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What implications could this have for oil? Isn't oil bought and sold using US Dollars? I've always heard the World "Does Business" in US Dollars. Is this the be

by vxxzy 11y ago

What implications could this have for oil? Isn't oil bought and sold using US Dollars? I've always heard the World "Does Business" in US Dollars. Is this the beginning of the end for the Dollar as an international norm?

deleted 11y ago
[deleted]
adventured 11y ago
Modest implications. No more than the Euro or Yen at their peaks did. No, it's not even remotely close to the end of the dollar as the international norm. The dollar is stronger today than it has been in 20 years, and it's gaining strength as the Eurozone and Japan are a mess. The most likely outcome to this, is that the Yen loses the position it has held on the global stage for the prior 30+ years or so. Japan is the nation that will suffer the most as China's currency rises. Right now Japan is depending on the Yen as their only remaining prop to use against their debt; the weaker the Yen's global position, the less they can spread that debt monetization cost around. China's currency will become the dominant Asian currency; the Euro will remain the dominant European currency (unless something unexpected - and worse than it has already absorbed - happens to rip the union apart (that could be Finland bailing, triggering other nations to leave as well)); the dollar will remain the global reserve currency (there needs to be one, and the West is far more comfortable with that scenario than becoming more reliant on China, as are Japan and numerous China competitors in Asia).
- the-dude 11y ago
  > The dollar is stronger today than it has been in 20 > years As far as I remember the US Dollar was about 1.25 the value of the Euro at it's peak in 1999/2000. We traded in dollars at the time.
  - adventured 11y ago
    The Yen was a credible currency in 1995, and it's now in much worse shape (both today and its outlook). The Euro was widely expected to pose a challenge to the dollar globally, which has not happened at all. The dollar is as strong as it is even with 0% interest rates. Imagine if rates were even half the levels they were 20 years ago. I'd definitely make the argument the dollar is stronger today than it has been since the late 1990s when the US economy was riding very high. In the next few years, most likely the dollar will gain more strength (the US budget is currently under control, growth is ok, and the employment picture continues to strengthen spurring tax growth), the Euro will be debased with more QE in mostly futile attempts to spur Eurozone growth, and the Yen will lose a lot more value. The Yuan is also likely to face significant devaluation as China struggles to grow in real terms, but it will at least see greater global share. Things are looking great for the dollar at least for the next ten years.
    - the-dude 11y ago
      > The Euro was widely expected to pose a challenge > to the dollar globally, which has not happened at all. The dollar was trading at about 0.75 to the Euro around 2009. What is a challenge in your eyes? Anyway, these are just opinions ( yours and mine ). Mine: no US rate hike in the foreseeable future, QE4.
      - adventured 11y ago
        The Euro has acted as a strangling device for everyone in the union not named Germany. For Germany, it has enabled them to ride an artificially cheaper currency with their exports (were they using their own currency, it would be far more expensive). For Italy, Spain, Portugal, Greece etc, the currency held them back by being even more expensive than their own currency would have been; for eg Finland, it has prevented them from making adjustments to become more competitive on numerous cost structures. The end result has been eight years of no net economic growth (and in recent dollar terms it's now far worse than that). The lack of Eurozone growth will spur more QE for years to come. The US is presently done with its QE program, and there's nothing on the horizon that indicates it'll need to return to that in the next several years (large budget deficits would cause that, but so far Congress isn't growing spending in an out of control manner). That context will push the Euro lower, and the USD higher versus. Until the Eurozone can show off serious growth (not 0.3%-0.5% type 'growth'), rapidly improving household balance sheets, and a significantly improving employment picture (not 11%), the Euro will struggle.
- beamatronic 11y ago
  At the moment, 1 US Dollar equals 1.33 Canadian Dollar and 0.95 Euro.
- dools 11y ago
  Japan's debt is denominated in Yen. They don't have foreign denominated debt and they issue their own currency, therefore they're fine. The crisis in the Eurozone is due to the fact that members of the EMU gave up their currency sovereignty and can't make new Euros when they need to. Japan and Europe are in a completely different situation to one another.
digi_owl 11y ago
The only thing that could end the (petro-)dollar would be the intro of Bankor for international trade. Meaning that if US wanted to buy something off china, it would have to convert USD into Bankor, then buy whatever from China, that would then turn those Bankor into Renminbi (or hold them for more imports). This would mean that a import heavy nation would find their Bankor exchange rate plummeting etc, potentially balancing out trade. As long as the USD is the international trade currency, USA can always print to cover needs. This in contrasts to various historical death spirals where a lack of exports and a constant printing to cover foreign expenses ran the currency into the ground.
deleted 11y ago
[deleted]
fredgrott 11y ago
not all oil...Saudi oil is because of the US agreement to defend Saudi which has that clause

by vxxzy 11y ago

deleted 11y ago

[deleted]

adventured 11y ago

Modest implications. No more than the Euro or Yen at their peaks did. No, it's not even remotely close to the end of the dollar as the international norm. The dollar is stronger today than it has been in 20 years, and it's gaining strength as the Eurozone and Japan are a mess. The most likely outcome to this, is that the Yen loses the position it has held on the global stage for the prior 30+ years or so. Japan is the nation that will suffer the most as China's currency rises. Right now Japan is depending on the Yen as their only remaining prop to use against their debt; the weaker the Yen's global position, the less they can spread that debt monetization cost around. China's currency will become the dominant Asian currency; the Euro will remain the dominant European currency (unless something unexpected - and worse than it has already absorbed - happens to rip the union apart (that could be Finland bailing, triggering other nations to leave as well)); the dollar will remain the global reserve currency (there needs to be one, and the West is far more comfortable with that scenario than becoming more reliant on China, as are Japan and numerous China competitors in Asia).

the-dude 11y ago
> The dollar is stronger today than it has been in 20 > years As far as I remember the US Dollar was about 1.25 the value of the Euro at it's peak in 1999/2000. We traded in dollars at the time.
- adventured 11y ago
  The Yen was a credible currency in 1995, and it's now in much worse shape (both today and its outlook). The Euro was widely expected to pose a challenge to the dollar globally, which has not happened at all. The dollar is as strong as it is even with 0% interest rates. Imagine if rates were even half the levels they were 20 years ago. I'd definitely make the argument the dollar is stronger today than it has been since the late 1990s when the US economy was riding very high. In the next few years, most likely the dollar will gain more strength (the US budget is currently under control, growth is ok, and the employment picture continues to strengthen spurring tax growth), the Euro will be debased with more QE in mostly futile attempts to spur Eurozone growth, and the Yen will lose a lot more value. The Yuan is also likely to face significant devaluation as China struggles to grow in real terms, but it will at least see greater global share. Things are looking great for the dollar at least for the next ten years.
  - the-dude 11y ago
    > The Euro was widely expected to pose a challenge > to the dollar globally, which has not happened at all. The dollar was trading at about 0.75 to the Euro around 2009. What is a challenge in your eyes? Anyway, these are just opinions ( yours and mine ). Mine: no US rate hike in the foreseeable future, QE4.
    - adventured 11y ago
      The Euro has acted as a strangling device for everyone in the union not named Germany. For Germany, it has enabled them to ride an artificially cheaper currency with their exports (were they using their own currency, it would be far more expensive). For Italy, Spain, Portugal, Greece etc, the currency held them back by being even more expensive than their own currency would have been; for eg Finland, it has prevented them from making adjustments to become more competitive on numerous cost structures. The end result has been eight years of no net economic growth (and in recent dollar terms it's now far worse than that). The lack of Eurozone growth will spur more QE for years to come. The US is presently done with its QE program, and there's nothing on the horizon that indicates it'll need to return to that in the next several years (large budget deficits would cause that, but so far Congress isn't growing spending in an out of control manner). That context will push the Euro lower, and the USD higher versus. Until the Eurozone can show off serious growth (not 0.3%-0.5% type 'growth'), rapidly improving household balance sheets, and a significantly improving employment picture (not 11%), the Euro will struggle.
beamatronic 11y ago
At the moment, 1 US Dollar equals 1.33 Canadian Dollar and 0.95 Euro.
dools 11y ago
Japan's debt is denominated in Yen. They don't have foreign denominated debt and they issue their own currency, therefore they're fine. The crisis in the Eurozone is due to the fact that members of the EMU gave up their currency sovereignty and can't make new Euros when they need to. Japan and Europe are in a completely different situation to one another.

digi_owl 11y ago

The only thing that could end the (petro-)dollar would be the intro of Bankor for international trade. Meaning that if US wanted to buy something off china, it would have to convert USD into Bankor, then buy whatever from China, that would then turn those Bankor into Renminbi (or hold them for more imports). This would mean that a import heavy nation would find their Bankor exchange rate plummeting etc, potentially balancing out trade. As long as the USD is the international trade currency, USA can always print to cover needs. This in contrasts to various historical death spirals where a lack of exports and a constant printing to cover foreign expenses ran the currency into the ground.

deleted 11y ago

[deleted]

fredgrott 11y ago

not all oil...Saudi oil is because of the US agreement to defend Saudi which has that clause