There is an interesting thing potentially about to happen or has already happened and the effect is lagging. KSA is now or will be accepting Yuans for their oil. The real economic war comes if they make the US buy oil in Yuans. The US has but one option to squash that, and it is academically unstable imo, military power, power furnished by the folks that serve in the military. Complex equation I think.
Saudi Arabia has no reason to make the US buy oil in Yuans. The only reason KSA will start taking them is to have the currency to buy goods (presumably weapons) from China in the event that relations with the US becomes more strained.
Accepting some currency other than just U.S. dollars, is a far cry from not accepting, U.S. dollars-- so, I think your premise is a farce, to begin with. But even if Saudi Arabia stopped accepting dollars, that would be nothing that would be essential for us to "squash," making your thread about some impeding, dire circumstance, a double fail.
Possibly, maybe even likely they, the KSA, are already trading with China in Yuans for oil. If so, this is already a huge problem that very likely underlies this surge in the inflation of the dollar. Eh?
Not really. The yuan and the riyal are both pegged partially to the US dollar. The implications are really just all about trade. Nations in particular desire to hold the currencies they engage in a lot of trade with so they can cut out the skimming done by financial institutions on the currency exchanges. China likes everybody's currency for that reason and because it is a hell of a lot harder to impose some of the more drastic economic sanctions on a country if they can bypass those middlemen. The only real problem for the US is that if KSA starts to trade too much with China, they will stop parking all their excess money in US bonds which will then cause us to potentially have to pay higher yields to attract buyers to fill in the gap. China holds about a trillion dollars in US bonds. Doing so stabilizes their currency and makes Chinese goods relatively cheaper so it encourages more exports. There was a lot of concern by companies going into China because previously the exchange rate between the dollar and yuan was arbitrarily set by China. BY adding all the US bonds (and thereby US dollars) into the mix of how that value gets established, it has helped China lure in more manufacturing as well.
Most likely Saudi Arabia will still offer to sell their oil in exchange for US dollars but for a higher price, to take into account the cost of inflation to them. This would be essentially the same as making the US buy oil in Yuans. Or they would immediately trade their US dollars for Yuan on the open market, with the same effect. The point is that the dollar has lost its desirability to other countries. And if the US dollar has lost its desirability and other countries do not want to hold them, then it means more inflation for the US. The US could only get away with printing so many dollars (without that causing so much more inflation) because other countries in the world wanted those dollars.
Kind of makes you sympathetic for all the other countries that have been having to pay for their oil in USD all this time.
Although some people have been talking about this, I don't think it is actually an issue. (Although it is a very big issue, let me explain, it's not going to come to a point where the Saudis flat out refuse to accept US dollars any time soon) What will be likely to happen, however, is the Saudis are going to be more reluctant to accept the US dollar, after seeing high levels of inflation in the recent past. So they are probably going to charge a premium for US dollars. In other words, if a barrel of oil cost 100 USD or 71900 yuan before, now maybe it is going to cost 108 USD, or the buyer could still pay 71900 yuan as before. That's what happens when other countries become more reluctant to accept the US dollar. The dollar will also lose some small amount of value as other countries in the world refuse to use it or have less demand for dollars because they are no longer using dollars for certain transactions. So there will be a feedback effect, that will have an add-on inflationary effect, although I expect this feedback effect to remain small over the next 15 years. But it could have much bigger long-term consequences over a longer time frame, like say 50 or 75 years. If the Saudis decide to charge a big enough premium for paying with US dollars, that could have an effect on international exchange rates, since people would be trading dollars to get an alternative currency to buy the oil at a slightly better price. More US dollars flooding into the international marketplace since Saudi Arabia is not being paid with and accepting those US dollars. Saudi Arabia is only one part of the bigger picture, of course, and I'd guess even if Saudi Arabia flat out refused to accept any US dollars that would only represent no more than maybe 17 percent of the US dollars used in foreign trade. (But as I previously explained, there would be some feedback effect from that, so that might end up having an effect more like 25 percent, if it were to happen)
Nope. The meaning of a statement like that is, imo, more concisely and accurately written like this, Kind of makes me sympathetic for all the other countries that have been having to pay for their oil in USD all this time.
I already did, but your permission to have done so makes my testicles warm, and fuzzy….. Thanks for reviving my thread, into stalking much?
No, these days, "you" is often used as an informal substitute for the third person impersonal pronoun, "one," because many people think "one" sounds too pompous: "Kind of makes one sympathetic for all the other countries that have been having to pay for their oil in USD all this time."
I cannot attest to what many people think, and I would not quite use the word pompous to describe the practice, but, any folks that project their opinion onto others are in fact making an assertion that may have no basis in fact. It is a common tool used by politicians, a good example being Mitch McConnell, representative of a bureaucratic division of government administration, claiming to act on behalf of “the people”
The USA had a nice thing going there for a while. Other countries had to acquire/buy USD to buy oil from the Saudis. That was great for the USD. If KSA stops that requirement, USD will lose the advantage it’s had for a while. Boo hoo.
Good thing the Dept. of Education has been hooking us up with a service economy- "Would you like fries with that?"
The US protected the dollar in 2006 with Hussein's demise and did it again in 2011 with Gaddafi's. Problem was, (got CRS and too lazy to look it up) China and Russia made a deal for oil that same year in rubles/yuans, and a day or so later Moody's lowered the petro dollar's valuation. The US's demising was obviously stymied at that point, and the KSA, likely tired of the 50 year old BS over a worthless dollar, is presenting the same 'complex equation.' While an announcement of a potential deal may be the KSA's unsubtle bid for something they want from the US, like the China/Russia deal, the US has no leverage to stop the KSA doing an oil deal in any currency they want. However, somehow forcing the US to buy oil in yuans, and soon thereafter in currencies from other oil countries, would indeed create a huge problem for the dollar's wilting hegemony and the US's financial stability, if not survival.
The dollar isn't going anywhere. It's been a wet dream of people for decades, it's not happening. Nothing else is anywhere near as stable, and that is all that really matters. The Yuan is a joke. Dogecoin is more stable.
The deal was that the U.S. would make the world safe for trade [patrolling the 7 seas] in return for the benefits of being the reserve currency. Yuan is of less value than monopoly money. China is such a mess that I am not sure why anybody would tie up any of their wealth in that currency. You have any Yuan in your wallet?
Who ever runs the US (Obama/Etc) is happy to have a declining dollar and a rising crime rate. It's just a game to them. Pushing up the debt and reducing interest payments means it isn't worth holding on to dollars any more, so the dollar will decline, and as it loses it's position as a trading currency and as a reserve currency, the decline will get faster and more irreversible.
It is the US that is driving countries off the dollar, confiscating 300 billion dollars from Russia means we could do that to anyone careless enough to have dollars in banks accessible to the US govt, and requiring countries to use a currency other than the USD to trade with Russia was like saying 'pick another currency to trade in, and set that up as an alternative to the US dollar and see it you prefer it.'
