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The Collapse Of The Petrodollar


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#1 SuperChimp

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Posted 09 April 2012 - 08:27 PM

I need your help guys and gals.

As far as my understanding of the situation goes, the US dollar was previously linked to gold. The dollar is now broadly 'linked' to oil because all trading of oil has to be conducted in dollars. This props up the dollar by forcing nations and companies to buy and trade with the dollar.

I have read online that Iran is trying to sell its supplies of oil for other currencies and is trying to encourage other countries to follow its lead.

Where do you think the tipping point in this situation is? How many other countries would be needed to cause a collapse of the US dollar?

Is there a specific amount of oil business that needs to be conducted in US Dollars to keep the system going?

Thanks.

#2 ChairmanOfTheBored

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Posted 09 April 2012 - 11:11 PM

As far as my understanding of the situation goes, the US dollar was previously linked to gold. The dollar is now broadly 'linked' to oil because all trading of oil has to be conducted in dollars. This props up the dollar by forcing nations and companies to buy and trade with the dollar.


Just reading through Coggan's Paper promises. and hit the line that commodities are traded in dollars and had one of those WTF/of course moments. The proper investment banks have now moved into commodities trading in a big way because really it's an unholy mix of FOREX trading and betting on trade flows - i.e. who needs the commodities, what will they pay for them and what it their currency going to be worth in 2 days time!

Setting up new alternative markets in other currencies will reduce the opportunities for arbitrage, so it will happen and it will happen soon. (The US is kind of overstretched at the moment on the fighty-fighty front and it's traditional to go to war with your debtors not your creditors...)

Edited by ChairmanOfTheBored, 09 April 2012 - 11:12 PM.

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