Analysts Skeptical of Iran Oil Plan (Iran begins Euro push)

[katty]

more: http://story.100.com/?rid=688397aa6f4f641f&cat=1b76a2b4cf7810bd

May 5, 12:32 PM EDT

Analysts Skeptical of Iran Oil Plan

TEHRAN, Iran (AP) -- Iran took a step on Friday toward establishing an oil market denominated in euros, a plan analysts described as highly unlikely to materialize but which in theory could have serious consequences for the U.S. economy.

Iranian state-run television said the country's oil ministry granted a license for the euro-denominated market, an idea first floated back in 2004, though just who would trade on it remains unclear.

If the market were to succeed - or if Iran simply demanded payment for its oil in euros - commodities experts said it could lead central bankers around the world to convert some dollar reserves into euros, possibly causing a decline in the dollar's value.

Oil is currently denominated in dollars around the globe, whether through direct sales between producers and consumers or in trades made on markets in New York and London.



"If OPEC decided they didn't want dollars anymore," he added, "it would signal an end of American hegemony by signaling an end to the dollar as the sole reserve currency status."

[Poll_Blind]

1. Not possibly...it would kill the dollar.

It isn't Iran's move that's the kiss of death to the dollar, specifically. It's the world banks that divest themselves of US Dollars in response to a more popular currency which scares the shit out of U.S. currency speculators.

I have no idea how many dollars are out there but you should imagine some gigantic number (I recall $20T or something around there but do not have time to pull up a supporting link). Now, everyone knows we left the Gold Standard decades ago. So even as far back as the 50's we had way more dollars than gold to back it up- no biggie. However, since OPEC determined that all sales of oil were to be in US Dollars, no matter where in the world those transactions took place or which two countries the transactions were between, there are far, far more dollars in circulation than our currency can support. Well, that's all good and fine. Well....ok, I fibbed a bit. It's fine if all the Dollars are used to continue to purchase oil. However, if those transactions are being done with some other currency then those dollars will migrate back to the U.S. or wherever they may be spent on something else.

And that's a big problem. A really, really big (economy-killing) big problem. Because the moment those dollars fall out of favor they still remain dollars, and they will be spent. What this means if enough divestiture of dollars occurs the value of the dollar (as it has been) will continue to drop. Which very quickly cause inflation. From there, who knows? But I do know it will not be good. It will not be pleasant. Everyone in America will be affected. It will not end quickly after beginning and it will take decades to undo the damage done.

PB

[dipsydoodle]

2. Initially

it should have no more effect than when Iraq did the same. Just meant that the USA had to buy Euros to buy Iraq's oil - didn't go down too well that though. China and India have both got substantial Euro reserves which they can use as a matter of routine to buy oil and it would be natural for part of Europe <not the UK which still uses £'s> to use Euro's anyway. Might even encourage the UK to join the Euro. China and India may not need to dump dollars but may eventually decline further payments using your currency.

The situation will prevent Iran's assets from being seized by spreading them. Can't say I blame them really. I'm sure you'll agree this a defensive reaction thought up some time ago and bought about by Bushco's antics.

So - don't blame Iran : blame ****

[katty]

5. certainly is a defensive action any country would take under

the current situation.

[Poll_Blind]

6. As I said before...

"It isn't Iran's move that's the kiss of death to the dollar, specifically. It's the world banks that divest themselves of US Dollars in response to a more popular currency which scares the shit out of U.S. currency speculators."

I can't blame them either- I'd be doing the same thing in their position, or something similar, respective to petrodollars vs eurodollars, anyway.

PB

[katty]

4. thank you-good reminders-no, it won't be pleasant!

[FloridaPat]

3. The dollar dropping is killing these countries. They are loosing

moeny badly. Had they switched to the Euro 5 years ago, they would be way ahead in terms of money in the bank.