Implications of OPEC trading in Euros

No, they married the US military. The dollar (with any value still) is the bastard child of this union.

The marrage contract is simple: They stay on throne, avoid even pretense of democracy, etc. IF and ONLY IF they sell oil only for dollars.

 

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Billy T ? Originally Posted by kmguru ... Saudi Arabia Royal Family is married to the Dollar... ? No, they married the US military. The dollar (with any value still) is the bastard child of this union. The marrage contract is simple: They stay on throne, avoid even pretense of democracy, etc. IF and ONLY IF they sell oil only for dollars. ---------------------------------------------------------------
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funny how sadist insane wasnt a problem-UNTIL he wanted to deal in euros...

cue team america theme song here

http://www.stlyrics.com/lyrics/teamamericaworldpolice/americafuckyeah.htm


nooow....

iran said a year ago it wanted to do the same...

guess who is now in `team americas' sights??

same old excuses even (remember when iraq could destroy america within 45 minutes??the weapons of mass distraction?)

imho by the same rules the usa is using(nuclear preempt strikes)
if the iranians `actually' had nukes-
id be quite understanding if they `preempt'ed the usa's strike on them
by using the nukes on the usa

or does the preempt `rule' only apply to the usa??

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Apparently, every improvization on the theme of empire results in shorter half-lives as the world's population incrementally gains awareness through history.

I expect things are going to get very turbulent as America's bluff gets called- as the fear of us is replaced by loathing- as our tantrums hasten our dishonor- and as our corporate sponsors of empire switch flags to the next players. Hold on to your hats, because the pace of history is about to get dizzying.

Here's hoping that once the half-life of empire is less than a generation, and once governments are popularly prohibited from selling out to megacorporations, a more widespread and enduring prosperity will emerge. For those left to enjoy.

 

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On review I am puzzled by the assuredness of some in the power of market forces, and more specifically in the US economy. That is, that everything will chug merrily along because we have an inherently stable world standard. There are sterling examples to the contrary.

Is the Dollar's hegemony not founded in international goodwill? Is the Dollar not a leading "brand" of money, facing new competition? And is monetary brand-loyalty not tied to geopolitics?

 

Are these difficult questions?

 

three "yes" answers.

If you wish to understand better the origins of this "assuredness" take a look at my post in the "Most Powerful Empire in History" thread of History forum. There I show that Americans are only continuing a long heritage of Christian ignorance and arrogance under the leadership of GWB.

 

Come on, this is way more ignorant imperial policy than many intelligent Christians I know. Or intelligent politicians whose thoughts I have read.

These bastards are trying to wreck the ship. Why????

 

I have made 3 parts of your text bold. Please be more clear what you are talking about on these items. Your msg is too vague to have any meaning as it is.

 

"hypewaders"- that's me.

"this"- is the policy alluded to in the post immediately above, that I was responding to. You can often find conversational replies functioning in this way, that is without repeating all of your post which is, after all right above for reference.

"These Bastards"- also refers to your post, specifically the last 4 words.

Sorry for the vagueness. I only wanted to remark that present US foreign policy is severely damaging US interests abroad. What is motivating our leaders to so damage our global effectiveness and profitability, as they have done under this administration?

 

thanks for the clarifications.

Glad we agree. I am only speculating on your question, but think it is the vested interest (profits for the few at the expense of the many.)

Same reason why tax payers contribute billions to a few large agri-corporations so they can pay more for the food they eat. Cargill is privately held, not even a stock company, so its take for not growing some crops etc. does not even get passed on to the wealthy few holding shares.

GWB was an oil CEO, and not a very good or bright one at that, so it is not too hard to manipulate him to make sure American tax payers pay Halliburton well, in no bid contracts, etc. It is the same oil/auto interest that have made the average US car a gas hog by keeping taxes on gasoline lower than in Europe etc.

The whole suburban infrastructure that has been built up in the US has assumed (despite the sure knowledge it is false) that cheap oil is God's gift to America. The neglect of public transportation, permitted the decay of the urban centers, flight to the suburbs (owing at least one car is essential) has made America much more vulnerable than any other country to the coming reality of expensive oil, placed America's economic survival in the hands of China et. al. who finance these oil imports and all the other deficits. (Americans are in net debt individually, on average, and much more so when their share, about $26,000 per head, babies included, of the national debt is considered, so there is no way they can help solve the problem. Years ago, one of my favorite cartoons was Pogo. He would frequently say: "We have met the enemy, and it is us.")

But to return more directly to your question: The wealthy will not get hurt in the collapse of the US economy they are causing. They are even today profiting by the decreasing confidence in the US dollar the debt and deficits are causing. That is, they are moving their wealth out of dollars and into commodities (Why price of all, oil included, have at least doubled in last three years. China is aiding this, but much of the demand is speculative hoarding. For example oil production still easily exceeds consumption when speculator’s demand is removed. Same is true of copper and all the metals that are so high in price now.)

I am not poor nor wealthy, but because I could see US dollar collapse coming three years ago, I moved dollar assets in to foreign ADRs and they have also at least doubled in the same time period. My holding in Brazil's oil company, PetroBras is up more than 6 fold, Sao Paulo's water company's ADR more than 5 fold. etc. Unfortunately, the average American is unaware of how badly he/she is being abused, loves his big Detroit monster and suburban home, etc.

Soon, when car is up on blocks because gas is too expensive to drive it and the housing bubble has ruptured to the extent his mortgage balance exceed the house value, he may realize he/she has been had by those who got their wealth out in time. It is not only GWB that the wealthy are manipulating for their advantage, increased wealth, etc. It is average Joe American, who still in ignorance, is confident every thing is swell.

 

Something doesn't quite make sense to me: Special interests evolved as creatures of the US Government, feeding on the immense bonanza of US federal revenue. It does not make sense to me that such organizations would conspire to kill the cash-cow. Government contracts are vital to major corporations. There is no government spending like the USA's on Earth- In fact there has never been in history.

So to manipulate for a fall, and to ruin one's best customer (Uncle Sam), seems irrational. During the last American crash of the late 1920s, many corporations imploded, and many wealthy people lost their fortunes right along with a suddenly vanished middle-class.

"The wealthy will not get hurt in the collapse of the US economy they are causing."

I agree that they have done well lately- see Exxon-Mobil's record earnings of late. But it seems to me that the competitive position of US special interests would be less lucrative if the entire domestic market were scuttled, and they resorted to competition with foreign corporations on foreign ground. On the present course of international affairs, corporations, products, and services with an overtly American flavor are becoming less and less attractive worldwide.

Assuming special or corporate interests- not transnationals but supranationals- that are working to destroy state economies do exist: Would such an evolution not result in the rapid destruction of their very financial habitat? It seems to me, having observed the relationships from afar, that big government and big business are symbiotes.

That's why the idea of transnational corporations sacrificing the US economy just doesn't add up to me. More plausible to me is the rationale that we are witnessing a panicked and botched attempt by captains of state and US industry, intended to keep the USA at the top of the geoeconomic heap, but that is having the opposite effect.

 

All true, but no one, certainly not me, is expecting the US government to collapse, only the dollar. The government will in fact be more active than ever - very busy, running printing presses and collecting taxes in a desperate effort to pay it debts and current bills. Because of all the problems, their expenditure (particularly related to failed corporations defaulting on pensions, wide spread unenployment compenstion costs, Baby Boomers wanting to collect Social Security instead of pay taxes, etc.) will increase. Well politically connected firms will get even bigger, "no bid" contracts to help out. (Just like the current administrations efforts to get the private sector to take over parts of the medical insurance game etc.)

Certainly it makes no sense to kill the government as a cash cow. Do not worry about that or for the the well connected rich. The well-paced few will continue to milk the government more vigorously than ever. However that said, one must realize that that the current government functions mainly as a transfer agent. It does create some money (and more once they get the printing press running 24/7), but that is small potatoes compared to what they get by sticking their hand in your pockets.

As transfer agent, it takes money from the central 80% of the tax paying population and gives small part to the bottom 15% (that evil "welfare" you read so much about) and the majority of the tax income to the richest 5% (the oil depletions allowances, etc that permit your corporation to show a book keeping loss while raking in lots of money, farm price supports, more bombs needed, etc. but please do not call that "welfare for the rich," as I sometimes have. People will think you are being critical.

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Trust me on this, I know.)

 

While I can agree that some of the captains of state and industry have run the ship aground (Enron etc.) I think your fundamental error or oversight is the failure to recognize that once you have gotten every thing Joe American has and in fact have even his grand children so deep in debt to you that it can only be paid by printing press money it is time to move on to more fertile ground. It is sort of like the pre-fertilizer farming practice. Once the soil is exhausted, move on.

That is why the automotive industry is closing factories in US and building them like crazy in China. etc. Effectively they have realized that Joe American is flat broke, deep in debt and that there is no more blood they can drain from him. (Poor ignorant Joe does not realize it yet, but is growing suspicious because his job just was exported and he cannot find a new one.)

The typical Chinaman, in aggregate is with great ability to spend (not even debt yet! - less than 1% even have credit cards) All the international banks also recognize that China has a very long way to go before they and the wealthy few will destroy it for there benefit - at least a 100years run of more enrichment for the few.) Eventually these self interested, powerful few will repeat the procedure they have perfected on America and destroy China too, but that is far in the future.

 

That seems an iteration of the Marxist rejection of market economies, Billy T- which is to assert that market economies are constructed to impose a self-destructive environmental and social process after which the robber-barons move on to their next prey. To me this has always held some truth, until it gets into grand conspiracies about international wealth-sucking elites that are hoodwinking our governments, and all of the world. Whenever it comes down to defining these elites, some sort of stupidity like racism or xenophobia often creeps in, and that's where I lose interest. Specifically who is conspiring to destroy the Dollar, then?

I'm not convinced that there is something inherent in any market economy that inevitably leads to depletion, decline, recession, depression, etc. I'm not convinced that the political community, for its many faults, is ignorant of the intents of industry, or of the super-wealthy. Each of these expend much time courting/getting to know each other... and crossing the increasingly blurry lines from the corporate to political worlds, to the point where I suspect that they are inextricably intertwined in personas and vision.

Acknowledging your scenario suggesting the host government is not politically destroyed by the financial elite, but instead reduced to an economic shell: This process does not seem as lucrative as would be maintaining stable markets, considering the expensive growing pains on entering new markets entailing immense cultural and political differences. Surely a stable, upwardly-mobile middle class such as the USA enjoyed in the early Postwar era was easier pickings than going to China now, regarding returns on investment. I don't see China welcoming foreign ownership of national assets. Why not clean up our own back yard?

Perhaps you are suggesting that no economic system is sustainable, or that capitalism preys on hapless nations both weak and strong. In some long-term view over eons I can agree, along the lines of general entropy. But in real-time, the rationality of what is being deliberately done by US leadership escapes me: US policies precipitating the end of the US Dollar as world standard still do not seem a profitable or rational goal for those most directly controlling our economy.

Which brings me to another perhaps naiive suspicion: That nobody is at the economic wheel; that economics remains an embryonic proto-science, still offering no reliable answers to important questions about the future.

 

Again you are reading into my text thngs that are not there. I too do not believe there is any "grand conspiracy" nor am I making any rejection of the "market economy" - In fact it is why china is doing so well. China is just now fully accepting it, realizing that many of their state enterprises are terribly inefficient. For example, only in the last few years have they allowed westerners to enter the banking field, which previously lent money to state enterprises to keep them from collapsing, saving jobs etc despite the loans having no chance of ever being repaid. China is finally realizing the benefits of "destructive creation" letting some of the state enterprises go under freeing up the workers and capital for more productive tasks etc. Some banks are even writing off the worst of the losses, as they should have years ago.

China is entering the phase of capitalistic development that the US had more than a century ago, when the "robber barons" built America, it railroads, steel mills etc - a period of great industrial growth. I don't know, but bet if the GNP growth percentage of 1850 were known, it would be like China's today - a double digit value.

There is no conspiracy. Just the actions of millions of individuals, like me, who see that the US is too deep in debt and growing deeper in debt every year, so we try to protect ourselves from the eventual collapse and those very actions only hasten the day it happens. It is not just the investors, but more fundamentally it is the US society (the "now generation" especially) that has thus far found willing lenders to permit them selves to live far beyond even their current means, much less their means when things turn sour and they have lost their job, then their house to the bank etc.

I do not know if this birth, growth, maturity and death cycle is inherent in capitalism or not. I would hope that the environmental movement could change the capitalism's current fundamental assumption from "Must grow or die" (which is obviously going to collapse someday on any finite planet) to one of "Must leave the Earth to the next generation in healthier condition than we received it from our parents, or at least no worse." If capitalism can be transformed to focus on stable sustainable improvements, especially in energy use*, instead of ever growing requirements of irreplaceable fossil fuels, then there is at least the possibility "that it need not contain the seeds of its own destruction."
--------------------------------(if presed for time skip this footnote. It maily relates personnel history related to fusion energy)
*Currently that means great increase in energy efficiency and conversion to solar energy - not photo cells but things like alcohol and biodiesel for ALL mobile liquid fuels, well run regulated base load nuclear fission power, hydro electric and wind (disguised solar) power where feasible, even some tidal and river current power.

Some day that may mean fusion power, but not very soon, I fear. When first armed with my new Ph.D. in physics (and a dissertation related to plasmas) I was hired more than forty years ago by JHU/APL to join four others in the relatively new CTR group (Controlled Thermo-nuclear Research). The US navy was paying us, and did so for about 10 years. Then the group was dispersed.

The navy uses APL as a "knowledgeable trusted agent" to help them keep contractors honest and from wasting the Navy's money. APL has done this job very well for many major Navy systems. The Navy's ideas, and ours too at the time, was that in about 10 years the Navy would be letting a contract for the first fusion powered aircraft carrier and they wanted APL to have some hands-on experience. They did not expect our small group to do anything significant, and in this, we did not disappoint them.

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Finally they and we all realized that fusion power was decades away, if ever it was to come, and they stopped supporting the group.

As I know, or at least once knew, something about all this, I am inclined to think that: Yes a large Tomak type machine like the international reactor now being designed for a French site, I think, may be able to make net energy if all goes very well, but it is a very long way from there to economically affordable power as most of the cost of power is the capital, not the fuel. (Free fuel would possible knock about 10% off your coal-fired plant's electric bill - hydro electric is "free fuel" already.) I just cannot see how a low energy density volume, complex vacuum systems, super conducting coils, radio active tritium handling equipment, neutron shielding, etc and a complex heat-exchange closed-loop steam boiler can economically compete with a high energy density flame, a brick chimney and a simple steam boiler in producing a product that is mainly capital cost.

You are right about that, unless Adam Smith’s “invisible hand” is “somebody” - the problem is there always are a some very strong hands near or in the government who (like almost all others) are looking out for Number 1, in most cases.

 

While the total dollar size of the US debt is pretty impressive, it is not that huge as a portion of the American economy. See here for a ranking of countries by public debt as a percentage of GDP:

http://en.wikipedia.org/wiki/List_of_countries_by_public_debt

Some of the countries that rank higher than America include France, Germany, Italy, India, Japan and Belgium; hardly what I'd call sinking ships. Incidentally, Brazil is not too far behind the US in terms of debt (50% GDP instead of 65%), so you might consider moving again if you're really that worried about high debt.

Then again, examining a map of countries colored by external debt:

http://en.wikipedia.org/wiki/Image: Debt.PNG

one quickly notices how well-correlated debt is with living standards. So perhaps countries with low debt aren't so attractive after all... Far from being a sign of decline, large debts indicate a country has become rich. After all, nobody would loan them these huge sums if they weren't convinced they'd be repaid.

 

Again thanks for the references. No disagreement with anything in your post, but I would like to point out a difference between US and Brazil and generally call your attention to the fact that you are 100% right -it is the expectation that the debt will be repaid which makes the lenders lend, so you must consider more than the level of debt - the net income, with which to pay the debt, is important too.

Because of its negative net income, US is adding to its debt at almost the trillion dollar/ year rate and it already is at 65% of GDP.

Brazil is reducing its debt (by about $10 billion last year, I think, as that was the trade SURPLUS). Brazil paid off entirely its debt to the IMF. Its debt, in terms of GDP is 23% less than the US and headed downward, not up as the US's is.

Thus I think I am safer economically here, except for the fact my Social Security is paid in dollars, and they may become nearly worthless before I die. (US government has promised to keep them “inflation corrected” but I think there will be many such promises that are empty words when the going gets rough.)

If you agree, and want me to look around for you, - find some nice 100 acre farm, with one or two houses on it, you can buy for $60,000 just let me know. Typically it will come with a man (and his wife/ kids) whose garden and fruit trees will keep you well feed, but you must now pay him the minium wage which is now R$350 / month - I sold my farm three years ago. Then his monthly wage was less than US $100s, but he was so honest, hard working etc. that I usually paid him that despite the fact other owners did not like this upward "wage pressure" on their "serfs."

A couple of years ago, you could have gotten it for $40K or less, but that was back when a dollar would buy 3 Brazilian Real. Now it only buys about 2.10R$.

The dollar has not dropped that much against most currencies, so I conclude many people are thinking the Brazilian Real is the place to hold excess cash. This flux of dollars into Brazil is a Real* problem. Government is buying dollars up as few want them, but this puts Reals in the public hands so to keep inflation under control these circulating Real must be attracted into savings or someway taken out of circulation.

Because Brazilians have had so much inflation a few years back, it is hard to persuade Brazilians to save, instead of spend. Thus the real interest rates (adjusted for inflation) are the world's highest, about 14% per year. (Central Bank uses “inflation targeting.“) This world’s highest interest of course just makes the flood of dollars coming to Brazil increase. - It is a problem no one knows how to solve. Brazil is now “energy self sufficient“ (80+ % are all cars now sold can run on locally produced alcohol.), so Brazil is now a net exporter of oil. This is not is not helping with this "problem" either.

I can easily live on just the interest I recieve from money in the bank, which I moved to Brazil when I could get almost 3R$/ US$.

If you are interested, better buy that Brazilian farm now. - It will cost more next year, especially if you are trying to buy with dollars. When I bought mine about 12 years ago, during the rapid local inflation, the seller wanted dollars for his mattress and thus there were no currency conversion costs. No one wants dollars here now and that is a US problem that will soon be more universal.
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*both meanings intended

 

Well, to get the growth rate of the debt as a percentage of GDP, you also have to include the growth rate of the GDP. The actual plot is here:

http://en.wikipedia.org/wiki/Image:National_debt_as_a_%_of_gdp.jpg

While it is high by the standard of the past few decades, it doesn't look to me to be on the verge of any large upheaval. The last 5 years look better than the early 1990's, to be honest... Within a few years we'll stop dumping money into Iraq, the Bush tax cuts will expire, and we'll pay down the debt for a while. Then we'll come up with some new reason to borrow trillions of dollars. Hopefully it'll be something everyone can enjoy next time, like a Mars mission or a space elevator...

 

Thanks for ref. - All of wikipedi was down a few minutes ago but will be back soon, so they say.

Some info from today's Sao P. paper that may interest you:

Brazil will repay $20 billion of external debt this year. Included is the 6.6B of Bradies, some (or all? - not clear in the report) not due until 2024. $3.7B has already been repurchased, but it cost 4.2B due to the premium.*

Last year Brazil's remaining 15.5B due the IMF was paid off. The foreign reserves are now 54.8B and after this year's pay down the government's total foreign debt will be only 65B. Despite its history, Brazil is now only two steps away from "investment grade", and many of the larger firms here now are "investment grade." Brazil should join them in less than a year. The domestic debt is not so pretty. IMHO, the local interest rates, (world's highest in real terms), will drop significantly prior to the October elections and some (hopfully not double digit, but only close to 8%.) inflation will result and help "pay" some of the uncorrected domestic debt. (Poor people who can finally buy that new washing machine, etc. tend to vote for the PT, the workers party, even if every new day there is a new PT scandle. I.e. Lula will be relected.)

A few days ago I read that Venezuela has or soon will (I forget) also pay off all its Bradies prematurely. This is, of course just, the vehicle used to "recycle "petro-dollars, but both B&V are adding to the flood coming out of coffee cans and mattresses, (I think - I am not an expert on all this, in fact am entirely self taught, but I read and think. - I often foresee 10 things to far ahead of when 7 happen and finally learn 3 never will, but it has been profitable, anyway.)*
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*(A few years ago I wanted to buy some Bradies when they were at 0.53 of face, but I did not know how to do it. - still do not. Only bonds I have ever bought were in 10K amounts via "treasury direct" or series EEs from banks. The EEs I bought about a dozen years ago, just before the 6% floor guarantee offer was ending, I held until their maturity in Dec 2004, when I foolishly cashed them ALL in. -I should have accepted the much lower post maturity rate for a month and put half into 2005's taxes. Not only did my error bump my marginal tax rate up, but also made most of my Social Security taxable. - Live and learn, but must it always be the hard way?

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Overall, I can't complain. All my ADRs have all at least doubled in three years and some are up four fold! I foresaw the rush to emerging markets well and also understand that the drop in dollar, if it occurs as I am expecting, will still increase their value. Much more rapidly than if I were a local buyer of these companies. ADRs are a great, very efficient, essentially zero cost, dollar hedge for me, living in Brazil.

I am set up now so I do not care what the dollar does. - A philosophy I have followed for more than 40 years. For example, when buying my electric power from BG&E, as graduate student, I held their stock and did no care what the PSC did about their rates. May not get rich this way, but you sure sleep well, and there is usually enough left over to take some fliers, to make things interesting. For example:
I listen to small drug companies presentations at industry conferences (Amazing what you can do with internet when retired and organized.), read their releases, try to understand if they may have a "magic bullet" or not in the pipeline, etc. I spotted sRNAi early and jumped in. - IMHO, they are going to fix most genetic diseases and hit all solid cancers hard with their "small molecule RNA interference" approach. They have solid IP on this also. Wish I had bought more.
Eyetech also impressed me, but they have been eaten by OSIP and worse is one of the big guys is claiming better results for treating server retinal problems. ("Wet" Macular Degeneration - Rich people will pay $1000 every couple of weeks for an injection in eye to not go blind, so even though still hard to make these magic bullets, it has big profit potential.). Eyetech's drug, is the only one currently FDA approved and is a well aimed rifle, where as the bigger guy's approach to interference with excessive retinal vascular growth (iVEGf) is more like a shotgun, likely to hit targets you do not want too, so I am staying with the stock I got in OSIP when they "merged" Eyetech in. Only a few side-effect deaths can sink a stock, and FDA may not approve for years because of this "shot gun" approach. Anyway it has been fun to learn the details of these new drugs. I knew even less about RNA mechanisms etc than economics but now am not very ignorant in either field.)

 

$75 a barrel has now compelled the Bush Administration to reverse flow into the SPI, and dump crude on the market.

Please note the first letter in SPI is "strategic". For strategic reasons, the SPI was just dipped into. B-but relax, folks, the decider has decided and we need not worry.

If they are this psycho at $75, they could go failed-state at $100 because the curves these bunglers are flirting with turn steep.