[smiley]

Ukraine to Drop Dollar Peg, Add Euro to Reflect Trade With EU
March 16 (Bloomberg) -- Ukraine plans to replace the hryvnia's peg to the dollar with a more flexible exchange-rate system that includes the euro, reflecting the former Soviet state's growing trade with Western Europe, Economy Minister Serhiy Teryokhin said.

link
The dollar as role as the worlds reserve currency seems to be slowly falling apart.

[Kingcoal]

It's an interesting situation that is playing out and I don't see rising interest rates as having any effect. However, the dollar really hasn't had any backing by gold since the early '70's. It's been a toilet paper fiat currency since then.

Oil could be the wild card in this though. Perhaps the only thing that has given the dollar any worth is the demand for petrodollars. If oil is traded for other currencies or gold, which is where I think things might end up, dollar demand should dry up. From my vantage point, the future of the world economy lies in the hands of the oil producers, hence the rational for "taking out" people like Hussein. The most logic target next: Hugo Chavez.

[frankthetank]

I strongly agree. Chavez must know he had a target on his back.

Wasn't Yushenko (whatever) backed by the US? Putin somewhere must be laughing

[tdrive]

Bulgaria also dropped the dollar peg and switched to Euro, waiting on its pending admission to EU. These are, however, peanuts, driven not by the deteriorating dollar, but by the fact they do business mostly with Europe.

[ernest]

The gold standard had no more value than the current standard. Back then Gold had a more stable and meaningful value. Today gold is not some kind of eternal and never ending value, it is just a precious metal.

The dollar, and all currencies are value based in the sense that they reflect the strength and stability of the economy that they stem from. The US economy is still huge and a blockbuster.

The one thing that is dragging the dollar done is the inflation rate in the US, and it is made worse by the incredible liquidity, cheap money, and bogus real estate loans. I heard one the other day: "Borrow more than the price of the house, cash back, 1% variable rate for the first year, and yada yada." What could possible inflate house prices and the currency more than loans like that?

[Teclo]

>The dollar, and all currencies are value based in the sense that they reflect the strength and stability of the economy that they stem from. The US economy is still huge and a blockbuster

Thats the key. Gold was used in the first place because it was stable

After WWII the dollar became a currency that was as stable as gold, and I disagree since the 70's its been just paper, it represented a stable and strong currency global business could trust

Now the US is no longer stable, the dollar is unstable and it doesn't matter how strong it used to be, there's no sentiment about it in other nations

I don't want the US to crash and burn, I just want the neo-cons to destroy themselves. Man, will this be wake up call

Martin

[RdSnt]

The US chaffed at the gold standard because it prevented them from expanding their money supply as they wished. Nixon didn't want to pay the debts the US owed so he disconnected the currency from gold and deflated the US buck out of debt.
The advantage of gold was precisely that it was a finite supply, meaning that it forced governments to control their money supply because gold was the guarantour of the money.
No gold no money.
Now what you have is phantom money, printed without any support whatsoever.

What we have now is a global economy that is essentially a giant check kiting scam. There is no underlying value to the US currency, there is nothing supporting it and there is absolutely no way America can pay it back.
All we are waiting for is for someone to blink. It will happen, there is no other possible outcome.

[lorenzo]

This is all part of the big geopolitical game, creating a Grand Eurasian Axis which runs from Paris all the way to Beijing. It is directly directed against the USA.

Russian oil will go to Europe and China, Central Asian Oil will be fought over. But the Eurasian Axis is well under way. And here to stay.

Of course, the USA will try to enlarge the EU artificially until it breaks (by pushing for Turkey's admission and for the Ukraine's), but we're not stupid. We see through this strategy.

Meanwhile, the Ukraine has no other choice than to become a virtual EU member, because this means that it will have more control over the negotiations surrounding the oil from the republics in the Kaukasus. (Which comes to Europe anyways).

[basketballjones]

The gold standard had no more value than the current standard. Back then Gold had a more stable and meaningful value. Today gold is not some kind of eternal and never ending value, it is just a precious metal.

Do you see what a contradiction this is? Either gold has no value, or it is a 'precious metal'. It cannot be both. Ask anyone and i'll expect that the answer is that it has value. Lots of value.

The dollar, and all currencies are value based in the sense that they reflect the strength and stability of the economy that they stem from. The US economy is still huge and a blockbuster.

Then why has the US $ lost so much value over the last 3 years? The US economy is huge yes, but it's shell when compared to the might of it's post WW2 economy. Back then, the US was the worlds biggest exporter and creditor. Subsequently, the US has outsourced alot of it's industry over the past 20 years as well as just the simple fact that the US is one of China's largest markets and thus the US now imports vastly more than it exports resulting in a massive trade deficit.

The one thing that is dragging the dollar done is the inflation rate in the US, and it is made worse by the incredible liquidity, cheap money, and bogus real estate loans. I heard one the other day: "Borrow more than the price of the house, cash back, 1% variable rate for the first year, and yada yada." What could possible inflate house prices and the currency more than loans like that?

You're correct in saying that the massive increase in the money supply is a bad thing, but inflation that is causes isnt the reason behind the decline in the $US. Many factors govern the exchange rate of a fiat currency, but to single out inflation as the sole governor i think is a bit short sighted.

[savethehumans]

Wasn't Yushenko (whatever) backed by the US? Putin somewhere must be laughing.

He was, he was! From all appearances, the player (the U.S.) has been played!
But I can't shake the feeling that the U.S. approved of this move in advance. ("Give us all the pipeline control, and you can do this to look independent, stoke the EU's ego, and quiet Putin down.")
Guess we'll know, soon enough....

[frankthetank]

true...the future will prove us wrong or right...

the dollar is still the petrol dollar...petrol being known as "BLACK GOLD"

[Kingcoal]

I think that at the center of these arguments is a question of worth and I think I understand the answer. Ultimately it is scientific discovery and technological development that provides real worth. Worth is hope. We can produce hope by fostering growing economies that support large technical societies. The more scientists working to discover, invent, etc, the better. In order to produce that kind of society, we need to offer huge rewards for the inventors. The huge demand for oil produces a huge potential reward for the inventor working on a replacement for it. The bigger the economy, the larger the incentive to invent. A side effect of this is a certain frivolity, but it is worth it in my opinion.

Invention and the ownership (rights) of those inventions is the essence of worth.

According to a Bond Trader I know, the rise in the Euro is caused by the EU constantly raising interest rates (and to a lesser extent, US deficits.) He says this will ultimately hurt the EU member economies, many of which are based on exports. He used a term I often hear on this board: unsustainability. You have to have a strong, growing economy to back up your high interest rates, or you'll have a hard time paying on them. My friend also says that most European economies have higher debt as a percentage of GDP than the US.

Maybe things aren't so bad for the US after all.

[uNkNowN ElEmEnt]

The last time this happened the US just sold lots of its assets and got the rest of the world to pay for its debts. but if the EU is starting to float its own debts it won't be in any position to do this again.

I also am betting that the US's bubbles will burst long before the EU's will.

[Wildwell]

Looks like the gravy train has come to a halt, mind the gap Leaf:
Russia's gas giant, Gazprom, has threatened to cut off gas supplies to Ukraine if a new contract is not in place by the beginning of next year.
Ukraine receives heavily discounted gas from Russia, offsetting the price against fees levied for transporting Russian gas through its pipelines.
Gazprom says it will not compromise over its demand that Ukraine pays what it says are appropriate market rates. The company says a three-fold increase is both overdue and justified. link

[bobcousins]

I read recently that Russia intends to use its oil and gas resources to leverage strategic influence in the region. This all adds up. I think Putin is a pretty smart guy, after losing the Cold War Russia would love to make the USA squirm. PO really changes the whole geopolitical ball game.

Er, pity we chose the wrong side!

[erl]

bob, I guess the answer is that you can always choose a different side. That is if you want the bear looking over your shoulder.
But, feel free.

[BrownDog]

It's a good thing Russia has lots of gas left, with North America peaking and all... Less for Ukraine, more for us!
(how many LNG ports to we have, again?)[yes, this is sarcasm]

[Slowpoke]

And Russia will sell gas to to the US... in what alternate dimension ?

[mrniceguy]

Russia will cut off natural-gas supplies to Ukraine if no compromise is reached by Jan. 1

Just in time for the coldest time of year, average temp in Kiev in January is -3 Brrr. Wrap up well Leaf Kiev

net exporter of Nuc energy

Why do I feel uneasy when I read this?