Russia (China) officially dropping the dollar

[Uchi Mata]

Zankou,

I don't follow the economic logic you're making.

1) How is China the winner here? What do you know of their contract terms with the Russians? (Perhaps I missed it.)

2) How is this related to the "retarded" petrodollar recycling?

*****

The dollar is just a medium of exchange. A lot of countries hold dollars because the market for them is the largest and most liquid in the world. Some countries have pegs to the dollar, and they hold a lot of dollars in reserves to defend those pegs. Other countries have persistent trade deficits with the U.S., and so they build up significant dollar reserves because what other currency are we going to buy their goods with?

I don't see how pricing oil in dollars significantly helps the U.S. As Williams points out in the link you referenced, the benefit to the U.S. is probably so small as to be meaningless.

So countries hold a lot of dollars because it's largely in their interest to hold a lot of dollars, and it really doesn't help us in any significant way. But I also don't see how Russia hurts themselves with a contract with China. As far as I'm concerned, this news is all a lot of hot air about nothing.

The only real advantage having oil priced in dollars gives us is that we control the supply of dollars and as such we can change the price of oil in the short term by growing or shrinking the supply of dollars, but prices would adjust to the new level very quickly. It does create some demand for dollars since the contracts are dollar denominated, and to some extent it may help regulate the price of energy relative to other goods in the US economy, but thats' about it.

 

[DoomAndDarkness**]

The place that came up with the Sherdog meme 'besmirched' had a more reasonable debate about the Sterling issue. Amazing.

Actually that was William Regal. They just took it from WWE.

Literally 99% of the 'sherdog' memes you see on here are stolen from 4chan, bodybuilding.com, etc...

Even 'shoop dat' is stolen.

 

[kahiljabroni]

Seems like most people are incapable of believing that the shit will ever hit the fan in the US...I guess because it has never happened in their lifetime. Take a look at our "leaders"...take a look at how our manufacturing has eroded...take a look at our debt and tell me we wont have to reap what we have been sowing for the last 2 decades.

 

[D3THRONED]

Seems like most people are incapable of believing that the shit will ever hit the fan in the US...I guess because it has never happened in their lifetime. Take a look at our "leaders"...take a look at how our manufacturing has eroded...take a look at our debt and tell me we wont have to reap what we have been sowing for the last 2 decades.

Pretty sure if shit hits the fan in the Us, shit will hit the fan everywhere else. Enough with this doomsday bullshit.

 

[Zankou]

The only real advantage having oil priced in dollars gives us is that we control the supply of dollars and as such we can change the price of oil in the short term by growing or shrinking the supply of dollars, but prices would adjust to the new level very quickly. It does create some demand for dollars since the contracts are dollar denominated, and to some extent it may help regulate the price of energy relative to other goods in the US economy, but thats' about it.

That wouldn't change the price of oil either, because the market price floats -- it isn't set in dollars. If the US dollar crashed in value by 50% tomorrow, the price of oil would (all other things being equal, ie assuming this isn't a global economic collapse) simply be twice as high *in dollars*, but the same in euros (meaning you could settle the debt with the same euros as before). The fact that the price is denominated in dollars is irrelevant to that.

What the US can do with monetary/fiscal policy is affect the value of ANY long-term contract denominated in dollars, including oil contracts. To a degree. Sophisticated modern contracts are often stupendously complicated in how they deal with such things, with all sorts of contingencies and such. But broadly speaking, if you have a contract that says you get paid in dollars over the next 20 years, and the value of the dollar crashes, then you got fucked. Anybody promising to pay or be paid dollars in a contract is by definition exposed to the attendant currency risks.

This is where there is a slight advantage to holding dollars if you are the obligor, because that hedges you against those currency risks. You could hold euros instead, and just settle with them at an exchange rate when payment comes due, but in that scenario you'd have exposure to the dollar/euro exchange rate. But even so, the hedging is so inefficient relative to the other forces determining your overall investments and holdings that it doesn't make much difference. Also there are tons of other ways to hedge. Private investors would use derivatives, for example. Or the contract could be modified to operate like some form of derivative, with contingencies based on currency movements. Likely the contract between Russia and China has an extraordinarily complex contractual definition of the payment terms that is tied to all sorts of weird contingencies. I would be surprised if it's just a simple statement of payment in one currency, rather than some contractual 'meta-currency.'

 

[PainIsLIfe]

New video asking if China could kill the dollar. Makes some points about everything China are doing to drop the dollar. Also explains at the end why such a scenario would be devastating for the US.

Just to be clear; truthloader is about a half step above Alex Jones - their motto is Question Everything. This is their rationalpedia entry:

Truthloader[1]: A channel bringing investigative and citizen journalism together that's run by British media group ITN. But as its stated goal is also to cover things the media either ignore or don't touch, it also covers quite a good deal of conspiracy theories and fringe woo. The resulting can come across like a hipper, diluted version of RT, where legitimate news clashes with both amateur journalist fodder and features involving UFOs, Alex Jones, etc.


That doesn't make the vid unreliable, but when it acts as though something is bought and paid for in US dollar (not exactly how it works) I have to seriously question the rest of the vid, especially when it a subtle hawking of gold.

 

[Zankou]

Gold. The answer is ALWAYS gold.

Gold.

 

[DangDaGawd]

Seems like most people are incapable of believing that the shit will ever hit the fan in the US...I guess because it has never happened in their lifetime. Take a look at our "leaders"...take a look at how our manufacturing has eroded...take a look at our debt and tell me we wont have to reap what we have been sowing for the last 2 decades.

Just cut the crap and admit you're an unhappy person and fantasizing about the collapse of America is the only thing that gets you through your day.

 

[Francis Rossi]

Actually that was William Regal. They just took it from WWE.

Literally 99% of the 'sherdog' memes you see on here are stolen from 4chan, bodybuilding.com, etc...

Even 'shoop dat' is stolen.

Don't mention wrasslin. The hardcore bros will be in here to cause trouble.

 

[PainIsLIfe]

Gold. The answer is ALWAYS gold.

Gold.

Not that gold isn't a traditional hedge, but it seems that if these sites were truly looking at protecting your assets that they would be pushing silver instead considering the relatively cheap price - of course I imagine they work on commission.

 

[IDL]

Not that gold isn't a traditional hedge, but it seems that if these sites were truly looking at protecting your assets that they would be pushing silver instead considering the relatively cheap price - of course I imagine they work on commission.

Yeah most of the dollar collapse people recommend silver or gold or both. Or farmland. Anything tangible really.

Part of the reason some recommend gold I think is because it is being transferred East so there may not be much left here.

 

[Zankou]

Not that gold isn't a traditional hedge, but it seems that if these sites were truly looking at protecting your assets that they would be pushing silver instead considering the relatively cheap price - of course I imagine they work on commission.

How is silver any cheaper? Hedging 500 bucks in gold and 500 bucks in silver is the same thing. The fact that you get more weight in silver for your 500 bucks doesn't make it "cheaper" in any relevant sense. You still have the same store of value.

You could argue that silver is currently undervalued relative to gold, but that's another issue.

 

[Cubo de Sangre]

How is silver any cheaper? Hedging 500 bucks in gold and 500 bucks in silver is the same thing. The fact that you get more weight in silver for your 500 bucks doesn't make it "cheaper" in any relevant sense. You still have the same store of value.

You could argue that silver is currently undervalued relative to gold, but that's another issue.

So water isn't cheaper than gas? Price point isn't relevant? I'm missing the philosophical distinction being made.

 

[PainIsLIfe]

How is silver any cheaper? Hedging 500 bucks in gold and 500 bucks in silver is the same thing. The fact that you get more weight in silver for your 500 bucks doesn't make it "cheaper" in any relevant sense. You still have the same store of value.

You could argue that silver is currently undervalued relative to gold, but that's another issue.

In my opinion gold is over valued, but I was more thinking of the fact that silver is a lot closer to the same price it was 5 yrs ago than gold is.

Since 'we're' just using it as a hedge and both carry a risk; I'd prefer the one with less downside.

 

[Zankou]

So water isn't cheaper than gas? Price point isn't relevant? I'm missing the philosophical distinction being made.

It's financial, not philosophical. When you are talking about investment, saying that silver is a cheaper investment than gold is like saying dimes are a cheaper investment than quarters which are cheaper than dollar bills. For a given amount of money to be invested, it doesn't matter. So yes, $5000 worth of water is not cheaper than $5000 worth of gas which is not cheaper than $5000 worth of silver which is not cheaper than $5000 worth of coconuts which is not .....

I don't know what you mean by 'price point,' but gold and silver can both be bought (and are commonly bought) in almost infinitesimally small quantities.

The point about gold being currently overvalued relative to silver is a different issue ... that's a question of placing bets on the market valuation.

 

[Cubo de Sangre]

It's financial, not philosophical. When you are talking about investment, saying that silver is a cheaper investment than gold is like saying dimes are a cheaper investment than quarters which are cheaper than dollar bills. For a given amount of money to be invested, it doesn't matter. So yes, $5000 worth of water is not cheaper than $5000 worth of gas which is not cheaper than $5000 worth of silver which is not cheaper than $5000 worth of coconuts which is not .....

I don't know what you mean by 'price point,' but gold and silver can both be bought (and are commonly bought) in almost infinitesimally small quantities.

The point about gold being currently overvalued relative to silver is a different issue ... that's a question of placing bets on the market valuation.

Makes sense if we're using the term in a strictly financial sense. Price point is what you have to pay to buy something. The price point for a unit of silver is lower than it is for the unit of gold. Or let's say I'm looking at the happy hour menu and there's nothing under $15. I'd say $15 is the price point for enjoying happy hour.

 

[Zankou]

That's because you are using it for a specific purpose, not investing in it. If you want a paperweight, then I would agree a solid silver paperweight is cheaper for that purpose than a solid gold paperweight. If you are talking about investing some money, on the other hand, the concept of 'cheaper' is meaningless and confused when you are getting the same value. Quarters are not cheaper investments than dollars.

If you are considering two different items that have both an investment and use value for you, then you might consider one cheaper relative than the other relative to that specific use. But even then, if you are investing the same amount anyways, the use value is irrelevant since the investment cost will predominate. And when you invest in silver and gold, you aren't generally using it for anything. An exception might be silverware, I suppose, where you can use it AND invest in it, while goldware would be prohibitively expensive. But that's a pretty unusual example.

Another example might be if you want to wear it as a thick necklace, but can't afford a gold necklace so thick, only silver.

But again, that has nothing to do with investment. Neither is a cheaper investment, by definition.

 

[Cubo de Sangre]

That's because you are using it for a specific purpose, not investing in it. If you want a paperweight, then I would agree a solid silver paperweight is cheaper for that purpose than a solid gold paperweight. If you are talking about investing some money, on the other hand, the concept of 'cheaper' is meaningless and confused when you are getting the same value. Quarters are not cheaper investments than dollars.

If you are considering two different items that have both an investment and use value for you, then you might consider one cheaper relative than the other relative to that specific use. But even then, if you are investing the same amount anyways, the use value is irrelevant since the investment cost will predominate. And when you invest in silver and gold, you aren't generally using it for anything. An exception might be silverware, I suppose, where you can use it AND invest in it, while goldware would be prohibitively expensive. But that's a pretty unusual example.

Another example might be if you want to wear it as a thick necklace, but can't afford a gold necklace so thick, only silver.

But again, that has nothing to do with investment. Neither is a cheaper investment, by definition.

Yeah man, I get what you're saying. You asked what I meant by price point so I told you after having already agreed to what you were saying. At least that's what I thought I was doing. :icon_lol:

 

[PainIsLIfe]

Zanakou is correct and cheaper wasn't the best word to use, but I'm at a loss for a better word at the moment. It just seems a bit safer if the price drops with current prices sitting where they are.

 

[Cubo de Sangre]

Zanakou is correct and cheaper wasn't the best word to use, but I'm at a loss for a better word at the moment. It just seems a bit safer if the price drops with current prices sitting where they are.

Arbitrage?