Casey Research: Oil’s role in $ as reserve currency breaking down MUST READ

[Paul Or Nothing II]

Prices can adjust if the currency is also allowed to adjust but since China keeps their currency at an artificially low level prices are not allowed to adjust.

Under normal trade, if the US is running a trade deficit with a country, we are buying a lot of goods from them and using dollars to make the purchases. The other country typically has no use for the dollars they take in and sell them for their own currency which increases the demand for their own and increases the supply of dollars. This causes the value of their currency to rise against the dollar. As their currency rises against the dollar, the prices we in the US would pay for goods from them rises due to the changes in the exchange rate. China is keeping their dollars (by buying US dollar denominated things like US Treasury notes) as dollars and not converting them so the exchange rate does not change as it would if there was a free market. This keeps prices artificially low for US buyers of Chinese goods and keeps prices of our exports to them artificially high. This is an indirect government subsidy to its producers in China and distorts the market.

If we are importing more goods then we aren't producing as much at home as we would. If we are exporting less we are producing less to export. Both of these mean fewer jobs here and more jobs in the other country. Labor is effectively exported.

It is true that we get lower priced goods but the exchange is that we have fewer people working. Now if this "frees up labor to do other things" then we should have lots of jobs being created today since we have had so much labor freed up (as in our high unemployment rate).

What a poor Keynesian argument!

Oh, pray tell me, what happens as we spend LESS money on buying goods!
Hint - we end up with more money to consume & invest ELSEWHERE, which will go into the LOCAL economy & it will create more jobs in LOCAL-CONSUMPTION; as I've said before, higher currency means less export-jobs but more local-consumption jobs & lower currency means more export-jobs but less local-consumption jobs!

It is this Keynesian stupidity that pervades the economic sphere that people are made to believe that government devaluing their currency is "good for jobs" & all it leads to is people losing their purchasing-power & a race to the bottom between all countries trying to see who can devalue the fastest - CURRENCY WARS!

It's because Keynesians are so incapable of understanding the concept of "opportunity cost" that they also support massive government spending, not realizing that government spending more simply means less capital & labor available to the private sector (productive sector to be precise)

[Zippyjuan]

The money that used to go to local producers of these goods when they were made here is now going to China or other countries instead. That means that there is less money to spend in the local economy- not the same amount. Then you also have the people who lost their jobs no longer getting paid and they are earning less (or no money) and also have less to spend locally. It also puts downward pressure on wages.
If I buy a widget locally, the seller of that widget can hire somebody to make more. He can also take that money to the grocery store and buy bread and go to the barber for a haircut and the hardware store for a hammer- they have more demand and can hire more workers too. If I buy that widget from China- that money is gone and he is not going to the grocery store, barber, or hardware store which means they are selling fewer products and need less workers too. It multiplies through the economy.

Yes, the imported things mean lower prices but in exchange we as a whole have less money overall to spend on buying them. China is now holding over $1 trillion in US dollars which is not being spent in the local US economy creating jobs here.

[Aurave]

----Paul's energy policy will be focused on "free market" energy solutions. He says federal "regulations, corporate subsidies, and excessive taxation have distorted the market and resulted in government bureaucrats picking winners and losers," and have increased energy prices. He would repeal laws and regulations that impede energy production and would lower taxes on energy production.

Paul has said that reducing U.S. dependence on foreign oil will simplify U.S. foreign policy and improve the "anemic economy at home." He opposes energy subsidies, which he views as a government handout, but he supports tax credits.----

exporting our oil does not reduce our dependence on foreign oil and does not improve our anemic economy at home .

dollars just move around , because of the velocity/mult of money jobs are created as the money is spent , cheaper oil / energy prices would put more money in the pockets of american consumers thus helping our " anemic economy ".

Sounds like a plan. Lets outlaw exporting refined petroleum products in the US, because doing so would help "reduce our dependence on foreign oil". That would work wonders, refineries in the US would suddenly have an incredibly hard time realizing any profit at current price levels because less than half of a barrel of crude can be processed into gasoline even with significant downstream reprocessing. And being that the US is one of only two countries in the entire world where the majority of its oil usage is in motor gasoline, well it's not hard to see what will happen.

Refineries in the US wouldn't be able to sell all the refined products that the US doesn't demand or need. These products would flood inventories, unable to respond to pricing information and leave to places outside the US where they desperately need these products. Once inventories were nearing capacity these products would be flooded into the US domestic market( if refineries even stay open long enough to reach that point), those holding inventory would want to accept nearly ANY price to realize SOME profit over having useless refined products sitting in their inventories. The prices of non motor gasoline cracks would plummet everywhere in the US, prompting more demand for these products.

At the same time, the price charged for motor gasoline by domestic refiners in the US would have to rise considerably, being that the profitability of half of each barrel refined just dropped to near nothing. A barrel of oil is still a barrel of oil, and while the US is one of the largest producers of crude in the world it also imports about half of its crude demand from foreign sources, and this foreign crude is competing on a world market. And being that the excess US refined products are now taken off the international market, the price of crude oil has risen as other countries increase their refining capacity for their own domestic needs that the US was previously filling, subsequently increasing demand and the price for crude.

With the price of gasoline rising to $10 per gallon in the US and paralyzing the economy, foreign refineries respond to price changes and start sending their motor gasoline, which the US is uniquely dependent on, to the US and reap the profits. In the meantime those few domestic refineries that were left are slowing shutting down, as they just can't compete, half of every barrel they refine is stuck in a domestic market that does not demand its products.

Congrats, ignorant emotionally moved fool. You helped reduce the dependency on foreign oil in the US by outlawing exports which leads to more dependency on foreign oil! What's the next move? It's pretty obvious...those foreign refiners are unfair. Democrats and Republicans in congress hold up charts showing how as prices rise, more and more gasoline from foreign sources is imported into the US. So idiot in chief ILUVRP, channeling the emotional pains of the entire country, holding seances with Abraham Lincoln and the founding fathers so as to be able to declare he knows what they would want to do; declares plans for more intervention to "help" the working folk who are being gouged by the foreign energy companies by placing a price ceiling on gasoline at the pump. Hooray for ILUVRP! Gasoline can never rise above $6! Foreign companies won't be gouging the American people! Of course the domestic refineries that are left will cry foul, they can't make possibly make any money with gasoline at $6 a gallon. So in order to keep America energy independent, ILUVRP provides subsidies to all the remaining oil refineries to make up for the lost revenue from incredibly low prices on all non gasoline cracks. Not only did ILUVRP make America energy independent, he stopped foreign companies from gouging the working man, and saved jobs by subsidizing the domestic refinery industry, which employs hundreds of thousands of workers!

[GreenBulldog]

80% of American voters couldn't get through that article, and if they did would have no idea what they just read. Tweeted and FBed.

...Which is why 20% makes 80% of the money (the 80-20 rule).

[enter`name`here]

Prices can adjust if the currency is also allowed to adjust but since China keeps their currency at an artificially low level prices are not allowed to adjust.

I am sorry but I do not buy this. In the long run can entrepreneurs not form expectations about what the future exchange rate will be and make pricing decisions based on this? If they do not doesn't this imply that the are not maximizing profit i.e. the economy is not in equilibrium? Consider this as analogous to the fisher effect. In the short run unexpected inflation benefits borrowers at the expense of lenders, but in the long run as inflation expectations become ingrained, interest rates rise so as to remove the gains to borrowers due to inflation.

[ILUVRP]

pon2 1/2 , i won't even waste my time saying anything about what you write , i put down what ron paul said , you don't even understand what he was talking about , you must keep taking your pills.

oh btw , were you kicked off the limpball forum for being too much of a neocon ??

[presence]

The world doesn't need to revolve around US dollars anymore and the longer the US tries to pretend that the dollar is still and will remain dominant, the more often its international actions will backfire.

That is the bottom line. Cutting off our nose to spite our face.

The only possible brilliance in the plan unfolding before us lies in the likelihood that these actions by our "leaders" represent a purposeful destruction of the US economy by puppets acting on behalf of globalists, with world government interests.

presence

[presence]

80% of American voters couldn't get through that article, and if they did would have no idea what they just read. Tweeted and FBed.

This is why the founding fathers created a republic not a democracy.

The masses are the untruth.
The old republic is still acting like a soldier to uphold fading beliefs of a bygone era.
We are the mavens of the coming metamorphosis.
A meniscus tear will soon unleash the cascade of the new republic.

just watch (and get you're ducks in a row),

presence

[Paul Or Nothing II]

The money that used to go to local producers of these goods when they were made here is now going to China or other countries instead. That means that there is less money to spend in the local economy- not the same amount. Then you also have the people who lost their jobs no longer getting paid and they are earning less (or no money) and also have less to spend locally. It also puts downward pressure on wages.
If I buy a widget locally, the seller of that widget can hire somebody to make more. He can also take that money to the grocery store and buy bread and go to the barber for a haircut and the hardware store for a hammer- they have more demand and can hire more workers too. If I buy that widget from China- that money is gone and he is not going to the grocery store, barber, or hardware store which means they are selling fewer products and need less workers too. It multiplies through the economy.

Yes, the imported things mean lower prices but in exchange we as a whole have less money overall to spend on buying them. China is now holding over $1 trillion in US dollars which is not being spent in the local US economy creating jobs here.

Is this supposed to be some kind of joke or something? I don't know how can you not know the implications after spending so much time on this forum!

Anyways, when people prefer imported products, it's because they are more cost-efficient, & it's the nature of the markets to continuously move towards the most cost-efficient products
So, imports only means that the labor used on producing those products domestically would be used to produce something else & hence there would be MORE goods & services (REAL WEALTH) within the country, lower prices & higher living-standards so jobs don't necessarily have to be "lost", they merely shift to producing other products.
The problem isnt' necessarily the imports, they merely INCREASE real wealth in the country; the problems are the often the regulatory hindrances that prevent businesses from taking utilizing that labor as soon as possible & other stupid laws like minimum wage laws, which keep people unemployed

Ah! The money! That's the Keynesian issue because they think "money" is wealth & that's why they THINK just printing more of it will create more wealth But for those who understand real economics, GOODS & SERVICES are REAL WEALTH; if "money" was wealth then Zimbabwe would have become the richest nation in the world when they'd hyperinflation.

Let's look at a simple example :
Let's say there are a $100 in the economy & there are 100 people capable of producing 100 goods in a closed economy
Now, that's the baseline at an averate rate of 1 person = 1 good = $1
Let's say 11 goods are imported from China at $10, what effect does that have on 100 Americans' labor capacity? NONE. They can STILL produce 100 goods & since the supply of money has reduced in relation to labor, it puts downward pressure on its NOMINAL price (wage/salary) so now it's $0.90 = 1 person = 1 good
But guess what happened to the WHOLE ECONOMY, now there are 111 goods (100 + 11 imports) & $90, meaning every $1 is worth 1.23 goods instead of $1 = 1 good, the average NOMINAL wage has dropped from $1 to $0.90 BUT previously they could each buy 1 good on average, now they can buy 1.11 goods each on average (1.23 x 0.90)
Oooh, those $10 are gone BUT there are 11 MORE goods that otherwise wouldn't have been there

So again, "money" is NOT wealth at the macro-level, it's the goods & services that determine the living-standards within a country, the more goods & services there are, the cheaper they'll be & higher the living-standards

Again, you should seriously consider leaning about "opportunity cost"
You keep posting this Keynesian fallacies that have been debunked ages ago, you should read this book & may be you'll gather the market-perspective - http://www.hacer.org/pdf/Hazlitt00.pdf
It's a very short book, written in plain English & it's absolutely free so please go ahead & have a look!

[Paul Or Nothing II]

Sounds like a plan. Lets outlaw exporting refined petroleum products in the US, because doing so would help "reduce our dependence on foreign oil". That would work wonders, refineries in the US would suddenly have an incredibly hard time realizing any profit at current price levels because less than half of a barrel of crude can be processed into gasoline even with significant downstream reprocessing. And being that the US is one of only two countries in the entire world where the majority of its oil usage is in motor gasoline, well it's not hard to see what will happen.

Refineries in the US wouldn't be able to sell all the refined products that the US doesn't demand or need. These products would flood inventories, unable to respond to pricing information and leave to places outside the US where they desperately need these products. Once inventories were nearing capacity these products would be flooded into the US domestic market( if refineries even stay open long enough to reach that point), those holding inventory would want to accept nearly ANY price to realize SOME profit over having useless refined products sitting in their inventories. The prices of non motor gasoline cracks would plummet everywhere in the US, prompting more demand for these products.

At the same time, the price charged for motor gasoline by domestic refiners in the US would have to rise considerably, being that the profitability of half of each barrel refined just dropped to near nothing. A barrel of oil is still a barrel of oil, and while the US is one of the largest producers of crude in the world it also imports about half of its crude demand from foreign sources, and this foreign crude is competing on a world market. And being that the excess US refined products are now taken off the international market, the price of crude oil has risen as other countries increase their refining capacity for their own domestic needs that the US was previously filling, subsequently increasing demand and the price for crude.

With the price of gasoline rising to $10 per gallon in the US and paralyzing the economy, foreign refineries respond to price changes and start sending their motor gasoline, which the US is uniquely dependent on, to the US and reap the profits. In the meantime those few domestic refineries that were left are slowing shutting down, as they just can't compete, half of every barrel they refine is stuck in a domestic market that does not demand its products.

Congrats, ignorant emotionally moved fool. You helped reduce the dependency on foreign oil in the US by outlawing exports which leads to more dependency on foreign oil! What's the next move? It's pretty obvious...those foreign refiners are unfair. Democrats and Republicans in congress hold up charts showing how as prices rise, more and more gasoline from foreign sources is imported into the US. So idiot in chief ILUVRP, channeling the emotional pains of the entire country, holding seances with Abraham Lincoln and the founding fathers so as to be able to declare he knows what they would want to do; declares plans for more intervention to "help" the working folk who are being gouged by the foreign energy companies by placing a price ceiling on gasoline at the pump. Hooray for ILUVRP! Gasoline can never rise above $6! Foreign companies won't be gouging the American people! Of course the domestic refineries that are left will cry foul, they can't make possibly make any money with gasoline at $6 a gallon. So in order to keep America energy independent, ILUVRP provides subsidies to all the remaining oil refineries to make up for the lost revenue from incredibly low prices on all non gasoline cracks. Not only did ILUVRP make America energy independent, he stopped foreign companies from gouging the working man, and saved jobs by subsidizing the domestic refinery industry, which employs hundreds of thousands of workers!

+1

Who cares about all that - GOVERNMENT - that's the answer to everything! Politicians & bureaucrats can solve any problem, they can give us cheap oil, cheap cars, cheap houses, cheap everything, all they need to do is pass laws to make everything cheap & everything will be cheap, hell, they could even make it free!

Capitalism sucks! Communism rocks!

...Which is why 20% makes 80% of the money (the 80-20 rule).

+1

Exactly!

pon2 1/2 , i won't even waste my time saying anything about what you write , i put down what ron paul said , you don't even understand what he was talking about , you must keep taking your pills.

oh btw , were you kicked off the limpball forum for being too much of a neocon ??

I LUV P,

Where has Ron Paul said that he'll ban oil-exports????

As I've said before, he's said that he respects the PRINCIPLE OF PRIVATE-PROPERTY so much that he wouldn't use government force against any kind of non-violent discrimination so there's no way he's going to violate PROPERTY-RIGHTS of those exporting oil - they're the once investing & producing it so it's their PRIVATE-PROPERTY!
Besides, I'm sure he stands more than anyone that government CAN'T make anything cheaper, it's the markets that determine prices & government-intervention only makes things worse!

You're calling me a neo-con??? When in fact YOU are the neo-con, like those who talk about "letting the market work" & less government but don't know sh!t about the market-economics & therefore support MORE GOVERNMENT & MORE MARKET-INTERVENTION

And don't forget to take your birth-control pill, we don't need any more communists on this planets, there are already too many here & they're doing everything to violate the freedoms of & enslave the rest of the people to the government!

That is the bottom line. Cutting off our nose to spite our face.

The only possible brilliance in the plan unfolding before us lies in the likelihood that these actions by our "leaders" represent a purposeful destruction of the US economy by puppets acting on behalf of globalists, with world government interests.

presence

NO! EVERYTHING isn't some pre-planned conspiracy! There may be people working towards their self-interest but acting like "everyone is in on it" is pure paranoia & something that needs to be minimized if we wish to have any credibility.

People act in their self-interests & they mayn't all always be in line with one another. Congress simply supports wars because they get money to support it, oil-companies want to secure oil, war-profiteers want profits & so on
But does NOT mean that they are "all working in unison" to destroy that "chosen land" of America; in fact, such American exceptionalism doesn't help at all
Even Ron Paul has said many times that people in Congress support the policies they do because they get paid for it but often they're too stupid to think about the deeper consequences so the question of them being on some mega-conspiracy is rather absurd, they are just not that smart

This is why the founding fathers created a republic not a democracy.

The masses are the untruth.
The old republic is still acting like a soldier to uphold fading beliefs of a bygone era.
We are the mavens of the coming metamorphosis.
A meniscus tear will soon unleash the cascade of the new republic.

just watch (and get you're ducks in a row),

presence

Yes, they knew the dangers of democracy! In fact, initially, voting was only restricted to PROPERTY-OWNERS, which was only a small percentage of population because they knew that if every idiot got to vote then people will vote for thieves that promise to steal from those who have earned it & give it to those who haven't!

The battle isn't necessarily between Rich & Poor as the communists would want people to believe, it's between corrupt rich/poor who government force against honest rich/poor!