Iran rejects the dollar - so it begins.

[aspiringconstitutionalist]

http://www.nasdaq.com/aspxcontent/NewsStory.aspx?cpath=20071208%5cACQDJON20071208044 0DOWJONESDJONLINE000007.htm&

So begins the domino effect of global rejection of the Dollar. If Ron Paul isn't elected President this year, this country's economy will crash. Better promote Ron Paul like our entire economy depends on it.

[OptionsTrader]

Iran isn't the first nor will it be the last, but yes it will keep the Bush war machine on their case, regardless of what the NIE has to say.

By the way, you may like this Ron Paul speech on Dollar Hegemony from 2006:

Text:
http://www.house.gov/paul/congrec/congrec2006/cr021506.htm

Vid:
http://video.google.com/url?docid=-8327695139643041382&esrc=sr1&ev=v&len=2089&q=Dollar%2BHegemony&srcurl=http%3A%2F%2Fvideo.google.com%2Fvideoplay%3 Fdocid%3D-8327695139643041382&vidurl=%2Fvideoplay%3Fdocid%3D-8327695139643041382%26q%3DDollar%2BHegemony%26tota l%3D7%26start%3D0%26num%3D10%26so%3D0%26type%3Dsea rch%26plindex%3D0&usg=AL29H21zHjN2vC5v83z2xH6TeD9n8o5GqQ

A couple other links for you:

The Real Reasons Why Iran is the Next Target: The Emerging Euro-denominated International Oil Marker by William Clark 27 October 2004
http://globalresearch.ca/articles/CLA410A.html
http://en.wikipedia.org/wiki/Iranian_Oil_Bourse
http://www.petrodollarwarfare.com/

[RPinSEAZ]

The economy is going to correct itself, the government is attempting to delay the correction, thereby increasing the scope and effect of the necessary correction to come. Not good.

[OptionsTrader]

The economy is going to correct itself, the government is attempting to delay the correction, thereby increasing the scope and effect of the necessary correction to come. Not good.

And with raging inflation, the Federal Reserve is going to artificially lower rates again tomorrow. Yet again.

[OptionsTrader]

It is little wonder why the Fed has refused to continue to report M3.

Look at that parabolic inflation of the money supply that makes every American feel poorer. Waging multi-trillion dollar wars ain't free....................

http://www.nowandfutures.com/images/m3b_long_term.png
M3 consists of M2, institutional money market mutual funds, time deposits in amounts of $100,000 or more, repurchase agreement liabilities of depository institutions (in denominations of $100,000 or more) on U.S. government and federal agency securities, and Eurodollars.

For reference, and as of early 2007, M3 is about $11.5 trillion, M2 about $7.1 trillion, institutional money markets funds about $1.4 trillion, jumbo CDs about $1.7 trillion, repos about $.67 trillion ($670 billion) and estimated Eurodollars are about $.61 trillion ($610 billion).

http://www.nowandfutures.com/key_stats.html

[john_anderson_ii]

I really can't figure Mr. Bush out. I mean seriously, is he playing checkers or chess with our nation?

If we put our handy conspiracy theory hats on, and make believe G. W.'s goal is the NAU, this was a stroke of evil genius on his part. Bully Iran until they stop selling oil in dollars. Then start bullying every OPEC nation that Iran tries to rally against us until they drop the dollar also. Watch our economy circle the toilet until Americans are screaming for a stronger currency so they can buy food. In jumps the CFR with the Amero/NAU plan, which is greeted as a liberator. If this is the case, then old George is playing a masterful round of chess.

Now, if we put our conspiracy theory hats back in their tin foil boxes, Mr. Bush just becomes a plain idiot of common variety. A clueless waste of genes and oxygen who is unfortunately destroying an entire nation of once free and proud people. In this case, he's playing a game of checkers, slack jawed and poorly I might add.

I really, honestly, cannot tell with this guy. Either way the cookie crumbles, this guy should be behind bars at not at the helm of the last great superpower.

[BillyBeer]

Get ready for the Amero and NAU...Coming in 2025!

[cmc]

Guys, Iran still pegs its currency to the Dollar. This is just political posturing.

China's influence on our currency is way, way more important than the Gulf's. Check it out:
http://www.rgemonitor.com/blog/setser/

[manny229]

And with raging inflation, the Federal Reserve is going to artificially lower rates again tomorrow. Yet again.

But the guys at CNBC (and Cramer ) say a .5% cut will solve our problems and avoid any future recession. Nothing to worry about Boooyaaa :rolleyes:

[derdy]

But the guys at CNBC (and Cramer ) say a .5% cut will solve our problems and avoid any future recession. Nothing to worry about Boooyaaa :rolleyes:

lol

[Mark Rushmore]

Guys, Iran still pegs its currency to the Dollar. This is just political posturing.

Source on the peg?

[Visual]

IMO, Iran's dropping the dollar is for political not economical reasons. If it was for economic reasons, they shoulda dropped it back 20 some years ago when it was lower than it is now.

[OptionsTrader]

It isn't a debate of currency pegging it is a matter of what currency Iran accepts for oil transactions.

[RSLudlum]

read last week that there's already Gulf Cooperation Council closed door meetings with lots of talk about pegging to Jap. yen, British pound, and Euro.

[Arek]

Iran has been more interested in Japanese Yens. They've been buying them up actually...

[Laja]

It's not Bush that's carrying out these plans. He's just a programmed individual, a puppet.

[therealjjj77]

For those of you who are more money minded I have a question:

How much money is currently in our system if you do not include the money expansion of fractional reserve banking(other then that done by the federal reserve)?

Also, how much is the total amount of debt by everyone and every bank owed solely to the federal reserve?

[OptionsTrader]

For those of you who are more money minded I have a question:

How much money is currently in our system if you do not include the money expansion of fractional reserve banking(other then that done by the federal reserve)?

Also, how much is the total amount of debt by everyone and every bank owed solely to the federal reserve?

See these charts:

http://www.nowandfutures.com/key_stats.html

[McLane2007]

The Slow Death of the US Dollar

December 03, 2007 10:11 AM

"The dollar is falling" was the cry of Iran's President at a recent OPEC meeting. Many OPEC members are now publically expressing their grave concerns about the dramatic decline of the value of the U.S. dollar. In fact, some members are publically calling for depegging from the dollar, the use of other currencies in which to sell their oil. For OPEC, the issue is the substantial decrease in the value of their huge financial reserves which are denominated in U.S. currency. There is also the recognition that huge investments in foreign companies in the U.S. do not create local wealth; and with the weakening of the American dollar, the value of such investments is rapidly eroding.

While free market economists have their theories about the fall of the dollar, I would argue that the unprecedented rise in the Euro's value to the U.S. dollar is another facet of the Bush administration’s failed Iraq Policy. Bush’s unilateral and antagonistic policies may have perhaps irrecoverably debased the dollar as the world’s currency. If OPEC were to decide to accept the Euro for its oil, then American economic hegemony would be irreversibly challenged. “If one day the world’s largest oil producers demanded euros (sic) for their barrels, it would be the financial equivalent of a nuclear strike”. Bill O’ Grady, A.G. Edwards

Iraq, which has the second largest oil reserve in the world after Saudi Arabia, has been a major US concern since the start of the Bush administration, and indeed earlier. Iraq’s total reserves could be 200 billion barrels or even more, and all of it can be easily and cheaply extracted. Because the US is the world's largest consumer of oil and its appetite is growing because of its standards of consumption, it needs control over the oilfields of the Middle East.

The U.S.'s policy, however, is not premised on controlling oil for its domestic consumption. More importantly, it wants to also deny this control to the other world economic powers - the European Union, China, Japan. Driven by both strategic imperatives and reasons related to energy security, the US wants to ensure that Europe's access to oil will be routed through American-controlled pipelines.

Indeed, broadly speaking, the war in Iraq was directed as much against major powers in Europe as Iraq, a fact to which the "old Europe" of Chirac and Schroeder were quite alert. As in the case of Caspian oil, the US wants to deny Iraq’s oil to China as well, which has a quickly increasing need for imported crude. Since America perceives China as its potential rival in establishing a secure and dynamic global system under its own control, this is quite a significant reason for the Bush administration’s persistence to keep China out of the oil regions of Eurasia.

There were many motives related to the Iraqi oil justifying the Bush administration's military intervention in Iraq. But the biggest one seems to be about the currency used to trade oil: the role of preserving the dollar as the world’s reserve currency.

The United States' status as the unrivaled global superpower has rested on two unchallengeable pillars. First, the overwhelming US military superiority over all other rivals; second, the control of global economic markets with the dominant role of the US dollar as reserve currency. Reserve currencies are held by governments and institutions outside the country of issue and are used to finance international economic transactions, including trade and the payment of debts. Reserve currency status is not just an international status symbol. It brings international seignior age, benefits for ‘home’ financial institutions, relaxation of the ‘external constraint’ on macroeconomic policy, a greater role for the issuer in international institutions, and the wider geopolitical consequences of exercising currency hegemony.

However, this all changed in 1971 when president Richard Nixon took the dollar off the gold standard that has been agreed to at the Bretton Woods Conference in 1944. Thus, the dollar has been an irredeemable currency, no longer defined or measured in terms of gold. This removed the restraints on printing new dollars. The dollar has become the world’s dominant currency and the core reserve asset of central banks all over the world. It has replaced gold as an international currency. Central banks around the world have built up large reserves of dollars. Those dollars flow back into the US banking system in the form of investments in US dollar-denominated assets.

The dollar hegemony is key to the future of American global dominance, in many respects as significant if not more so, than the overwhelming military strength. And the petrodollar has been at the heart of the dollar hegemony since the early 1970s. Almost two-thirds of the world's currency reserves are kept in dollars, because oil importers pay in dollars and oil exporters keep their reserves in the currency they are paid in. The entire global oil trade is conducted in dollars. This means that everyone needs to keep dollars. This effectively provides the American economy with an interest-free loan, as these dollars can be invested back into the U.S.A. with zero currency risk. This money is not inactive; it is invested in dollar securities like US Treasury notes, stocks, mutual funds, and bonds. The US dollar's current strength is supported by OPEC’s requirement that all OPEC oil sales be denominated in dollars. This was secured by an agreement between the US administration and Saudi Arabia, the largest OPEC oil producer. This had been determined in June 1974 by Secretary of State Henry Kissinger, establishing the US-Saudi Arabian Joint Commission on Economic Cooperation. In 1975 OPEC officially agreed to sell its oil only in dollars.

America today practically borrows from the entire world without keeping reserves of any other currency. Because the dollar is the de facto global reserve currency, the US currency accounts for approximately two-thirds of all official exchange reserves. America does not have to compete with other currencies in interest rates; even at low interest rates, capital flies to the dollar. The more dollars there are circulating outside the US, the more the rest of the world has had to provide the US with goods and services in exchange for these dollars. The fact that the world uses the currency in this way means that the US is importing vast quantities of goods and services virtually for free. The US has a luxury of having its debts denominated in its own currency. This is the position the US has enjoyed for 30 years. It means that the US has been afforded a huge subsidy from everyone else in the world. The United States economy is, therefore, intimately tied to the dollar's role as reserve currency. The dominant position of the US dollar in world markets is not only a matter of pure economics, but also “deeply rooted in the geopolitical role of the United States.”

Until the advent of the Euro in late 1999 there was no potential challenge to this dollar hegemony in world trade. The coming of the Euro has threatened the dominant role of the US dollar as reserve currency. Some European leaders have even said that the Euro's main aim is to put Europe on an equal monetary footing with the United States - ending the dollar's 'hegemony,' in the word of former President Jacques Chirac of France.

In just a few years, the Euro has emerged as a real alternative to challenge the dollar. It has established itself as the second-most important currency in the world’s financial markets. Just before the introduction of the Euro, the outstanding amount of bonds and notes denominated in the legacy currencies of the Euro accounted for barely 28% of world issues, compared to 45 % for dollar-denominated bonds and notes. By mid-2007, the gap became much smaller: the share of issues in dollars had fallen to 32 %, while the Euro’s share had increased to 51 %. And even more spectacular development took place on the money market. At the end of 1998, money market instruments denominated in the Euro’s predecessor currencies accounted for just over 17% of world issues, compared to 58 % for dollar denominated instruments. By mid-2007, the share of issues in dollars had fallen to 19%, while the share of Euro issues had climbed to almost 61%. The Euro today accounts for over one quarter of the global market.

Iraq was the first OPEC country, in November 2000, to convert its reserves from dollars to Euros. This was the first time an OPEC country dared violate the dollar price rule. Iraq also converted $10 billion of its currency reserves to Euros. Since then the value of the Euro has increased, and the dollar has begun to decline. Libya has been urging for some time that oil be priced in Euros rather than dollars. Iran, Venezuela, and other countries have begun to denominate their petroleum trade in Euros. In 2002 the majority of reserve funds in Iran's central bank had been shifted to Euros. Some in Saudi Arabia have called for switching to the Euro as “a more effective punishment [than an oil embargo] for the United States, Israel’s principal source of financial and political support”. Russian President Vladimir Putin has threatened to price its oil in Euros as well. Since the oil trade is a central factor underpinning the dollar's hegemony, all these are potentially very significant threats to the strength of US economy in particular, and the US global hegemony in general.

With a significant part of the petroleum trade using the Euro instead of dollars; many countries would have to keep a part of their reserves in Euros. The dollar would then have to compete with the Euro for global capital. Not only would Europe not need dollars anymore, but Japan (which imports more than 80% of its oil from the Middle East) would have to convert most of its dollar assets to Euros. The US, too, being the world’s largest oil importer would have to get hold of Euro reserves. This would be disastrous for the American attempts at monetary management. Not only they would lose a large part of their annual subsidy of effectively free goods and services, but the switch to Euro reserves from dollar reserves would bring down the value of the US currency. Even a modest shift out of dollars, or a change in the flow, would create significant changes. If the Euro becomes a bigger reserve currency [i.e. if the US were to share its reserve currency status with the Euro] it is also likely to mean that either the US buys more Euros or the Europeans reduce their dollar holdings and buy Euros.

That is why there is a clear and definite oil (and petrodollar) connection in the recent military conflict in Iraq. This financial dimension is a power game of the highest geopolitical significance. The future of the dollar/ Euro competition to be the global reserve currency is far from a minor issue of interest only to banks or currency traders. A hidden war between the dollar and the new Euro currency for global hegemony corresponds to two different perceptions of the global order: Pax Americana, or the American Century model of global hegemony on one hand; and to balance the overwhelming dominance of the U.S. in world affairs on the other.

Consequently, the war in Iraq is a war whose purpose is much bigger than fortunes of Halliburton or Exxon: it's a long term and a strategic objective being fought to maintain America's position on top of the world.

http://www.arabisto.com/p_blogEntry.cfm?blogEntryID=923

[therealjjj77]

See these charts:

http://www.nowandfutures.com/key_stats.html

LOL I still have no idea. Those charts do not make sense to me completely. Pretend I'm chart illiterate. =P

[Kregener]

Iran is building a nuclear....no...no wait...Iran is threatening the Straits of Hormuz!

They are ripe for invasion and democracy installation...

[OptionsTrader]

Iran is building a nuclear....no...no wait...Iran is threatening the Straits of Hormuz!

They are ripe for invasion and democracy installation...

I loved Ron's column today..........

Bombed if you do, Bombed if you Don't (http://www.house.gov/paul/tst/tst2007/tst120907.htm)

The latest National Intelligence Estimate has been greeted by a mixture of relief and alarm. As I have been saying all along, Iran indeed poses no quantifiable imminent nuclear threat to us or her neighbors. It is with much alarm, however, that we see the administration continue to ratchet up the war rhetoric as if nothing has changed.

Indeed nothing has changed from the administration's perspective, as they have had this latest intelligence report for some time. Only this week has it been made known to the public. They want it both ways with Iran. On the one hand, they discredit the report entirely, despite it being one of the most comprehensive intelligence reports on the subject, with over 1,000 source notes in the document. On the other hand, when discrediting it fails, they claim that the timing of the abandonment of the weapons program, just as we were invading Iraq, means our pressure must have worked, so we must keep it up with a new round of even tougher sanctions. Russia and China are not buying this, apparently, and again we are finding ourselves on a lonely tenuous platform on the world stage.

The truth is Iran is being asked to do the logically impossible feat of proving a negative. They are being presumed guilty until proven innocent because there is no evidence with which to indict them. There is still no evidence that Iran, a signatory of the Nuclear Non-Proliferation Treaty, has ever violated the treaty's terms – and the terms clearly state that Iran is allowed to pursue nuclear energy for peaceful, civilian energy needs. The United States cannot unilaterally change the terms of the treaty, and it is unfair and unwise diplomatically to impose sanctions for no legitimate reason.

Are we to think that Iran hasn't noticed the duplicitous treatment being received by so-called nuclear threats around the globe? If they have been paying attention, and I think they have, they would see that if countries do have a nuclear weapon, they tend to be left alone, or possibly get a subsidy, but if they do not gain such a weapon then we threaten them. Why wouldn't they want to pursue a nuclear weapon if that is our current foreign policy? The fact remains, there is no evidence they actually have one, or could have one any time soon, even if they immediately resumed a weapons program.

Our badly misguided foreign policy has already driven this country's economy to the brink of bankruptcy with one war based on misinformation. It is unthinkable that despite lack of any evidence of a threat, some are still charging headstrong into yet another war in the Middle East when what we ought to be doing is coming home from Iraq, coming home from Korea, coming home from Germany and defending our own soil. We do not need to be interfering in the internal affairs of other countries and waging war when honest trade, friendship, and diplomacy are the true paths to peace and prosperity

[kjk437]

Alright, I'm just as convinced as the next guy that the dollar is in the beginning stages of free-falling, but even I think it's a bit sensationalist to believe that Iran rejecting the dollar is the beginning of the end. Iran doesn't exactly have the highest opinion of the U.S. because of our unnecessary actions in their neck of the woods, so their actions don't really alarm me at this point.

[OptionsTrader]

Alright, I'm just as convinced as the next guy that the dollar is in the beginning stages of free-falling, but even I think it's a bit sensationalist to believe that Iran rejecting the dollar is the beginning of the end. Iran doesn't exactly have the highest opinion of the U.S. because of our unnecessary actions in their neck of the woods, so their actions don't really alarm me at this point.

You're right, Iran alone is inconsequential. But more countries are losing faith in the dollar every day. If you scan Bloomberg news on a daily basis there is at least one story of a leader of a foreign country that speaks about "diversifying their reserves" aka dumping the dollar for competing currencies that are not on the glide slope to zero.

[ronpaulyourmom]

You're right, Iran alone is inconsequential. But more countries are losing faith in the dollar every day. If you scan Bloomberg news on a daily basis there is at least one story of a leader of a foreign country that speaks about "diversifying their reserves" aka dumping the dollar for competing currencies that are not on the glide slope to zero.

Are you betting on 25 or 50 tomorrow?

[Tidewise]

The Wall Street Journal had an article recently about the rampant inflation faced by those Gulf oil-exporting countries that have pegged their currencies to the dollar. Inflation is running 7-13%, causing civil unrest among the immigrant workers who come to those countries to send money back to their families.

These Gulf states will be forced to strengthen their currencies which will give more momentum to the dollar decline.

[Trigonx]

I only wish I didn't own only US Dollars :(

[Minuteman]

The problem I see is this. If Iran does choose to say peg their oil prices on the yen, it gives others the door opening they may need to do it themselves.

[LeonardK]

I only wish I didn't own only US Dollars :(

Granted. Send all of yours to me.

[therealjjj77]

As sad as this may sound, I say cheers to Iran. I'm sure they would have had no problem accepting Liberty Dollars.

It's about time a whole country boycotts our Federal Reserve. Unfortunately, anyone else who has done so has faced serious consequences. =x Well, this probably means "Bye bye Iran".

[OptionsTrader]

Are you betting on 25 or 50 tomorrow?

Wasn't speculating on the amount but as far as the stock market goes I had been building up a straddle on the SPY for the past few days and made a small profit today on increased volatility (http://i3.tinypic.com/6ouxkp0.gif). Better than losing money on a move. I was pretty sure it was going to be at least 25. Print those dollars Bernanke ... nothing cures the ills of inflation like more monetary inflation...

http://www.cboe.com/images/index_straddle.gif