World Game Changer
If this article from the U.K. Independent is true, the world financial center of gravity just moved.
In the most profound financial change in recent Middle East history, Gulf Arabs are planning - along with China, Russia, Japan and France - to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.
Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars.
Robert Fisk, who wrote the story is a good reporter with a lot of experience. One could argue that a good bit of the American competitive advantage over the last 30 years has been the dollars role as the world reserve currency. It has kept our interest rates abnormally low as foreign debt-holders buy U.S. treasuries. If that changes, everything changes.
October 6, 2009 2:57 PM | Reply | Permalink
This is a classic trial balloon leak. I particularly enjoy the french reaction, but the writing is on the wall.
I would say it sucks, but all we have done with our status is cut taxes, buy stupid crap, and invade countries that didn't do a damn thing to us. The truth is that we are not a serious country.
However I don't think it will happen too soon, we are way too addicted to low interest rates and the rest of the world knows it (imagine if the fed was at 6% today- economy would collapse again). Damn, what a mess it will be.
October 6, 2009 6:52 PM | Reply | Permalink
You forgot to mention that under free trade, we allowed US businesses to uproot our industrial might and transplant in all on Chinese soil. Their power is based on their wealth from the industry we gave them because they could produce more for less meaning more profit with fewer expenses. not like seeing the fruits of our labor ripening on the vine only to realize too late the fruit is soured.
October 7, 2009 6:42 AM | Reply | Permalink
The whole purpose of the "free trade" mantra was to allow the wholesale export of US industry to regions with lower wages, lower benefits, a more cowed work force, strong police presence, and lower environmental standards. Corporations keep dreaming of the US Golden Age back at the end of the 19th century when they enjoyed all of those advantages too. Bush's tax policies just sped up the process by allowing the corps to move off-shore by the boatload, literally.
October 7, 2009 12:26 PM | Reply | Permalink
Full support. Yes, Robert Fisk is the gold standard for foreign reporters!
October 7, 2009 2:44 PM | Reply | Permalink
Note the countries involved:
Russia, China, Japan and Brazil
I can't help but think it amounts to little more than a little bluffing by a group of countries itching for more attention on the world stage.
Nevertheless, I don't see the G-20 gurus doing anything quite so...drastic...given the current financial clime. the demand for dollars hasn't fallen enough yet (even accounting for the chicken-and-egg issue)
October 6, 2009 2:58 PM | Reply | Permalink
http://tpmcafe.talkingpointsmemo.com/talk/blogs/ickyma/2009/10/down-goes-the-dollar.php?ref=reccafe
October 6, 2009 3:03 PM | Reply | Permalink
http://tpmcafe.talkingpointsmemo.com/talk/blogs/donal_fagan/2009/10/new-reserve-currency.php
October 8, 2009 2:07 PM | Reply | Permalink
I agree.
The American middle-class lifestyle is unsustainable in a truly global economy where labor and capital can migrate freely across borders. There's an article in today's Bloomberg in which Goldman's O'Neill opines that the world economy is recovering nicely with most growth likely to take place in developing economies while Stiglitz and others believe that America's recovery will be weak and characterized by increasing joblessness. Where do you think American investment will go?
All this assumes business as usual. What will happen if we take peak oil and environmental threats seriously? What if green jobs are a load of baloney (as is very likely) and there are no substitutes for oil (even more likely)?
October 6, 2009 3:08 PM | Reply | Permalink
Not allowing viable oil alternatives to flourish is a product of socioeconomic factors, not technological ones. The powers that be are addicted to the centralized distribution and per-unit pricing mechanism that allows them to extract wealth from the general energy consuming populace by controlling supply. It is an artificial constraint, but a requirement for any replacement system is it must basically maintain the current economic structure.
The exact terminology escapes me at the moment, but this fact is always masked in a discussion of incentives for private industry investment, etc. The basic premise is that if a corporation can't extract enough profit from the new solution, it isn't viable to expect them to invest in a commercialization to distribution scale. In an idealized free-market world, that means that a corporation is rewarded for coming up with something innovative that everyone wants to buy; if people would spend their money on it someone in the mysterious market will build it. In our warped world of reality, that means that corporations will only allow a solution to come to market if it is as profitable (or more so) than the solution everyone is currently locked into buying.
Maybe a change in exchange currency could finally be an incentive to get more serious about our national priorities.
October 6, 2009 8:29 PM | Reply | Permalink
I disagree.
A Cal Tech physicist has examined the proposed alternatives to oil and found them wanting. He could be wrong, of course, but his is the best analysis I've seen.
October 6, 2009 9:04 PM | Reply | Permalink
do you have a link for that?
October 6, 2009 10:45 PM | Reply | Permalink
http://pr.caltech.edu/periodicals/CaltechNews/articles/v38/oil.html
October 7, 2009 12:13 AM | Reply | Permalink
"Not allowing viable oil alternatives to flourish is a product of socioeconomic factors, not technological ones."
"socioeconomic factors"
You mean "GREED?"
These monopolists in capitalist clothing (oil and gas in particular) are the real problem.
Make them live by the creed they claim to espouse, (free enterprise) and much of this roller-coaster world economy would stabilize.
But too many of "them" depend on that roller coaster for their profit. And they buy our politicians for a pittance, to assure their monopolies are protected from both internal and external competition..
The Supreme Court we currently have was built by Bush to represent those same monopolists.
October 7, 2009 9:59 AM | Reply | Permalink
Thanks for the link. Kind of light on technical analysis though - I guess he's summarizing the book? Honestly, this reads like a pitch for a national push to commercialize nuclear fusion research. But trivially it kind of demonstrates my point:
The devil is always in that "commercially viable" bit. What does that mean exactly? In regards to Hydrogen, "commercially viable" means mass produced and stored in tanks then sold through individual stations as if it were propane gas. An associate with the Florida DOE was occasionally assigned a prototype H2 Ford Focus that he liked to show off. Thing had a bomb in the trunk - literally. It used H2 to generate electricity for a 65KW powerplant and had a single speed transmission. Crazy vehicle, but more to the point it exemplifies the economic model that Bush's view of "commercially viable" hydrogen is built around - a network of compatible fuel stations.
Would a solution that allowed one to dump water in their tank and used small-scale electrolysis to produce just the quantities of H2 required to run an internal combustion engine be considered "commercially viable?" What would implementation of such a solution do to service stations, fuel delivery drivers, refinery workers, oil field workers, executives? What would the military implications be if suddenly vehicular mobility was dissociated from the need for fuel stores that could be destroyed/controlled?
Leaving aside the debate if the solution I highlighted is a "working" patent (and I have strong reason to assert it is), who exactly would be motivated to bring it to market? Nobody. In fact, they were motivated to buy the patent and put it on a shelf in Hong Kong until everyone forgot it even existed. A few guys got a pretty good chunk of cash (and none of the royalties they expected for "changing the world").
As long as the question/assessment is "commercially viable" and not "technologically possible" the economic portion of any solution is actually more important than the technological one and determines the outer edges of what will be considered for implementation. For instance (superficially), tooling for electric vehicles and increasing grid capacity reemploys the workforce displaced by theoretical cuts in the petroleum industry and also maintains the built in per-mile charge to drivers that allow corporate profits be derived as a function of vehicular distance traveled - and most corporate types are being forced into that solution kicking and screaming with maximum sabotage and foot dragging. Do you think they'd let a solution that was even less profitable for them see the light of day? It's very similar to the wall we're running into trying to fix health care.
(Note: the H2 device described here is a good example to demonstrate my point in context with the highlighted article, but there are many such technologies addressing mobility and other energy needs that fail "commercial viability" because of the socioeconomic reality of our current system)
October 7, 2009 3:30 AM | Reply | Permalink
Does this mean the Chinese will change their currency valuation policies?
If the Yuan moves, will it relieve some of that downward pressure on the dollar, because the Chinese "own" so many of them?
Isn't China's arcane fiscal policy one of the reasons the American economy has declined?
October 7, 2009 9:54 AM | Reply | Permalink
First, read the book.
Second, have the argument with the author. He's a world-class physicist who thought the problem was important enough to take time away from his specialty and write a book about it. I'm sure he'd be open to any decent opinion.
Third, I am not open to conspiracy theories. The auto replaced the horse. The Internet displaced I don't know how many pencil pushers. The United States replaced Britain and China is replacing the United States. What doesn't get replaced are smart businessmen. They always find a way to beat the dummies. If peak oil is real and there really is a viable alternative - meaning one which produces more energy than it consumes and which is cheaper than oil - then it will find a way to market...and all those you mentioned will have to find other jobs.
October 7, 2009 10:02 AM | Reply | Permalink
Petroleum and other fossil fuels really do have a fantastic energy:mass ratio and they're very easy to store(this is a biggie) and transport relative to most other fuels and energy types.
But really, it's like claiming that you'll starve if you give up prime rib and caviar at every meal, and start eating fish and whole grains instead. They are plenty nutritious, and less intensive to produce.
October 7, 2009 10:10 AM | Reply | Permalink
Sorry no. You're wrong.
The numbers count here. How much energy does the world consume? How much can sources other than oil provide? Goodstein does the math...and it comes up very short for all proposed and feasible alternatives.
He calculates that - baring a breakthrough in fusion or solar energy devices - the world can sustainably support no more than 2 1/2 billion people. It might be considerably less - I don't have the book in front of me and I don't quite trust my memory.
This is doomsday stuff - and we've been through a lot of phony test runs. Goodstein is aware of the failures of Malthus and Ehrlich so he's cautious in his predictions. But if we simply ignore him we run the risk of joining the evolution and global warming deniers - people who refuse to look at the facts because the facts demolish their ideologies and threaten their livelihoods, or their very existence.
October 7, 2009 11:04 AM | Reply | Permalink
Baloney. He says wind won't work because it's noisy and people think it's ugly - waaay scientific there(Oil pumps are even more ugly, but they are EVERYWHERE). How does that stack against this observation from the AWEA:
That's just a single state (though the best one we have for wind). The five states of North Dakota, Texas, Kansas, South Dakota, and Montana have the potential to provide 100% of the energy needs of America. Not to mention offshore potential in areas like Cap Cod which have an even better wind profile, shallow depths and a short distance to run undersea power lines - that would be completely non-intrusive.Amazingly, he then concludes that the only viable solutions are the ones being developed by his team at Cal Tech. How surprising. When what you have is a hammer, every problem looks like a nail.
Glad you found his book helpful and his degree impressive. The article you link to doesn't make me want to spend my money on his book.
October 7, 2009 7:24 PM | Reply | Permalink
Or even "Cape Cod" ;-)
October 7, 2009 8:29 PM | Reply | Permalink
Are we going to bury all those power lines, or what? Because I'd hate to see what happens when several dozen tornadoes rip through the national power grid each year.
October 11, 2009 3:45 PM | Reply | Permalink
These technologies are great if you believe the fantasy that the "inventors" have repealed the 2nd Law of Thermodynamics. Anytime somebody claims that they have designed an process which operates in a cycle, returning to the same initial state, without actually consuming more energy in the process, I become reluctant to believe the claims.
October 7, 2009 12:22 PM | Reply | Permalink
The 2nd law of Thermodynamics? I don't see how entropy applies here. You likely mean the 1st law of Thermodynamics:
Really though, Faraday's laws are most germane in this case. But I'm not getting in to it here, that's what I meant by "leaving aside the question". (I will now bite my tongue)
I could have just as easily used the example of small-scale distributed wind/solar electricity production into a smart grid ... but I wanted to pivot off the "commercially viable" wording because it was a good illustration of my previous comment.
Way to totally ignore the point.
October 7, 2009 7:50 PM | Reply | Permalink
No, I meant the 2nd Law of Thermodynamics precisely. Faraday's Laws have nothing to to do with the cycle. This is the point, so I've avoided nothing. Moving around the cycle increases the entropy in the total system, meaning that you can't provide surplus energy with this scheme. Your proposed system consumes energy, providing nothing useful, like the current fusion systems. I guess I needed to be more direct and explicit.
October 8, 2009 1:00 AM | Reply | Permalink
That only applies to a closed system.
All of our usable energy comes indirectly from the sun or from radioactive sources. This is important to a greater or lesser degree depending on the problem, but our economy will always be dependent on that.
Wind turbines will likely be our main source of usable energy after we deplete oil, gas, and coal to the point where they don't provide a return on investment.
Hydrogen is NOT an energy source. It's an energy storage solution. If you generate it onboard a vehicle then you have to carry around the energy to make it.
Fission is unlikely to happen because of the high capital costs and the safety issues--even in the improved systems. And because of the water requirements.
The other possible candidates are thin-film organic photo-voltaics, that is, spray-on solar collectors, and solar thermal installations--liquid flowing through tubes that get heated by the sun to generate steam, and geothermal systems.
If you want to grow vegetables or make ax handles you have to use these sources.
October 8, 2009 3:05 PM | Reply | Permalink
Re: the self-electrolyzing hydrogen car - every one of these schemes is essentially a Rube Goldberg version of an electric car. It takes more energy to split the water molecules than burning them gives off. The only example of a system that's not limited like this was one based on a electrolytic cell that required a third compound (name eludes me, but it was $$) which was consumed in the process.
The "hydrogen fuel network" idea is a way of decoupling the creation of the hydrogen (could be done on industrial scales, using [hopefully] green electrical energy) from its consumption. It's offered as an alternative to the massive transmission grid upgrades that would be needed to support pure-electric vehicles.
October 7, 2009 5:06 PM | Reply | Permalink
IMO, we are going to have to upgrade the power grid no matter what. My impression is that the hydrogen-cars idea was not really serious. I just figured it was the corporations doing something they knew wouldn't be ultimately viable to get legislators off their backs while claiming they were doing alt-fuels research.
The safety issues alone are a dealbreaker. The solution on the vehicle I drove was a "safety" valve on the tank that would shoot a 20' rooster tail of flame rather than explode outright. Hope the car stays on all 4 tires and isn't in a tunnel or the lower level of, say, the GW bridge in NYC!
October 7, 2009 8:05 PM | Reply | Permalink
I don't think your interlocutor understands how net surplus energy is produced or calculated. I agree with you that these self-contained schemes are just perpetual motion machines hiding behind bafflegab. The example you cite demonstrates that. Even if the cycle could be made to work with the addition of a catalyst, that catalyst's production would consume energy, thereby making the cycle a net energy sink. Producing hydrogen as a liquid fuel for transportation makes sense only as a process to store energy transformed from some other green process like wind, solar or tidal, as you so cogently pointed out.
October 8, 2009 1:07 AM | Reply | Permalink
In an idealized free-market world, that means that a corporation is rewarded for coming up with something innovative that everyone wants to buy;
In an idealized free-market world, all products are sold at cost, i.e. cost of labor + cost of capital, i.e. wages + interest. Because the dividend is paid from what is left after wages and interest are paid, in an ideal free-market there are no corporations and no stock markets. In such a world, there is no difference between expanding production of an existing producer or adding a new producer. Because each producer reaches a point when her free time is worth more than the additional income, an idealized free market grows by expanding the number of producers, not the size of production.
October 7, 2009 7:05 AM | Reply | Permalink
You forgot to include profit as a cost.
October 8, 2009 11:20 AM | Reply | Permalink
I didn't. Profit is not a cost.
October 8, 2009 2:27 PM | Reply | Permalink
Many US companies are at bargain-basement prices. Many foreign investors are buying up industries wholesale. That means all the work Americans produce which earns a profit goes into the pockets of foreigners. That means we're creating money for other economies other than our own. We're going to slowly work ourselves into the poor house.
October 7, 2009 6:47 AM | Reply | Permalink
Hmm, one of the theories about why the Americans were so eager to topple Saddam Hussein was that he wanted to switch from dollars to Euros.
It would be pretty funny (though maybe not haha funny) if the switch were accomplished by our "allies" instead.
October 6, 2009 3:17 PM | Reply | Permalink
From history, one can also learn that Germany was a growing industrial power at the outset of World War One and the German Mark was exceeding the British Pond just before the war broke out. Much of this was due to the Berlin-Bagdad railway that avoided dependency on shipping to obtain oil from the Middle East to fuel its manufacturing.
When we refused to work together with other nations under Dubya, they began working together without us. This was to be be expected. We need to take care of things at home before we can presume to have a say in what other nations are doing.
October 6, 2009 3:32 PM | Reply | Permalink
Are you implying that one can learn from history?
Communist.
Sorry, couldn't resist that. You are of course correct. A more "Global" world is going to happen. (Even Tom Friedman can see it.) The US, during the late Clinton and early Bush years, had the opportunity to facilitate an orderly transition from the sinking ship of the bipolar world to the lifeboats of multilateralism. But instead, we treated the world to Monica Lewinski, George Bush and the NeoCons. What a shame.
October 6, 2009 4:47 PM | Reply | Permalink
Paradise Lost. That will be the legacy of Dubya.
October 6, 2009 6:11 PM | Reply | Permalink
Paradise Lost?
No, just postponed...
October 7, 2009 10:01 AM | Reply | Permalink
Much of this was due to the Berlin-Bagdad railway that avoided dependency on shipping to obtain oil from the Middle East to fuel its manufacturing.
Rather than a railroad, China and Russia have been cutting pipeline deals with the Saudis and Iranians and other countries in Central Asia and the MidEast, including Pakistan, India and Afghanistan. This will allow them to bypass and avoid the shipping lanes currently patrolled by the US Navy.
While the US was playing 'hunt for the scary terrorist in a cave', Asian and Middle East countries were participating in the new world of petropolitics. Apparently the US was not invited.
The heads of states in the SCO, along with interested observers, will be meeting next Oct. 14th in Beijing.
October 6, 2009 6:19 PM | Reply | Permalink
Won't it be interesting if they actually do create petrodollars?
I think we have squandered an amazing global position by playing tough guy. We elected an average guy, Dubya, and were reduced to an average nation. The US has no clothes.
October 7, 2009 12:15 AM | Reply | Permalink
Which is why, as I have been stating for years, we should be investing in new energy technologies. Let them continue to build pipelines, let them construct their economies atop 20th century technologies. The country whose mobility is not harnesses to choke points like pipelines and refineries will rule over those whose entire economy is so strangled.
Somebody is going to develop these technologies someday. That country will lead in the world in the 21st century. We have that opportunity today, if only some leader brave enough and creative enough could sense the change waiting to happen, reach out his hand, and grab it.
October 7, 2009 5:11 PM | Reply | Permalink
I was just going to mention this. Thanks for beating me to it.
October 7, 2009 5:06 PM | Reply | Permalink
market watch has a rebuttal story
http://www.marketwatch.com/story/officials-deny-plans-to-drop-dollar-from-oil-price-2009-10-06
whether this story is true or not, it shows that people are thinking about it.
October 6, 2009 3:28 PM | Reply | Permalink
I will be surprised if this has much of any impact on the dollar exchange rate versus major foreign currencies. If for example TPM were to suddenly decide that the price of advertising (e.g for obnoxious pop-up ads) would henceforth be based on a weighted average of the price of baloney plus silly putty plus skunk oil, would it therefore necessarily have to open up new bank accounts?
October 6, 2009 3:45 PM | Reply | Permalink
This comes as no surprise if you have been paying attention. Given the profligacy of the US Government from 2000-2008 and the criminal irresponsbility of our "financial sector" during that same period, the subsequent collapse of our economy, and no prospect for cleaning up our act, the only realy surprise is how long it took them. Our nation is done for economically for the forseeable future. We are hoist on our own petard. Making matters worse is the fact that our present adminsitration seems not to have a clue and neither does our business community. Thus, when our dollar is recognized as the worthless piece of paper it has been for some time, what's left of the economy is going to grind to a halt when inflation skyrockets and money becomes scarce for the first time since the early years of our republic. The irresponsibility of our ruling class is astounding when considering this question. If nothing else, the worthlessness of our money and the recognition that our nation is actually bankrupt will at least force the end of our imperialist wars and will also force contraction of our far flung imperial armed forces around the globe. What's most sad is that none of it had to happen. It was the unrestrained greed of the ruling class that brought us down and, as Billy Jack so famously said "And there's not a damn thing you can do about it." America is screwed. Big time.
October 6, 2009 4:19 PM | Reply | Permalink
Shazaam!!!
October 6, 2009 9:25 PM | Reply | Permalink
Nonsense with a capital N.
If billions of people around the world want to hold trillions of dollars, then those dollars are not "worthless."
When all devout Marxists in America rise up in unison to seize whatever means of production were not long ago outsourced abroad, when the evil US ruling classes reincarnate Hitler, Mussolini, Franco, Marcos, Pinochet, Ponzi, Al Capone, and King Leopold, and they all band together to stage a coup in Washington DC, when little green aliens exercise simultaneous mind control over the boards of directors of every central bank in the G20, then you'll buy able to buy dollars with monopoly money. Meanwhile, like the price of oil, gold, soybeans, tattoos, nose rings, roubles, and pet rocks, the dollar's value will go up and down, but not straight to zero just because it happens to suit a rumor-monger or two.
October 7, 2009 5:25 PM | Reply | Permalink
Well, we'll just see what is nonsense as things develop. The other great nations of the world are clearly already moving in the direction of abandoning the dollar as the reserve currency. They are doing it because the value and stability of the dollar is not reliable and they are not reliable because our government and business leaders have bankrupted our nation. And yes, when it happens, all those dollars will be devalued dramaticaly because of the lack of value in a nonreserve currency of broke nation.
October 8, 2009 1:20 AM | Reply | Permalink
I think that many countries have been thinking getting off the dollar for some time, and some of them are talking about it, but even the Iranians say that it would take a broad agreement for it to happen. For sure they are all going to deny doing it so that there isn't a rush for the door with the dollar plummeting, which would cause these very same countries to lose a lot of money fast.
What is clear is a growing consensus that the USA is no longer a serious country and cannot be the universal reference of good practice and good value and good values.
When the change comes it will happen very fast and a lot of people will get hurt... especially folks with a fixed income in dollars.
October 6, 2009 4:22 PM | Reply | Permalink
The fact that China and Japan are still buying US T bills means that they are not going to do something to tank the dollar. But we all know that someday, probably within a decade or so, the dollar is going to lose its reserve currency status.
October 6, 2009 4:35 PM | Reply | Permalink
I think its hard to "within a decade" it could be this week or it could be decades away if ever. If it happens I think it will happen because of some panic, for example, a huge terrorist attack on a US target. When it happens it will happen very fast with people trampling each other like in a theater fire and many people's livelihoods will be destroyed by it.
October 6, 2009 4:48 PM | Reply | Permalink
The item in the post is setting the foundation for further movement away from the dollar. It's most likely that the euro will become the reserve currency after a period of shared status with the dollar. But it is happening already and our nation is doing nothing to prepare for the jarring reality of how bad that will be for our people and our economy.
October 7, 2009 1:16 AM | Reply | Permalink
Fisk is a great reporter of what is going on in the Middle Eastern streets and countrysides but he is not a guy with connections to financial insiders.
The biggest losers every time the dollar drops are those who hold US Treasuries, China, Japan and Saudi Arabia. The US economy is huge, with exports of 1.84 trillion in 2008 and it is not going to go away like another Zimbabwe.
Just 6-8 months ago everyone with money was buying US dollars and Treasuries and selling everything else. If I owned a lot of gold now I would sell most of it at the current $1040.
There is no doubt our government must raise revenue and cut spending in the future. Even as the EU often has trouble keeping a unified Euro interest rate across all its nations, replacing the dollar would not be an intuitive international financial slam dunk.
October 6, 2009 6:18 PM | Reply | Permalink
but he is not a guy with connections to financial insiders.
Finance hasn't been his ouevre. But, Fisk has long been tied to the Hariri family who are Saudi born and very very close to the KSA. It's safe to speculate that his information derives from that association.
October 6, 2009 6:48 PM | Reply | Permalink
Which Hariri who is close to the KSA did Robert Fisk get this information from, any guess? The former Lebanon PM Rafik Hariri was assassinated in in 2004. My experience with Fisk is he sometimes can be overly dramatic in his reporting.
Everyone has known for years that countries plan to diversify out of the dollar to an increasing extent. Although last year investors couldn't buy enough dollars, and the demand for short term Treasuries was a stampede, and caused them to sell at a negative interest rate.
Sentiments change, usually not causing economic disasters worse than we already are experiencing.
October 6, 2009 7:19 PM | Reply | Permalink
Interesting the story and comments all dance around the root cause of the dissatisfaction with the dollar being used as the benchmark for oil - it's not worth a dollar.
Simply put, oil producing nations don't give a r@tas$$ what monetary denomination is used as the benchmark so long as their purchasing power isn't diminished. Bu$h's monetary policy was for a devalued dollar so as to help the business sector sell more American products abroad. The Chinese are aware of this and sense a weakness in the US monetary policy, especially with the republicans against any and everything democrat.
Currently, it costs an American $1.47 to purchase a Euro, but only 68 Euro cents for a European to buy a dollar. Now take those oil producing nations who are paid in dollars and need to convert to some other currency. Start to see the problem? The more the dollar drops the more dollars it costs them to maintain their current level of wealth and spending. So they have to adjust the price for oil to offset the dollar's decline.
The only way I can see for the US to drive a stake thru the heart of this beast would be to shore up the value of the dollar - make it a strong, valued currency. That means they need to rake in the excess dollars floating around the globe - create a global shortage. Unfortunately, with this recession causing business to shutdown or go idle, job markets hemorrhaging putting producive people out of work, and banker's paradise swimming in cash without any responsibility to put assets to work, Obama has his hands tied at the moment and the republicans will shove as many sticks as they can thru the spokes of any initiative he tries to head this off.
If we can't get any compromise on health care for the public, I have my doubts we'll see anything by Congress to address this until it smacks them right between their eyes and it'll be too late to get a plan of action worked up an implemented.
October 7, 2009 7:14 AM | Reply | Permalink
This report has already been denied by the head of Saudi Arabia’s central bank, Mohammed al-Jasser.
In any event, there have been frequent discussions by the major players - China in particular - regarding moving to a basket of currencies regarding oil.
October 7, 2009 9:13 AM | Reply | Permalink
So, other than having the unfair protection of insiders in the White House, how is it the natural gas prices are dropping so precipitously, now that a fossil-fool is no longer in the White House?
Just how CONTRIVED BY MONOPOLISTS has the energy market become, as opposed to being freely responsive to market cycles of demand?
"Supply side economics" means more than we ever knew. And now it is coming back around to bite us in our conservative rear.
October 7, 2009 10:15 AM | Reply | Permalink
We gave up the gold standard, then the silver standard, so now we have the oil standard?
What this means is that, instead of oil being worth so many dollars, and the trading based on that figure, we now have oil representing wealth rather than money.
So whatever oil is worth in any given currency won't be pegged to the dollar any more. It will really make for a new money market, traders haggllng daily over which currency to buy so they can buy oil cheaper.
Can't wait to see the derivative instruments that are spawned by that combination.
October 7, 2009 12:24 PM | Reply | Permalink
Actually, it's not really an "oil" standard so much as it's an "energy" standard (as in BTU or Kcal). Crude oil just happens to be a quick and dirty way of running the calculation. One can determine the exact equivalency for producing a fixed quantity of energy in liquid form no matter what the starting material - crude oil, coal, biomass, nuclear, raw starlight, what have you. The world needs energy to power its tools and transportation and the energy to achieve that output is what determines the value.
October 7, 2009 12:34 PM | Reply | Permalink
FYI, I first saw a link to this story on a conspiracy theory website.
October 7, 2009 5:12 PM | Reply | Permalink
Just because I'm paranoid doesn't mean people aren't out to get me!
October 7, 2009 8:33 PM | Reply | Permalink
It's only paranoid if you're wrong.
October 8, 2009 9:34 AM | Reply | Permalink
I'd be a bigger fan of the strong dollar if (for example) Nike were selling Air Jordans for $50, instead of $310.
http://store.nike.com/index.jsp?country=US&lang_locale=en_US&cp=usns_0328071544=en_US&l=shop#l=shop,pdp,ctr-inline/cid-1/pid-245333
I understand that Wall Street investors would prefer stronger dollars, with which to buy more third world sweatshops. But I see no reason to accommodate them. They've passed on just enough of those savings to put American producers out of business, and appropriated the rest to themselves.
If that changes everything, good.
October 11, 2009 3:32 PM | Reply | Permalink