Manu, one of things that bothers me a great deal is when posters try to use Zimbabwe or evidence of a) peak oil, or b) the dangers of a fiat currency.
Zimbabwe used to be a successful middle-income country up until Robert Mugabe took over in 1980. One of the most diversified and wealthiest in Africa. Even today they might be producing agricultural commodities and base metals very much in demand by the rest of the world. Especially fast-growing Asia. If it were not for Mr. Mugabe's gang of kleptocrats who have systematically destroyed the economy for their own short-term benefit.
Many farmers from Zimbabwe migrated to neighboring Zambia when their farms were confiscated. As a result, Zambia's agriculture exports as well as farm-employment have exploded, while Zimbabwe faces shortages of even basic food stuffs.
$this->bbcode_second_pass_quote('', ' ') Robert G. Mugabe has ruled over this battered nation, his every wish endorsed by Parliament and enforced by the police and soldiers, for more than 27 years. It appears, however, that not even an unchallenged autocrat can repeal the laws of supply and demand.
One month after Mr. Mugabe decreed just that, commanding merchants nationwide to counter 10,000-percent-a-year hyperinflation by slashing prices in half and more, Zimbabwe’s economy is at a halt.
Bread, sugar and cornmeal, staples of every Zimbabwean’s diet, have vanished, seized by mobs who denuded stores like locusts in wheat fields. Meat is virtually nonexistent, even for members of the middle class who have money to buy it on the black market. Gasoline is nearly unobtainable. Hospital patients are dying for lack of basic medical supplies. Power blackouts and water cutoffs are endemic.
Manufacturing has slowed to a crawl because few businesses can produce goods for less than their government-imposed sale prices. Raw materials are drying up because suppliers are being forced to sell to factories at a loss. Businesses are laying off workers or reducing their hours.
PeakOil is You
What does it matter if oil is traded in US$ or other?
Re: What does it matter if oil is traded in US$ or other?
by MrBill » Thu 02 Aug 2007, 10:13:34
Source: Caps on Prices Only Deepen Zimbabweans’ Misery
Economic mismanagement and corruption can effectively bankrupt any country regardless of its currency system. Zimbabwe's hyper-inflation is in response to mismangement of the real economy as living standards started to fall and the government ordered more money to be printed to cover the shortfall.
Another reason that I support independent central banks free of interference of populist, or worse authoritarian, politicians. But then again Zimbabwe does not have free or fair elections; a separate independent judicial; respect for the rule of the law or basic human rights; private property rights or protection from confiscation; or any of the trappings of a functioning country. It had them, but Mr. Mugabe and his thugs systematically undermined them and then did away from them.
Please use Zimbabwe as an example of a failed state, but please do not tell me it is due to their currency system or a wider cause of peak oil depletion. That it is not.
The organized state is a wonderful invention whereby everyone can live at someone else's expense.
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Re: What does it matter if oil is traded in US$ or other?
by manu » Fri 03 Aug 2007, 05:32:41
The point about Zimbabwe is that when it failed, their paper currency was usless. But if you had gold it still has value in S.A. or where ever you move to. That is my point about paper currency, it is just paper backed by a promise. I stick to my point that it does matter if oil is traded in US$ or other currency. I admit the U.S. does have resources and still pumps around 10 mil. barrels of oil a day. But they also have a debt of $250,000 for every person in the country. When the $ (not if) collapses it will take the world economy with it. Good luck with your promisorry (pun intented) notes then!
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Re: What does it matter if oil is traded in US$ or other?
by MrBill » Fri 03 Aug 2007, 08:55:44
$this->bbcode_second_pass_quote('manu', 'T')he point about Zimbabwe is that when it failed, their paper currency was usless. But if you had gold it still has value in S.A. or where ever you move to. That is my point about paper currency, it is just paper backed by a promise. I stick to my point that it does matter if oil is traded in US$ or other currency. I admit the U.S. does have resources and still pumps around 10 mil. barrels of oil a day. But they also have a debt of $250,000 for every person in the country. When the $ (not if) collapses it will take the world economy with it. Good luck with your promisorry (pun intented) notes then!
So the issue is debts and deficts as well as the ability to pay for imports with economic output NOT in which currency oil is priced as the external value of the USD vis a vie the euro or a basket of currencies already takes into consideration the US' imports as well as their exports and over-all current account deficit.
Therefore, I maintain that the price of crude is currently somewhere around $77.25, which at $1.3700 is 56.39 euros, and the price would be the same based on current supply or demand whether it was in euros or dollars. It does not matter to the Chinese or the Japanese whether they sell yuan or yen to pay for oil imports in US dollars or euros. Their currencies are under-valued against both currencies.
If the price of oil was denominated in euros would you then argue that European exporters, like Germany, get their oil for free by printing euros? Again, I find that position hard to defend. But I am enjoying your posts. Thanks ; - )
The organized state is a wonderful invention whereby everyone can live at someone else's expense.
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Re: What does it matter if oil is traded in US$ or other?
by manu » Sat 04 Aug 2007, 02:11:01
$this->bbcode_second_pass_quote('', 'S')o the issue is debts and deficts as well as the ability to pay for imports with economic output NOT in which currency oil is priced as the external value of the USD vis a vie the euro or a basket of currencies already takes into consideration the US' imports as well as their exports and over-all current account deficit.
Therefore, I maintain that the price of crude is currently somewhere around $77.25, which at $1.3700 is 56.39 euros, and the price would be the same based on current supply or demand whether it was in euros or dollars. It does not matter to the Chinese or the Japanese whether they sell yuan or yen to pay for oil imports in US dollars or euros. Their currencies are under-valued against both currencies.
If the price of oil was denominated in euros would you then argue that European exporters, like Germany, get their oil for free by printing euros? Again, I find that position hard to defend. But I am enjoying your posts. Thanks ; - )
Therefore, I maintain that the price of crude is currently somewhere around $77.25, which at $1.3700 is 56.39 euros, and the price would be the same based on current supply or demand whether it was in euros or dollars. It does not matter to the Chinese or the Japanese whether they sell yuan or yen to pay for oil imports in US dollars or euros. Their currencies are under-valued against both currencies.
If the price of oil was denominated in euros would you then argue that European exporters, like Germany, get their oil for free by printing euros? Again, I find that position hard to defend. But I am enjoying your posts. Thanks ; - )
If the price was denominated in euros, my argument would be that the euro value would go up and the $ would lose value. If Saudi decided to only take gold for the oil, well then, they would be invaded the next day. It may not matter so much to the Japanese or Chinese what currency they pay in, but it does matter to the U.S. or Western Europe what currency they pay in. It would matter a whole lot more if the U.S. was not allied with W.Europe. Like what is happening with Russia right now because Putin is not doing everything they want him to. I have to return to my farm but will be back in a week.
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Re: What does it matter if oil is traded in US$ or other?
by cube » Sat 04 Aug 2007, 03:30:33
Purchasing US dollars or any commodity has a "bullish" effect on its price but selling it has a "bearish" effect. If for example France "bought" US dollars to trade for oil with Saudi Arabia and then Saudi Arabia immediately "sold" the US dollars in exchange for gold that would completely negate everything about the US dollar. However now that Saudi Arabia is "hoarding / sitting on" gold that would have a bullish effect on gold prices.
buy + sell == zero effect
the sum of a positive and negative == zero
Why is this so difficult to understand?
I feel like I want to smash my head through a chalk board out of frustration.
I now have more respect for teachers and instructors I don't know how they can have the patience to put up with this on a daily basis. I would lose my sanity.
buy + sell == zero effect
the sum of a positive and negative == zero
Why is this so difficult to understand?
I feel like I want to smash my head through a chalk board out of frustration.
I now have more respect for teachers and instructors I don't know how they can have the patience to put up with this on a daily basis. I would lose my sanity.
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Re: What does it matter if oil is traded in US$ or other?
by kjmclark » Sat 04 Aug 2007, 08:31:35
$this->bbcode_second_pass_quote('Qolio', 'O')k, 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.
1) Because oil is traded in dollars, other countries must have huge dollar reserves, lets say $1 trillion.
Actually the IMF says it's currently over $2 trillion in official reserves. That doesn't count corporate, black market, and personal reserves.
$this->bbcode_second_pass_quote('cube', 'A')nd what about oil producing nations themselves...Saudi Arabia, Russia, Kuwait.....? They certainly do NOT need to hold onto US dollars to buy oil if you know what I mean....but yet they still have plenty of US currency reserves. *grin*
anybody want to explain that? hmmm?
Oil isn't the only commodity priced in dollars. The oil producing nations are big purchasers of things like grain or construction materials and equipment. Also, if your currency isn't the most stable in the world, contracts are often priced in dollars instead of your currency to ensure no one gets fleeced.
Agreeing with KingCoal's point, you have to think of the four sets of US dollars in the world. There is a large amount of dollars in use in the US. There is a large amount of dollars held in reserve by organizations and individuals in the US. Then there is another large amount of dollars out in the world being used on an active basis for transactions. Finally, there is the large amount of dollars held in reserve by foreign countries, businesses, other organizations, and individuals around the world.
In a sense, you can think of US dollars as the force. "It surrounds us, penetrates us, binds the galaxy together." Dollars are all over the world, used in transactions all over the world, and keeps the international financial system working cohesively. All of this could be in another currency, but it isn't. That's of great benefit to the US, just as it was of great benefit to the pound when it was the world reserve currency last century.
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