Petrodollar

Eugene Norman

Exactly what benefit do you guys see accruing to the US from oil being priced in dollars?

Torakx

That's a good question. I honestly haven't seriously thought about that until now.
My first thoughts might be, that if the oil is tied to the dollar, then the dollar is tied to the oil.
I am thinking if the dollar drops in value, the price of oil should go up.
If dollars were worth less all of a sudden, I presume the oil would cost more in dollars.
If that is correct, and I could be way off, then it would benefit the oil tycoons the most to base it off a currency that inflates quickly. Especially if you can manipulate that currency and the amount of oil available at any time.

When you say benefit the US, I can get easily confused. I am not sure if you mean the US as a nation or the US as an oligarchy/ business conglomerate.

http://business.time.com/2009/10/06/what-if-oil-werent-priced-in-dollars/
article is..meh..
But it might hint at some answers. I'm not sure myself.

Overheal

My current understanding had been because it is the currency that oil is traded on, that US currency becomes a requisite of that trade. Imagine you're Uruguay or someone and you need to buy oil from the Middle East. First you need to acquire petrodollars. Just like when you go on vacation to New York to buy a MacBook or some ****, you need to buy dollars at a conversion rate - and a nominal bankers fee. Factor that by the countless magnitudes of money used to make oil exchanges all around the world and you have a pretty decent product just ensuring that American greenbacks are in ready supply for trade.

ohnonotgmail

is there much of a conspiracy here? Oil is traded in dollars because it is an internationally accepted, relatively stable, currency. The same way the price of a lot of other commodities is set in dollars.

shanered

There is a conspiracy to manipulate the global markets in the US's favor, and I bear in mind the difference between the US's business and oil oligarchy, its not the average US citizen who is the net receiver of the extra revenue.
Bigger are the negatives which stem from such attempts of the protection of this racket which is petrodollars, such as the removal of leaders and replacement with pro-petrodollar puppets. And war games against those countries which cannot be infiltrated and adjusted from within.
The advantages of this petrodollar usage is the continuation of empire which the US's global domination of the markets for its corporations to access more markets and reduce domestic competition in other states.
Maybe you might see commercialization and privatization of state agencies as a benefit but if your anything like me you would see it as a danger.
I believe that the US's corporation working in conjunction with its government is working towards total world domination, which is usually the downfall of most expansionist states.

For me the petro-dollar is a tool which could be used both positively and negatively but....."and i remain open to the fact that a glass can look both half-full and half-empty depending on how you look at it".........i see the the petro-dollar as a tool of American (again america as a state along with its corporate institutions) expansion.

Overheal

That's actually not really a conspiracy though, but publicly well known (among anyone with a tie or a copy of the Financial Times) economic foreign policy. Talk about countries changing currency crops up all the time, famously it was mentioned in situations like Libya/Iraq in the 90s. Well, one of those. Maybe both of those hell I don't keep track of everything. Russia is usually in the news on an occasional basis trying to get petrol trade off the dollar, etc.

does that answer your question OP?

Zebra3

Eugene Norman wrote: »

Exactly what benefit do you guys see accruing to the US from oil being priced in dollars?

There are no benefits as it allows the US to continue to dominate world affairs.

miss tickle

Other nations using stockpiles of petro dollars to purchase oil are essential to the US liquidity, if oil was to be purchased using another currency, then the dollars would essentially be returned or remain with their owner, the US. If this were to happen, then the US would have to rely on the productivity of it's own nation to be competitive and the dollar would begin to drop. This could ignite a run to cash in treasury bonds which would bankrupt the country.

http://www.zerohedge.com/news/2013-05-20/guest-post-coming-collapse-petrodollar-system

Torakx

And if the amero comes in as a currency, I wonder would it be worth less or more than the dollar.
If a dollar was worth only a few cents to the amero, they would crash... or hyperinflate?

realitykeeper

Now that Saudi Arabia is selling oil in currencies other than just the US dollar, is there any reason for Ireland to continue holding US dollar reserves i.e. US bonds?

Dohnjoe

https://www.boards.ie/discussion/comment/120470770#Comment_120470770

Last I checked we get around 2% of our oil from Saudi. Most of our oil comes from UK and Europe. We keep dollars as a foreign reserve or hold bonds as a diversification, good collateral and to protect against economic shocks and issues.

realitykeeper

https://www.boards.ie/discussion/comment/120473451#Comment_120473451

Well the shift away from the US dollar seems to be gathering pace in the global south. It will be interesting to see how long confidences in the green back endures in the G7.

Dohnjoe

https://www.boards.ie/discussion/comment/120473587#Comment_120473587

As long as the US is a superpower and there's high confidence in the dollar, then it will likely stick as a key currency.

Also many of the flows and processes have long been in dollars, so it's become the default in many systems, so it's easier in a practical sense to use it. Yes it benefits the US, but there's no big sinister conspiracy behind it. Likewise the way English has become the default language for finance around the world, again no big conspiracy, just the way things have evolved.

realitykeeper

https://www.boards.ie/discussion/comment/120473649#Comment_120473649

As you know the dollar weakened after 2008 and that had a noticeable impact on multinationals here. What happened in the construction sector was of course far more significant but I really think Ireland`s next recession will devastate the multinationals and all the local businesses that service them. The reason I think this might happen is because the FED in the US will probably give up the fight against inflation as the problems in the US economy pile up. Some commentators think this will happen later this year but I think it will take longer because the FED knows what will happen if they give up. Basically it means America will no longer be the largest economic power, China and perhaps other large economies will overtake it. But eventually I think they will give up and that is when Ireland`s economy will take a plunge. But even if the FED does not give up hiking interest rates, it will certainly have to do more QE, and that is something that is already happening.

If interest rates in the US continue to rise, my guess is US mortgage defaulters will be given plenty of leeway and their banks will have to be rescued by bigger banks which in turn will eventually have to be rescued by the FED at a cost of trillions. If that happens, it will make no difference whether the FED gives up it`s fight against inflation or not, the dollar will crash and the Irish economy will be the next donimo.

It is funny how the US dollar affects different economies. Third world countries with a lot of dollar debt are hit hard by a strong dollar but a strong dollar is good for Ireland. And, vice versa.

zell12

The USD became the world official reserve currency of the world in 1944 Bretton Woods Agreement. Decided by 44 Allied countries after the war. All global commodities are traded in USD.

China seeks to change this hegemony, and it will.

Dohnjoe

https://www.boards.ie/discussion/comment/120480400#Comment_120480400

2008 was a systemic global meltdown, despite that, currencies didn't actually move that much.

So when will "the dollar crash" according to you?

Dohnjoe

https://www.boards.ie/discussion/comment/120480467#Comment_120480467

"Go totalitarian China! Defeat the evil economic framework of the West"

realitykeeper

https://www.boards.ie/discussion/comment/120482466#Comment_120482466

The US dollar has declined dramatically over the last hundred years yet if you look at the hundred year decline in the US dollar you will see a levelling off in recent years. The reason is because the FED hit rock bottom, keeping interest rates a zero % for a number of years, and it can`t really go below zero without causing other problems. So now it is hiking interest rates trying to beat inflation and if it continues, it will destroy the US economy but if it gives up, the dollar is toast. The FED is monitizing every problem caused by it`s increasing interest rates which is the same thing as giving up. What will happen is more and more small banks will be propped up by bigger banks until the big banks themselves need propping up and only the FED can do that but it will cost trillions. That is when the dollar will crash.

L1011

https://www.boards.ie/discussion/comment/120482899#Comment_120482899

Not a word of this is true.

100 years ago, it was fairly stable at US$5 = 1 GBP. The trend over the last hundred years has been of the USD significantly strengthening against other reserve currencies

Do you ever even check the basic facts before you make stuff up?

Dohnjoe

https://www.boards.ie/discussion/comment/120482899#Comment_120482899

Right but when will this happen, when will the dollar "crash"?

I've come across this prediction countless times over the last 3 decades, hasn't happened. So far it's on a par on "aliens will contact us".

realitykeeper

https://www.boards.ie/discussion/comment/120482958#Comment_120482958

A pound is just a unit of currency. I was referring to stuff you can actually use. A dollar could buy a lot more chocolate a hundred years ago than it could today.

realitykeeper

https://www.boards.ie/discussion/comment/120484876#Comment_120484876

We know we are in the end game because zero % interest rates are as low as the FED can go. As soon as the FED started trying to normalized interest rates, we see a lot of problems arise that need to be monitized. And even if they do nothing from now on, and even if inflation stabilizes, it will continue to erode purchasing power. Meanwhile we see the flight from the dollar internationally and the Saudis selling oil in other currencies. Things happen slowly until they happen quickly. We should see something significant before the next US election.

Dohnjoe

https://www.boards.ie/discussion/comment/120486788#Comment_120486788

And even if they do nothing from now on, and even if inflation stabilizes, it will continue to erode purchasing power.

Which has always been the case. Currency is a medium of exchange. purchasing power will always erode unless bank rates are higher than inflation (which only happens in extreme situations, e.g. Russia last year).

We know

It's your prediction. You'll find hundreds of similar predictions on this forum stretching back since it's inception.

realitykeeper

https://www.boards.ie/discussion/comment/120487110#Comment_120487110

In the past the FED could always cut interest rates to stimulate a stagnating economy. Well now the US has bank runs and rising bankruptcies but if they cut interest rates the US dollar will stop being the world reserve currency. That was not the case before.

https://www.boards.ie/discussion/comment/120486788#Comment_120486788

We've been in the "Endgame" for decades. Whenever conspiracy mongers want to sell their particular narrative, it's always a good sales tactic for them to present it as if it's a imminent threat that just around the corner. But they are almost always non specific. And when they are specific, it's usually a time outside the attention span of the new cycle, or it makes very non specific.

Notice how you are mimicking this. You give a time frame that's far enough away you can forget about your current predications, and is completely vague. You claim that "something significant" will happen, but you don't explain what "something" might be or how "significant" it will be. This allows you (and the conspiracy theory media) to pretend as if you've predicted something when you've not actually said anything at all.

Of course "something significant" will happen happen inside the next year and half. It's like saying "bad weather will happen in the future" and claiming to be a meteorologist.

If you had access to any real insider or secret information, or if you had some kind of special insight, you'd be able to provide a more specific prediction in terms of time or events or both. You wouldn't have to rely on vague suggestions that something might happen sometime somewhere to somebody.

Dohnjoe

https://www.boards.ie/discussion/comment/120487215#Comment_120487215

All central banks cut interest rates to stimulate flagging economies.

There was a unique run with SVB, a tech bank, mainly due to it's structure. That fear and contagion spread to a couple of other US banks (and across to Europe) however that fear has largely subsided for now and it's been seen as a moderate banking crisis. Is it completely over? We don't know. But what we do know is that whenever something happens in finance or global economy, a bunch of people come out of the woodwork proclaiming "end times".

The pandemic? Everything was going to crash to nothing. The war in Ukraine? Global starvation, we'd be freezing by the winter. And so on.

USD will stop being a reserve currency when it stops being so stable and reliable.

silliussoddius

I don’t think everything that goes with being a reserve currency is compatible with crappy regimes

https://m.youtube.com/watch?v=JHZnVdBZJfA&feature=youtu.be