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The bourse is the source, of course, of course
July 4, 2006 12:50 AM   Subscribe

Iran is the next target of the U.S. because of the establishment of the Iranian Oil Bourse, which would trade in Euros, not dollars.
No, it isn't.
Yeah, it probably is.
No, seriously, it's not. (Yeah, really though, it is)
Ok, maybe it is, maybe it isn't either way the odds were running 50/50 we'd bomb Iran by the end of the year. (previously - here)
posted by Smedleyman (44 comments total) 2 users marked this as a favorite

 


China and Russia won't let it happen.
posted by bardic at 1:11 AM on July 4, 2006


China and Russia are going to stop us with ... what? UN jibberbabber?

I say we put the trillions of dollars we've been spending on our warmaking power to productive use. The USAF and USN (modulo USMC) have been standing around, dick-in-hand, for a couple of years now.

Clearly it devolves on the US, in its special God-Given position of Holy Super Empire Force for Good, to smack around any other nation with the temerity to look at us sideways (provided of course they harbor anti-zionist ideologues and have oil we can re-acquire).
posted by Heywood Mogroot at 1:19 AM on July 4, 2006


A nation-state taxes its own citizens, while an empire taxes other nation-states. The history of empires, from Greek and Roman, to Ottoman and British, teaches that the economic foundation of every single empire is the taxation of other nations or of their subjects. The imperial ability to tax has always rested on a better and stronger economy, and as a consequence, a better and stronger military that peacefully or militarily enforced the tax.

Thus (from the first link) Krassimir Petrov, Ph.D. Austrian Macro Economist/Investment Strategist, who concludes that the American empire "depends on the US dollar."

I call bullshit on that. His history seems to include one big lacuna: th British Empire. The Crown enriched itself by granting trading monopolies (e.g., The East India Trading Company) and then taxing the commerce that the monopoly generated. No doubt that the arrangement resulted in a transfer of wealth from the colony to the Crown, but currency had little to do with it.

Today, American companies/banks/investors trade in all currencies and own securities on every bourse in the world - the current administration achieves liquidity by borrowing from banks all over the world. Currencies are intertwined, private currency speculators (like the erstwhile Warren Buffett) can move their cash assets in the blink of an eye.

If Iran takes payment in Euros, Dollars, Visa, or Master Card it seems to me the impact on the dollar would be mininal - certainly far less than the effect of the current account deficit.
posted by three blind mice at 1:31 AM on July 4, 2006


I call bullshit on DailyKos diary links, too (ditto LGF links, surprisingly absent in a post about a USian war in that area) particularly from six months ago.

Submitter could have just as easily submitted this as two google searches. "US is at war with iran" and "US is not at war with Iran."

Is this one of those ones where we go to MeTa and scold the poster for posting links to: dailykos, PRNewswire, a make believe futures website, and other assorted non-best-of-the-webby stuff, or am I just snarky because I can't seem to sleep? Do I get bonus points if it's both, or a MeTa scolding at me for being snarky?
posted by swerdloff at 1:39 AM on July 4, 2006


"US is at war with iran"/ "US is not at war with Iran"looks the same.
I think the cognitive dissonance on this is the really interesting thing. And the older links, I think are still relevent, particularly since Iran hasn't closed the deal. But have at it, I'm already there.
posted by Smedleyman at 2:13 AM on July 4, 2006


http://futures.fxstreet.com/ - is a make believe futures site?

....yeah, I suppose those goofy articles on Chicago Board of Trade soybean futures are a dead giveaway.

"July soybeans ended 6 3/4-cent higher at $6.01 1/2, November soybeans finished 6 3/4 cent higher at $6.29 1/4, July soymeal settled $1.10 higher at $175.70 a short ton, and December soyoil ended 19 points lower at 26.17 cent a pound"

Whoa! Whatever you say tinfoil hat boy!
posted by Smedleyman at 2:19 AM on July 4, 2006


I love these internets to death when their pretty little tubes get all full of macroeconomic theories and "analysis." They are cuter than a floppy footed new puppy in a button up sweater on Christmas Day! Specially when part of 'em gets all honest 'n everything, and pees on the rug, and looks a little puppy guilty doing it (from the 5th link in the FPP, here's Kos gettin' all bashful 'n editorial):
"I'm not enough of an economist to be able to predict the impact on the removal of the dollar as the sole currency for the purchase of oil, but there are plenty of experts who predict some pretty scary things, the least of which is a massive destabilization of the American economy."
Makes me want to rub his belly, and find him a soft treat, while I blot the rug. Petro theorists! Tee hee! See if they'll play tug-of-war! Or maybe chase their own tails (from the sixth link):
"Iran's privatisations have typically run into trouble because the only organisations with enough money to gobble up state assets have been themselves state-run. Khamenei said this vicious circle should be avoided."
And look, over here, in the corner is a little economic forecaster gettin' all frisky and truthy:
"Energy forward curves are historically poor predictors of price. If we had believed forward curves two years ago, we would find the current price of crude around $33 per barrel. If we believed last year’s forward curve, we would expect the current price to be $58 per barrel."
"Do I get bonus points ... or a MeTa scolding at me for being snarky?"
posted by swerdloff at 4:39 AM EST on July 4


Aw, it's America's birthday, swerdloff. Can't we just play with the cute puppies 'til it's time for bed?
posted by paulsc at 2:20 AM on July 4, 2006


Bravo Zulu on the post, Smedleyman.

As I used to say back during the Cold War: "An enemy is a useful thing."
posted by pax digita at 2:25 AM on July 4, 2006


His history seems to include one big lacuna: th British Empire. The Crown enriched itself by granting trading monopolies (e.g., The East India Trading Company) and then taxing the commerce that the monopoly generated. No doubt that the arrangement resulted in a transfer of wealth from the colony to the Crown, but currency had little to do with it.

Currency is only one of many mechanisms by which an imperial power can tax conquered nations.

If Iran takes payment in Euros, Dollars, Visa, or Master Card it seems to me the impact on the dollar would be mininal - certainly far less than the effect of the current account deficit.

This is pretty doubtful. Currencies, like all other commodities, obey the law of supply and demand. The critical need to purchase oil by every business on the planet creates a huge artificial demand for the dollar. Take away this monopoly and the literal trading value of the dollar will fall sharply. The falling dollar will make the foreign investors run and once they're gone the whole house of cards collapses. It's not a particularly complicated scenario.

Still, it's pretty unlikely that Eurodollars will ever take off. Soj's diary is thorough, but like a lot of dollar pessimists, he doesn't understand the real value of a dollar. A dollar no longer measures the strength of the American economy, it measures the strength of the world economy. To exaggerate a bit: what's often referred to as the 'global economy' is really just the American economy and change. If the American economy collapses every other country will quickly follow. There will always be an enormous demand for dollars and it just makes sense to price oil in what is really the global currency and avoid exchange risk whenever possible. The American empire has far too much momentum to be seriously checked by this sort of monetary manuevering.
posted by nixerman at 2:44 AM on July 4, 2006


The world economy is not just the American economy. The United States is a big part of it, but there are also another five billion seven hundred million of us. Even Canada's economy, as closely as we are tied with the States (too close for our own benefit and independence), works independently - we've had good times when the States has had bad, and vice versa. (Sometimes too good - Canadian manufacturers like when the US dollar is strong and ours is weak, because then we have cheap exports. But it probably also hits us on imports and debt.) But how good or bad it will be for the world will depend on each country's economic relationship with the US. The fact that we've allowed the US economy to become so intertwined and dominant (to the point that people are saying the global economy=the US economy) is a very bad thing.

For the rest of us, the diversification of oil sales away from just dollars needs to happen to balance out the world economy. There is too much money (and power) flowing through New York and the American owned exchange in London. We need to have several economic super powers, to balance each other out. Canada will never be one of them, but we as a country should be looking to diversify our international trade away from the US to balance it with Pacific and European.
posted by jb at 3:59 AM on July 4, 2006


Still, it's pretty unlikely that Eurodollars will ever take off.

Travel much nixerman? The Euro has not only "taken off," it's flying quite nicely; it's the world's second largest currency.

There are approximately 300 million people in the Eurozone with a combined GDP approx. 75% of the United States. In addition, there are another 100 million in countries (like Sweden) which trade in Euros runs in parallel with national currencies.

Trade in Euros has not caused the U.S. dollar to crash, nor has it had any material impact on the U.S. GDP.

The myth of the "Euro-Oil-Bourse" is just a way for American neo-cons to deflect criticism onto Europe.
posted by three blind mice at 5:20 AM on July 4, 2006


Background on conspiratorial petrodollar theories.

So you're saying it'll be a clash of civilizations, jb?

If the bouse is the voice of rogue-state discontent, these dark horses are probably futzing with forces they little understand. Besides, who's to say Iran doesn't come off a little better in the ensuing global depression? The US benefited enormously from the last one, after all.

I'm thinking Lenin might have been right....
posted by anotherpanacea at 5:27 AM on July 4, 2006


All of these bourse stories you linked to are old-- is there anything more recent?
posted by Dogmilk at 5:32 AM on July 4, 2006


And of course Lenin was right.
posted by Dogmilk at 5:38 AM on July 4, 2006


So you're saying it'll be a clash of civilizations, jb?

No, in fact I'm confused as to what that even has to do with the conversation. Unless you think Canada and the US are intrinsically different civilizations incapable of mutual understanding, in which case I must agree.

What I was saying was that, for the economic stability of nations like Canada which are not the US (which would be everyone in the world except the US), it would be better to have several major economic powers rather than allow all of the money and power to flow through one. Competition between Europe and the US is good for Canada. And Australia, and New Zealand and Singapore and all the rest of the world.
posted by jb at 5:46 AM on July 4, 2006


China and Russia are going to stop us with ... what? UN jibberbabber?

Don't need to. Russia can say 'oil in rubles only please' and China can say 'the 2 trillion in US Dollars - we'd like to dump 'em and buy whatever we can with 'em'

Material items like metals, land, oil, food and infrastructure would run up in price and whipsaw the US of A citizens with a round of price inflation. When the 2 trillion is gone, a round of deflation.
posted by rough ashlar at 5:55 AM on July 4, 2006


...it would be better to have several major economic powers rather than allow all of the money and power to flow through one.

Which is the premise of Huntington's book. If you look at the zones of influence created by currencies, you can easily argue that they describe a sort of civilizational aura: the yen, the euro, the dollar. The Aussie and Canadian dollars will never have the reach of those currencies, so they can compete without risking global instability. But if the dollar takes a dive, it's going to soften demand for Canada's logging exports quite a lot, and Europe, with its protectionist tendencies, won't pick up the slack. Like it or not, you're stuck with us.

That's a different argument than those I was linking to, which are primarily about justice rather than wealth-production. The center/periphery structure that monopolistic currencies impose is terribly unjust, even as it promotes efficiency and growth in places, like Canada, relatively close to that center.
posted by anotherpanacea at 6:11 AM on July 4, 2006


Russia can say 'oil in rubles only please'

LOL.
posted by anotherpanacea at 6:12 AM on July 4, 2006




Exactly. Not much of a threat, though.
posted by anotherpanacea at 6:45 AM on July 4, 2006


Yet you shouldn't worry about anything. If anything bad happen our leadership will fly to Dubai ! I feel safer already
posted by elpapacito at 7:00 AM on July 4, 2006


Russian oil production: 8 million barrels per day

US oil production: 9 million bpd plus Iraq's 3 million bpd

OPEC minus Iraq: 33 million bpd

Hmmm.
posted by anotherpanacea at 7:00 AM on July 4, 2006


Russian oil production: 8 million barrels per day
US oil production: 9 million bpd plus Iraq's 3 million bpd
OPEC minus Iraq: 33 million bpd
Hmmm.
posted by anotherpanacea


Yea, things that make one go 'hrmm' If current US production stayed flat, that gives us an R/P ratio of 7.2 years. At that point, in 2013, discounting both declines and reserve additions--which may, surprisingly, even out, the US will import every single barrel of oil it consumes.

OPECs big producer is Saudi Arabia. The kings and queens of SA have been in production for 40+ years, and the water cut is rising. Ghawar is dying as a google search Venezuela has talked about not using the US Dollar for settlement of its oil contracts. And if you include its heavy oil, Venezuela has larger reserves than the Saudis. So your OPEC numbers are worthy of Hmmmming.



The 'save the dollar' plans not mentioned due to the long shot nature: expanding NAFTA throughout the Western Hemisphere and evolving it into an “American Union” patterned after the European Union. The dollar would become the common currency of the American Union. If such a plan could be pulled off, the 'labor' to back the dollar (with the US getting a cut of the transactions) would have an effect similar to having Leo Wanta's ruble trade money be worth derivatives balances outstanding are now believed to exceed some $770 trillion and have that money go into the US Treasury.
posted by rough ashlar at 7:27 AM on July 4, 2006


running 50/50 we'd bomb Iran by the end of the year.

From this article: "The odds that the USA and/or Israel execute an overt Air Strike against Iran by December 31, 2006 are currently "even" according to "futures trading" website:tradesports.com (As of 6-26-06: "Bid" 13 /"Ask" 13.8)"

Wrong, wrong, wrong, wrong, and unbelieveably stupid.
posted by Kwantsar at 8:33 AM on July 4, 2006


Kwantsar is right. Didn't anyone bother to read the details of the contract? PRWeb certainly didn't.
posted by Slithy_Tove at 8:52 AM on July 4, 2006


Administration backs off Bush's vow to reduce Mideast oil imports
By Kevin G. Hall
Knight Ridder Newspapers

WASHINGTON - One day after President Bush vowed to reduce America's dependence on Middle East oil by cutting imports from there 75 percent by 2025, his energy secretary and national economic adviser said Wednesday that the president didn't mean it literally.

Is this one of those ones where we go to MeTa and scold the poster for posting links to: dailykos, PRNewswire, a make believe futures website...?

Nah, yours is one of the endless tactics of the typical conservative, who can't mount a cogent criticism of the link contents, so he whines about the link source.
posted by fold_and_mutilate at 9:02 AM on July 4, 2006


"and China can say 'the 2 trillion in US Dollars - we'd like to dump 'em and buy whatever we can with 'em'"

Gwynne Dyer thinks they won't.
posted by exon at 10:04 AM on July 4, 2006


If the American economy collapses every other country will quickly follow. There will always be an enormous demand for dollars and it just makes sense to price oil in what is really the global currency and avoid exchange risk whenever possible. The American empire has far too much momentum to be seriously checked by this sort of monetary manuevering.

Unless the world gradually changes to euros that is.
posted by jouke at 10:06 AM on July 4, 2006


Lay down your unliquidated dollars here. See Current Events/Iran. I will sell you bombing cheap.
posted by wallstreet1929 at 10:07 AM on July 4, 2006


rough ashlar: yeah, OPEC is clearly divided. Also, as demand peaks in China, I suspect that it will become very hard for those who depend upon the Chinese to resist politico-economic pressure to increase production. But Russia's oil reserve is, at best, 150 billion barrels, while there's something like 500 billion barrels under Islamic control. Comparing the Chinese juggernaut of consumption with the trickle of Russian production is pretty silly.

Oh wait a second... Wanta? Didn't he shoot Vince Foster from a grassy hillock in Switzerland, then hide the body in a DC park or something? Give me a break.
posted by anotherpanacea at 10:30 AM on July 4, 2006


Lay down your unliquidated dollars here. See Current Events/Iran. I will sell you bombing cheap.
posted by wallstreet1929 at 1:07 PM EST on July 4 [+fave] [!]

Hehe. Gloriously eponysterical.
posted by bardic at 10:58 AM on July 4, 2006


i'm betting the shuttle will go out of control and crash into iran. accidently, of course.
posted by quonsar at 11:09 AM on July 4, 2006


while there's something like 500 billion barrels under Islamic control.

Please 'define' this "Islamic control" your claim.
posted by rough ashlar at 11:25 AM on July 4, 2006


Islamic control? Ummm... Saudi Arabia, Iran, (not Iraq,) United Arab Emirates, and Qatar?

Islam being the religion defining the culture in the Persian Gulf region, while Catholicism defines the culture of Venezuela, who has more in common with Mexico, Peru, and Bolivia than with its OPEC partners. I'm still arguing for a modified version of Huntington's thesis.

Also, what's with the scare quotes around "define"?
posted by anotherpanacea at 11:47 AM on July 4, 2006


Islamic control? Ummm... Saudi Arabia,

Lets run with that one. How is the behavior of the House of Saud "Islamic" vs behavior of a group of people who have power/money, and want to retain power/money?

Billions of Saudi oil money is invested in America - yet many followers of Islam claim there are few investement oppertunities which square with their religious believes.

And Saudi Arabia has the political groups claiming the present leadership violate the teachings of Islam.

Also, what's with the scare quotes around "define"?

A healty doubt about a claim that "This nation follows religion X" when there is a large amount of money at stake.
posted by rough ashlar at 12:14 PM on July 4, 2006


I'm not really interested in arguing minutia with you. Sorry.
posted by anotherpanacea at 12:28 PM on July 4, 2006


words words words
zip
nada
posted by Postroad at 12:32 PM on July 4, 2006


and China can say 'the 2 trillion in US Dollars - we'd like to dump 'em and buy whatever we can with 'em'

What alternative investment matches the risk/return profile, liquidity, and stability of US debt?

One of China's biggest problems is the ease of domestic bank fraud. Billions in currency just "evaporate" overnight. They havn't been able to build a robust local financial infrastructure, so they have to rely on foreign investment.

Japan's banking sector has its own issues.

The EU and EMU look promising, but have very little track record.

Russia - no comment.

What else is there?
posted by b1tr0t at 1:23 PM on July 4, 2006


Given that N. Korea has publicly claimed nukes, and a willingness to use them for 'defense,' and today threw up a couple of short range test missiles for the hell of it, I'm gonna say that Iranian schemes to make the euro the quotation and clearing currency for Iranian oil just don't seem all that nefarious. We've been advocating markets and freedoms for all, so let's let the Iranians create their market, if they can, and see how they fare... In the meantime, the Shrub and his unindicted co-conspirators senior Cabinet officials may have other business with the Axis of Evil:
"It should make people nervous when nontransparent regimes, that have announced that they've got nuclear warheads, fire missiles," Bush said. "This is not the way you conduct business in the world. This is not the way that peaceful nations conduct their affairs."
posted by paulsc at 2:11 PM on July 4, 2006


"...it would be better to have several major economic powers rather than allow all of the money and power to flow through one."

Which is the premise of Huntington's book. If you look at the zones of influence created by currencies, you can easily argue that they describe a sort of civilizational aura: the yen, the euro, the dollar. The Aussie and Canadian dollars will never have the reach of those currencies, so they can compete without risking global instability. But if the dollar takes a dive, it's going to soften demand for Canada's logging exports quite a lot, and Europe, with its protectionist tendencies, won't pick up the slack. Like it or not, you're stuck with us.

That's a different argument than those I was linking to, which are primarily about justice rather than wealth-production. The center/periphery structure that monopolistic currencies impose is terribly unjust, even as it promotes efficiency and growth in places, like Canada, relatively close to that center.
posted by anotherpanacea at 6:11 AM PST on July 4 [+fave] [!]


But agreeing that there are several economic metropoles really has nothing to do with the "Clash of Civilizations" argument, which is one I hate. It's ridiculous to suggest that Islamic cultures and Christian/European ones are incompatible - they are incrediably like each other, much more so than either are like Eastern cultures.

Also, as you point out, Europe is a metropole - but so is the US, and how are they different civilizations in any stretch of the imagination? Native American civilization is distinct from European, but current American culture is part of a greater Western tradition.

As for Canada - yes, the dollar taking a dive would hurt us, which is exactly why we need to diversify our trade. Right now our logging is being hurt by illegal American trade practices, and we can't do a thing about it because we are too wrapped up with them. And while Europe may be protectionist (though I have to ask whether they are any more protectionist than US, who is already screwing us), we do produce things they might want. Like oil, for one.

As for Canada getting into a common market with the US, that would be the stupidest thing for us ever to do. In Europe, no one country dominates. If Canada were to unite with the US, that would be the end of our freedom. I would probably emigrate permanently to Britain - I have no desire to be a part of a republican (as in not monarchial - our parliamentary system is so much easier to deal with), right wing, heathcare-less country. Americans are nice people, like most people on the planet, but I hate the way they run their country and I would weep if mine were ever controlled by them. I could live happily with Canada existing as a province within a larger world government, but not just getting in bed with the elephant that doesn't even notice or care that we are there before it rolls over on us.
posted by jb at 6:12 PM on July 4, 2006


Sorry jb, I stepped away from the computer. What you say about Canadian trade diversification is exactly right, though I suspect that it won't happen -until- the dollar dives. Canada is too dependent on its primary industries (oil and lumber) and diversification will take baby-steps so long as the US exerts its subtle brain-drain. The European demand for oil is less important than the Asian one, but it's still only half of the equation for your economy.

As for Huntington: I'm resistant as well, which is partially why I'm playing devil's advocate. The appeal is that he provides a nice model for tracking loyalties in those moments of crisis like peak oil or a major dollar sell-off. The current configuration is brittle at several spots, so there's a disjunct between the way things are and the way they might suddenly unexpectedly become. Also, I think you're wrong about the commonalities of Europe and the US: they share financial interests, as all colonial powers must, but we don't think alike, and we run up against cultural conflicts more often than not.

Perhaps it is better to say this: our commonalities with other monotheistic cultures inevitably become reasons for conflict, while our differences from the East have appeared to be quite conducive to trade and a growing confluence of interests. The key (for me, at least) is that China has many options for trading partners, and that they will increasingly play opponents against each other (like Iran against the US). As Asia rises, all the other configurations will shift, and I suspect that Huntington is not far wrong about the cultural basis of some surprising affinities. Between currency and culture, you can get a surprisingly good picture of the geostrategic relations that will (should?) define US foreign policy going forward.
posted by anotherpanacea at 6:56 AM on July 5, 2006


No problem - I don't expect people to be wasting as much time as I seem to be doing today.

You're right that Europe and the US do have many areas where they don't think alike (though many where they do), but it's also true that on most of the political issues where Europe and the US disagree, Canada also does not agree with the US. Sometimes we agree with Europe (very close on health care, to a lesser degree on social welfare, but are more like Europe than like the US, the purpose of government and the shape of democracy, the centralisation of government), sometimes we go our own way (multiculturalism over a "melting pot" ideal). Having lived in Canada, the US and Britain, I find that culturally (in language, food and lifestyle ways) we share a lot with our American neighbours, but that politically we are more like Britain, New Zealand but not so much Australia, and Europe. And I think you will find that most conflicts between Europe (and a lot of the rest of the first world) and the US are not cultural (because most Europeans and most Americans aren't that aware of the strongest cultural differences - like sizes of houses, ways to shop, the shape of the landscape), but political.

So you can understand why I am very worried that many people around the world seem to be just lumping Canada in with the US, as if geographic proximity leads directly to political compatability. We're a country with still four (until recently five) large political parties, and the US can't even seem to get a viable third choice going (a political scientist told me once that was because of the direct election of the president). Our system is based not on idealising democracy, but "responsible government" - I don't measure the quality of a democracy by how many offices are directly elected, but how responsive that government is to the needs of their people. The differences go on and on - they are more than just the difference between left and right within the US, they are just a completely different way of thinking about politics, goverment and what the job of government is.
posted by jb at 9:22 AM on July 5, 2006


I see... I was suggesting that, when push came to shove, the US and Europe would find their differences more provative than their commonalities. But the US and Canada... well, I slipped into the economics for a moment, ignoring the clear political differences. As you point out, the political culture in Canada is much more European. It's hard to say which will trump the other: your dependence on the US economically or your historical ties to Europe, and of course this is part of the problem with Huntington-like arguments (also with that book, The Pentagon's New Map, or even with serious scholarship in International Relations) Depending on the type of crisis, certain states will split one way or another. Canada's behavior vis a vis Iraq is one indication that you're more likely to side with the Europeans. But this is far afield from the original topic! :-)
posted by anotherpanacea at 3:22 PM on July 5, 2006


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