Replies to post #104 on Currencies (FOREX)

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Hey Amaunet,

great to have you on board. :-)

The reality is that the strength of the U.S. dollar since 1945 rests on it being the international reserve currency. Thus it assumes the role of fiat currency for global oil transactions (ie. `petro-dollar'). The U.S. prints hundreds of billions of these fiat petro-dollars, which are then used by nation states to purchase oil/energy from OPEC producers (except Iraq, to some degree Venezuela, and perhaps Iran in the near future). These petro-dollars are then re-cycled from OPEC back into the U.S. via Treasury Bills or other dollar-denominated assets such as U.S. stocks, real estate, etc. In essence, global oil consumption provides a subsidy to the U.S. economy. #msg-994080

Indeed, and who is paying the subsidy is hardly ever mentioned. Just to consider: What happens with the oil after a country imports it? It evaporates into nothing after it's used. Sure it increases the efficiency and productivity of an economy, but it still is burned away.
So what do countries have to do to keep on importing? They have to export goods continously for the exchange of paper called USD.
That provides a neverending stream of goods and wealth into the US. Is it good for all the other countries? No, there are only 2 solutions for them.
1. Be more productive and efficient than the average country to export your way out of that misery (e.g. Germany)
2. Sell natural resources like crude, copper etc. (e.g. Canada)

If a country neither has 1 or 2, it has a problem. It will be called third world country or developing country. But it is not poor because it's people are extremely stupid, bad or don't take a shower 3 times a day, but simply because of the system. Some call it the "Modern form of slavery". If the squeeze gets too strong, the IMF or other institutions step in and relief the pain a bit to keep the system from falling down.

The USD in it's form as the "petro-dollar" is maybe the biggest and longest pyramid-scam the world has ever seen. But it will come to an end, at last when there is no crude left to trade or when supply gets too tight or when the world doesn't want to be slave anymore.
We might live long enough to see that happen or not.

Until then, good trading. Take a piece from the cake and don't let a few on top have everything.

S.