In what ways can a lower US dollar contribute to inflation?

[grantx]

Atilla,

“good call and you are right” . I think that cancels my bad call on USD/JPY a couple of weeks ago.

“Maybe one day we can see the Arabian kingdom and all their princes work for their Big Macs.” And convert to Catholicism.

Jacinto,

When the yield hits 15% and USD has tanked, pile in for the yield, the appreciating dollar yield value, the appreciating underlying value. Trebles all round.

Grant.

 

[SAINT]

History has shown that the way to combat a large deficit is through higher rates and lower (much lower) currency! No country has ever been in debt like the U.S. is now.

On the subject of the dollar and oil, the u.s. goal is to protect dollar hegemony. Saddam
began accepting his oil in euros and see where it got him. At the moment the u.s. has a large grip on the market as anyone who requires oil must first buy dollars to get it. Imagine the result if three of the largest producers- Iran, Russia and Venezuela stopped accepting dollars for their oil.

On the other side though, it's not a simple investment strategy. The u.s. won't sit back and watch their role as a superpower be challenged. (see deposing saddam and installing a western-friendly leader as a sign of future strategy). The u.s. didn't get where they are because of luck in resources and geographic location, and nor do they sit and let the market dictate their status. They are the market!

 

[grantx]

Saint,

Oil producers want to be paid in the strongest currency, while buyers would prefer a weakening currency. And never the twain shall meet.

If Russia, China or anyone else decides on payment in Euros, are the US going to invade? And given that Russia provides most (?) of Europe’s energy needs, where will the support come from – a war in your own (Europe’s) backyard is not good for business.

Today, Iraq invited Russian oil and gas companies to undertake operations, eg treatment, delivery an drilling, and will provide substantial incentives. So what of the US re Iraqi oil? Presumably, they will have their interests but other countries operating within Iraq will ensure competitive prices (and undermine US dominance of Iraq’s resources). It will be interesting to hear what the US says about this

Here’s a quote from the Energy Information Administration of the US’s Department of Energy:

“Russia holds the world's largest natural gas reserves, the second largest coal reserves, and the eighth largest oil reserves. Russia is also the world's largest exporter of natural gas, the second largest oil exporter and the third largest energy consumer.”

The Russians have a lot to fight for, and I can’t see Putin giving up without a fight.

An interesting topic. Some good stuff can be found via a Google search of: Russia oil currency.

Grant.

 

[Atilla]

History has shown that the way to combat a large deficit is through higher rates and lower (much lower) currency! No country has ever been in debt like the U.S. is now.

High rates and lower currency are conflicting parameters.

High interest rates reduce business investment. Better to have moderate rates than high ones. Agree with low currency helping Xports and reducing Mports. Not much difference between Bush or Mugabe other than the colour of their skins. I do agree with you. :cheesy:

On the subject of the dollar and oil, the u.s. goal is to protect dollar hegemony. Saddam
began accepting his oil in euros and see where it got him. At the moment the u.s. has a large grip on the market as anyone who requires oil must first buy dollars to get it. Imagine the result if three of the largest producers- Iran, Russia and Venezuela stopped accepting dollars for their oil.

Venuzuela and Iran already have I believe. The US is in no position to do anything other than retreat out of the swamps it has sank it's boots into. I envisage it will linger in Iraq for another 15 years or so at reduced capacity at severe cost to it's foreign and domestic policies.

On the other side though, it's not a simple investment strategy. The u.s. won't sit back and watch their role as a superpower be challenged. (see deposing saddam and installing a western-friendly leader as a sign of future strategy). The u.s. didn't get where they are because of luck in resources and geographic location, and nor do they sit and let the market dictate their status. They are the market!

You are right about the agressive economic power of big global companies. They use everything in their power, governments, force, assasinations, bribery, corruption. The list reads like a comic book but all true.

However, these global company people all over the world even abuse their own kind. That's the sad truth of it. They come up with false causes and reasons to justify their actions.

I concur with Grantx in that the US and Europe will not be able to fight the Russians or the Chineese. Russia and China will not allow the ME or central Asian resources to be dominated without a fight.

Best foot forward would be to play by market rules and let price determine allocation not force.

 

[jacinto]

Jacinto,

When the yield hits 15% and USD has tanked, pile in for the yield, the appreciating dollar yield value, the appreciating underlying value. Trebles all round.

Grant.

dunno mate, just thinking of a "caeteris paribus" kind of dynamic

edit: and we know "caeteris paribus" just dont exist, now do we :cheesy:

 

[Atilla]

dunno mate, just thinking of a "caeteris paribus" kind of dynamic

edit: and we know "caeteris paribus" just dont exist, now do we :cheesy:

Does if you are an economist... :cheesy:

 

[grantx]

Or a classicist.

Grant.

 

[jacinto]

Or a classicist.

Grant.

or a neo-classicist educated economist

 

[Atilla]

Or a classicist.

Grant.

Wrong thread but here is a joke for you on expectations theory.

An economist professor and a pupil walking along in the university campus.

The pupil sees and says look sir five pound note on the floor.

Professor replies don't be silly Tom if there was, somebody would have picked it up by now...

 

[grantx]

Jacinto,

Or a Marxist classicist economist linguist.

Atilla, an old one but still funny.

Grant.

 

[chump]

http://www.bloomberg.com/apps/news?pid=20601080&sid=a1nIJ4BJvhkk&refer=asia

it will contribute to inflation ok ,but not where people think...I'd say the Fed are going to achieve what Paulson couldn't do jawboning ...unpeg those countries whose pace of growth has basically underpinned inflation since the millenium....timber...watch out below.

and another...

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aR0qK719hWU0