[Yamaha_R6]

As far as I know, oil is traded in U.S. dollars.

Also it seems the United States is going bankrupt, what keeps the value of our currency is that China and other Asain markets are buying up our dollars to keep the dollar strong so we can buy more of their goods.


Lets look at a senario in which gasoline is 5$ a gallon by 2008. The Third world goes to hell because they cannot afford gas, and America laughs because we are so rich we can afford to pay it as long as we conserve and carpool.

This would be when the Asain's decide to dump all of their U.S. dollars, only they would spending these dollars to get oil, as we all know oil is traded in U.S. dollars. Since the Asains have so much of them, they in a sense... have a lot of oil. (they just havent claimed it yet).

Of course... with all these dollars released all at once, the dollar will inflate and its value will go down. Since the dollar is now worth less, Americans will now have to pay even MORE to get oil.

BUT WAIT, since the dollar has gone down, the Yen, and other Asain currencies will be WORTH MORE IN RELATION, meaning they will have greater buying power, and will be able to buy EVEN MORE U.S. Dollars in which to buy more oil.

With all the oil and a strong currency, the Asians, specifically China will get stronger and stronger while the U.S. gets weaker.

But it doesn't end here. Many of you will say if China destroys the United States, they destroy themselves, as they need us to buy their goods.

Let me ask.... are you absolutly sure that will be the case in the future? Seems to me the Chinese could just sell their goods to themselves, after all, they have 1 billion people to sell to locally, why waste energy transporting goods to the U.S. when you can sell at home. This worked fine for the Americans for many years.

This might not work now and def. wouldn't have in the past, as the Chinese are too poor to buy all the goods they produce, but that is changing. Since more of them have better jobs, more education, and more money, their own market is stronger, and will be much stronger in the future, it is possible the U.S. market could be small and un-important in relation in the future.

All the wealth will be in China since the U.S. dollar will now be worth nothing, and we will no longer be able to pay as much for oil as they will. In the end, they will buy all the oil and leave us to stew in our own failure.

Even worst they could just start trading oil in the Asian currency and cut us out all together, and since the U.S. dollar wont be worth anything, we wont have the money to buy any of their currency in which to buy oil. China is going to KICK our ASS so badly.


Am i dead-on with my assesment or am i smoking crack?

[Doly]

$this->bbcode_second_pass_quote('Yamaha_R6', 'M')any of you will say if China destroys the United States, they destroy themselves, as they need us to buy their goods.

Let me ask.... are you absolutly sure that will be the case in the future? Seems to me the Chinese could just sell their goods to themselves, after all, they have 1 billion people to sell to locally, why waste energy transporting goods to the U.S. when you can sell at home. This worked fine for the Americans for many years.

[jimmydean]

It's definitely plausible but won't happen anytime soon. Why would China interrupt this flow of U.S. dollar investment at this point?

Maybe in another 10 years when the Yuan has gained every more strength vs. the dollar and we start seeing a growing middle class that can replace the American consumer.

[linlithgowoil]

$this->bbcode_second_pass_quote('', 'T')his would be when the Asain's decide to dump all of their U.S. dollars, only they would spending these dollars to get oil, as we all know oil is traded in U.S. dollars. Since the Asains have so much of them, they in a sense... have a lot of oil. (they just havent claimed it yet).

[MicroHydro]

If China were to give all their workers credit cards and keep the interest rates low, they could sell as much production domestically as desired.

[spot5050]

$this->bbcode_second_pass_quote('Yamaha_R6', 'L')ets look at a senario in which gasoline is 5$ a gallon by 2008

[Kingcoal]

You are neither dead on nor smoking crack (unless you really are smoking crack.) The big mistake that people often make when they try to predict the future is forget that everything is in flux. Everything, meaning the instantaneous value of this and that. Nothing really has any value by itself, value has to be added. This is true of currencies, equities, etc. Economic conditions add value to things. For instance currently there is a huge demand, worldwide for light sweet crude to be used for making everything from distillate fuels to plastics. America's huge per capita consumption and the lighting fast rise of China have doubled the price of oil. This situation is unsustainable and the price per barrel will go as high as is necessary to bring consumption in line with supply.

What we worry about on this site is dramatic supply disruption caused by a sudden drop off in production of one or more of the big reservoirs (such as Ghawar in Saudi Arabia.) Free markets tend to be self regulating under gradually changing conditions. However, successive shocks can cause the normal free market process to become disorderly.

The USA has a fantastic track record at adding value to its products and services. China is the opposite, preferring to destroy their competition with rock bottom pricing. As you can tell, I'm not impressed with China. In fact, I'm worried about what China will do when it can no longer maintain +7% annual growth. Without this manic pace of growth, their economy, as it is designed right now, will collapse.

[smiley]

$this->bbcode_second_pass_quote('', 'I') don't think the Chinese could sell to themselves their exports in the near future. But there is a difference between "the USA" and "the whole of the developed world" that the Americans often fail to notice. The Chinese can sell to Europe, and in fact, they have been switching to make more and more business with Europe and less with the USA in the last couple of years. I think this is highly significative.

[MagnoliaFan]

$this->bbcode_second_pass_quote('Yamaha_R6', 'B')ut it doesn't end here. Many of you will say if China destroys the United States, they destroy themselves, as they need us to buy their goods.

Let me ask.... are you absolutly sure that will be the case in the future? Seems to me the Chinese could just sell their goods to themselves, after all, they have 1 billion people to sell to locally, why waste energy transporting goods to the U.S. when you can sell at home. This worked fine for the Americans for many years.

Am i dead-on with my assesment or am i smoking crack?

[MagnoliaFan]

$this->bbcode_second_pass_quote('smiley', 'I')t is an important 20%, but it is not like China is 'totally' dependent on exports to the US.

[MagnoliaFan]

$this->bbcode_second_pass_quote('Kingcoal', 'T')he USA has a fantastic track record at adding value to its products and services. China is the opposite, preferring to destroy their competition with rock bottom pricing. As you can tell, I'm not impressed with China. In fact, I'm worried about what China will do when it can no longer maintain +7% annual growth. Without this manic pace of growth, their economy, as it is designed right now, will collapse.

[smiley]

$this->bbcode_second_pass_quote('', 'I') think the important numbers are the trade surpluses have with the rest of the world. If we could break down China's trade surplus, does it's surplus with the US exceed 20%? I would guess that the answer would be a resounding yes.

[ab0di]

$this->bbcode_second_pass_quote('smiley', '')$this->bbcode_second_pass_quote('', 'S')ure a US recession would slash Chinese economic growth and probably cause a recession. However it would not lead to mass unemployment and a collapse of China's internal market.

[MD]

Isn't real national material wealth better measured by infrastructure, manufacturing capacity, food production, and raw material?

[MrBean]

$this->bbcode_second_pass_quote('smiley', '
')
It is an important 20%, but it is not like China is 'totally' dependent on exports to the US.

[MrBean]

$this->bbcode_second_pass_quote('MagnoliaFan', '
')What happens when that gravy train stops? Will China be able to replace its trade surplus it had with the US and look to Europe to open its markets? The social democratic parties of Europe would be committing political suicide if they agreed to this. The original poster said that China could sell its products to themselves, but their industry is based on cheap labour, if the Yuan increases in value, their cheap labor becomes not-so-cheap after a while and then their exports (trade surplus) will diminish. Where will they get the excess capital to purchase energy on the world market?

[MrBean]

Very telling picture:



Even with weakening dollar, US trade deficit has kept on widening at same horrible rate. Also against the euroland of Western Europe, by 14% from 2003 to 2004. So energy costs is one main reason (deficit with OPEC up 40%), but not the only.
http://www.epinet.org/content.cfm/webfe ... ct20050210

[MagnoliaFan]

$this->bbcode_second_pass_quote('ab0di', 'A')n interesting article on the Chinese economy. I wonder what the effect of a Chinese recession/depression would have on the US economy.

[MagnoliaFan]

$this->bbcode_second_pass_quote('MrBean', 'T')he so called social democratic parties of Europe (in fact Third Way "neoliberalism with human face" parties, nothing socialist about them) committed political suicide ages ago.

[DantesPeak]

As already implied above, the dollar is vunerable to a sudden loss of purchasing power because foreign countries have already accumulated a large amount of US dollars - and the amount of the new dollars flooding the world monetary system is huge and accelerating rapidly.

Indeed, the ability of the US to maintain its high standard of living rests on the smooth functioning of the dollar based world trade system - which is kept in place by the US based world trade institutions and the generally perceived superiority of the US military.

The current account deficit, which is now growing at a $900 billion a year annual rate, can only be financed at low interest rates when confidence in the dollar is high. Indeed, confidence is extreme - the total amount of worlwide savings available is estimated by some distinguished economists at $1 trillion - which doesn't leave much to the rest of the world.

As long as all those new dollars are accepted, and old dollars held, the the US can outbid the rest of the world for energy.

Everything changes when those dollars are no longer accepted or held. One does not need an advanced economics degree to see the entire $US system fails to work when those $900 billion of new dollars are not accepted every year.

The yuan revaluation was a kind of 'Trojan Horse' to switch Chinese dollars into Euros, Yen, while the markets were distracted with a public statement that nothing changed. Many other countries have made more public acknowledgement of their switch to Euros, yen.

The day of reckoning draws nearer by the day. Keep in mind when foreigners start to accept less dollars, that means the US will be able to buy less with dollars probably also worth less - i.e. less oil will be imported. It is very easy to imagine an energy crisis developing from a dollar crisis.