32 ms·

This piece is rather poorly reasoned. It matters very little what currency oil is priced in...oil is re-priced constantly (as is the dollar), and the dollar ca

by ckinnan 17y ago

This piece is rather poorly reasoned. It matters very little what currency oil is priced in...oil is re-priced constantly (as is the dollar), and the dollar can readily and immediately be exchanged with euro or yen or most anything else in massive global forex markets. I can just as easily price oil in euros or in ounces of gold....it is the supply and demand for oil, and the supply and demand for dollars, that matters.

nazgulnarsil 17y ago
you're ignoring that demand for dollars is hugely tied to oil.
- ckinnan 17y ago
  It is a keystroke to change from euro to dollars to buy oil and another keystroke for the seller to exchange those dollars for another currency. The fact that oil is priced in one currency has almost no impact on the underlying supply and demand. The important element to the oil-dollar story is the idea of the Gulf States opting to leave the American sphere and the sense of American decline.
  - jeromec 17y ago
    It's a play on words, but I believe "priced in dollars" means oil payments made in dollars. In other words, the currency you need to have on hand to trade with. See the article linked below: Excerpt: "Brazil has shown interest in collaborating in non-dollar oil payments, along with India." http://www.businessweek.com/globalbiz/content/oct2009/gb2009106_736291.htm http://www.businessweek.com/globalbiz/content/oct2009/gb2009... Also, Saddam Hussein was threatening to take payments for oil in euros...
  - nazgulnarsil 17y ago
    right, but with millions of transactions a day this serves to boost aggregate demand for dollars, since currency is constantly being traded into it for a commodity which is then consumed.
hmmmm 17y ago
Except that if oil is priced in dollars and you have a dollar printing factory then oil is effectively free to you. If my ISP accepted pictures of my cat rather than insisting on pictures of president Jackson it would make a big difference to me.
- jeromec 17y ago
  > Except that if oil is priced in dollars and you have a dollar printing factory then oil is effectively free to you. That's not exactly how it works (although that edge helps keep our oil cheap). The more money that is in circulation (printed) the less value to each person that holds it. Imagine a game of Monopoly where everybody had as much money as the Bank; nobody would have much spending power. When this happens in the real world, such as the 90's in Argentina, in Zimbabwe, and elsewhere throughout history, it's called hyperinflation. The U.S. has uniquely been able to get away with excessive printing because of the dollar hegemony, a good credit rating - "backed by the full faith and credit of the U.S. governement" - from having a stable government, and dominating the world economy. But we're not invincible... even Rome fell.
  - hmmmm 17y ago
    The USA has been able to get away with printing dollars because it sold things people wanted (an had to pay for in $) - the article alleges that this is no longer true.
    - jeromec 17y ago
      There is nothing so significant the US exports which allows free reign printing of dollars. The US doesn't sell it buys - in fact it's the highest consuming country in the world. Even if there were exports the US could sell there is nobody which can afford to buy significantly. That's the economic drawback of having the near top currency.
known 17y ago
I think it is related to http://en.wikipedia.org/wiki/Opportunity_costs http://en.wikipedia.org/wiki/Opportunity_costs

by ckinnan 17y ago

nazgulnarsil 17y ago

you're ignoring that demand for dollars is hugely tied to oil.

ckinnan 17y ago
It is a keystroke to change from euro to dollars to buy oil and another keystroke for the seller to exchange those dollars for another currency. The fact that oil is priced in one currency has almost no impact on the underlying supply and demand. The important element to the oil-dollar story is the idea of the Gulf States opting to leave the American sphere and the sense of American decline.
- jeromec 17y ago
  It's a play on words, but I believe "priced in dollars" means oil payments made in dollars. In other words, the currency you need to have on hand to trade with. See the article linked below: Excerpt: "Brazil has shown interest in collaborating in non-dollar oil payments, along with India." http://www.businessweek.com/globalbiz/content/oct2009/gb2009106_736291.htm http://www.businessweek.com/globalbiz/content/oct2009/gb2009... Also, Saddam Hussein was threatening to take payments for oil in euros...
- nazgulnarsil 17y ago
  right, but with millions of transactions a day this serves to boost aggregate demand for dollars, since currency is constantly being traded into it for a commodity which is then consumed.

hmmmm 17y ago

Except that if oil is priced in dollars and you have a dollar printing factory then oil is effectively free to you. If my ISP accepted pictures of my cat rather than insisting on pictures of president Jackson it would make a big difference to me.

jeromec 17y ago
> Except that if oil is priced in dollars and you have a dollar printing factory then oil is effectively free to you. That's not exactly how it works (although that edge helps keep our oil cheap). The more money that is in circulation (printed) the less value to each person that holds it. Imagine a game of Monopoly where everybody had as much money as the Bank; nobody would have much spending power. When this happens in the real world, such as the 90's in Argentina, in Zimbabwe, and elsewhere throughout history, it's called hyperinflation. The U.S. has uniquely been able to get away with excessive printing because of the dollar hegemony, a good credit rating - "backed by the full faith and credit of the U.S. governement" - from having a stable government, and dominating the world economy. But we're not invincible... even Rome fell.
- hmmmm 17y ago
  The USA has been able to get away with printing dollars because it sold things people wanted (an had to pay for in $) - the article alleges that this is no longer true.
  - jeromec 17y ago
    There is nothing so significant the US exports which allows free reign printing of dollars. The US doesn't sell it buys - in fact it's the highest consuming country in the world. Even if there were exports the US could sell there is nobody which can afford to buy significantly. That's the economic drawback of having the near top currency.

known 17y ago

I think it is related to http://en.wikipedia.org/wiki/Opportunity_costs http://en.wikipedia.org/wiki/Opportunity_costs