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mah_magic watch carefully Joined: 08 Aug 2002 Total posts: 245 Location: Yorkshire Age: 46 Gender: Male |
 Posted: 11-01-2006 17:49 Post subject: |
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To what lengths would the US, China and Japan etc go to keep the US economy afloat?
If the UK where to join the Euro, this would obviously effect our special relationship! but how far would they go to prevent a domino effect of countries trading in oil Euro's instead of Dollars.
Perhaps by involving the UK so heavily in Iraq, they have prevented us doing anything. It has caused problems with our relationship with the rest of Europe, and the war could be a cause for the UK's increased deficit thus making it unlikley for the UK to join the Euro.
I think 'Stiched up like a kipper' is the relavent term! |
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| Jerry_B Great Old One Joined: 15 Apr 2002 Total posts: 8265 |
| Posted: 11-01-2006 18:02 Post subject: |
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It really depends on how long any country which has assets in the US thinks it's worth keeping them there. After all, there's no point staying aboard a ship if it's sinking, especially if it threatens to take others as well as yourself with it. It's basically a gamble on whether the US economy looks as if it can sustain any damage and recover. Problems may get to a certain level in which sustaining an economic interest in the US may not be at all worthwhile, especially if such an interest also starts to damage your own economy. Whilst I wouldn't be surprised if there was an effort to shore up the US economy on the part of other foreign economies, there's only so much they can do. If the US economy went into freefall and it's currency became too devalued, no-one would want to stay with it. The costs would be too great.
The US can only extend it's power in limited ways, if it doesn't want to end up bankrupting it's economy. The lesson with Iraq is that this can't be done without incurring very large costs, especially when no sizable benefits can be made from such actions. The cost of sustaining the US military infrastructure and development is already extremely expensive to US taxpayers - it's even worse of that military power is then used for any prolonged period of time and to any wide extent.
There's also not much the US could do to stop countries trading in Euros for oil. It is, after all, a free market. |
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| techybloke666 Mad for Golf
Great Old One Joined: 09 Mar 2005 Total posts: 3671 Age: 49 Gender: Male |
| Posted: 11-01-2006 18:42 Post subject: |
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| Quote: | There's also not much the US could do to stop countries trading in Euros for oil. It is, after all, a free market.
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that remains to be seen.
the US is the most powerful country on the planet , I,m sure they will not surrender their supremacy without a fight of some sort. |
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| Heckler20 The Sockpuppet of
Cthulhu's Prodigal Son Joined: 16 Jul 2004 Total posts: 4702 Location: In the Nostril of The Crawling Chaos Gender: Unknown |
| Posted: 11-01-2006 18:48 Post subject: |
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| techybloke666 wrote: |
that remains to be seen.
the US is the most powerful country on the planet , I,m sure they will not surrender their supremacy without a fight of some sort. |
'The sinews of war are infinite money' as Marcus Cicero said.
Difficult to wage war if you can't pay your troops or feed them or equip them. |
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| Mighty_Emperor Divine Wind
Joined: 18 Aug 2002 Total posts: 19943 Location: Mongo Age: 42 Gender: Male |
| Posted: 11-01-2006 18:52 Post subject: |
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| Jerry_B wrote: | | There's also not much the US could do to stop countries trading in Euros for oil. It is, after all, a free market. |
Except of course that the only country to start trading in Euros was invaded soon after - interestingly they switched back to dollars just before the invasion. Was it an attempt to buy them more time? I'd imagine the invasion sent rather a strong message to others thinking about trading in the Euro.
Now another country is proposing trading in Euros and they have the US breathing right down their neck. Now (as pointed out on the documentary) Iran is a different beast (twice the population, difficult terrain, etc.) and I'd think it'd be foolish to invade them but they could certianly make their lives a misery but that is a topic for a different thread 
Anyway the Wikipedia entry on Oil and the Euro:
| Quote: | The euro and oil
The Eurozone consumes more imported petroleum than the United States. This would mean that more euros than US dollars would flow into the OPEC nations, but oil is priced by those nations in US dollars only. There have been frequent discussions at OPEC about pricing oil in euros, which would have various effects, among them, requiring nations to hold stores of euros to buy oil, rather than the US dollars that they hold now. Venezuela under Hugo Chávez has been a vocal proponent of this scheme, despite selling most of its own oil to the United States. Another proponent was Saddam Hussein of Iraq, which holds the world's second largest oil reserves. Since 2000 Iraq had used the euro as oil export currency. In 2002, Iraq changed its US dollars into euro, a few months prior to the 2003 invasion of Iraq. If implemented by the OPEC, the changeover to the euro would be a transfer of a 'float' that presently subsidises the United States to subsidise the European Union instead. Another effect would be that the price of oil in the Eurozone would more closely follow the world price. When oil prices skyrocketed to almost 50 USD/barrel in August 2004, the oil price in euros didn't change nearly as much because of the concurrent rise in the exchange rate of the euro to the US dollar (to an exchange rate of EUR 1.00 = USD 1.33 in December 2004). Similarly, should oil prices lower significantly, together with the USD/EUR exchange rate, the oil price in the Eurozone would not fall as much. On the other hand, if the exchange rate and the oil price move in different directions, oil price changes are magnified. Pricing oil in euros would nullify this dependency of European oil prices on the USD/EUR exchange rate. |
http://en.wikipedia.org/wiki/Euro#The_euro_and_oil
and:
| Quote: | Consequences
Despite the euro's rise in value, as well as the value of other major and minor currencies, the US trade deficits continue to rise. Economic theory would suggest that a fall in the dollar and a rise in the euro should lead to an improvement in US exports and a decline in US imports, as the former becomes cheaper and the latter more expensive. However, this depends to some extent on how currency costs are passed down the supply chain. Furthermore, the declining dollar makes foreign investment in the US cheaper (although also reducing the return), so that continuing foreign investment may underpin the dollar to some extent.
The role of the dollar as the world's de facto reserve currency helps support both the dollar and the US budget deficit — but it depends on the continued willingness of foreigners to finance both. Central banks and others finance the budget by acquiring newly-issued, dollar-denominated US government bonds, which they need to acquire dollars for. If at some point foreigners become unwilling to accept new bonds at the prevailing interest rate (perhaps because the falling dollar is reducing the bonds' value too much), the dollar will fall even more — or the US will have to raise interest rates, which would reduce economic growth.
There is speculation that the strength of the euro relative to the dollar might encourage the use of the euro as an alternative reserve currency; Saddam Hussein's Iraq switched its currency reserves from dollars to euros in 2000. Moves by central banks with major reserve currency holdings such as those of India or China to switch some of their reserves from dollars to euros, or even of OPEC countries to switch the currency they trade in from dollars to euros, will further reinforce the dollar's decline. In 2004, the Bank for International Settlements reported the proportion of bank deposits held in euros rising to 20%, from 12% in 2001, and it is continuously rising. The falling dollar also raises returns for US investors from investing in foreign stocks, encouraging a switch which further depresses the dollar.
The rise in the euro should dampen Eurozone exports, but there is little sign of this happening yet. The main reason is that the currencies of Euroland's major world-wide customers are also seeing their currencies rise relative to the dollar. As the current account deficits continue to rise and the US plans no austerity measures to curb foreign imports and increase exports, the situation may cause the US dollar to lose its position as a hegemonic currency replaced by either the euro or the euro and a basket of currencies. |
http://en.wikipedia.org/wiki/Euro#Consequences |
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| Mighty_Emperor Divine Wind
Joined: 18 Aug 2002 Total posts: 19943 Location: Mongo Age: 42 Gender: Male |
| Posted: 15-01-2006 22:02 Post subject: |
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| That episode of Conspiracies is repeated on Sky One tonight at 1 am - worth catching. Nothing too new but they paint an interesting Big Picture. |
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| Jerry_B Great Old One Joined: 15 Apr 2002 Total posts: 8265 |
| Posted: 16-01-2006 01:49 Post subject: |
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| techybloke666 wrote: | that remains to be seen.
the US is the most powerful country on the planet , I,m sure they will not surrender their supremacy without a fight of some sort. |
Well, that depends. The US economy cannot sustain a continual war footing in the same way that it once did. Even if there's an invasion of Iran in order to stop the petroeuro, in the longer term it's always possible that a protracted war will cripple the US economy, which is something the petrodollar can't really remedy. The main power that the US currently has relies on it's ability to project that power - something that it won't be able to do in future if it can no longer afford to do so. |
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| coldelephant |
| Posted: 16-01-2006 09:18 Post subject: |
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| Jerry_B wrote: |
The main power that the US currently has relies on it's ability to project that power - something that it won't be able to do in future if it can no longer afford to do so. |
Especially if certain countries stop supporting the US dollar as their currency of choice for trading their 'Texas Tea' or if they stop lending the USA money.
I read somewhere that China ("Of all the gin joints in all the towns in all the world") lent the USA money.
If that were so, it would go some way to explain why the USA is reluctant to annoy China.
I remember one US government rep arguing with a China government rep on TV.
One said to the other, surely you aren't afraid of us?
No, we have no reason to be afraid of you...
Even if I'm wrong - the USA is, like everybody else it seems, many billions of dollars in debt to somebody else.
Who are we all in debt to by the way?
Is there any country in the world with no national debt? |
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| Jerry_B Great Old One Joined: 15 Apr 2002 Total posts: 8265 |
| Posted: 16-01-2006 11:30 Post subject: |
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| coldelephant wrote: | | Who are we all in debt to by the way? |
Each other.
| Quote: | | Is there any country in the world with no national debt? |
Not AFAIK. There are varieties of scale tho'. |
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| coldelephant |
| Posted: 16-01-2006 13:16 Post subject: |
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If we are all in debt to each other, and inflation results in prices for everything going up and wages going up as a consequence and prices going up with inflation as a consequence of that - surely a global economic overhaul is inevitable at some point?
Otherwise a loaf of bread will end up costing a tenner and house prices will average out at about half a million pounds or more.
That isn't sensible. |
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| Heckler20 The Sockpuppet of
Cthulhu's Prodigal Son Joined: 16 Jul 2004 Total posts: 4702 Location: In the Nostril of The Crawling Chaos Gender: Unknown |
| Posted: 16-01-2006 13:19 Post subject: |
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| coldelephant wrote: |
Otherwise a loaf of bread will end up costing a tenner and house prices will average out at about half a million pounds or more.
That isn't sensible. |
Well the latter part of that is not far off.....  |
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| lupinwick Joined: 24 Sep 2005 Total posts: 1883 |
| Posted: 16-01-2006 13:57 Post subject: |
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| Quote: | I read somewhere that China ("Of all the gin joints in all the towns in all the world") lent the USA money.
If that were so, it would go some way to explain why the USA is reluctant to annoy China. |
True, the numbers are vague but between 20 and 40% of the US debt is held elsewhere.
For those interested - see the Debt Clock for the current extrapolated figure the US debt 
Debt Clock
Although calling in the debt could be problematic as the US can't pay. |
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| Electric_Monk I'm the Easter Platypus! Joined: 12 Sep 2001 Total posts: 966 Location: Santa Clara, CA, USA Age: 32 Gender: Male |
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| Bertie_Akbar Yeti Joined: 15 Aug 2005 Total posts: 80 Gender: Unknown |
| Posted: 16-01-2006 14:30 Post subject: |
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| coldelephant wrote: | If we are all in debt to each other, and inflation results in prices for everything going up and wages going up as a consequence and prices going up with inflation as a consequence of that - surely a global economic overhaul is inevitable at some point?
Otherwise a loaf of bread will end up costing a tenner and house prices will average out at about half a million pounds or more.
That isn't sensible. |
Money = Confidence
If we are all very confident we'll be alright, so cheer up and don't worry, otherwise it'll all end in tears. |
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| Jerry_B Great Old One Joined: 15 Apr 2002 Total posts: 8265 |
| Posted: 16-01-2006 15:03 Post subject: |
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| coldelephant wrote: | If we are all in debt to each other, and inflation results in prices for everything going up and wages going up as a consequence and prices going up with inflation as a consequence of that - surely a global economic overhaul is inevitable at some point?
Otherwise a loaf of bread will end up costing a tenner and house prices will average out at about half a million pounds or more.
That isn't sensible. |
That depends on whether you mean that a tenner will have the same value now as it will in future but that any given product will rise in value. That's not how it tends to work And inflationary price rises aren't pegged to the value of any commodity but to the value and amount of any given currency that's in circulation. If a currency becomes too devalued (i.e. via inflation), you need more of it to buy any given commodity. |
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