Save ourselves by screwing over US$?

HelpWhereIcan

I have not given this a great deal of thought (possibly not the best thing to admit) but it occurs to me that one solution to the current economic crisis could be to join the € and be at the centre of a movement to encourage a switch from the US $ as the dominant currency in world trade and oil to the € (the petro€).

The US has a significant trade advantage from the fact that an accident of history meant oil was priced in US $ so therefore was most international trade and lending/debt. That has allowed the US to run at an immense trade deficit and still be the currency that everyone runs to in times of economic uncertainty.

Given that Iran, Venuzuela, malaysia and Indonesia have already done a certain amount of oil trade in € (much to the chagrin of the US) and there is a growing call around the world for an alternative to reliance on the US $ are we not better off being part of it than relying on the old order.

To relate to the credit crunch etc at the moment. Consider how much part of the attraction of US CDOs was that they were mortgages denominated in US$.

If the € was dominant worldwide would that lead to an increase in demand for € denominated securities (including CDOs) that would lead to an injection of cash into the euro zone credit market?

What effect would the associated collapse of the US have on us?

strange what you think about on a saturday afternoon

monkeymaster

The Euro has it's own problems on the horizon.

See http://www.globalpost.com/dispatch/ireland/090203/ireland-the-game for one example. Spain and Italy are in similar dire straights.

Any anyway it's unlikely they'd let us because our debt is too high which is one of the conditions of entry.

leveller2911

Interesting post, have to think of that for a bit.

dollar or euro????? "between a rock and a hard place" springs to mind.......

:rolleyes:

HelpWhereIcan

monkeymaster wrote: »

The Euro has it's own problems on the horizon.

See http://www.globalpost.com/dispatch/ireland/090203/ireland-the-game for one example. Spain and Italy are in similar dire straights.

Any anyway it's unlikely they'd let us because our debt is too high which is one of the conditions of entry.

I agree that the euro zone is in for a hard time ahead (I even think sometimes that the £ will ultimately strengthen against the € despite lower rates for just the reason you have given).

however, that is why I also think that it could be a case of saving ourselves at the expense of the US.

The problems in the US would be so much worse if it were not for the fact that the $ is the international currency of trade, oil and debt.

if you want to trade internationally or borrow internationally you need to do so in US $. That creates a demand for US $ that may not be in line with its underlying value (or security).

China for example has to keep buying US debt just to keep trading with the US. The yanks have a trade deficit in the trillions but people keep lending them money because the US (as well as being mass consumers) is the source of all that valuable US$ paper.

Take away the need to have US$ to trade, you take away the need to bankroll US government borrowing by buying securities. The US govnt then needs to pay a higher coupon (interest rate) plus the US then has to take a long look at running less of a deficit.

Transport that need to one for € and you have a eurozone that finds it easier (and cheaper) to bankroll the government support (and quantative easing?) that needs to be done to get us out of this.

As for whether we could join the € - if Iceland can why would we not be able to. I think people in this country often underestimate our value to the eurozone - politically and economically.

97trophy

HelpWhereIcan wrote: »

I have not given this a great deal of thought (possibly not the best thing to admit) but it occurs to me that one solution to the current economic crisis could be to join the € and be at the centre of a movement to encourage a switch from the US $ as the dominant currency in world trade and oil to the € (the petro€).

Total load of !!!!!!!!.

Your comments show a complete lack / misunderstanding of what has happened and how we got here.

Zagu

I think if one major currency collapses, the others will suffer. Much of the UK economy is underpinned with the dollar, so I think we would have major problems if it does.

HelpWhereIcan

97trophy wrote: »

Total load of !!!!!!!!.

Your comments show a complete lack / misunderstanding of what has happened and how we got here.

Please expand

(unless you are about to explain CDOs/MBSs etc and their role in the credit crunch)

bubblesmoney

power and politics are the two cheeks of the same ar*e, in the bargain morals and people get flushed down the toilet. this holds true in any country.

about the dollar decline, this video covers a lot of trends the video is about a year or more old now.

[SIZE=-1][SIZE=-1]We have about 50% of the world's wealth but only 6.3% of its population.... Our real task in the coming period is to devise a pattern of relationships which will permit us to maintain this position of disparity without positive detriment to our national security. To do so, we will have to dispense with all sentimentality and daydreaming, and our attention will have to be concentrated everywhere on our immediate national objectives. We need not deceive ourselves that we can afford today the luxury of altruism and world benefaction.... We should cease to talk about vague and unreal objectives such as human rights, the raising of the living standards, and democratization. The day is not far off when we are going to have to deal in straight power concepts. The less we are then hampered by idealistic slogans, the better."[/SIZE][/SIZE]
[SIZE=-1][SIZE=-1]George Kennan, secret U.S. State Department memo, 1948[/SIZE][/SIZE]

bubblesmoney

i think the instability in fiat currency and stocks will drive precious metals prices up for years (14y cycles for gold from what some of the graphs on the video shows) as has always happened through out history at times of upheaval.

its explained better in this video

HelpWhereIcan

bubblesmoney wrote: »

power and politics are the two cheeks of the same ar*e, in the bargain morals and people get flushed down the toilet. this holds true in any country.

about the dollar decline, this video covers a lot of trends the video is about a year or more old now.

Thanks for that. I enjoyed it right up to the last bit that started to explain the (well known) fact that gold is a good hedge to the dollar and appeared to be a sales pitch for gold.

However, it was good to see some figures put on the switch from US$ to € that has been happening and in some respects helps my argument that Britain should be part of the new world order of the € as the world's reserve currency and the undoubted economic advantages that come with it.

Should we add political weight to the switch demanded by the likes of Iran, China and Russia rather than remain silent as our US friends would expect us to?

it's all well and good those nations trying to encourage eachother to denominate in €, but what if Britain and the Eurozone actively and overtly courted them to do so?

I cannot help but think having the power to issue € securities with the same gusto as the US does could only help fund whatever measures are needed to get through the current crisis.

China expected to have near 10% growth this year. Asia outstripping the west in growth for the forseeable - now is the time to wrest economic power from the US to our own benefit. Better the € than the Yuan (not that China would be seen as politically stable enough for countries to hold foreign reserves in the Yuan for decades yet)

Btw, I do not mean that to sound quite as Che Guevara/Ahmadinejad as it sounds but I do think we have to consider our reliance on and economic loyalty to the US.

and no, I do not really want this to turn into a discussion about buying vast quantities of gold and wearing tinfoil hats to prevent the coming world where we live in squatter camps under the jackboot of our asian debtmasters. not yet anyway

epz_2

Iraq tried to get rid of the $ as their oil trading currency, worked out well for them!