The Euro vs Dollar Conspiracy Theory: part II - "The P

Should we build a world economic model to answer the euro myth quesiotn once and for all?

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I think not

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Re: The Euro vs Dollar Conspiracy Theory: part II - "T

Huck said:
ITN, wikipedia is reviewed extensibvely by over 800 professionals. Its accuracy has been demonstrated to be higher than encarta and britannica.

as for the oil being sold in dollars, how can it be any more obvious than that? ;)

Even if that were true, to suggest they have the ability to check millions of documents for their accuracy is not possible. Wikipedia isn't an economic database of truths. When you want an expert opinion on a health issue, do you go to wikipedia?
 

Huck

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Jan 25, 2006
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Re: The Euro vs Dollar Conspiracy Theory: part II - "T

ITN, what else can we use for facts if an encyclopedia is not good anymore. Common. Anyways, OPEC is probably one of the most reviewd page on the enclopedia.
 

Huck

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Re: The Euro vs Dollar Conspiracy Theory: part II - "T

Im not talking about anything esoteric here. Its simple: OPEC sells oil in USD only, that means that they accept USD only. period.
 

Huck

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Re: The Euro vs Dollar Conspiracy Theory: part II - "T

ITN, only facts are to be used in this discussion. No opinion letters.
 

Huck

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Re: The Euro vs Dollar Conspiracy Theory: part II - "T

So basically what im saying is that when a country sells oil in USD, it sells it's oil in USD only. can this be ackoldged as fact?
 

Huck

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Re: The Euro vs Dollar Conspiracy Theory: part II - "T

ok,


So,o from here on, unless it is proven otherwise, we will consider fact that the oil exporting nations accept only USD if they export in USD and if they export in euros, accept only euros.


we will also consider fact that if i have canadian dolalrs nd i want to buy oil in USD, i must convert my money using the active currency rate.
 

I think not

Hall of Fame Member
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Re: The Euro vs Dollar Conspiracy Theory: part II - "T

I think you need to understand the difference between trading and transacting. Trading in Euros or Dollars is a benchmark, transacting can be made in any currency.
 

Huck

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Re: The Euro vs Dollar Conspiracy Theory: part II - "T

Yes, but you must convert your currency to the benchmark. THis has been explained in earlier posts already.

if the oil barel is 60$ US, and i want to buy in CAD, i can, but i will get the 60 USD value of a barel for my CAD. so, i must pay more in CAD because of the prevailing conversion rates.


It is the same reason the oil countries increase or lower the price of the barel. When the USD is strong, they get paid in USD and convert it to their currency. They will usually get more, becasue the rate is high. If the USD devalues, they make less profits, and must then increase the price of oil. i dont m ake this up, these is simple economics.
 

I think not

Hall of Fame Member
Apr 12, 2005
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Re: The Euro vs Dollar Conspiracy Theory: part II - "T

Well you know, I seriously have lost interest in this thread, we went from determining if the Euro vs Dollar was in essence the key issue of the Iraq invasion, to analyzing conversion rates. I honestly have no head for this, I'll stick to reading it instead of participating.
 

Huck

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Jan 25, 2006
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Re: The Euro vs Dollar Conspiracy Theory: part II - "T

well, youre in luck, im comming with the first full model in a few minutes. UNless proven otherwise, what i say will prove the throry is true. 8)
 

Huck

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Re: The Euro vs Dollar Conspiracy Theory: part II - "T

-------------------IMPORTANT-------------------



Good,

Now we have all the keys to a good model.

Now, I will repeat the main mechanisms of the model. I will not repeat everything so for more details, please read earlier posts.


Notez bien : This model may be difficult for some to accept. It is not easy to have our beliefs shattered. But my only goal is to make the truth stand out, and only the truth. It should be based on verifiable facts. If I got something wrong, please point it out and prove where i am wrong so we can correct the model.


Here is how our economical world works:


The USA has dollar hegemony. This means that their currency is wanted by all countries in the world. Countries want these US dollars because it allows them to repay debts allocated from the IMF in USD, buy commodities transacted in USD such as oil and value their own currency, in case they plunge in the market place.

The only issuer of USD is the United States of America. So, to get USD, countries must produce goods, which are sold to the USA. The USA, because it is the creator of the money, can print and create out of thin air the required funds to buy the goods. This money has value because the world recognizes it. The receiving country will most likely keep these dollars for future use. Now, because the money is given to another country, it becomes his, and this avoids the USA from diluting their money, even as they create new money.

Plus, they get the goods, which allow them to transform them and resell them. This mechanism makes investors happy, and it prevents the interest rates from rising, hence increasing inflations. As long as other countries need USD, the USA can print new money without deadly inflation.

Also, because the USA are the providers of money for the rest of the world, the banks are happy. The international monetary fund provides its loans in USD, so, for a country to avoid currency conversion costs, it is better off paying in USD. And to get USD,, must sell goods to the USA and provide the banks. So, this “vicious circle” keeps the USA going and productive, which makes the banks happy and allow the USA to keep borrowing money, greatly increasing the debt. In short, the banks make money by lending to the USA.

The USA currently have a massive trade deficit, which means they buy much more than they export, which means that in theory, they make no money. But, they can sustain their activities with the mechanism above. In fact, the US dollar makes up to 70% of the world reserve currency. This means that the world has a lot of US dollars, and keeps pumping them in. This mechanism is recognized by investors and since the US goes well under these conditions, they keep investing. In short, the USA are economically healthy even if the debt grows and trade deficit is important. (as long as the hegemony lasts)

Now, lets see what would happen if the euro (or another currency) was to become a major reserve currency and an oil trade currency.

Again, to buy oil, a country would not need USD anymore, but rather euro. So, they would basically either transform their dolalrs to euros, or begin using these dollars in the USA and buying goods. The first main effect would be that the other countries, to have euros instead of USD would begin exporting goods to Europe instead. This would make a drop in USD imports. Then, the USA would also begin needing euros for oil, because the dollar is not the defacto standard anymore, so it would need to also begin exporting goods to Europe. This would be very difficult with the trade deficit they have, because they would need to have a trade surplus. Also, the debt would begin being important, because the flow of free money would stop, scaring investors. Banks will now want to get paid, the vicious circle being broken.

Also, all the US dollars that would begin to flow out of the other country’s reserves would flood the US market, diluting the dollar and dramatically lowering its value. This would in turn generate high inflation.

All these factors put together do not look good from an investor’s point of view. IN fact, if all this happens too quickly, the USA would surely crash, and so would the rest of the world. So, it must be gradual. But, it would also mean that the USA would become a smaller country, and no more a super power. Luckily for the USA, the IMF still loans in USD for now, so the dollar would maintain a certain reserve to repay loans and would smooth the impact of the euro. But, if the IMF was to become like the World Bank and accept many currencies, the dollar would fall even more.

So, to protect their economy, the US must absolutely ensure the hegemony continues. And, well I guess in this case, the end justifies the means…



So, this means that the theory of the petroeuro crashing the USA is true. I will let you pull you own conclusions and links as with the wars and US foreign policy, but they certainly seem to have good reasons to defend their hegemony…
 

I think not

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Re: The Euro vs Dollar Conspiracy Theory: part II - "T

Would that mean that Ecuador, Panama and El Salvador also benefit since they use American dollars as their official currency?
 

Huck

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Re: The Euro vs Dollar Conspiracy Theory: part II - "T

I think not said:
Would that mean that Ecuador, Panama and El Salvador also benefit since they use American dollars as their official currency?

Excellent question. I believe that the USA is the only one able to print US dollars, and hence is the only one to "fuel" the vicious circle.
 

I think not

Hall of Fame Member
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Re: The Euro vs Dollar Conspiracy Theory: part II - "T

I think you have already covered that the US government cannot go on a dollar print frenzy, because it causes inflation. And I have to go and shovel snow. :(
 

Toro

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May 24, 2005
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Re: The Euro vs Dollar Conspiracy Theory: part II - "T

Huck said:
Ok, toro, here it goes.

Im sorry to say, but about the PPP, i believe you are wrong. I just discussed with a very good economist in my personall surroundings, and here ti goes:

On a Sunday morning?

Well, I have a degree in economics, work in the capital markets, work with economists, speak to them as well as others outside my organization almost daily, am required to read about macro issues as part of my job, and have several shelves of books on the subject. So, though I'm not correct about everything, I feel confident I know this subject fairly well.

Am I to assume then you have no formal training in this discipline.

Huck said:
I believe that the mistake you make is that you are american.

Well, that would be another mistake as I am not American.
 

Huck

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Re: The Euro vs Dollar Conspiracy Theory: part II - "T

I'm sorry toro, i did not want to insult you. i deeply and sincerely apologize.

I really hope we can agree on the model we are building, in the name of truth and freedom... :)
 

I think not

Hall of Fame Member
Apr 12, 2005
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Re: The Euro vs Dollar Conspiracy Theory: part II - "T

Huck said:
I really hope we can agree on the model we are building, in the name of truth and freedom... :)

Huck said:
I believe that the mistake you make is that you are american.

I think you need to reorganize your thoughts a bit Huck, are you implying that Americans can't have an objective opinion simply by virtue of being American? As far as I'm concerned, you've lost credibility in your so called quest for the truth.
 

Huck

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Re: The Euro vs Dollar Conspiracy Theory: part II - "T

ITN, please, i believe you are a sensed and rational guy. You quoted me incompletely and out of context. here is the complete sentence i said:

I believe that the mistake you make is that you are american. By that, i mean that you are not used to handle currency conversions. I will give you an example:

what i meant by this is that americans are not used to converting money, this is why toro may not be used to these mechanics. Canadians are used to conversion, because we do it so often.

I will never bash americans, nor anyone without a valid reason.

I apologize if it seemed rude and i was misunderstood... English is not my first language, so i may formulate wierd phrases sometimes. but i meant no wrong... :D
 

Toro

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May 24, 2005
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Re: The Euro vs Dollar Conspiracy Theory: part II - "T

Huck said:
what i meant by this is that americans are not used to converting money, this is why toro may not be used to these mechanics. Canadians are used to conversion, because we do it so often.

We do currency swaps where I work.

I more than understand how currency conversion works.