Strong USD is a bigger problem than high oil prices

The high US dollar is hurting oil buyers and users all over the world. A stronger local currency is what the likes of India really need right now to help offset higher oil prices. At the current rate, demand destruction is already starting to take place. Can the producing nations and consuming nations do something to weaken the mighty US dollar?

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2 hours ago, Andrew Sun said:

The high US dollar is hurting oil buyers and users all over the world. A stronger local currency is what the likes of India really need right now to help offset higher oil prices. At the current rate, demand destruction is already starting to take place. Can the producing nations and consuming nations do something to weaken the mighty US dollar?

The obvious answer is to stop using the $. There is growing discontent that America is abusing its position of the world’s trading currency to impose unilateral sanctions so it is something on many countries minds. I believe India is looking at using rupees to buy Iranian oil and China, Russia, U.K., France and Germany are looking at other trading methods to bypass using $ and therefore American banks. We may not be far away from a step change in how world trade in oil is conducted as necessity forces countries into alternative methods of trading.

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for a starter, they may stop borrowing long USD expecting its interest rate to keep falling. So their currency won't get hammered by 50% as Argentina's or Turkey's...

USD index barely moved (mostly Euro in it) so issue is not just dollars. Gold hasn't plummeted either.

But yes, demand from emerging economies may suffer. All eyes on China...

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I think this is the gist of the issue. The Fed has to keep hiking interest rate to reduce the over heating of the our economy. The hot money will keep on flowing into the US. Why not put your money into DOW 30 and the FAANG stocks when you can make 10% every month right? The higher yielding bond rate from the Fed is an added bonus. This cycle just keeps on rolling. Ever higher Fed rates bring in ever more money which requires ever higher rates. The emerging markets will just keeps on failing and their currencies keeps on tanking.

Not trading with the dollar may work to an extent between the Chinese and the Russians or between the Chinese and other oil producers. But I don't see how that's practical with others. What does India produces that the Iranians or the Russians desperately need, a side from the US dollars?

How much time do you think is left before this cycle breaks down somewhere to cause the next major finical crisis?

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(edited)

3 hours ago, Andrew Sun said:

Not trading with the dollar may work to an extent between the Chinese and the Russians or between the Chinese and other oil producers. But I don't see how that's practical with others. What does India produces that the Iranians or the Russians desperately need, a side from the US dollars?

I suggested not using the $ as the solution to expand on that you could use a different global currency eg Euro or gold or even Bitcoin,  I was not suggesting everyone trade in their own currency. The fact countries are starting to bypass the $ using their own currencies is just possibly the very beginning of a road that may lead to a new global trading currency Bitcoin is probably a bit fanciful but on the gold option Russia, China and Turkey have been accumulating gold for a while which some goldbugs are translating as a plan to use it for trade in the future.  The Euro could be substituted but that would eventually have the same problems as the $.

Edited by jaycee

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The dollar is stable.  Trying to use another currency would create a global market without any peg.  Using China for example doesn't make sense due to constant manipulation of its currency to sustain it's economy.  In addition they don't produce much oil so the manipulation of their currency would have a terrible affect on oil prices, investment and development. When you don't have any skin in the game the price of oil doesn't matter to their economy

 

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(edited)

America is weak. The supposed "strong economy" propaganda will soon start to unravel. AS it does, and as the inevitable fall of the american dollar occurs, the rest of the economies will benefit. This will help push oil to 100 and beyond, which will subsequently increase the pace of transitioning into a green economy.. Also a deteriorating dollar value will force scared and unconfident investors into gold. So rising oil and rising gold.   Rising oil will effect the first world more drastically as gas prices will sky rocket, and since we already have so much debt,.......with rising rates, a failed bull market, fuel price increases and general inflation,well darn, we are screwed.  China, India, Russia, the euro, and many others will happily use their own currencies.

Edited by Danial Gable

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On 10/6/2018 at 4:10 AM, jaycee said:

The obvious answer is to stop using the $. There is growing discontent that America is abusing its position of the world’s trading currency to impose unilateral sanctions so it is something on many countries minds. I believe India is looking at using rupees to buy Iranian oil and China, Russia, U.K., France and Germany are looking at other trading methods to bypass using $ and therefore American banks. We may not be far away from a step change in how world trade in oil is conducted as necessity forces countries into alternative methods of trading.

If they can pull it off, this would be good for America too.  Decades of deficit spending and inflation - all fueled by the petrodollar - have gutted our industry while the bankers got rich.  We lost real skills, real production capability, and our middle class.  Take the petrodollar away; we're better off without it. 

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