Alfred Tennyson wrote:We are not now that strength which in old days
Moved earth and heaven, that which we are, we are;
One equal temper of heroic hearts,
Made weak by time and fate, but strong in will
To strive, to seek, to find, and not to yield.
AgentR11 wrote:It'll be slow I think, but the path seems inevitable now. Communications technology makes it so easy to buy and sell in any arbitrary currency; drives costs of conversion down very hard at the high end of the transaction meter.
If Iran wants to buy rice for instance, they can buy it in rupee from an Indian wholesaler who bought that rice from Thailand in baht or dollar or gold-etf or whatever. The rice itself may never even be unloaded in India. No pieces of paper involved, just a mouse click, followed by a few more mouse clicks. Even something more complicated, with two or three steps through India and China, or even Russia, India, and China, can all happen very fast and very transparently. At a certain point, there's really not much advantage to being paid in USD unless you have very specific USD debt you want to service; and Iran doesn't.
I get what Pop's is saying about a reserve standard, but I think modern communications technology has reached the point where it will start eroding the advantage that using any currency for a reserve might have had. Basically, I think the whole notion of a "reserve" currency will die.
Australia has run bigger trade deficits for longer than the United States, nobody holds Australian dollars as a reserve currency, and Australian governments are not wasting their time trying to convince anyone to do it.
The reason Australia can always run trade deficits is ultimately not that mysterious. Australia is a rich country with a credible legal system and a stable political order that also — thanks to immigration — has a substantially higher population growth rate than other advanced economies. That makes Australia well-suited to receive a net inflow of private investment money from the rest of the world. All this also applies to the United States, though to a lesser extent, and so we also can sustain large trade deficits.
Pops wrote:I really don't know much about currency markets but it seems to me a global economy with a patchwork of local currencies is inherently unstable – just as the US currency patchwork was unstable back when every bank had its own script.
pstarr wrote:Is it a function of peak oil? (Is everything peak-oil related? My foot fungus? The god-durned gophers in my yard ).
Subjectivist wrote:It has long been known that dollar reserve agreements give America a large advantage in international trade. The world accepted this because from the early 1970's to 2008 it worked well for the rest of the world as well. The problem is since 2008 America has been on a printing or digitizing binge however you like to say it. Either way the advantages for the rest of the world have evaporated while the advantages for America have remained. Most of the world no longer sees American dollar reserve currency as a good thing like they did in 1975, so naturally they are looking for ways to change the system.
Iran becomes India’s 3rd largest oil supplier: Iran sold 19.8 million tonne crude oil to India in the first nine months of the FY17 behind Saudi Arabia’s 30.3 million tonne and Iraq’s 29.1 million tonne , officials say
New Delhi: Iran has zipped past the likes of Venezuela and Nigeria to become India’s third largest oil supplier as easing western sanctions enabled Indian companies to increase purchases from that country.
Saudi Arabia and Iraq continue to be ahead of Iran, which was sixth biggest supplier of crude oil to India in 2015-16. It has overtaken Venezuela, Nigeria and UAE to become India’s third largest supplier in April-December period of 2016-17.
Iran sold 19.8 million tonne crude oil to India in the first nine months of the current fiscal, officials said. This is behind Saudi Arabia’s 30.3 MT and 29.1 MT sourced from Iraq. In full 2015-16 fiscal, Iran had supplied 12.7 MT crude oil to India. That year Saudi Arabia had sold 40.4 MT oil to India with Iraq chipping in 26.8 MT. Venezuela supplied 23.6 MT, Nigeria 23.4 MT and UAE 15.7 MT.
Alfred Tennyson wrote:We are not now that strength which in old days
Moved earth and heaven, that which we are, we are;
One equal temper of heroic hearts,
Made weak by time and fate, but strong in will
To strive, to seek, to find, and not to yield.
Tanada wrote:How long until other countries openly commit to dropping dollar denominated trade?
KaiserJeep wrote:Yet, the US$ is still doing well, and is more than ever, the reserve currency of the World:
...in fact, the Trump Presidency is apparently very good for the US Economy. (Hint: You might want to cash out in 2020 or before, and buy the homestead.)(Before people notice the oil shortage.)
evilgenius wrote:Tanada wrote:How long until other countries openly commit to dropping dollar denominated trade?
Now we see why it is very important that Trump settle into the job and stop the erratic behavior that causes people not to trust him.
Outcast_Searcher wrote:-snip-
The value of the dollar is certainly important to people that hold lots of them (relative to other currencies) like the vast majority of Americans. It buys a lot of stuff in (relatively) weaker foreign currencies, like the Euro, for example.
A lack of trust in the dollar long term is one of the reasons to hold precious metals -- as a hedge. Interestingly, both gold (compared to historical prices) AND the dollar remain pretty strong in recent years. I would say this implies there are a LOT of people globally who want a hedge, just in case.
I choose to hold my largest hedge in well diversified, low cost, ex-US index stock funds, as unlike Gold they tend to pay dividends and appreciate long term with the global economic growth. (I also hold gold and silver but in much smaller amounts).
So KJ, I certainly get and agree with your point that things could change and the dollar could weaken and being prepared is a good idea.
OTOH, I don't get the point about people noticing "the oil shortage". Are you assuming that we will sail staight from big glut to big shortage in X years due to reduced production due to current lower prices? If so, given how much shale production can be ramped up quickly (just in the US) according to articles I've read, that might not be a good bet. And in the multi-decade time frame, you run into the cumulative impact of improving efficiency, EV's (of all flavors) and all green energy build-out.
I don't know what the long term results are (hell, I can't even come close to predicting the oil price the next year in our annual price picking game), but I suspect that assuming that we rapidly return to a meaningful lasting shortage (i.e. enough to force high, say $100+ish) prices for many years is far from a sure thing.
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