4 ms·

You should check your hunch against the reality, at least periodically. The US dollar has strengthened since the current US-Iran conflict started.

znnajdla 7mo ago
I have checked. It’s too early to tell but anyway relative price is not what matters. What matters is purchasing power. EUR purchasing power was better and improving compared to USD. And check out interest rate derivatives — the euro has actually overtaken the dollar as the #1 currency in this massive market.
- roncesvalles 7mo ago
  Purchasing power for what? Consumer goods? Most purchasing power calculations are completely bogus because they rarely compare goods of equal quality. A neighborhood with just a Walmart doesn't have higher purchasing power than a neighborhood with just a Whole Foods.
  - znnajdla 7mo ago
    Commodities. Raw materials with which all goods and services are made. Coffee, sugar, wheat, pound of beef, gasoline. Also products which are supposed to be identical like a Big Mac. Purchasing power is hard to measure but it’s a question studied deeply by economists.
    - roncesvalles 7mo ago
      Even the Big Mac index is flawed because it's not quite the same burger, since it's not made in the same regulatory environment, or by people compensated equally fairly.
      - znnajdla 7mo ago
        All measures are flawed but can you do better?
        roncesvalles 7mo ago
        No, my point is that there is no such thing as purchasing power. An iPhone doesn't cost less in China or India even though their "purchasing power" is much higher on paper. Having "high purchasing power" just means that you have access to low quality options that people in "low purchasing power" countries don't because there isn't a market for it.
  - deleted 7mo ago
    [deleted]
culi 7mo ago
Yes it tends to strengthen during times of conflict as countries buy more dollars in response. That's kinda the whole gimmick with the petrodollar. War is good for the US But if Iran does successfully force countries to stop using the petrodollar by only allowing countries trading in yuan through the strait, then we could actually see that reverse. IMO destroying the petrodollar is the primary clear "victory" Iran could achieve from this war
- roncesvalles 7mo ago
  Reserve currency status entirely depends on how effective the issuer is at dropping a precision-guided munition over anyone who dares to counterfeit it. China is actually the second-best contender now due to its growing military prowess. But it still might not be at the level where it can carry out the aforementioned task anywhere in the world without exception, like the US can. Hence the dollar will most likely stay.
  - nextaccountic 7mo ago
    I'm not seeing the US bomb North Korea though
    - roncesvalles 7mo ago
      The US used enough financial sanctions and diplomacy to make North Korea stop doing it. If NK did it on a large enough scale and persisted, we'd absolutely have a war with them.

znnajdla 7mo ago

I have checked. It’s too early to tell but anyway relative price is not what matters. What matters is purchasing power. EUR purchasing power was better and improving compared to USD. And check out interest rate derivatives — the euro has actually overtaken the dollar as the #1 currency in this massive market.

roncesvalles 7mo ago
Purchasing power for what? Consumer goods? Most purchasing power calculations are completely bogus because they rarely compare goods of equal quality. A neighborhood with just a Walmart doesn't have higher purchasing power than a neighborhood with just a Whole Foods.
- znnajdla 7mo ago
  Commodities. Raw materials with which all goods and services are made. Coffee, sugar, wheat, pound of beef, gasoline. Also products which are supposed to be identical like a Big Mac. Purchasing power is hard to measure but it’s a question studied deeply by economists.
  - roncesvalles 7mo ago
    Even the Big Mac index is flawed because it's not quite the same burger, since it's not made in the same regulatory environment, or by people compensated equally fairly.
    - znnajdla 7mo ago
      All measures are flawed but can you do better?
      - roncesvalles 7mo ago
        No, my point is that there is no such thing as purchasing power. An iPhone doesn't cost less in China or India even though their "purchasing power" is much higher on paper. Having "high purchasing power" just means that you have access to low quality options that people in "low purchasing power" countries don't because there isn't a market for it.
- deleted 7mo ago
  [deleted]

culi 7mo ago

Yes it tends to strengthen during times of conflict as countries buy more dollars in response. That's kinda the whole gimmick with the petrodollar. War is good for the US But if Iran does successfully force countries to stop using the petrodollar by only allowing countries trading in yuan through the strait, then we could actually see that reverse. IMO destroying the petrodollar is the primary clear "victory" Iran could achieve from this war

roncesvalles 7mo ago
Reserve currency status entirely depends on how effective the issuer is at dropping a precision-guided munition over anyone who dares to counterfeit it. China is actually the second-best contender now due to its growing military prowess. But it still might not be at the level where it can carry out the aforementioned task anywhere in the world without exception, like the US can. Hence the dollar will most likely stay.
- nextaccountic 7mo ago
  I'm not seeing the US bomb North Korea though
  - roncesvalles 7mo ago
    The US used enough financial sanctions and diplomacy to make North Korea stop doing it. If NK did it on a large enough scale and persisted, we'd absolutely have a war with them.