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theo
Penny Hoarding Member
USA
588 Posts |
 Posted - 12/23/2009 : 14:48:17
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Although, I don't subscribe to EW's deflationary bias. They bring up some interesting points. However, I only have one question for the author; "What if the Gulfo was backed by gold?"
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Pricing Crude Oil in "Gulfos"? In Their Dreams
12/21/2009 11:30:00 AM
A bloc of oil producing countries led by Saudi Arabia, Kuwait and others (not OPEC; for some reason they left out Dubai) reported preliminary steps to establish a regional currency: The “Gulfo,” in which to trade their oil in lieu of U.S. dollars. Is this a threat to the dollar hegemony?
Some would say yes, but I would say no. In fact I would go as far to say heck no.
This is a region of the world rife with tribal mistrust, border skirmishes, oil production quota breaking, and no institutionalized or constitutional outline for common defense. As the mess in Dubai shows, the region lacks a vibrant economic base and depth to support a common currency. The countries in question lack even the framework for regional trade agreements. Even if a move towards regional defense and cooperation did emerge, it would present more of a national security problem (for the U.S.) than an economic one.
And what would support a common Arab currency -- oil? If so, how would the reserves be audited, or would they? If the world dips deeper into recession and the demand for oil slides, how would the Gulfo be supported then? Would there be intervention in more Gulfos, or perhaps dollars or euros? Too many potential problems, and the world is unwilling and unprepared to adopt a new currency when the trade-weighted balance of payments in question is in the trillions. Plus, there are some who would argue we are already at or beyond peak oil production in the Middle East, suggesting that we are already beyond "peak Gulfo." That’s all we need, another currency in perpetual decline.
Notice the timing of this proposal. It didn't come out a year ago, when the U.S. dollar was strong -- it's coming out when the global sentiment towards the buck can be summarized in one word: disdain. The euro has been the darling and the dollar the pin cushion. "Goldman Sachs Group Inc. recommended its clients buy the euro versus the dollar, forecasting the common European currency will rise to $1.55 in three months amid an anemic U.S. economic recovery." -- Dec. 16, Bloomberg.
Trade forex or energy? EWI's Currency and Energy Specialty Services give up-to-the-hour intraday updates. Details.
But the Elliott Wave Principle tells us time and again that when things are at their worst and emotions run high, that’s when the contrarian viewpoint is most often properly employed. On December 17, Standard & Poor's put more than $2 trillion worth of European covered bonds on downgrade watch. Rather than just rating all these bonds triple-A as is typically the case, now banks will have to support the potential liabilities with substantial reserves. The potential bank exposure and decrease in pricing is leaving many to question the lofty value of the euro. Whoops. Seems not all is well in euro land.
Previously I wrote a column "In Defense of the Dollar," stating that its status as the reserve currency would persist over the foreseeable future because there are simply no good alternatives. We have our problems here in U.S. to be sure, but I would rather be standing here with a fistful of dollars than over there with a handful of sand -- and I don't think I'm alone in saying that.
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keys
Penny Collector Member
383 Posts |
Posted - 12/26/2009 : 13:10:05
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"I would rather be standing here with a fistful of dollars than over there with a handful of sand"
Sand can be turned into something useful, like glass bottles or drinking glasses, dollars are a faith based currency, no faith, no currency.
The talk of a region currency has been an onn again off again thing for several years. I recall reading somewhere thast there was a desire to set up a gulf regional currency in 2006 or so.
"As the mess in Dubai shows, the region lacks a vibrant economic base and depth to support a common currency."
The mess in Dubai actually shows what happens when you borrow more than you can afford or place your bets wrong, Iceland and Ireland are learning those lessons the hard way.
Lastly, I seem to recall that many "experts" predicted that the Euro would never get off the ground, or if it did, it would fail in a year or two. My, how accurate those experts turn out to be.
I forget who said it or if I am quoting it correctly, but it goes sometrhing like this-
It is hard to convince a man he is wrong when his job depends upon him to believe and state otherwise, looks like the Elliot Wave author falls under this category.
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I change with the times-
but like silver coins found in your change
I stay the same.
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The United States of America started out as the new Republic of Rome.
Will The United States of America end up as the New Imperial Rome? |
Edited by - keys on 12/26/2009 13:15:52 |
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keys
Penny Collector Member
383 Posts |
Posted - 12/26/2009 : 13:19:31
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Great find, theo,
always glad forum members are finding such interesting things to read whether we agree with tem or not. |
I change with the times-
but like silver coins found in your change
I stay the same.
*****************
The United States of America started out as the new Republic of Rome.
Will The United States of America end up as the New Imperial Rome? |
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Pricing Crude Oil in "Gulfos"? In Their Dreams
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