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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (70595)	10/28/2007 1:51:18 PM
From: RealMuLan	Read Replies (1) \| Respond to of 116555

>>Discussion of baskets is just a political ploy<< I guess we will see. Personally, I think it is much more than just a political ploy.

To: mishedlo who wrote (70595)	10/28/2007 8:18:26 PM
From: JohnG	Read Replies (2) \| Respond to of 116555

"Pricing units however, are irrelevant" But not irrelevant to the US. If oil were SUDDENLY no longer priced in dollars, the circulation of dollars in the world economy would be reduced significantly. The excess supply of dollars would increase -- read this as dollars looking for a home. The desirability to hold dollars as a reserve currency would diminish. All of this would RAPIDLY weaken the value of the dollar against other currencies. This could well lead to A NEGATIVE SPIRAL in the value of the dollar and an inrush of foreign buyers for tangible US assets. Putting this imense quantity of dollars outside of the US was lots of fun as long as we were receiving tangible goods for paper dollars and dollar credits. It will be excruciateingly painful and inflationary if they all come flying home looking for tangible US assets.

To: mishedlo who wrote (70595)	10/28/2007 8:41:48 PM
From: Chispas	Read Replies (3) \| Respond to of 116555

"..what is happening on the global financial stage today is frightening.." billcara.com

To: mishedlo who wrote (70595)	10/29/2007 12:17:47 AM
From: sea_biscuit	Read Replies (1) \| Respond to of 116555

If oil is not entirely priced in dollars, then countries like India no longer have to maintain large reserves of dollars, and would rather use them to buy something when the greenback still has some value. And all those "homecoming" USDs mean one more thing here - inflation.

To: mishedlo who wrote (70595)	10/29/2007 11:05:10 AM
From: Incitatus	Respond to of 116555

An example. The Nintendo Wii is priced at $250. It's been kept at that price for a year now in the US. The price is set using US dollars. If the price had been set using another currency, the price to US consumers would have fluctuated. Of course, the manufacturer could have tried to keep the price flat in the US by moving the price up and down in the other currency (whatever amount will be needed to hold $250 after conversion to US dollars). But if the widget is priced in another currency, why bother aiming for stability in US dollars? If OPEC switches to another currency or a basket of currency, won't it give less attention to keeping the price of oil at a certain level in US dollars? Not that OPEC has absolute control over oil the way Nintendo has over the Wii, but doesn't it have some influence?

To: mishedlo who wrote (70595)	10/30/2007 12:36:28 AM
From: sea_biscuit	Respond to of 116555

Given that currency conversions are instantaneous, 24 hours a day, 7 days a week, as a practical matter oil is already priced in any currency anyone wants. OK, so oil is at approximately Rs. 3650 per barrel now ($93 * Rs 39.20/USD). But if the exchange rate changes to Rs. 43 per USD and even if the dollar price of oil does not change, the price of oil in rupees will go to nearly Rs. 4000. So, it costs more rupees to buy a barrel of oil even when the dollar price of oil has not gone up. This is how a former official of the Reserve Bank of India (the central bank) explained to me why India has to maintain enormous reserves in the currency in which oil is priced, or else face uncertainties on the currency exchange front.