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Why is the US dollar so high?
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NASA Test Pilot Away
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Post: #34
RE: Why is the US dollar so high?
@The Beast1, see PM

@thoughtgypsy

This is essentially my understanding. De Gaulle really forced the hand of the US. Nixon, and more importantly, the Congress could have reduced spending and ceased the war in Vietnam. I would add the other major part of the deal was in the recycling of the petrodollars. The Saudis (and other countries) took their oil profits and channeled them back into the US financial system (particularly US Treasuries). This point is paramount to understanding US financial power. I may tie it into a post with bonds.

Consider two more points. Firstly, at $30 per barrel of oil, less dollars are needed in the system; secondly, if you are outside of the US you must earn dollars to buy things while the US does not need to earn them (work), they just print. This causes the world to be an unfriendly place.

My information is that Saudi Arabia is running through their reserves and there is significant internal unrest. Part of running through their reserves may not be deficit spending yet (although their social spending is going through the roof), but rather a sale of their US Treasuries in order to purchase (tangible) assets (some of which may be placed in newly set up Sovereign Wealth Funds). Saudi Arabia is not the only Middle Eastern country doing this and the magnitude of these funds may be on the order of 2.2+ Trillion USD.

The primary issue is the House of Saud maintaining power and secondarily turning east toward Russia (and China). They are selling oil and quite a bit of it. I contend that it is a part of a larger multi-nation plan that is combating US dollar hegemony. In this case, it is more difficult for US companies (i.e. shale) to be profitable. Not being profitable and having large hedged debts denominated in US dollars is not a positive thing for the USD. I look for the Saudis to begin to accept payment for their oil in currencies other than the dollar. When (if) this happens it will be an important world precedent and will have a significant influence in the decrease of US financial power.

Interestingly Iran is about to have a million barrels per day come into the market and that number will increase over time. This Iranian oil will not be sold in USD. There is a long game going on and I would not be surprised if China is telling Iran, Saudi Arabia and other Gulf nations who traditionally split along Sunni-Shia lines, to start playing nice with one another (at least for a while) and not allow the western powers to divide you rather focus on trade and strengthen yourselves. China has been seriously involved in Africa for well over 15 years and many rounds have been sent down-range. Look at China prepositioning around the Gulf of Aden (in both Djibouti and Yemen). I am not sure if people want to go geo-political in this thread so I will stop.
01-24-2016 02:24 AM
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Messages In This Thread
Why is the US dollar so high? - pitt - 01-21-2016, 03:09 PM
RE: Why is the US dollar so high? - trian1 - 01-21-2016, 03:13 PM
RE: Why is the US dollar so high? - Drazen - 01-21-2016, 03:26 PM
RE: Why is the US dollar so high? - Easy_C - 01-21-2016, 08:56 PM
RE: Why is the US dollar so high? - Oz. - 01-21-2016, 10:03 PM
RE: Why is the US dollar so high? - Onto - 01-21-2016, 11:05 PM
RE: Why is the US dollar so high? - rpg - 01-24-2016, 03:36 PM
RE: Why is the US dollar so high? - Easy_C - 01-22-2016, 06:39 PM
RE: Why is the US dollar so high? - NASA Test Pilot - 01-24-2016 02:24 AM
RE: Why is the US dollar so high? - Krieg - 01-24-2016, 05:16 AM
RE: Why is the US dollar so high? - Krieg - 01-24-2016, 05:35 AM
RE: Why is the US dollar so high? - Krieg - 01-24-2016, 01:44 PM
RE: Why is the US dollar so high? - jayko - 02-13-2016, 03:03 PM

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