posted on Sep, 16 2012 @ 10:29 AM
Today, most of the oil is sold in dollars. And, all countries need oil. So, most countries need to get dollars. This is a thing that benefits USA a
lot. Because while this situation persists, the dollar will continue to rise almost no matter what. There is much speculation about exactly what USA
has done to keep this status quo. The value of the dollar reflects the fact that everybody needs oil, not that everybody needs American goods.
To buy goods would be the other reason to buy dollars. I need to get a bit technical to explain this. Lets say company A makes a contract with a
Chinese company to buy some goods. They will mostly make this contract in dollars in todays world. The payment and the delivery of goods happens in
the same time. But, between the order and the delivery there is a long time. In this period of time, the dollar-value can fall or rise a great deal.
This gives USA a competitive advantage. So, why won't China just start to sell in their currency today? Because it makes a lot of sense to have the
oil-price pegged to the transaction. The world-economy is so dependent on oil that most other variables will follow or influence the oil-price in some
The alternative is something that is being brokered by BRIC now. Russia and Brazil has oil, China and India has manufacturing. So, those countries can
benefit a huge deal by eliminating the need for dollars. Some countries will manufacture stuff, and other countries will give back oil. That means
that these countries need to stockpile each others currencies. Some of this stockpile will be pure currency. But, a lot of it will also be other
stuff. Some of that currency will be government bonds that will allow the countries to borrow money at favorable terms instead of being a victim of
international loan-sharks. Other parts of the currency needed for trade will be tied into property and stocks, boosting their economy. It makes a lot
of economical sense for these countries to do this deal.
But, that emerging economies will do much of the inter-trade without dollars, is something USA will loose much money on. It might be that they won't
idly sit by. But, ti might also be that this process is too big to stop. It might also be that this backfires for all parties involved and creates
special drawings rights. If that happens, a lot of currency transactions will be more efficient. The countries who have positioned themselves
correctly in the old system will have a harder time if that happens. We live in interesting times indeed.