Indeed supply and demand. Oil is, as you know, is also directly tied into both and the greenback. If I must have dollars, I’ll need more if what I sell sits at $100 vs $33…
Now, I’ll admit I don’t understand Markets.
For me, and what I want to do, that would be dangerous and costly.
No, it’s just reflecting power. Study history and you’ll see how people bitched and moaned when Kings did this type of thing in Gold. The sky is not falling.
Currency can be a weapon. And I believe the US has among the best records for knowing prudent uses of weapons.
No way should we believe a formal education gives anyone the upper hand, because formal education can be educated ignorance, and that is what is happening in this thread. I attempted to get a college to pay attention to Youngquist book, “Mineral Resources and the Destiny of Nations”, and to my horror, they thought they already knew everything they needed to know and ignored the book, like the Pope and his men refusing to look threw Galileo’s telescope and see for themselves that the moon and planets are not perfect orbs.
The economist were so unprepared to consider what oil has to do with our economy, our local newspaper editor, also rejected Youngquist’s book, until Youngquist got the Geological Association award, and then he did an editorial saying the economist got it wrong and the geologist got it right. It took me years, to get him to read the book.
The economist and professors are only men like the Pope and men of Galileo’s day. Your mind is not closed to truth by education. Good for you.
Well some economist have a bad record when it comes to knowing. Even the core bedrock principals of finance are in doubt- Mandlebrot challenges risk assumptions, and others argue against random walk.
So it’s a bit like God. Highly credible people on both sides and no damn body knows for sure.
But here, with Oil, I do believe oil is tied in (called correlation)with the US dollar but largely due to it’s massive size for affecting(as faust points out) SUPPLY and DEMAND. That doesn’t mean that the US is losing because the dollar is a multi decade lows, actually I think they are a step ahead.
Before Rome fell, it had exhausted its gold mines and began cutting its coins with cheaper metals. Our pennys had real copper in them and were worth their value in copper. Our nickle was made of nickle and worth its value in nickle. Our dimes, quarters and silver dollars were all worth their wieght in silver. Now all our coins are as worthless as our dollars bills, but so that the public doesn’t notice this change, they are amused like children, with quarters of all the states, and no mineral value.
I love history, and the sky did fall when Rome fell. The biggest economic problem in the Dark Ages was lack of gold. Everyone’s money was tied to gold, so they didn’t have enough money for growth.
Reality is not like Simi City. We can not just building without respect for mineral resources. The US was the world’s supply of many mineral based products and is now an importer. That is revenue coming in, verses revenue going out. We no longer have an industrial based economy, but a service based economy. What service can we sell the world, that will employ people, like mines and factories? Mineral based economies kept the jobs where the minerals were found, and towns grew around them. Service jobs can be done any where. They can be done by India, and Indias economy is going as long as it charges less and the US exports service jobs. The Service may be American owned, and a source of national revenus, that makes our GNP look good, but this doesn’t help the man on the street a whole lot. Unlike Simi City, we can’t just build more industry without minerals for the products, and resolve unemployment.
The US currency is not no longer backed with valuable minerals, but was backed by the GNP, which was backed by oil. It “power” to control the trading of oil, is slipping away. Rome is falling again, unless the masses get a grip and think their way out of this fast.
Okay, let us say the dollar gets pegged to the lowest currency, and all its workers become as valuable as workers in third world countries, because now they can compete with the third world for jobs. Is this a good thing?
You are correct, wikipedia says, “Fractional-reserve banking refers to the common banking practice of issuing more credit than the bank holds as reserves. Banks in modern economies typically loan their customers many times the sum of the credit reserves than they hold.”
I noticed many of the bankrupcies during the 1970 recession were the result of paying too much for buildings. That is, they owed much more for buildings than the dropped value of the building. We have had inflated property values again, and many people are living on mortage loans. Now what will happen if the price of oil doubles?
No, I disagree. I think the argument that the ‘backing’ is done by might is somewhat true. These nations that hold reserves do so willingly, or enough such that backlash has occured only under the most anarcic regimes. North Korea for example. On a default basis if North Korea is right, I’m not so sure I want to be right…
The US doesn’t control the trading, they just are the central clearing house, so to speak. It’s like a a casino where you have to change your money for the houses cash.
Now sometimes in a casino you have costs. Suppose the cost of the cards began to triple. That could hurt the house. And we know the house never loses. So what would you do?
You could bomb the card maker. You could also re-value your house chips. The very same ones the card company must accept when you pay them.
Card company “Today the price is triple what you paid yesterday.”
Casino “Oh Yeah tuff guy, today those chips you hold are worth three times less.”
Obvuiosly this is oversimplification. But it makes the point.
Yes, it is like a casino, and what is happening is the US no longer has the only casino. Bombing the card maker isn’t going to help if that does not make you the only casino. The problem isn’t the price of the cards, but no longer being the only casino.
Ah but setting up a casino is no easy task. Look at the Russians, who had one big winner and then did completely away with the game. In other words no one wants to go to a casino with a stacked deck.
Now, you may say the look at Europeans. Indeed they have good game. But for some time the Sr Managers over there have been working deals to start their own casino’s. Thats much to risky for a big money player. He might put his money in and not get it back out.
That leaves China and the USA. But the Chinese simply take their winning to the USA, so why play there?
Athena - it doesn’t matter if the price of oil doubles - it has already doubled many times. It matters how quickly it doubles. It also matters that most of the price of refined oil, which is what the end-user buys, is in the refining, and not in the raw oil.
The falling real estate market has little to do with oil. It has more to do with speculation within the market - by middle-class people, and not by Big Evil Investor Capitalist Pigs. And the bankcruptcy rate has more to do with greed by these same middle-class people than with any other factor.
Again, it would be better, I think, if instead of merely listing factoids, you actually made a case - by showing the causal connections between these premises.
Fractional reserve banking has nothing to do with this - it has been practised since the Middle Ages.
The talk of a casino was an analogy. Oil was sold only in dollars, so the US had the only casino. This is no longer true. Say, your casino chips are worth a dollar each, in your casnio, but they are no good in the Euro casino, and everyone decides to play in the Euro casino. How valuable are your chips if no one cares to use them, because everyone is playing in your competitors casino with your competitors chips? When oil is traded in Euro’s and the Yin, the US no longer has the only casino.
If I were an investor, I would pay careful attention to this explanation of the connection between oil and value of the dollar. I would take my money out of places where oil demand decreases and put it in places where the demand for oil increases, because money is to be made where the demand for oil increases. This would indicate industrial growth. Conversely, where the oil demand is decreasing, this could indicate the opposite of growth, unless the decrease in oil demand is the result of a hydrodam, or nuclear plant generating electricity. Oil is energy, and the money is where the energy is.
Athena, no offense, but you are badly mis informed on this topic. And to make it worse you jump knee deep to the most catastrophic version of your hypothetical arguments.
Sorry, I just don’t feel like discussing the issue as you seem to novice and not willing to see anything but your own point.
For what its worth, the Energy trading hub of the world is London, NYC and Houston.
Ain’t a one of them switching anytime soon to yen or Euro. Indeed both Japan and the ECB may (should for now) be against the very idea.
Hum, lately there is talk about the decrease in the value of the dollar. Compared to what? I guess compared to the value of the dollar a year ago. Is the estimated decrease in the value of of dollar, beginning to look like fact yet, or do you still believe you need to teach me about economics?
The decrease in the value of the dollar is against foreign currency. Notably the euro, lately. And it is likely to decrease even more. I have lost track of this thread. That’s harmful how?
Instead of quoting CNN, why don’t you make an argument?
I will readily admit that high energy prices hurt (in the short run) - but waht is your point again?
By the way, all those who say we’re too dependent on oil should be rejoicing. It’s high oil prices that will eventually lead us to alternatives. That we don’t use many of those alternatives points out that oil is still cheap, compared to those alternatives.
I think we are getting close to an intelligent discussion now.