Shazbuckle, on 03/26/2009, -4/+13They can always wish
- Shazbuckle, on 03/26/2009, -2/+11Pound is doing horribly at the moment.
1 euro = 1 pound where it used to be 79c to a pound - jasonstock, on 03/26/2009, -0/+8Wouldn't this explain why we don't have fuel efficient/alternative vehicles and ridiculous environmental restrictions that don't allow 70 mpg turbo diesel cars?
- Jeeum, on 03/26/2009, -1/+9No.
- Tablecrusher, on 03/26/2009, -0/+8Not trying to sound ignorant but is there enough gold to be able to back up the amount of currency needed to run a country like the USA? Heck even right now only 3% of the total amount of US dollars are in physical form, everything else is digital.
- inactive, on 03/26/2009, -0/+8I don't want to die a virgin
- kemp34, on 03/26/2009, -1/+9There aren't that many actual paper dollars either. Less than $1 trillion according to the Fed.
- QuantumBios, on 03/26/2009, -2/+9The banksters are trying to control the world by controlling the currency. Pretty easy to see. "Give me control of a nations money supply, and I care not who makes it's laws" <--Who said it?
- jeffiek, on 03/26/2009, -0/+7You may be right, but you won't help matters by calling people idiots.
- Zomgondo, on 03/26/2009, -9/+16Gold has no more inherent value than the dollar does... you know that, right?
- inactive, on 03/26/2009, -1/+8And Bush is proof people over 30 should not vote. You guys got your beer buddy, now the young are getting their hope.
And it all adds up to yet more evidence Aristotle was right about democracy. We are a least-common-denominator culture with least-common-denominator leadership. - Shazbuckle, on 03/26/2009, -0/+7Once in a while someone comes along with a comment which trumps them all.
- Kumaku, on 03/26/2009, -0/+7Yes, unless the EU pushes hard or China stops being communist. It's going to be a crazy 5-10 years.
- JohnnyDIGGme, on 03/26/2009, -2/+9How about the Canadian Dollar? Most stable banking system in the world, makes good sense. ;)
- kemp34, on 03/26/2009, -0/+7Pretty easy to see with some basic observation of facts.
- Daamien, on 03/26/2009, -8/+15"Gold has no more inherent value than the dollar does... you know that, right?"
"Gold is backed by faith as well..."
Gold is not fiat. It is a tangible asset rather than a intangible piece of debt (fiat currency is simply tradeable debt for goods and services rendered). Gold has inherent investment value due to its natural scarcity and various applications (notable in electronics and medicine).
Good try though guys. - DukeLeto2, on 03/26/2009, -0/+7A Rothschild said that. Just like the most recent Rothschild announcement that they believe the internet to be the number one security risk to America.
- grantface, on 03/26/2009, -0/+7The Dollar is already dead. We all like to pretend otherwise though. It's fun.
- pradador, on 03/26/2009, -2/+8How would a country's ability to mine for gold reflect their resources and output?
- ninjaturtles1, on 03/26/2009, -0/+6Doesn't take an expert mate! Watch this children's cartoon for an explanation! Hope it helps!
http://www.youtube.com/watch?v=t_LWQQrpSc4 - Pirataholic, on 03/26/2009, -0/+6Don't worry, I'm using a press to mold new coins out of dog turds, even with all the crap that we get daily it won't raise inflation nearly as much as our government has in the past... All around its a pretty stable currency, as long as you feed your dog anyway.
- inactive, on 03/26/2009, -0/+6Simple answer: No
Timmy Franz Geithner screwed the pooch on that one. Let's all switch to Rubles, Yen, or the Euro. I hear the Peso is doing good these days. Good-bye America...;-( - Daamien, on 03/26/2009, -0/+5"Nothing has inherent value. However, it is much more likely that gold will be valued more than printed cotton since it is more scarce and arguably more useful."
Physical assets like gold do have an inherent value given their tangibility. While the cotton dollar bills also has some inherent value due to their physical nature, a tangible physical dollar is equal to an intangible dollar that the Federal Reserve can create at will. Therefore, the concept of dollars in general can be classified as intangible in nature and therefore inherently worthless. I am making an argument on the basis of asset classification rather than market value as determined by perceptions of supply and demand. - cowsgonemadd3, on 03/26/2009, -0/+5How about bacon(I just had to being on digg)?
- kemp34, on 03/26/2009, -2/+7Same as it does today.
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