Proposed Iranian oil Bourse

Decessus · Mar 9, 2006

I recently read an article and not being an economist, it was difficult for me to tell how much of the article was true, and how much was false.</br></br> Here is a link to the article: <a href="http://www.energybulletin.net/12125.html">Iranian Oil Bourse</a></br></br>I'd like to get some feedback on whether or not the author has any merit for his argument.

Babak · Mar 9, 2006

Anyone who thinks that it matters in which currency a commodity is priced flunked Econ 101.

Decessus · Mar 9, 2006

Quote from Babak:

Anyone who thinks that it matters in which currency a commodity is priced flunked Econ 101.

Do you mind explaining why? I took an Intro to Economics in school, but to be honest, I don't think the instructor did a very good job. I received a high B in the class, but I don't feel like I know that much more than I did before the class.

Pekelo · Mar 9, 2006

Quote from Babak:

Anyone who thinks that it matters in which currency a commodity is priced flunked Econ 101.

Lucky me, because I never took Econ 101, so I understand the situation better than you. It matters a helluva lot, not necesserily for economic, but for political reasons.

Do a Google search on the issue, educate yourself and oh yes, you can whipe your ass with your Econ classes...

Sorry if I sounded a bit harsh, but ignorance in these matters can be extremely dangerous. You probably think that the US is in Iraq for their freedom...

Decessus · Mar 9, 2006

Quote from Pekelo:

Lucky me, because I never took Econ 101, so I understand the situation better than you. It matters a helluva lot, not necesserily for economic, but for political reasons.

Do a Google search on the issue, educate yourself and oh yes, you can whipe your ass with your Econ classes...

Sorry if I sounded a bit harsh, but ignorance in these matters can be extremely dangerous. You probably think that the US is in Iraq for their freedom...

Do you agree with what the author is saying then?

nevadan · Mar 9, 2006

Every time a major foriegn central bank makes noises about reducing their dollar holdings it causes ripples in the markets. If oil consuming nations ( and who isn't) have an option of purchasing oil with euros and thus lowers the level of Eurodollars they must hold to purchase oil for their needs it stands to reason that the demand for dollars would drop. It seems reasonable to assume that could have a profound effect. I saw an article in the Financial Times recently that said Norway is considering its own bouse as well. Could be the coming thing.

wareco · Mar 9, 2006

Quote from Pekelo:

... You probably think that the US is in Iraq for their freedom...

Well, why don't you tell us why the US is there?

Decessus · Mar 9, 2006

Quote from nevadan:

Every time a major foriegn central bank makes noises about reducing their dollar holdings it causes ripples in the markets. If oil consuming nations ( and who isn't) have an option of purchasing oil with euros and thus lowers the level of Eurodollars they must hold to purchase oil for their needs it stands to reason that the demand for dollars would drop. It seems reasonable to assume that could have a profound effect. I saw an article in the Financial Times recently that said Norway is considering its own bouse as well. Could be the coming thing.

When you talk about reducing their dollar holdings, that means they give the dollars that they currently have back the U.S. in exchange for whatever it is they exchange, correct?

dcraig · Mar 9, 2006

Quote from Pekelo:

Lucky me, because I never took Econ 101, so I understand the situation better than you. It matters a helluva lot, not necesserily for economic, but for political reasons.

That is an excellent (indeed critical) point. Empires have always been established and maintained by the threat and application of military power. Ultimately application of military power is a political decision. You won't get any understanding of this from Econ 101, or from most of modern economics.

From another piece with a slightly different perspective on this issue in todays Asia Times:

"Why Iran's oil bourse can't break the buck"

The F-16 dollar backing

Since 1979 the US power establishment, from Wall Street to Washington, has maintained the status of the dollar as unchallenged global reserve currency. That role, however, is not a purely economic one. Reserve-currency status is an adjunct of global power, of the US determination to dominate other nations and the global economic process. The United States didn't get reserve-currency status by a democratic vote of world central banks, nor did the British Empire in the 19th century. They fought wars for it.

For that reason, the status of the dollar as reserve currency depends on the status of the United States as the world's unchallenged military superpower. In a sense, since August 1971 the dollar is no longer backed by gold. Instead, it is backed by F-16s and Abrams battle tanks, operating in some 130 US bases around the world, defending liberty and the dollar.

http://www.atimes.com/atimes/Middle_East/HC10Ak01.html

nevadan · Mar 9, 2006

When you talk about reducing their dollar holdings, that means they give the dollars that they currently have back the U.S. in exchange for whatever it is they exchange, correct?

Decessus

The dollar hasn't been exchangeable for anything since Nixon took us of of the gold standard. Eurodollars is a euphamism for any money (US dollars) held outside of the US. What we have now is fiat currency. Simply put, our money is the full faith and credit of the government. If faith in the government fails, so does the currency.