Price Precious
Price of Oil and precious metals based on a currency other than the US Dollar?
Just curious,
What would happen if instead of pegging the price of oil and precious metals to the US dollar that the world market instead decided to use another currency such as the Euro? Would investors lose confidence in the US Economy? What would happen to the economy? Or do you think there would likely be no change at all.
It would be a disaster for the US; some people have even said that one of the reasons Iraq was invaded was because Saddam was starting to use Euros for Iraqi oil rather than US$.
Let me explain why I say it would eb a disaster.
You see, what makes the US$ special is that it is the reserve currency of the world, that is, central banks all over the world keep their reserves in US$. They are likely to have small holdings of the Euro, and some currencies of their major trading partners, but across teh world the US$ is what they keep.
Now they don’t just keep notes and coins, but buy US$ denomnated bonds issued by the US government.
The US government issues these bonds because the US runs a deficit in the balance of payments, that is the US buys much more goods and services from the rest of the world than it sells. This deficit has to be financed, and while selling say the Sears tower and such assets would help, the perfect solution is to issue US$ bonds.
It’s the perfect solution since the US can finance its deficit by paying some minor interest, but the key is that due to the reserve currency status, countries are likely to keep buying the bonds and financing the US deficit for the foreseeable future. The buyers and happy because they have their reserve currency. The US is happy since the deficit is financed cheaply; it’s very close to having found a money printing machine that doesn’t cause inflation.
But if tomorrow prices are quoted and trades in commodities are done in Euros, then many countries would rather use the Euro as the reserve currency. Then they wouldn’t keep buying the US$ bonds and the US would find it difficult to finance its deficit. The US$ would definitely drop, crash even. Prices of imports in the US would shoot up, and the lives of many people would be made that much harder.
Of course the devaluation of the dollar is in itself an adjusting mechanism in that as imports get more expensive, people in the US will buy less of them, and thus slowly the US would reduce the deficit.
But imagine the pain. No more cheap foreign cars, no more cheap food or t-shirts from China or Mexico, no more cheap holidays in Mexico…
Furthermore, the US would probably lose its competitive edge. The US constantly attracts the best talents from all over teh world, and these brains propel the US industries forward. But if the US$ depreciates so much, they might prefer to go elsewhere, the US could lose its competitive edge…
Fisher Price Precious Planet Jumperoo
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Authentic French LAGUIOLE – 30 pcs flatware set – RED color – in HEAVIER 25/10 stainless steel blade : 2.5 mm thick (very sturdy !) – 6x knives + 6x soup spoons + 6x dessert/coffee spoons + 6x large forks + 6x dessert/pudding forks (COMPLETE official Jean Dubost full family quality dinner table cutlery setting for 6 people – dishwasher safe – gift-wrap available! – direct from FRANCE) $475.00 This 30 pcs LAGUIOLE set is a set for 6 people and consists of : 6 knives – 6 large spoons – 6 small spoons – 6 large forks – 6 small forks. Measurements: KNIFE: length = 23 cm (9″) – weight = 60 grams | LARGE FORK: length = 21 cm (8 1/2″) – weight = 60 grams | SMALL FORK: length = 16 cm ( 6 1/2″) – weight = 25 grams | LARGE SPOON: length = 21 cm (8 1/2″) – weight = 70 grams | SMALL SPOON: length … |
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GE 50246 Smart Home Door Stop Alarm $7.00 Securing rooms from unauthorized entry couldn’t be easier. The GE 50246 Personal Security Door Stop Alarm requires no wires or complicated installation and is powered by a single nine-volt battery (not included). Simply place the pressure-sensitive Door Stop Alarm at the base of any door, and the device will emit a powerful 120-decibel alarm when the door is opened. The 50246 Door Stop Alarm is ex… |
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GE 45117 Deluxe Wireless Door Alarm $10.29 Alarm or chime sounds when door is opened4 digit keypad activates and deactivates alarmHome or away selection allows for instant or delayed alarmLow battery indicator light… |
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Bounty Hunter Gold Digger Metal Detector $120.00 The stylish Gold Digger Metal detector will detect all kinds of metal from iron relics, coins and household items to precious metals like silver and gold. For more privacy when treasure seeking, the Gold Digger comes complete with headphones and 1/8â headphone jack for immediate use. Motion all-metal mode for detecting all types of metal Requires 2 9-volt Alkaline batteries (not included)…. |
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A Price Above Rubies $9.99 The story tells of the wife of a religious scholar who goes against her husband and their inner circle by taking a job in the diamond district in a family-run jewelry store. With her newfound freedom comes an unexpected romance with a puerto rican artist. Studio: Buena Vista Home Video Release Date: 04/04/2006 Starring: Renee Zellweger Glenn Fitzgerald Run time: 116 minutes Rating: R Directo… |
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