A currency basket for Oil

[Tulpen]

"Iranian Oil Minister Says OPEC Will Study Effect of Weak Dollar, Possible Currency Basket "

http://biz.yahoo.com/ap/071118/opec.html

Having a currency basket for oil seems to me a positive development for the world economy.

Opinions?

[GRG55]

"Iranian Oil Minister Says OPEC Will Study Effect of Weak Dollar, Possible Currency Basket "

http://biz.yahoo.com/ap/071118/opec.html

Having a currency basket for oil seems to me a positive development for the world economy.

Opinions?

So if I want to buy a barrel of the stuff I have to collect together a few $, some Euros, a Pound or two, maybe some Yen, and for good measure let's throw in some Swiss Francs (the Arabs love spending time in Geneva)?

This was just a way for the Saudi's to get the Iranians and Chavez to shut-up and sit down.

[metalman]

So if I want to buy a barrel of the stuff I have to collect together a few $, some Euros, a Pound or two, maybe some Yen, and for good measure let's throw in some Swiss Francs (the Arabs love spending time in Geneva)?

This was just a way for the Saudi's to get the Iranians and Chavez to shut-up and sit down.

zactly. remember when china announced they were switching to a basket of currencies and off the dollar peg? that got CONgress of the trail for a few months... until they figured out the composition of the basket: something like 9 parts dollars and 1 part everything else.

that said, i watched this al qaeda propaganda youtube a while back and one of the recommendations was for muslim nations to "drop the dollar and switch to a basket of currencies." went looking for it. couldn't find it but dug up this beauty!

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that situation might keep a person up at night.

[GRG55]

...that situation might keep a person up at night.

It should.

Although it has an odious government, one that for a time after the revolution was systematically liquidating its own intellectuals, Iran is (by the standards of this region) a stable nation. The Persians are an ancient civilization with a long and proud history.

Pakistan is none of these. And while Cheney frets about Iran's nuclear program, guess who already has the "Islamic bomb".

I am overweight precious metals and oil, and refuse to sell either. Pakistan is one reason why.

[Tulpen]

So if I want to buy a barrel of the stuff I have to collect together a few $, some Euros, a Pound or two, maybe some Yen, and for good measure let's throw in some Swiss Francs (the Arabs love spending time in Geneva)?
Not really, you could buy and sell one unit of the basket in any currency you want.
Such financial instruments are not new.

I think that eventually all commodity markets will use such instruments it makes a lot of sense.

[GRG55]

Not really, you could buy and sell one unit of the basket in any currency you want.
Such financial instruments are not new.

I think that eventually all commodity markets will use such instruments it makes a lot of sense.

I didn't mean to sound too flippant. As EJ has pointed out for some time, the world is shifting slowly to some sort of new monetary system that will feature a move away from the US$ as the reserve currency, or at least the exclusive reserve currency. So the idea of a basket for commodity trade wouldn't seem farfetched. If I understand your point the "unit" would be some sort of synthetic instrument at prescribed exchange rate against a number of currencies, perhaps in fixed ratio?

In recognition of its origins as a means to facilitate the commodities trade, and honoring its role in finally "flushing" the US$, perhaps it should be called the "commode"?

[metalman]

It should.

Although it has an odious government, one that for a time after the revolution was systematically liquidating its own intellectuals, Iran is (by the standards of this region) a stable nation. The Persians are an ancient civilization with a long and proud history.

Pakistan is none of these. And while Cheney frets about Iran's nuclear program, guess who already has the "Islamic bomb".

I am overweight precious metals and oil, and refuse to sell either. Pakistan is one reason why.

let's do a worst case scenario. what if musharraf looses control and militants gain control of pakistani nukes. what will the new militant government demand?

- all foreign troops off "muslim lands" including US out of saudi arabia and iraq
- minimally a palestinian state (or worse for israel?)

that's just for starters.

meanwhile looks like this cat's out of the bag...

OPEC's lost sway over oil prices (http://www.csmonitor.com/2007/1119/p01s01-wogn.html)

This weekend's summit focused mostly on poor nations, climate change, and the euro vs. the dollar.

Cairo - A rare meeting of the heads of state of the Organization of Petroleum Exporting Countries (OPEC) in Saudi Arabia this weekend was predictably focused on prices. But the price most often discussed wasn't the cost of oil, but rather the plummeting US dollar.

As oil hovers near $100 a barrel, it's causing global jitters. Some economists worry that price, which depending on whose math you use is either near or above an inflation-adjusted record, could push many world economies into recession.

But the organization that was created in 1960 to stabilize prices, today wields less clout than it once did over the cost of crude. The 13-nation cartel once controlled prices often by just talking about pumping more or less oil. But now its leaders say booming world demand – largely from India and China – and concern over a possible US attack on Iran are driving prices.

"OPEC is still a major force, but it's certainly far less influential that it was in the 70s or 80s," says Mustafa Alani, at the Gulf Research Center in Dubai, United Arab Emirates. "What we saw at this conference is that the leaders of OPEC were giving assurances that they'll do all they can to maintain the stability of the oil supply. But can they do it? We don't know."

[metalman]

I didn't mean to sound too flippant. As EJ has pointed out for some time, the world is shifting slowly to some sort of new monetary system that will feature a move away from the US$ as the reserve currency, or at least the exclusive reserve currency. So the idea of a basket for commodity trade wouldn't seem farfetched. If I understand your point the "unit" would be some sort of synthetic instrument at prescribed exchange rate against a number of currencies, perhaps in fixed ratio?

In recognition of its origins as a means to facilitate the commodities trade, and honoring its role in finally "flushing" the US$, perhaps it should be called the "commode"?

i can hardly wait to exchange my bonars for commodes. all this scatological money talk.

a move to a synthetic currency based on a basket of commodities is an eventuality. question is: when and how fast. the idea of a global currency always gets the black helicopter crowd going. but as long as it's not based on one nation's currency and can't be manipulated by governments it's the waaaay to go! we used to have a global currency. it was called gold.

[rj1]

the idea of a global currency always gets the black helicopter crowd going. but as long as it's not based on one nation's currency and can't be manipulated by governments it's the waaaay to go!

Now honestly, how can we have the idea of a global currency that in any scenario would not be manipulated by governments? That's a pipe dream that'll never occur. Americans won't give up financial control to the French and vice versa. Ditto for most other "proud" countries.

[GRG55]

Now honestly, how can we have the idea of a global currency that in any scenario would not be manipulated by governments? That's a pipe dream that'll never occur. Americans won't give up financial control to the French and vice versa. Ditto for most other "proud" countries.

Maybe the Euro holds some lessons? Here we have a currency that is increasingly difficult for any individual government in the Eurozone to manipulate.

[c1ue]

Maybe the Euro holds some lessons? Here we have a currency that is increasingly difficult for any individual government in the Eurozone to manipulate.

GRG,

It is true the Euro is harder to manipulate due to the varying economic tendencies of the EU members.

However, one negative is that in turn the Euro is harder to protect against other country's manipulation.

For example the current situation: it is clear that the dollar devaluation is killing the EU's trade competitiveness.

The warring tendencies within the EU means that the German desire to fix this is put on hold by the weaker members of the EU who need a strong euro to buy ex-EU goods.

Think UN.

[GRG55]

GRG,

It is true the Euro is harder to manipulate due to the varying economic tendencies of the EU members.

However, one negative is that in turn the Euro is harder to protect against other country's manipulation.

For example the current situation: it is clear that the dollar devaluation is killing the EU's trade competitiveness.


I don't understand why the Euro is regarded as having any particular disadvantage in this respect. The trade competitiveness issue is actively being debated in public in other jurisdictions like Canada, where its currency has risen more than 20% against the US $ year-to-date.

The "Anglo" currencies plus the Euro have taken the brunt of US$ adjustment so far, but that was never a sustainable situation, as we are now witnessing with $-adjustment increasingly venting through the Swiss Franc and Yen exchange rates. Next the pegged currencies of the oil exporters, and the lead-painted toy exporters, will also have to give way, unless the US soon changes its policy to support the US$. That debate is also active judging by recurring news reports out of the Middle East and Beijing.

The warring tendencies within the EU means that the German desire to fix this is put on hold by the weaker members of the EU who need a strong euro to buy ex-EU goods.

Think UN.

Interesting perspective. I've been of the view that the German's historical fear of hyper-inflation, and Bundesbank's discipline is the reason that ECB administered interest rates have not been cut, thus keeping a bid under the Euro.

[jk]

the weaker members of the eu want a weaker euro, not a stronger one. they don't mind the inflation as much as the germans do, and they want their exports to be more competitive.