Originally posted by dr_strangecraft
It comes from a fundamental misunderstanding of how securities markets operate.
The currency of record in a commodities auction is nothing more than a footnote. All foreigners will have to set up an account with a local bank, and
that bank will convert their money into the national currency so the person can buy or sell commodities.
You are underestimating the value of what currency oil contracts are quoted in. Oil sir, is the most important component of our energy mix, without
it, the industrial revolution would not have transpired (coal was not enough) to the extent that it did and we would probably not be here having this
discussion right now.
Lets look at a major Russian oil importer, the European union; an importer increasingly dependent on Russian oil as the north sea is in freefall
production decline leaving even the uk in need of importing oil.
Now, if I was the EU, and I needed gas, and Russia told me it will only accept payment in rubles, well, I have to start selling my goods and services
to them and ask for payment in rubles. Once I get those rubles, I'm NOT going to turn around and convert them into euros because well, I need to buy
gas and my economy would collapse without this cornerstone of energy. Effectively, a new but not so new concept comes in existence, the petroruble.
The united states, which has no oil to sell and imports most of it's needs and whos dollar is no longer needed on every oil trade; and only forced
the hand of oil exporting nations after we went off the gold standard in the 70's, will see a drop in demand for us dollars, effectively, importing
back the inflation that Russian oil carried.
Importing back that inflation being a key difference due to the fact that the us economy had much stronger fundamentals and has been a reserve
currency since brenton woods (then being on the gold, not oil standard), managed to retain this status.
I don't believe the ruble will become a reserve currency due to the half baked free market policies of Putin but it will go up in value. It might not
crush the dollar but will take it's respective value away from the dollar never the less.
Then again, there is a boatload of debt underwriting the dollar so anything can happen...
You sir have confused generic securities markets with money markets.