[Denny]

There seems to quite a big concern of late about some oil producers demanding payment in Japanese yen or the euro. But, what difference does it make, as money is so fungible? If the producer wants to be paid in yen, or rubles, or whatever, its a simple matter to exchange US$ for yen at a big bank or currency trading company. I would also expect the U.S. treasury holds other major currencies, along with gold. Even Canada's treasury holds other major currencies.

[gampy]

Dude. The only reason the US can maintain it's current trade deficit and economy is because oil is priced in US dollars.

There are many threads on this site devoted to the petrodollar and implications thereof.

Search "petrodollar" and you will find the answer to your question.

I thought about doing this for you, but fucked if I am going to do your work for you.

Suffice to say...you have some research to do before creating another thread.

PS : for someone with that many posts on this forum, I am a little confused that you are unfamiliar with the search function, nevermind the subject at hand.

[Armageddon]

$this->bbcode_second_pass_quote('gampy', 'D')ude. The only reason the US can maintain it's current trade deficit and economy is because oil is priced in US dollars.

There are many threads on this site devoted to the petrodollar and implications thereof.

Search "petrodollar" and you will find the answer to your question.

I thought about doing this for you, but fucked if I am going to do your work for you.

Suffice to say...you have some research to do before creating another thread.

[gampy]

$this->bbcode_second_pass_quote('Armageddon', '')$this->bbcode_second_pass_quote('gampy', 'D')ude. The only reason the US can maintain it's current trade deficit and economy is because oil is priced in US dollars.

There are many threads on this site devoted to the petrodollar and implications thereof.

Search "petrodollar" and you will find the answer to your question.

I thought about doing this for you, but fucked if I am going to do your work for you.

Suffice to say...you have some research to do before creating another thread.

[Armageddon]

I don't need links, just give me a short 1-2 line answer. It can't be that difficult, can it ?

[master_rb]

1-2 line I can even do

oil is blood for economyies around the world, to get oil you need dollars and everybody needs it to stay alive, you can't go around it this system till another currency comes along,

the value of dollar is kept high because of this arrangement - simple supply demand

[CrudeAwakening]

Well, as I understand it, it provides artificially increased demand for the USD, since dollars are required for the transaction, keeping the dollar value higher than it would be otherwise. In terms of the effect on the value of the USD, it's almost as if the US was the sole exporter of all of the world's oil. It also allows the US to print money to pay for oil without experiencing the level of currency risk or transaction costs of other countries.

However, it does appear to depend to a large extent on oil exporters opting to retain their earnings as USD or USD denominated assets, and as they decide not to do so, the influence of the petrodollar should in theory be lessened. So there's a bit of a vicious circle involved - petrodollars tending to be retained and recycled due to the USD being the de facto world reserve currency, and the petrodollar also helping to prop up the dollars status as reserve currency.

[cube]

$this->bbcode_second_pass_quote('gampy', 'D')ude. The only reason the US can maintain it's current trade deficit and economy is because oil is priced in US dollars.

[cube]

I guess I have to explain myself now huh?

I believe that ultimately what is important is whether the rest of the world wishes to hold onto US dollars. The fact that oil is priced in US dollars is irrelevant.

What's keeping the US dollar afloat right now is the central bankers of the world (especially Asian nations) holding onto US dollars.

[MrBill]

$this->bbcode_second_pass_quote('cube', 'I') guess I have to explain myself now huh?

I believe that ultimately what is important is whether the rest of the world wishes to hold onto US dollars. The fact that oil is priced in US dollars is irrelevant.

What's keeping the US dollar afloat right now is the central bankers of the world (especially Asian nations) holding onto US dollars.

[pogoliamo]

$this->bbcode_second_pass_quote('MrBill', 'W')hy I do not know

[SILENTTODD]

I don't really care in the short term;

Buy nothing but Gold. Make everything in America like we use to. Then everything will turn around. Don't talk to me till then!

[kjmclark]

Actually, it does matter, and some people have danced around the reason, but not quite hit it. Here's how I understand it.

Countries maintain currency reserves of foreign currencies to help keep their own currency stable (e.g. China) and to ensure that they can buy important goods in world markets. If the seller of a particular good wants payment in a particular currency, it behooves you to have a reserve of that currency to ensure you can make payments at a reasonable cost (without currency transaction fees), even in a time of emergency. Since most of the world has a reserve of US Dollars, and the world's most important commodity is traded in US Dollars, that works acceptably well for everyone.

It works particularly well for the issuer of that world reserve currency, since the rest of the world, by holding your currency, is giving you valuable goods/services for nothing more than pieces of paper you issue.

So the real value to the US of having oil traded in dollars is that it makes sense for the rest of the world to have dollar reserves. If the oil exporting countries decide to take payments in other currencies, there won't be as much value to various countries to hold dollar reserves. In that case, those dollars will come back to the US, with various, mostly negative, effects for the US.

[vision-master]

So you thought you were bringin' "freedom" to the IRAQ people? Pffffft... think again! This time try using your brain.

IRAQ = OIL = U.S. Petrodollars

[Denny]

$this->bbcode_second_pass_quote('gampy', 'D')ude. The only reason the US can maintain it's current trade deficit and economy is because oil is priced in US dollars.

There are many threads on this site devoted to the petrodollar and implications thereof.

Search "petrodollar" and you will find the answer to your question.

[FloridaGirl]

When the US invaded Iraq, the soldiers found huge stashes of millions of US dollars. At the time, I wondered why they had US dollars. Why wasn't their stashes in their own currency or a mix of currencies if they didn't trust their own? I didn't know then that all oil was traded in US dollars.

So if Iraq was stashing dollars, I expect other exporting oil countries are stashing dollars. When they keep the cash, that adds to the world-wide demand for the US dollar.

Here's where the US economy could go bad real fast if (oops, change "if" to "when") the world loses faith in the stability and/or value of the dollar. When the holders of the dollar see it's value falling too much they will start selling their dollars for more stable currencies, thus flooding the market (adding dollar supply) and then they will insist on other currencies for their oil (reducing dollar demand at the same time).

What we'll see here in the US is tremendous inflation.

[Denny]

$this->bbcode_second_pass_quote('pogoliamo', '')$this->bbcode_second_pass_quote('MrBill', 'W')hy I do not know

[pogoliamo]

$this->bbcode_second_pass_quote('Denny', ' ')Even today, one can argue that the U.S. dollar is undervalued in terms of what it can buy domestially compared to what other world currencies can buy in their countries. I know this, I just returned from an overseas trip where I found that most people more in euros than Americans pay in dollars for the same goods and services.

[IrrationalExuberanceMonky]

What Cube and Mr Bill said +1.

This story of "Iranian euro oil bourse of doom" tends to float around wacky unreliable left wing sites the same way "Al-Qaeda suitcase nukes from Russia of doom" float around wacky RW sites. Sure Iran not keeping their piggybank in USD denominated assets is negative for the USD, but in the grand scheme of things (international capital flows) a two-bit nation not buying USD assets is basically irrelevent.

[Qolio]

Ok, I hope someone can tell me if I've understood correctly. (The numbers are just examples, don't take them seriously.)
1) Because oil is traded in dollars, other countries must have huge dollar reserves, lets say $1 trillion.
2) More dollars are printed by US, and more credit money is created, so that dollar supply increases by 10%.
3) Dollar value drops by 10%. (Well, perhaps not this much, but that's irrelevant here.)
4) Other countries' dollar reserves lose 10% of their "real value", i.e. $100 billion.
5) They need to buy 100 billion dollars more just to keep the real value of the reserves constant.
6) Practically, US is getting $100billion worth of oil, other products, or other currencies for free.

Comments?