There seems to be a pretty concerted movement forward in getting rid of the dollar as the primary oil exchange currency to a "basket" of currencies.

http://biz.yahoo.com/ap/071118/opec.html

They get our oil and give us a worthless piece of paper," Ahmadinejad told reporters after the close of the summit in the Saudi capital of Riyadh. He blamed U.S. President George W. Bush's policies for the decline of the dollar and its negative effect on other countries.


To me, there is very, very little difference in personalities, morals and behavior between Ahmedinejad and GW, in fact, they could have been seperated at birth

So it is not the poeple that are making the statements- it is the fact that the statements are being made at all, and that OPEC nations are listening, by virtue of the fact that they are losing money because of the US dollar.

It has been said that the only way the US keeps it's economic superiority is it's trillions of dollars in interest free loans it gets by other countries using the dollar as a standard.

So the question is-

1) Will it be a financialluy sound decision for OPEC to convert to something other than the dollar? Will it be better to go with the "basket" suggested, or go straight to the Euro if the change comes?

2) Will this destroy the nations economy as many have suggested?

1) Will it be a financialluy sound decision for OPEC to convert to something other than the dollar? Will it be better to go with the "basket" suggested, or go straight to the Euro if the change comes?

1. Until relatively recently, the first world was the major consumer of petroleum products with the US consuming the most; thus, it was in OPEC's best interest to trade petroleum in dollars. However, the first world is no longer the chief consumer of petroleum as the developing world (China & India mostly) are the chief consumers (and growing).

2. Now, if the US had remained the chief petroleum consumer, a weak dollar wouldn't matter too much. Given that the developing world now consumes more than the first world, there is very little incentive to remain solely on the dollar. A "basket" of currencies makes sense in this case.

2) Will this destroy the nations economy as many have suggested?

No, this will not destroy the US economy. The cost of oil will go up for the US consumer as more and more petroleum is traded in non-US currencies. Oil exporters will see an improved bottom line, but they must be careful not to have the US see too precipitous a rise in oil prices.

The US imports oil from Canada more than any other nation; and not just oil, but refined oil products such as gasoline. Since the Canadian economy and the US economy are highly coupled, any changes to OPEC's strategy will be mitigated as far as the US is concerned.

I am much more concerned about the mortgage market meltdown causing major economic woes in the US than I am oil prices.

In my view this would mean global change due to the currency involved. I think if it gets to such a magnitude its ability via change to motivate thought such as gloom or doom could become larger also in bulk all over the world. The resulting stress would indeed be worth noting which I feel will occur. This will resonate I think in international and domestic industry the world over not only from the petroleum view but from what that market also all ties into.



That I think would be an interesting gauge of just the ramifications logistically speaking of any such change.

1) Will it be a financialluy sound decision for OPEC to convert to something other than the dollar? Will it be better to go with the "basket" suggested, or go straight to the Euro if the change comes?
It is indeed. In the short-run, the OPEC countries will take a sharp loss since they are holding many dollars right now. If they continue acquiring dollars, they risk losing even more money.

For several decades, the Dollar has been backed up by the confidence of the people using it. If the Government cannot control its spending and pays for its programs by printing out more money, investors might lose faith in the Government. This is a recipe for inflation and the inflation has to show up somewhere, whether it be in the price of Gold or the price of Real Estate.

2) Will this destroy the nations economy as many have suggested?
Right now, the World's eyes are upon OPEC. If OPEC dumps the Dollar, its going to have a much more significant impact on the investors' decisions than a small country like Syria, which already has abandoned the Dollar. If OPEC's decision causes a Dollar collapse, then without question the American economy will collapse.

So far, the American economy has continued to withstand higher oil prices. And if OPEC uses a currency basketcase, then the price of gasoline will become higher for Americans as well and Americans will simply adjust by cutting back on things like movie tickets or Cable TV. The big factor will be the actual oil supplies themselves. Because the World's oil production has been flat for several years despite rising demand from China and India, inevatibly competition will have to arise for the World's oil supply at some point in the future. If OPEC converts to a basketcase of currencies, America will only be able to afford a smaller slice of the World's oil production and the result will be gas lines and closed gas stations in some cities.

1) Will it be a financialluy sound decision for OPEC to convert to something other than the dollar? Will it be better to go with the "basket" suggested, or go straight to the Euro if the change comes?

I guess according to the PM of Iran that the USD is worthless paper. Well, then send all that worthless paper my way! I can put it to use.

I hear an echo of President Bush telling us that treasury bills and bonds are worthless paper, that in respect to how SS is funded. Then Al Franken offered to take all the T-bills and -bonds off of people's hands, they being worthless pieces of paper. Nobody sent any worthless T-bill or -bonds to Franken. He was even willing to pay ten cents for each one

2) Will this destroy the nations economy as many have suggested?

No way. It doesn't matter what currency OPEC uses as its trading currency, not to the USD. Exchange rates fluctuate a lot in the global economy. S. Korea got hit hard in the 1990s on this issue, but even as the Asian Miracle collapsed, the respective economies did not. Then later Asia came back but not as hot and heavy as during the crazed boom. I think the world's money managers have learned a lesson from that one.

What's happening with the weakened dollar is that imports are going up in price. I'm pretty sure that's why the Chinese poisons are entering our marketplace. The manufacturers of cheap consumer junk are under pressure to manufacture even cheaper junk that happens to be deadly. The American consumer market is still the Big Apple to be picked. So the trend would be to buy domestic goods instead.

I see this happening on several levels. Our recently opened brand new Wal*Mart has stuff that's more expensive than the little shops in town. The food part pales compared to Safeway, which is aggressively cutting its overhead. After the pet food scare, a local producer of organic and strange chemical-free stuff has expanded operations. The place even delivers the pet food to your door.

Locally raised meat is in big demand, especially the truly grass-fed lean stuff. The USDA under President Bush has allowed the term "grass-fed" to be used on meat that really is just the same old hormone-shot mass-produced mac-meat. So the organic folks have banded together to do their own standards, and it's working. Consumers get smart to the smarmy tricks of government.

Anyway, we'll do fine by producing for our own market. Now if we get off of oil, who cares about OPEC?

The PM of Iran seems a tad worried about the trends.

But the offer still holds true: Send all your worthless USDs my way, and I'll lighten your load.

The real problem is the way the Chinese cheat on their currency. The Euro is part of the western world, not the eastern world. If the Arabs start trading in Chinese yuan, then you need to worry.