The dollar is dead: long live the ?

cactus flower wrote:

Link To Muslim News

It seems that Iran has, or about to, stop using the dollar for trading oil. Will others follow suit, and what are the implications for the dollar?

The International Herald Tribune reported this yesterday too

http://www.iht.com/articles/ap/2008/04/30/business/ME-FIN-Iran-Oil.php. It will stabilise the dollar in the medium term as they'll have to buy less oil/petrol. It doesn't look like there was a massive dip in the dollar value as of yet.

http://www.bloomberg.com/markets/currencies/fxc.html

I went hunting for information on the role of the dollar as the trading currency for oil. Somewhat to my surprise the clearest view I found was in a speech made by Senator Ron Paul, an Austrian School free-market economist and Presidential Candidate, in a speech made to Congress in 2006.

Paul's Speech to Congress

Ron Paul told Congress that America should stop robbing the world with a paper currency backed by military might, and should build a viable economy at home.

He told Congress that the Iraqi war was instigated by the US in order to force a return from Euro to Dollar oil trading.

In this article by Mike from the Global Research Site, the writer suggests that George Bush's recent trip to the Middle East and Africa was to deliver a "horses head", to prevent them (particularly the Saudis) from switching from the declining Dollar to the Euro for their oil trading. Recent anti-Saudi propaganda reported by 905 in another thread may well be linked.

Winter went on to say

So, how important is it that oil continues to be denominated in dollars? Would the United States wage war to defend the dollar's status as the world's “reserve currency”?

The answer to this question could come as early as this week, since the long-awaited Iranian Oil Bourse is scheduled to open between February 1-11. According to Iran's Finance Minister Davoud Danesh-Jafari, “All preparations have been made to launch the bourse; it will open during the 10-day Dawn (the ceremonies marking the victory of the 1979 Islamic Revolution in Iran) The bourse is considered a direct threat to the continued global dominance of the dollar because it will require that Iranian “oil, petrochemicals and gas” be traded in “non-dollar currencies”. (Press TV, Iran)

The petrodollar system is no different than the gold standard. Today's currency is simply underwritten by the one vital source of energy upon which every industrialized society depends---oil. If the dollar is de-linked from oil; it will no longer serve as the de-facto international currency and the US will be forced to reduce its massive trade deficits, rebuild its manufacturing capacity, and become an export nation again. The only alternative is to create a network of client regimes who repress the collective aspirations of their people so they can faithfully follow directives from Washington.

As to whether the Bush administration would start a war to defend dollar hegemony; that's a question that should be asked of Saddam Hussein. Iraq was invaded just six months after Saddam converted to the euro. The message is clear; the Empire will defend its currency.

Similarly, Iran switched from the dollar in 2007 and has insisted that Japan pay its enormous energy bills in yen. The “conversion” has infuriated the Bush administration and made Iran the target of US belligerence ever since. In fact, even though 16 US Intelligence agencies issued a report (NIE) saying that Iran was not developing nuclear weapons; and even though the UN's nuclear watchdog, the IAEA, found that Iran was in compliance with its obligations under the Nuclear Nonproliferation (NPT) Treaty; a preemptive US-led attack on Iran still appears likely.

And, although the western media now minimizes the prospects of another war in the region; Israel is taking the precautions that suggest that the idea is not so far-fetched. “Israel calls for shelter rooms to be set up in a bid to prepare the public for yet another war, this time, one of raining missiles.” (Press TV, Iran)

"The next war will see a massive use of ballistic weapons against the whole of Israeli territory," claimed retired general Udi Shani. (Global Research http://globalresearch.ca/index.php?context=va&aid=7982)

Russia also sees a growing probability of hostilities breaking out in the Gulf and has responded by sending a naval task force into the Mediterranean Sea and the North Atlantic.

According to an article on the Global Research site:

“The flagship of Russia's Black Sea Fleet, the Moskva guided missile cruiser, joined up with Russian naval warships in the Mediterranean on January 18 to participate in the current maneuvers....The current operation is the first large-scale Russian Navy exercise in the Atlantic in 15 years. All combat ships and aircraft involved carry full combat ammunition loads.

(Global Research, http://globalresearch.ca/index.php?context=va&aid=7983)

France is also planning military maneuvers in the Straits of Hormuz. Operation "Gulf Shield 01," will take place off the coast of Iran and will employ thousands of personnel in combined arms operations that will include simulated attacks on oil platforms.”

Exercises are scheduled to take place from Feb. 23 to March 5, and will involve 1,500 French, 2,500 Emirate, and 1,300 Qatari personnel operating on land, at sea and in the air, the ministry said..."Around a half-dozen warships, 40 aircraft and dozens of armored vehicles will be in the war games", Fusalba said.

http://www.defensenews.com/story.php?F=3346953&C=mideast

Additionally, within the last week, three of the main underwater cables which carry Internet traffic have been cut off in the Persian Gulf and three-quarters of the international communications between Europe and the Middle East have been lost. Large parts of the Middle East have been plunged into darkness.

Is this merely a coincidence or is something else going on just below the surface?

Ian Brockwell, of the American Chronicle said:

"On the assumption that the cables cut were no accident, we must ask ourselves who would do such a thing and why. Clearly Iran, who were most affected, would gain nothing from such an action and are perhaps the target of those responsible?...Maybe this is a prelude to an attack, or perhaps a test run for a future one?

Communication has always been an important factor in military action, and cutting these cables might affect Iran´s ability to defend itself." (American Chronicle, http://www.americanchronicle.com/articles/51085)

Despite the lack of media coverage, tensions are mounting in the Gulf and the probability of a US-led attack on Iran is still quite high. Bush is convinced that if he doesn't confront Iran, then no one will. He also believes that if he doesn't militarily defend the dollar, then America's days as “the world's only superpower” will soon be over. So, the real question is whether Bush will realize that America is already hopelessly bogged-down in two “unwinnable” conflicts or if he will “go with his gut” once again and lead us into a ruinous region-wide conflagration.

Where I seriously part company with what Ron Paul says is that the burden of the enormous contraction of US living standards that he anticipates he apparently thinks should be mainly borne by those who are already on low incomes or on welfare. The return to the gold standard that he promotes when last tried triggered the Depression and would lead to a catastrophic fall in living standards in the US if introduced overnight.

GOLD STANDARD LINK

I have yet to see any reference in his speeches or writing to the obscene and enormous personal wealth gathered by US oligarchs since the 1970s switch to the petro dollar, and what contribution they should make to rebuilding the US economy and living standards, in a country where the social and economic division has escalated sharply.

Matters are complicated by the size of China ( and other state's ) dollar reserves, and a global juggling game of costs and disbenefits is being played out in the markets, with military back up.

Paul would be of the opinion that it is not the job of the federal government tp provide social services. He would eliminate the income tax and social security tax so everyone's wage would nearly double. His book is number 1 and I will be picking up my copy shortly.

Even if that happened, what about people who are sick or for other reasons can't work?

And what about the people who need a complex medical treatment which they can't afford. It is unworkable in practise.... Well it will work, but it would probably result in mass rioting. Half the point of the welfare states in Europe was a response to the end of the Second World War which occurred partially because of economic collapse. The point is that if you look after the poor they won't revolt. There is nothing more likely to bring about societal collapse than poor, sick, unemployed young men. There is a professor of history at Columbia University in New York who is particularly strong on this point. He gave a guest lecture to us in UCD when I was there.

the extreme right wing tends not to care very much about the welfare needs of the sick or needy. Or they think charity will solve the problem... back to the Victorian era, folks!

I have read that Ireland spends 16 billion Euro on health care. 4 grand each. 16 thousand Euro per family of four. It would be cheaper to buy health insurance for everyone and fly them out here if they got sick. Many people seem to thick free health care is free. Why should one person be forced to pay for someone else. Some people feel the are intitled to free everything. Thankfully the entire welfare state issue is coming to a head as the resulting inflation can no longer be ignored.

It seems to me that if Ron Paul wants to manage the US economy in a vacuum separated from the rest of the world, that is not going to go too well. Production is too globalised now. If the US put up protectionist barriers other countries would reciprocate and the total amount of production and trade would reduce. What about oil: does Ron Paul mean the US to be self-sufficient in oil without invading anywhere? This includes Canada.

Even if you left morality out of it, having a healthy population is more efficient. The costs of sickness are borne by society and by business as a whole - not having a healthy and fit workforce for example.

cactus flower wrote:

It seems to me that if Ron Paul wants to manage the US economy in a vacuum separated from the rest of the world, that is not going to go too well. Production is too globalised now. If the US put up protectionist barriers other countries would reciprocate and the total amount of production and trade would reduce. What about oil: does Ron Paul mean the US to be self-sufficient in oil without invading anywhere? This includes Canada.

And will they be giving China back all the money borrowed?

cactus flower wrote:

Even if you left morality out of it, having a healthy population is more efficient. The costs of sickness are borne by society and by business as a whole - not having a healthy and fit workforce for example.

Precisely. That is one of the greatest problems that Britain (and Ireland at the time) faced at the turn of the 20th century in relation to the Boer War and previously the Crimean War. When literally huge percentages of adult (men in this case) were unfit to serve. I believe at the time of the Boer War 70% of adult males in Manchester were unfit to serve in the army.

Obviously at that period the welfare state had not developed. However, it was for that reason that there was a rise in bodies such as the scouting movement and the boys brigade. It was also the beginning of interventionist public health measures by the State.

The argument about giving everyone 4 grand a year for private health service is also fairly flawed, to be perfectly honest. Private health insurance, in Ireland, is relatively cheap because it piggy backs on the public health service. That is part of the reason I believe colocation is going to be a disaster (it will increase the cost of private health insurance, causing people to drop it and thus putting a greater strain on the public health service when the whole point of it is taking people out of the public system) but that is a matter for a different thread. It also ignores illnesses which are incredibly expensive to treat, need long term treatment and are debilitating. Examples include MS, Alzeimhers, Cancer, CF etc etc.

The argument that if we get rid of the welfare state that everyone will support themselves is without foundation either normatively, or more precisely historically. Prior to the Welfare State poor people didn't support themselves. They either starved, relied on voluntary contributions or revolted.

The US has enough oil in Alaska for 200 years if we are to believe what that guy Williams had to say in the linked video of a few weeks back. The oil companies have congress bought off with conservationalists to make sure it stays in the ground and not depress prices. The whole Iraq war was about oil. It was to prevent the oil from coming to market and it has been a great success. Oil has gone from 20 dollars to 115 dollars. Why would the oil companies want cheap oil. After the Iran attack oil will be 300 dollars JR Ewing never had it this good.

When I was talking private health insurance I meant buying it here. Say 25000 dollars a year for the family. About 2 to 3 times what top class care would cost no matter how many diseases you had. So knock 16 billion off taxes and have a trolley auction.

The dollar has strengthened against the euro and the price of oil has dropped to close to $110. This is probably on the back of the interest rate cut from the Fed and this happened a month or so ago too. And then the bp started to rise slowly again. The Fed says it is at the end of the current phase of reducing interest rates ... it has made interest rate changes now seven times in the last seven months...

http://www.finfacts.ie/irishfinancenews/article_1013459.shtml

The dollar has indeed strenghtened somewhat. 8 days ago I was moaning that the gas price had gone from 3.19 tp 3.37 and yesterday it was 3.58. It is at a price where driving volumn will fall. Some commentators while in a minority are still predicting deflation. This clip on CBS news will determine the price

LINK

Reports like this are unusual here

youngdan wrote:

The dollar has indeed strenghtened somewhat. 8 days ago I was moaning that the gas price had gone from 3.19 tp 3.37 and yesterday it was 3.58. It is at a price where driving volumn will fall. Some commentators while in a minority are still predicting deflation. This clip on CBS news will determine the price
LINK

Reports like this are unusual here

I couldn't get it to play for me youngdan - What is it saying about Iran?

youngdan - petrol has risen to nearly 3.60? EVM you are going to NY soon will you bring back some prices?
Here's the link above.

It begins with a few fighters landing on the aircraft carrier as it steams into the Gulf. Then you have defence secretary Gates saying Americans are getting killed by Iranian munitions and it shows a clip of mortars. It shows the Iranians harasing the warships with speedboats. The idea being planted is that it is well past time that we kicked some Ah-rad Ass.

On a tangent, now is the time to subscribe to US and UK magazines while the exchange rate is in our favour. A three year sub can be really cheap... check it out.

Thanks for the tip WbS. Any recommendations?

So Libertas is taking an interest in the role of the dollar as reserve currency, and those unreasonable people in Iran and Venezuela who don't want to give all their oil to the US.

Quote :

The Libertas Energy Initiative

The Libertas Energy Initiative
European Energy Innovation Fund

Context

The most recent OPEC meeting in Riyadh heard demands from Venezualan President Hugo Chavez and Iranian President Mahmoud Ahmadinejad to use its position for political ends and considered proposals to stop trading oil in the US dollar in response to the currency’s slide on international markets and to sell dollar currency reserves in favour of the euro and other baskets of currencies. Were this to happen, inflationary and interest rate pressure in the Eurozone would further dent already sluggish growth and, taken together with significantly higher oil prices could well spark a worldwide recession.

This slide demonstrates graphically how weak Europe is in the face of such geopolitical power based on our over-dependence on oil.


Click here to enlarge the above slide.

The best map that could be posted is Who has the Wind. Also who has the food. Ireland would loom large in both and should declare independence.

youngdan wrote:

The best map that could be posted is Who has the Wind. Also who has the food. Ireland would loom large in both and should declare independence.

And this is why:

Since the world uses nearly 100 million barrels of oil a day then there is less than twenty years of oil left - around 15 according to that. That it says proven we don't take for gospel because there could well be oil under the Atlantic etc.

I thought Libertas sounded a bit hawkish with their stance above...

Shortcut to The global wind resource (2)[ ('')

youngdan wrote:

The best map that could be posted is Who has the Wind. Also who has the food. Ireland would loom large in both and should declare independence.

Ireland must be one of the most fecund countries alright and what are we doing with all the fecundity? Growing cows for export. I was once of the opinion that BSE was engineered by the world vegetarian society. The world might need a cultural shift to get us out of the idea of the predominance of beef and other meats if the food crisis we might be seeing deepens. I propose the citizens of Machine Nation adopt a diet of Intermediate Vegetarianism where lasagnes are cooked with only a fifth of the amount of meat normally used and with extra veggies and a decent proportion of local ones. Ever eat parsniips in lasagne? No but they are to die for roasted beside your chicken or on their own after being rolled in some cajun spice and honey.

I don't agree that we have enough wind resources to pull out of the European Union - see my Wind Window on the Wind Energy thread. Spain has good wind energy as we've seen thanks to your own post (if I could find the Spanish equivalent of the Eirgrid Wind Window I would) and we would be better off benefitting from their excess wind when we need it because though ours is good but we just don't have enough either turbines or batteries. So the quicker everyone gets together and gets an alternative to oil the better.


http://www.eia.doe.gov/oiaf/ieo/oil.html
(official energy statistics from the US government)

There has been hawkishness about oil in the past - is that what you lads are saying Libertas are into now?