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These are going to be hard times for all of us soon. The economic system we have been accustomed too will change once the world buys oil without ha...
These are going to be hard times for all of us soon. The economic system we have been accustomed too will change once the world buys oil without having to have US dollars to do so. If an oil producing country switches away from the dollar, the dollars related to its oil trade become superfluous and overflow the exchange market. Basically the US has three ways to get rid of the overflow:
1. Withdraw the dollars from the exchange market by issuing bonds. 2. Get the dollars back into the oil trade by letting the oil prices rise on IPE and NYMEX 3. Export more than import.
Method 1 won't work: There is insufficient demand for bonds. (Short term rates are already inverted.)
Method 2 won't work: Rises in oil prices on IPE and NYMEX are more or less blocked, if other oil producing countries decide to keep oil prices stable.
Method 3 won't work: Increasing tremendously the US exports is not a feasible short term solution.
For decades, foreigners always needed more dollars. The US treasury issued extra dollars. Like I mentioned today this is where it becomes very interesting and why I think it will affect you and I here at home. There is only one way to make these dollars available abroad. Spend them around the world! The US would purchase goods, services, shares, investments etc. But the US never had to deliver anything in return. Foreigners needed these dollars to buy oil. The purchases were just inscribed on the trade balances and the amounts added to the US foreign debt. For the US, the oil trade works like a fairy credit card. Each time more dollars are needed abroad, this means "free" shopping. Nothing can be done about it.
Up to 1971, each US dollar represented a fixed amount of gold. During the Vietnam War, the US had printed and spent more money than their gold reserves allowed. President Nixon had to abandon the gold guarantee. Since then the dollar value is determined by the law of offer and demand on the exchange market. Normally, the exchange rates between currencies reflect the health of their countries' trade balances. Countries that export more than they import will see their currency rise in value, and countries that buy more than they sell will see the value of their currency decrease. This is the case for all other currencies, but not for the US dollar. For 30 years the US has imported much more than it exported, and the trend is worsening. Normally, this should make the currency fall in value, but the dollar has not fallen. How is that possible?
The same year Nixon abandoned the gold standard, the Oil Producing and Exporting Countries (OPEC) agreed they would only accept US dollars in payment for their oil. This has a major advantage for the US: all other countries would have to buy dollars first before they can obtain oil. This creates a permanent demand for dollars. Those foreign countries account for roughly 85 percent of the international oil trade. This is the part of the oil trade that takes place outside the US, between oil producing countries and foreign countries. Call it the foreign oil trade dollar cycle: dollars are bought on the exchange market and spent in oil producing countries, which spend them in countries around the world. Those countries offer their dollar surplus on the exchange market and the cycle restarts.
Oil commerce always consumes more dollars. Global consumption increases, which raises demand for the dollar and allows the US to increase its production of dollars. Since they are needed outside the US, they have to be made available abroad. This is where it becomes very interesting. There is only one way to get the new notes outside the US: spend them and do free shopping around the world. (These notes have only cost the paper and the ink.)
Of course, this creates a debt, for the foreigners could use these notes some day to buy goods, services, shares, buildings or land from the US. But since they are now needed in the always -growing money cycle for the oil trade, there is no need to worry about that. This system works like a credit card. Although the US already has too much debt, suppliers cannot refuse to deliver goods, because they need the dollars for their oil purchases. There are more sources of demand for dollars. Dollars disappear from the oil trade cycle for use in international trade between countries abroad. They form huge amounts of dollars that stay outside the US, only because of the preference of traders to use this currency.
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USD is already crashing versus gold. The USD index is not a good chart to watch since it compares to other fiat currencies. USD is crashing down wards, DOW is crashing upwards as we speak.
Listen guys there is no way other countries will see a chaotic dumping of the dollar. If that were to occur there would be global armageddon and clearly that wouldn't be in their interests either.
It aint going to happen in the near future nor with the speed predicted here. More like a drawn out event over time and orderley withdrawal from the dollar.
Having said that it doesn't take much to start a panic so i guess you should be looking at probabilities of a sudden collapse.
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The collapse is not going to happen on the Democrats watch. They're too powerful- remember these people threw over the Clintons. Sadly, they're making it worse....but they will delay the inevitable until a switch in parties occurs.
Nothing personal but that's ignorant old way of thinking. The "democrats" have been destroyed and only exist as a halloween suit. The Progressives are in charge. They are in it to win and they are not going to just sit around and give up this attack on the constitution and independence. The left / right paradigm has been shattered wake up.
Thank you so much for your support. Really it means a lot...headed out today to see if I can find a sponsor for this month or the station is going to kick me to the curb....I'm a winner though so I will find a way. Wish me luck and thank you again for the kind words. Shane
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It aint going to happen in the near future nor with the speed predicted here. More like a drawn out event over time and orderley withdrawal from the dollar.
Having said that it doesn't take much to start a panic so i guess you should be looking at probabilities of a sudden collapse.
Really it means a lot...headed out today to see if I can find a sponsor for this month or the station is going to kick me to the curb....I'm a winner though so I will find a way.
Wish me luck and thank you again for the kind words.
Shane