Re: Unjustified fear of dollar collapse?

Amused,

I really couldn't strip away all BS overlayment to the economic reality.

<chuckle> I can identify with that. It's a really 'sticky', 'icky', 'gooey',
read. Perhaps the article below will be 'cleaner'.

It isn't so much about just Iran (who sells mainly to China), but the
potential for a domino-effect throughout the producing countries, even
beyond OPEC itself. As the article noted, some countries are stockpiling
Euros in case such an evenuality should come to pass.

The article below is less politicized, though it has its slant. The key
elements to understanding the "petrocurrency war" are:

The European Union has similar population to the US, and in 2002, had
roughly the same size economy as the US. The EU economy, however, is growing
faster, and has outstripped that of the US (that process will accelerate if
and as other countries join).

The European Union has grown to be a larger customer in the oil market than
the US is.

The EU, as a collective, has far more non-petroleum trading-relationships
with the Mid-East than the US does, and even non-petro trading is
increasingly being done in Euros intead of the USD.

In 2002, the USD was faced with a 6 trillion built-in debt burden, against a
9 trillion dollar economy that has to pay interest on that debt. The EU
economy is now at 12.9 trillion, versus our 11.7 trillion economy, and the
EU has relatively neglible debt denominated in borrowed Euros (the debts
mostly stayed 'local' to the member countries, and were considered in
calculating currency conversion-rate to the Euro, so debts reduced the
number of Euros their currency would buy. The Euro is thus tied more to
'assets minus liabilities', or 'net assets', of its members).

Now, don't get me wrong, I'm not forecasting, but in the last five years of
my observations of the global economy, the USD has steadily lost ground as
the "World's Reserve Currency", with some gains as the Iraq acceptance of
the Euro was changed. When China broke its currency's tie to the USD, that
ground, and more, was lost. Now Iran plans to (if it hasn't already), do
what Iraq was doing. And Iran sends 17% of its output to, guess where,
China, who no longer pegs its currency to the USD.

Quite simply, the USD is increasingly vulnerable and pressured, and is
susceptable to a signifcant geopolitical event, as well as continuing
erosion, which is demonstrated by the recent record prices and volatility in
the commodites markets. Gold is an indicator rather closely tied to currency
value, and it has gone from the $400 level two years ago to today's quote of
$620. Currently, futures have it at $660 by June (there is a link to a one,
five, and twenty-year gold-price chart below).

Using gold-price as a reference-point, the USD has devalued 40% against the
Euro in the last five years. Clearly, something is afoot, and it doesn't
look at all like what I'd prefer to see happening.

As to what an ivestor is to do about it? Hedge locally, and diversify
globally.

Link to article:
http://www.thinkandask.com/news/thedollar.html

Link to precious metals chart:
http://www.thebulliondesk.com/freecharts/

Allan


"Amused" <Amused@xxxxxxxxxxxxxxxxxx> wrote in message
news:x7adnai3p--bu9jZnZ2dnUVZ_vqdnZ2d@xxxxxxxxxxxxxxxxxxxx

"Allan Smith" <netsmith@(wherever).com> wrote in message
news:5S41g.5397$4O2.25@xxxxxxxxxxxxxxxxxxxxxxxxx
Amused,

Regardless of source, Florian is essentially correct. The largest single
market in the world is energy trades. The requirement to use the USD


.

Relevant Pages

  • Re: Unjustified fear of dollar collapse?
    ... It isn't so much about just Iran, but the potential for a domino-effect throughout the producing countries, even beyond OPEC itself. ... The EU economy, however, is growing faster, and has outstripped that of the US. ... The EU, as a collective, has far more non-petroleum trading-relationships with the Mid-East than the US does, and even non-petro trading is increasingly being done in Euros intead of the USD. ...
    (misc.news.internet.discuss)
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  • Re: OT: Youve got to like the second paragraph...
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  • Re: Yeah, and the right wing doesnt see why the protesters are protesting
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  • Re: OT: Youve got to like the second paragraph...
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    (rec.boats)