5 ms·

imho you forgot to mention the key difference between US and Europe. The US can print money because there is still demand in buying $. This demand is an artific

imho you forgot to mention the key difference between US and Europe. The US can print money because there is still demand in buying $. This demand is an artificial one caused by the petro-$, the binding of every oil purchase to $. So everybody involved in oil trading has to purchase $ to purchase oil! Iraq and Iran threatend to sell oil in €, for several reasons, they couldn't and didn't deliver, unfortunatly. The BRICs countries establishing their own trading in other currencies than $. So this dominating role of the US will end long term.

gaius 14y ago
Iraq only couldn't because they got invaded! There is a strong case that this was the real reason for Gulf War II.
- alan_cx 14y ago
  The first one actually.
  - gaius 14y ago
    Yep you are correct.
harryh 14y ago
You are wrong. http://www.pkarchive.org/economy/NothingforMoney.html http://www.pkarchive.org/economy/NothingforMoney.html
- nhaehnle 14y ago
  That link somewhat misleadingly downplays the role of other dollar-denominated assets held by non-US. Now it is true that the fact that trillions of USDs are held in treasuries by other countries (China, Japan, etc.) cannot significantly affect the interest paid on those treasuries, because this interest rate is largely a result of Fed monetary policy. On the other hand, it is very obvious that the fact that the Chinese government is buying up treasuries is what prevents the USD from dropping versus the RMB. So China is effectively giving the US a whole bunch of real goods for free, by buying up those treasuries. This may be irrelevant from the financial perspective, but in real terms, this is a huge benefit for the US. That said, the fact that China buys lots of USD doesn't have anything to do with the whole petro-dollar thing. It just so happens that their industry is geared towards exporting to the US, and it is not possible for them to restructure their industry quickly. So in a sense, the article is still correct on the whole petro-dollar front, but misleading in others.
CamperBob2 14y ago
So everybody involved in oil trading has to purchase $ to purchase oil! I don't really understand why this is considered so important. Big deal, so oil is priced in dollars. Say I have some Euros and want to buy €100 worth of oil. I trade the €100 for $X, buy $X worth of oil 100 microseconds later, and now I have the €100 worth of oil I wanted. What difference did it make to me if $X was $0.01 or $10,000? I'm trying to buy oil, not currency.
- excuse-me 14y ago
  But if you want oil and you have the machine that prints $ you don't have to actually pay for the oil - you are buying it with treasury debt. And since the producer can only sell oil in $ they have no choice but to lend to you - so oil in $ and owning the $ machine gives you a certain advantage over having to actually export somethign to balance our payments
- SuperChihuahua 14y ago
  But you need currency to buy oil. And the result is an "artificial" stronger dollar and a weaker euro - a different exchange rate - compared with if you could purchase oil in euro
  - CamperBob2 14y ago
    So the real problem is that currency has a value all its own, entirely apart from what goods and services it can buy. As a result, there's no way to blindly equate X in one currency with Y in another, because the very act of exchanging one for the other affects their relative values. Transactions that should be purely economic in nature have unavoidable political undertones. I see. Wow, that's broken.

gaius 14y ago

Iraq only couldn't because they got invaded! There is a strong case that this was the real reason for Gulf War II.

alan_cx 14y ago
The first one actually.
- gaius 14y ago
  Yep you are correct.

harryh 14y ago

You are wrong. http://www.pkarchive.org/economy/NothingforMoney.html http://www.pkarchive.org/economy/NothingforMoney.html

nhaehnle 14y ago
That link somewhat misleadingly downplays the role of other dollar-denominated assets held by non-US. Now it is true that the fact that trillions of USDs are held in treasuries by other countries (China, Japan, etc.) cannot significantly affect the interest paid on those treasuries, because this interest rate is largely a result of Fed monetary policy. On the other hand, it is very obvious that the fact that the Chinese government is buying up treasuries is what prevents the USD from dropping versus the RMB. So China is effectively giving the US a whole bunch of real goods for free, by buying up those treasuries. This may be irrelevant from the financial perspective, but in real terms, this is a huge benefit for the US. That said, the fact that China buys lots of USD doesn't have anything to do with the whole petro-dollar thing. It just so happens that their industry is geared towards exporting to the US, and it is not possible for them to restructure their industry quickly. So in a sense, the article is still correct on the whole petro-dollar front, but misleading in others.

CamperBob2 14y ago

So everybody involved in oil trading has to purchase $ to purchase oil! I don't really understand why this is considered so important. Big deal, so oil is priced in dollars. Say I have some Euros and want to buy €100 worth of oil. I trade the €100 for $X, buy $X worth of oil 100 microseconds later, and now I have the €100 worth of oil I wanted. What difference did it make to me if $X was $0.01 or $10,000? I'm trying to buy oil, not currency.

excuse-me 14y ago
But if you want oil and you have the machine that prints $ you don't have to actually pay for the oil - you are buying it with treasury debt. And since the producer can only sell oil in $ they have no choice but to lend to you - so oil in $ and owning the $ machine gives you a certain advantage over having to actually export somethign to balance our payments
SuperChihuahua 14y ago
But you need currency to buy oil. And the result is an "artificial" stronger dollar and a weaker euro - a different exchange rate - compared with if you could purchase oil in euro
- CamperBob2 14y ago
  So the real problem is that currency has a value all its own, entirely apart from what goods and services it can buy. As a result, there's no way to blindly equate X in one currency with Y in another, because the very act of exchanging one for the other affects their relative values. Transactions that should be purely economic in nature have unavoidable political undertones. I see. Wow, that's broken.