Iran Setting Up Oil Trade Exchange In Euros

Discussion in 'Commodity Futures' started by libertad, Nov 4, 2005.

  1. mhashe

    mhashe

    There are exceptions to every rule. In this case the Commodity in question is the life-blood of modern civilization. Every other nation has to convert their currency to the USD to make crude purchases, hence regardless of wether they want to hold a falling USD or not, the USD crude peg results in an artificial demand for the USD. The peg makes USD the defacto global currency. If that peg should move to the EUR, demand for USD falls and demand for EUR increases. Therefore, yes, it does matter which currency Crude is pegged to.

    And to expound further, if there is more USD floating around that no one wants, it loses value and creates inflation at home. High inflation triggers higher interest rates. With high interest rates, companies have to pay more to do business, and it becomes more difficult to open new business therefore effecting job creation. Also with high interest rates less dividend is paid. If less dividend is paid, stocks go down. If stocks go down and you have low job creation you are creating a recipe for a prolonged moribund economy. Well by now I assume you can understand why the USD peg to crude is vitally important for the US economy and maintaining global hegemony.
     
    #11     Nov 4, 2005
  2. mhashe...

    excellent commentary.....

    Very simple and correct explanation.....
     
    #12     Nov 4, 2005
  3. Babak

    Babak

    mhashe, by the same logic high ice cream sales would cause sunshine and high temperatures.

    The USD isn't the defacto world currency because of it is used to price oil and other commodities (gold, natural gas, etc.). Rather it is used to price these commodities because it is so widely used and as you say 'the defacto' world currency.

    As far as anyone is concerned oil could be traded in cloves of garlic and it wouldn't matter. Those buying oil would simply convert from their currency of choice to garlic currency(and backwards for sellers ). As I've said, the currency used to trade in commodities doesn't matter. Only financially illiterate consipracy kooks keep this fallacy alive.

    I'll leave it at that. Others can continue this discussion.
     
    #13     Nov 4, 2005
  4. I'll take the other side of your trades any day. You go be long EUR/USD all the way down to parity. Yours, your amount.

    And yes. The current president of Iran is an idiot. I don't have a problem saying that.
     
    #14     Nov 4, 2005
  5. Nobody is going to trade in Iran. Namely, risk of confiscation and fraud is extreme, not to mention sanctions will likey bar citizens of several other countries.

    If anything, Dubai will become the central financial market for the middle east, if one come into existence at all ...
     
    #15     Nov 4, 2005
  6. mhashe

    mhashe


    I think it's you who fails to grasp the connection. For those buying the crude with your Garlic currency, it may not matter. But for you, the individual supplying the Garlic, it certainly *does* matter. The fact that everyone wants your Garlic, definitely puts you in a favorable position in the market place.
     
    #16     Nov 4, 2005
  7. Babak

    Babak

    mhashe, you fail to understand that its just a medium of transfering wealth. That's all. Cloves of garlic will be bought AND sold, not hoarded as it is a way to exchange wealth. Garlic, Yen, Euro, USD, etc. it doesn't matter.

    Do yourself a favour and take an Econ101 course or just go to the nearest university and have a 15 min chat with a prof.
     
    #17     Nov 4, 2005
  8. mhashe

    mhashe


    I hope you're not also in the "market is random" and "market is efficient" camp. I don't plan on prolonging this thread needlessly so this is my last post here.

    btw, there is a reason most economists and economics professors are poor. And it begins with the fact that most of econ101 is useless drivel. :D
     
    #18     Nov 4, 2005
  9. Ouch, here goes another war. :mad:
     
    #19     Nov 5, 2005
  10. long EUR/USD? um, no. i wouldn't long or short that. gambling.

    And yes, I'd agree the president of Iran is an idiot. However that has nothing to do with whether or not Iran will trade in Euros.


    This is so insane I don't know what to say... do i really need to break this down for you?

    ok.


    - let's say oil traded in sawdust.
    - you could only buy oil with sawdust.
    - so let's say you want some oil
    - well... that means you'd need to go get some sawdust (i think that's DEMAND according to my old econ 101 book).
    - now. we ALL know the long term value of sawdust is pretty much zero.
    - BUT. right now, you need some oil. therefore YOU NEED SOME SAWDUST. (my guess is that lumber yards would be sweeping up their shops furiously)
    - BUT SUDDENLY. We reprice oil in your cloves of garlic.

    oops. so what happens to all that sawdust????

    that's right... it's right back to worthless again.


    I can't believe i had to write that out.
     
    #20     Nov 5, 2005