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

[Jay]

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

Thanks Toro.

I thought I told you this already.... You must have been drinking.

 

[Toro]

Re: RE: The Euro vs Dollar Conspiracy Theory: part II - &qu

Thanks Toro.

I thought I told you this already.... You must have been drinking.

I hope so!

Boy or girl?

 

[Jay]

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

We don't know....


Gotta run!

 

[Huck]

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

ok, hehe, got the facts, this is from encarta:

This is about inflation:

The aggregate level of income theory is based on the work of the British economist John Maynard Keynes, published during the 1930s. According to this approach, changes in the national income determine consumption and investment rates; thus, government fiscal spending and tax policies should be used to maintain full output and employment levels. The money supply, then, should be adjusted to finance the desired level of economic growth while avoiding financial crises and high interest rates that discourage consumption and investment. Government spending and tax policies can be used to offset inflation and deflation by adjusting supply and demand according to this theory. In the U.S., however, the growth of government spending plus “off-budget” outlays (expenditures for a variety of programs not included in the federal budget) and government credit programs have been more rapid than the potential real growth rate since the mid-1960s.

© 1993-2003 Microsoft Corporation. All rights reserved.

this basically supports what i was saying. If the money supply increases (dilution), the increased interrest rates will discurage consumption (people leave the money at the bank becasue interrests pay a lot) and banks invest less (because they give more money to interrest payment and have less money left for reinvestment).

This in turn causes the business to increase prices to cover the loses...

NB: There are many other causse to inflation, but should not be relevant to the model. (unless proven other of course)

 

[Toro]

Re: RE: The Euro vs Dollar Conspiracy Theory: part II - &qu

We don't know....


Gotta run!

Let us know how it goes!

 

[Huck]

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

So, for the ones that are still interrested to know, the model remains valid. Facts have been brought that suport its entire structure. If anyone has some new data to bring, please dont hesitate so we can perfect it

 

[Huck]

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

I will repeat if again for easy lookup:

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…

 

[Huck]

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

So, the ones who take the time to rationally analyze the model will recognise that what i will say is a very strong possibility:


The theory of the petro euro is true. The macroscopic mechanism explained in the model show that when the euro becomes a reserve currency, the USA's "spiral of death" will stop. Then, the weight of the debt and trade deficit will crush them (if the decline of the hegemony happens to fast obviously, otherwise they will recover, but become a trade surplus type of country, without the current advantages of the USA dollar anymore.)

Please, dont not flame, and bring proof if anything is not valid. Of course, rational thought is a must to understand this.

thanks for listening


PS: It is never easy to accept new theories. We can remember Galileo who got persecuted for revealing that the earth was not the center of the universe.

The flaming witnessed in the last posts show how manufacturing of consecent has locked some people in a certain ideology, for which they will fight for, without use of any rational argumentation and despite any support of facts whatsoever. But, i do trust that some people are capable of independent thought and will be capable to understand this model and ackoledge all the facts i provided through this very long thread.

In any case, weather i am right or not, it is your duty to rationally study the model, verify the facts by yourselves and consider the possibility that it may be true...

 

[Huck]

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

*Bump for the sake of freedom*

 

[Toro]

RE: The Euro vs Dollar Co

Continue here

 

[Toro]

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

From a currency trader.

...

Hedging for Fun, but Probably Not for Profit

Not only is crude oil priced in dollars worldwide, but most contracts for individual types of crude oil are written not in terms of absolute price but rather in terms of a differential to a marker crude such as Brent, produced in the British sector of the North Sea. Other contracts are written in what is called a "future formula cashout," meaning the oil will be priced upon delivery according to a basket of refined products in that local market.

The operational considerations involved in setting oil prices in a basket of currencies instead of a single currency would disrupt the entire contractual structure of the world oil market. Both the producers and the consumers would be forced to engage in all manners of currency transactions to preserve the economics of their crude oil purchasing decisions. Adding complex basket hedging trades on a politically constructed basket of currencies to the tough business of oil trading does not strike me as one of those ingenious simplifications we all so enjoy in life.

In the current contractual structure, both the buyer and the seller have a single currency risk, that of their native currency to the dollar, and they are free to hedge that risk as they see fit. That OPEC as a group has not engaged in active hedging of its dollar risk when it had the opportunity to do so does not justify a demand for higher prices on its part.

RealMoney ($)

Also,

Howard Simons

Bernanke's Wandering Expertise

3/24/2006 1:07 PM EST

And so it begins: Ben Bernanke just opined that pricing crude oil in euros instead of dollars would not affect the price much.

This non-starter of a proposal has been around forever; I wrote about it in January 2004. It would create an operational mess in the crude oil industry.

 

[Kreskin]

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

Currencies are priced like anything else, by supply and demand. If the oil industry converted to the Euro would it not create less demand for the US dollar?

I believe Iraq was the first to announce it's intention to trade in Euros. That was right about the time Saddam became a major WMD threat. More recently Iran announced the same. They are now a major WMD threat.

The world works in strange ways.

 

[Toro]

RE: The Euro vs Dollar Co

Kreskin, the first post onwards is a discussion entirely of that.

 

[Kreskin]

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

Toro, what's the consensus? 21 pages to go through. Can you give me a recap?

 

[Toro]

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

The argument is that Iran and Iraq changing the denominations of oil transactions from euros to dollars would cause the dollar to collapse since with oil priced in euros, central banks would not have much need to hold dollars as their primary reserve currency.

I argue against that oil though an important commodity is a fraction of world trade, that the reasons why central banks hold dollars are multifold and oil is only a minor reason, and most dollar reserves are held by Asian central banks who would have no reason to switch to euros simply because Iran starts trading oil in euros.

Some have even postulated that the reason why the US invaded Iraq and is threatening is Iran is because of this reason. I find that utterly bizarre, and made by people with little understanding of economics and capital flows - except maybe nutty gold bugs.

 

[darkbeaver]

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

The argument is that Iran and Iraq changing the denominations of oil transactions from euros to dollars would cause the dollar to collapse since with oil priced in euros, central banks would not have much need to hold dollars as their primary reserve currency.

I argue against that oil though an important commodity is a fraction of world trade, that the reasons why central banks hold dollars are multifold and oil is only a minor reason, and most dollar reserves are held by Asian central banks who would have no reason to switch to euros simply because Iran starts trading oil in euros.

Some have even postulated that the reason why the US invaded Iraq and is threatening is Iran is because of this reason. I find that utterly bizarre, and made by people with little understanding of economics and capital flows - except maybe nutty gold bugs.

You are wrong about the oil Toro, oil runs everything even the economy, how you consistantly fail to understand this economic postulate of the modern world is beyond belief. It fuels every aspect of the economy,your inability to grasp that basic truth is
utterly bizarre, if you could name just a few products or services that do not require oil I might consider your posts in a different light,I can't think of any, economics and capital flows are the by-products of power not the wellsprings of power.

 

[Toro]

RE: The Euro vs Dollar Co

Dude

Its about capital flows. Supply and demand for money is a function of capital flows. Oil is a fraction of global capital flows.

Food is more important than oil, yet food is also a small part of global capital flows.

But to the foilers, its always about oil. That's why they're not taken seriously.