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It wouldn't change the real value we have to pay externally for oil and so on. Most of the oil producing countries have currencies pegged to the dollar and pol

by yannis 17y ago

It wouldn't change the real value we have to pay externally for oil and so on. Most of the oil producing countries have currencies pegged to the dollar and politically they are bound to stay with it. If you have a low dollar Chinese goods will become more expensive and consumption will go down. America wants a stronger Chinese Yuan and has been pressurizing the Chinese for this - in efect if the Chinese dump dollars America's wish will be granted. (A similar move saw America out of the First Oil Crisis). I thought the problem with the "Continental" currency was that it got devalued due to the British forging large amounts.

hga 17y ago
"Peg" is a wrong word to use here, it's got the wrong connotations. Oil is priced in dollars: if you want to buy oil on the open market/from an OPEC nation, you have to pony up dollars to buy it. That says nothing about how many dollars are required ... e.g. look at what happened starting in the early '70s when Nixon closed the gold window. (I must say it's nice to be on a forum where I can reasonably expect people to know such references.) As for your second paragraph in toto ... I'm not sure the linkages will work that way. As for the Continental problem ... yeah, you could be right, I've certainly heard that was a factor, but the bottom line remains the same.
- yannis 17y ago
  The Gulf currencies are literally pegged to the Dollar. It's a fixed rate for the last 5 years that I had dealings with them (Qatar, UAE, Bahrain, Kuwait etc). But I agree nothing stops oil prices sky-rocketing. I must say it's nice to be on a forum where I can reasonably expect people to know such references Best forums on the web on any topic and to top it very civilized:)
  - hga 17y ago
    Sorry about that, I didn't know the Gulf states had actual pegs (they were omitted from a list I'd recently read) and therefore misread your starting sentence. However if the US$ started a sharp secular decline unrelated to anything happening in the Gulf (suppose the Fed uses QE to fund the Federal deficit for too long), they could change their pegs and I would imagine that in and of itself wouldn't be viewed negatively. (Of course in such an event there would be so much financial chaos... well, "Sufficient unto the day is the evil thereof.")

by yannis 17y ago

hga 17y ago

"Peg" is a wrong word to use here, it's got the wrong connotations. Oil is priced in dollars: if you want to buy oil on the open market/from an OPEC nation, you have to pony up dollars to buy it. That says nothing about how many dollars are required ... e.g. look at what happened starting in the early '70s when Nixon closed the gold window. (I must say it's nice to be on a forum where I can reasonably expect people to know such references.) As for your second paragraph in toto ... I'm not sure the linkages will work that way. As for the Continental problem ... yeah, you could be right, I've certainly heard that was a factor, but the bottom line remains the same.

yannis 17y ago
The Gulf currencies are literally pegged to the Dollar. It's a fixed rate for the last 5 years that I had dealings with them (Qatar, UAE, Bahrain, Kuwait etc). But I agree nothing stops oil prices sky-rocketing. I must say it's nice to be on a forum where I can reasonably expect people to know such references Best forums on the web on any topic and to top it very civilized:)
- hga 17y ago
  Sorry about that, I didn't know the Gulf states had actual pegs (they were omitted from a list I'd recently read) and therefore misread your starting sentence. However if the US$ started a sharp secular decline unrelated to anything happening in the Gulf (suppose the Fed uses QE to fund the Federal deficit for too long), they could change their pegs and I would imagine that in and of itself wouldn't be viewed negatively. (Of course in such an event there would be so much financial chaos... well, "Sufficient unto the day is the evil thereof.")