Saudi ends petrodollar treaty

[Jarhyn]

It is not my position that the US must, or even can, do anything about it.

This is not in evidence. You clearly care enough about it to start a thread on the subject.

The fact is, bullshit like this:

Are you claiming to have psychic abilities?

... Is just a deflection from the fact that humans, like it or not, can actually read intention out of the behavioral patterns of others. We have eyes and you are not so sly or slick as you imagine yourself.

People are shit at keeping their intentions disguised, especially folks like you.

Why are you here then, what is your position? If to laugh at the US for letting it fall through, then you DO encourage your original flawed interpretation of the treaty.

I didn't not ask "must". I did not ask "can". I asked you what your "ought" was. If you could advise someone else 10 years or 20 years prior to seeing such a history repeat, what would your advice be?

That is really why we have these conversations after all: to consider how to do things in the future.

 

[bilby]

Not zilch, as using euros to buy dollars increases the value of the dollars.

Yes, zilch, because selling the dollars again reduces their value by a roughly equal amount.

Do try to keep up.

 

[bilby]

The economy of the US and much of the world has been so severely distorted in the past century that opinions like the one above are common. It's sad, really.

Only if by "sad" you mean "realistic".

The economy can be as distorted as you like; It won't change the fact that fiat money is fiat money, and is not pegged to anything. Or the fact that gold isn't money at all; It's a commodity that you can by with (or sell for) money.

 

[bilby]

Well, it's not a thing anymore, so you're technically right about it not being even a thing.

It hasn't been a thing since the 1970s, so I am more than merely "technically" right.

 

[Swammerdami]

While everyone is looking at the election, and the court trials attendant to the election, something significant elsewhere.
. . .
The petrodollar has been a key component of US foreign policy and US economic strength for decades. Times are going to be interesting.

What possible difference could this make, in a global economy where both fiat currencies and oil are traded freely?

There's literally no difference between a US$80.45 barrel of Brent Crude, a €75.12 barrel of Brent Crude, or a £63.20 barrel of Brent Crude.

Wrong. The fact that contracts for petroleum and other key commodities are written in dollars is one thing that helps maintain the Dollar's status as the world's premier reserve currency. (When Bangladesh sells textiles to Japan there's a good chance the trade is done in neither taka nor yen, but in U.S. Dollars. The Federal Reserve Bank of New York is the clearinghouse for many transactions that do NOT involve dollar-based economies.) This status has been a boon for the U.S. economy; and has contributed to worldwide financial stability. Note that writing long-term contracts in dollars reflects faith that U.S.G. will not depreciate its way out of a crisis.

Recently the BRICS countries agreed to create their own financial system independent of the U.S. Dollar; obviously this drove a tiny hole into the Dollar's hegemony. Now Saudi is changing petrodollar arrangements. Will that have a big effect? I don't know, but it's another "straw on the camel's back."

Some of us are on record as predicting a hike in oil prices ("October Surprise") this Autumn orchestrated by Russia and Saudi. This WILL affect U.S. prices despite our fracking. For that reason, Saudi's recent action may be a danger sign.

 

[Jason Harvestdancer]

It is not my position that the US must, or even can, do anything about it.

This is not in evidence. You clearly care enough about it to start a thread on the subject.

"Care enough" != "advocate military intervention"

I see the root of your statist error. You actually think every problem must be solved by government force, so if someone notices a problem, that means they advocate government force. But I don't think every problem must be solved by government force, I don't even think every problem can be solved by government force.

The fact is, bullshit like this:

Are you claiming to have psychic abilities?

... Is just a deflection from the fact that humans, like it or not, can actually read intention out of the behavioral patterns of others. We have eyes and you are not so sly or slick as you imagine yourself.

It is pointing out the fact that you claim to know my intentions better than I do, and claim to know what is in my head better than I do. The only reasonable explanations are that you are very very wrong or that you claim to be psychic.

My position was, is, and continues to be "oh shit this is bad news." I do encourage my original correct interpretation of the treaty.

I didn't not ask "must". I did not ask "can". I asked you what your "ought" was. If you could advise someone else 10 years or 20 years prior to seeing such a history repeat, what would your advice be?

That it is a bad idea and that the US is trading short-term power for long-term losses.

That is really why we have these conversations after all: to consider how to do things in the future.

No, you have these conversations so that you can tell others what they really think, and then tell them that their assigned positions are wrong.

 

[bilby]

Some of us are on record as predicting a hike in oil prices ("October Surprise") this Autumn orchestrated by Russia and Saudi. This WILL affect U.S. prices despite our fracking. For that reason, Saudi's recent action may be a danger sign.

Again, it is completely irrelevant what currency the trade(s) in oil take place in.

You might note that OPEC was perfectly capable of hiking prices regardless of their use of US dollars; Their choice to use another currency in no way assists (nor harms) their ability to influence prices.

The price of oil is determined by the relationship between supply and demand; Absent a change in demand, Saudi Arabia can increase the price (in EVERY currency) by reducing, or threatening to reduce, supply.

The only counter to this is for other suppliers to increase production to compensate.

A barrel of crude is a barrel of crude. The more of them there are for sale, the less you need to pay to get one. That's true whether you pay in US dollars, euros, roubles, yen, pounds, dong, or bhat. The choice of currency changes nothing.

 

[Gospel]

Doesn't currency exchange incur costs? While I'm not certain of the exact impact, wouldn't this alone alter the costs for countries purchasing oil?

 

[bilby]

Doesn't currency exchange incur costs? While I'm not certain of the exact impact, wouldn't this alone alter the costs for countries purchasing oil?

Those costs are minuscule, at the scale of the international oil trade. They are small but noticeable if you are exchanging a few thousand dollars for a vacation; They are not important for trades in the millions or billions. The marginal cost of having a guy type six digits or nine when entering a number into a computer, over and above the cost of having him type only three digits, is pretty small.

 

[Jarhyn]

This is bad news

... that a treaty to impose violence on violators and to strong-arm the artificial support of a currency through statist controls has ended.

Quit trying to gaslight people out of seeing your position for what it clearly is.

 

[Jason Harvestdancer]

My position was, is, and continues to be "oh shit this is bad news." I do encourage my original correct interpretation of the treaty.

... that a treaty to impose violence on violators and to strong-arm the artificial support of a currency through statist controls has ended.

Quit trying to gaslight people out of seeing your position for what it clearly is.

You still find support for authoritarianism in there? I'm saying this is bad new for the dollar, and you still see support for imposing controls?

Man, sometimes I wish I was batshit insane. I could hear the colors and see the sounds, talk to the unicorns and share beers with Jesus.

 

[bilby]

Man, sometimes I wish I was batshit insane.

Well, you seem to imagine that this non-event is bad news for the US Dollar, so you might well get your wish sooner than you think.

 

[Jason Harvestdancer]

Man, sometimes I wish I was batshit insane.

Well, you seem to imagine that this non-event is bad news for the US Dollar, so you might well get your wish sooner than you think.

As an Australian, you might not be aware of the many and varied effects the Dollar has, and how much of the US foreign policy is bent on maintaining the dollar's place as the world's premiere currency. There are several aspects to it, and this is one of those aspects.

Then again, we live in an economy that is so messed up we actually have people who take MMT seriously.

Also, you expressed the opinion that my statement that time only goes forward somehow was an advocacy of flat earth. That puts limitations on what you think is sane and what isn't.

 

[bilby]

You expressed the opinion that my statement that time only goes forward somehow was an advocacy of flat earth

I am not planning to take your word for that without you quoting me expressing that opinion. I strongly suspect that this is either a severe distortion of something I said, caused by your failure to understand it; Or something someone else said that you are wrongly attributing to me.

 

[Loren Pechtel]

One of the reasons the dollar is as strong as it is, and one of the reasons the US has been able to go into far more debt than any other sovereign country can reasonably expect to do so, is the non-myth of the petrodollar. During the petrodollar era, anyone who wanted to purchase oil needed dollars with which to do so. That means other nations and people in other nations needed the dollar, which made the dollar a stronger currency.

Japan has entered the chat.

 

[Loren Pechtel]

The petrodollar isn't even a thing. It's of zero relevance to anything in the twenty-first century, and is a desparate attempt by people who hate and fear the reality of fiat currency to insist, counterfactually, that money has value due to a peg to a commodity.

"Petrodollar" actually does make sense if you understand what it really is referring to.

"Dollar" isn't "US currency", but "money". Petrodollars are oil money, specifically in terms of how they influence the country.