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Author Topic: Venezuelan move to replace US$ with the €uro upsetting Washington more than Saddam's
WingNut
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posted 23 June 2003 11:30 AM      Profile for WingNut   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
Is OPEC next?
From: Out There | Registered: Aug 2001  |  IP: Logged
tyoung
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posted 23 June 2003 11:48 AM      Profile for tyoung        Edit/Delete Post  Reply With Quote 
Not being an economics expert, I have been struggling to understand both this article and the discussion of how Iraq's move to trade in euros was so distasteful to the yanks before they invaded.

This article sheds some light on the consequences for the US if their currency slips from its position as "world standard":

quote:
The dollar is the de facto world reserve currency: the US currency accounts for approximately two thirds of all official exchange reserves. More than four-fifths of all foreign exchange transactions and half of all world exports are denominated in dollars. In addition, all IMF loans are denominated in dollars.

But the more dollars there are circulating outside the US, or invested by foreign owners in American assets, the more the rest of the world has had to provide the US with goods and services in exchange for these dollars. The dollars cost the US next to nothing to produce, so the fact that the world uses the currency in this way means that the US is importing vast quantities of goods and services virtually for free.


Huh.

OPEC seems to have gotten the message as they watch the plunder of Iraq- this story states:

quote:
The OPEC oil cartel will not switch dollar-denominated oil sales to the euro, despite the fall in the value of the U.S. currency...

From: Vancouver Island | Registered: Mar 2003  |  IP: Logged
Michelle
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posted 23 June 2003 01:40 PM      Profile for Michelle   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
Huh, indeed. Not being an economics guru myself (by a long shot!) I didn't know any of this either, about Iraq, Venezuela, or Iran. What an interesting take that was.
From: I've got a fever, and the only prescription is more cowbell. | Registered: May 2001  |  IP: Logged
Holy Holy Holy
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posted 23 June 2003 02:33 PM      Profile for Holy Holy Holy     Send New Private Message      Edit/Delete Post  Reply With Quote 
Venezuela has historically been OPEC's "spoiler" the one country that would violate OPEC's agreements and flood the market with extra oil - thereby keeping prices down.

Chavez changed all of that and has really turned OPEC into a force in global politics again. Moving to the Euro is another provocative move in the Bolivarian's ongoing battle to create a "multi-polar" planet and undermine the U.S.

Gutsy stuff.


From: Holy | Registered: Feb 2003  |  IP: Logged
RookieActivist
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posted 23 June 2003 05:18 PM      Profile for RookieActivist     Send New Private Message      Edit/Delete Post  Reply With Quote 
I wouldn't be surprised if there is another coup attempt on Chavez sometime soon.
From: me to you | Registered: May 2003  |  IP: Logged
Holy Holy Holy
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posted 23 June 2003 05:30 PM      Profile for Holy Holy Holy     Send New Private Message      Edit/Delete Post  Reply With Quote 
Maybe, but it's even more likely to fail then the last attempt.

The coup plotters and their foreign backers underestimated the support Chavez would recieve from other Latin American leaders. Ironically, it was not "the Left" that spearheaded the criticism of the coup (Lagos in Chile was partiuclarly pathetic) but leaders like Fox in Mexico. While they aren't all progressive they don't support coups in Latin America like they used to. Furthermore, Lula in Brazil, Guittierrez in Ecuador, and the new President of Argentina have all been elected since the last attempt and they are progressive in a way that Lagos is not.

Furthermore, the military has been purged of most of the potential coup plotters who were loyal to the elite. Unless things get really bad in Venezuela don't count on the remaining officers to betray their commander-in-chief.


From: Holy | Registered: Feb 2003  |  IP: Logged
Wide Eyes
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posted 23 June 2003 05:40 PM      Profile for Wide Eyes        Edit/Delete Post  Reply With Quote 
This is brilliant. Absolutlely BRILLIANT! Although I too am the furthest thing from having any form of economic wherewithall, I have to say the move by other countries to switch from US$ to the Euro for trade is a clever way to deal with the bully tactics of the US. Better than sanctions, outrageous tariffs and military action (no-win situation there). It sure seems like a good way to get the US to sit up and take notice of the consquences of their actions. With the devaluation of the US$, perhaps Canada should consider trade based on the Euro instead of the US$...
From: a lofty perch in my basement | Registered: Sep 2001  |  IP: Logged
DrConway
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posted 23 June 2003 07:20 PM      Profile for DrConway     Send New Private Message      Edit/Delete Post  Reply With Quote 
If Canada switched to the Euro I doubt it would do much except hurt importers again since the Euro is now worth what the US dollar used to be, ie. about $1.50 Canadian.

Currently about 40% of our GDP is still bound up in export-oriented production for the US market, and so it's still not a good idea to move to the Euro.

Chavez can "afford" to, in the sense that Venezuelan oil can be shipped anywhere and there is a further geographical separation.

As well, unlike Chretien, Chavez has no love lost for the US government and would love to stick it to the US (which is a major importer of Venezuelan oil), indeed forcing the US dollar to devalue as the US government bleeds Euro reserves - the chain that makes this take place is a bit hard to follow, but the basic logic runs like this:

Since oil companies in the US must pay PdVSA for the oil, they must now use Euros. So they go to a bank in the US, and ask for, say, a Euro-denominated bank account and switch over some of their US dollar deposits to get the account set up.

Well, every time they need to top up the account, they're exchanging US dollars.

And if the bank hasn't got any Euros to back the account, they need to eventually move up the food chain to the Federal Reserve, which has some Euro holdings. If the Fed won't or can't exchange for Euros, then the bank must go directly to a currency broker and ask for Euros. This means a direct transfer of US dollars out and Euros in, increasing demand for Euros and depressing demand for US dollars.

The consequence of this is that the world becomes flooded with US dollars that fall in value relative to other currencies because the demand for the US currency falls (and the supply goes up, too, but we're ignoring this for the moment). Meanwhile the Euro holds its value or rises precisely because the demand for Euros goes up.

Smart move, el Presidente.


From: You shall not side with the great against the powerless. | Registered: May 2001  |  IP: Logged
Meowful
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posted 23 June 2003 08:23 PM      Profile for Meowful   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
I don't like it one bit!

Because of our dependance on the US, it is in our best interests if the American dollar remains strong.

Our exporters and tourism industry are already being hit because of the shrinking dollar difference. (Among other things, but that's another topic)

I don't like the fact that Canada is so economically dependent on the US. In today's world we could be going down with the Titanic!


From: British Columbia | Registered: Jun 2003  |  IP: Logged
Steve N
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posted 23 June 2003 10:36 PM      Profile for Steve N     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
Because of our dependance on the US, it is in our best interests if the American dollar remains strong.

As far as I can tell, we will stay dependant on the U.S. as long as it is in our best interests to. ie as long as the U.S. dollar remains the strongest currency, their economy is the most powerfull, etc. etc.

Nothing will break that dependance, or even encourage us to try, untill AFTER it stops being in our best interest.

So if the U.S. dollar tanks, you may see us become more independant out of necessity, but not untill.


From: Toronto | Registered: Aug 2002  |  IP: Logged
Geneva
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posted 24 June 2003 05:55 AM      Profile for Geneva     Send New Private Message      Edit/Delete Post  Reply With Quote 
once the European Union integrates 10 new countries in 2004, its total population will be about 450 million, far larger than the U.S. (283 million), as will its gross production, about $12 trillion

the laws of economics, like the laws of gravity, cannot ignore that kind of mass; the E.U. will draw much of Eurasia (Russia, Ukraine, Turkey), North Africa and the Middle East and even, to a lesser degree, Latin America into its broad orbit

over the longer term, it is inevitable that the euro, representing such a large economic space, will establish itself as a strong no. 2 world reserve currency, and eventually oil will be priced in a "basket" of dollars and euros


From: um, well | Registered: Feb 2003  |  IP: Logged
Holy Holy Holy
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posted 24 June 2003 12:43 PM      Profile for Holy Holy Holy     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
Originally posted by Meowful:
I don't like it one bit!

Because of our dependance on the US, it is in our best interests if the American dollar remains strong.


It may be in our interests as Canadians but not as citizens of the planet. As an internationalist I like any move that undermines George W's global supremacy.


From: Holy | Registered: Feb 2003  |  IP: Logged
Meowful
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posted 24 June 2003 05:52 PM      Profile for Meowful   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
"Internationalist"... I like the sound of that.
I don't WANT us to be dependent on the USA, but in reality, we are STUCK on the same continent.

From: British Columbia | Registered: Jun 2003  |  IP: Logged
Jacob Two-Two
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posted 24 June 2003 07:00 PM      Profile for Jacob Two-Two     Send New Private Message      Edit/Delete Post  Reply With Quote 
Don't worry, Meowful. Just because the US's global eminence will decline doesn't mean that they will turn into a third world country or anything. There will be a relatively brief bad spot while they refuse to accept the new order of things, but then they will settle in. They'll still be a large, wealthy economy, but just one of many. Canada will continue to trade with them to the mutual benefit of both parties and we'll all be happy.

In fact, the mildly humbling effect that their decline is bound to have on them will make them less of a bully in terms of policy and trade. In the long run, bursting the US's bubble will be good for Canada.

edited to add: I'm hoping that right now is that brief, bad spot.

[ 24 June 2003: Message edited by: Jacob Two-Two ]


From: There is but one Gord and Moolah is his profit | Registered: Jan 2002  |  IP: Logged
Holy Holy Holy
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posted 24 June 2003 07:08 PM      Profile for Holy Holy Holy     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
Originally posted by Meowful:
I don't WANT us to be dependent on the USA, but in reality, we are STUCK on the same continent.

Ah, but who do you mean by "we". Chavez is - in my opinion - doing something pretty good for humankind at this time on this planet. Might be bad for Canadians but I think we either like it, lump it, or betray our principles.


From: Holy | Registered: Feb 2003  |  IP: Logged
lagatta
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posted 24 June 2003 07:20 PM      Profile for lagatta     Send New Private Message      Edit/Delete Post  Reply With Quote 
Well, Chavez is also stuck on the same continent. But all the more reason to favour a "multipolar world". Not that I have any illusions in European imperialism that has been every bit as loathesome in Africa as the US has in Latin America.

For us in Québec, developing stronger economic and cultural ties with Europe is very important. We do import a lot of books, software etc (and also produce French-language software exported to Europe).


From: Se non ora, quando? | Registered: Apr 2002  |  IP: Logged
Meowful
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posted 24 June 2003 07:46 PM      Profile for Meowful   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
Yes, I believe that we need to aggressively pursue economic opportunities abroad. We should put our energy into trade agreements with Europe (the EU) and Asia.

Currently, a full 80% of our trade is with the states.

Why aren't we trading more abroad already? Have we become so complacent that we thought our "customer" (the states) would always be loyal? Ha! Customers are never loyal... its all about the money. (and power)


From: British Columbia | Registered: Jun 2003  |  IP: Logged
Pogo
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posted 24 June 2003 08:22 PM      Profile for Pogo   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
Aren't Canada's foreign currency reserves held in a variety of currencies not just the US? I would imagine that the US would be a big player, but that we would have some of all our economic partners in reserve.
From: Richmond BC | Registered: Aug 2002  |  IP: Logged
DrConway
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posted 24 June 2003 08:49 PM      Profile for DrConway     Send New Private Message      Edit/Delete Post  Reply With Quote 
Reserves or the lack of them aren't a big deal if we let our exchange rate float completely freely, since the Bank of Canada would not need to intervene for any reason in such a case.

For practical purposes we do need some reserves to try and smooth out the fluctuations, but that's not the same as the US government's problem, which is that the US dollar would have to be propped up by the use of Euro reserves on hand in the US banking system. Once those run out, the currency had better be able to float freely.


From: You shall not side with the great against the powerless. | Registered: May 2001  |  IP: Logged
Pogo
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posted 24 June 2003 09:09 PM      Profile for Pogo   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
I mentioned reserves as that is the only real tie I see to the American dollar. Yes we intervene to maintain an exchange rate, but that has more to do with our volume of business that we need to protect, if we sold 75% of our goods to Argentina I am sure we take a big interest in their currency.

Where I see the new Euro interest playing out is in the British Pound/Euro debate. One of the big issues for the English is their currency pride. However, if the Euro is big enough that it can play with the Americans and win the odd battle, I can see the British jumping for a chance to see what its like to be on top again.


From: Richmond BC | Registered: Aug 2002  |  IP: Logged
rbil
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posted 24 June 2003 09:19 PM      Profile for rbil     Send New Private Message      Edit/Delete Post  Reply With Quote 
Here is a link to an article that circulated around the net before the US invaded Iraq. Made sense then and still does today. ;-)

http://homepage.eircom.net/~gulufuture/news/eurozone_war030323.htm

Cheers.


From: IRC: irc.bcwireless.net JOIN: #linuxtalk | Registered: May 2001  |  IP: Logged
Cougyr
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posted 24 June 2003 09:43 PM      Profile for Cougyr     Send New Private Message      Edit/Delete Post  Reply With Quote 
If you live in Canada, you may be invested in Euros and not know it. Some of my more financially tuned friends tell me that Canadian money markets and others started to invest in Euros some time back, to take advantage of the rising Euro. Pension funds are in to Euros. Any portfolio worth its name has Euros or European investments in Euros.
From: over the mountain | Registered: Nov 2002  |  IP: Logged
ReeferMadness
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posted 24 June 2003 11:32 PM      Profile for ReeferMadness     Send New Private Message      Edit/Delete Post  Reply With Quote 
IMHO, the fact that the USA can generate such a huge benefit out of what is essentially a paper chase illustrates how artificial, inefficient and morally bankrupt the world economic system has become.

I can hardly wait for the revolution.


From: Way out there | Registered: Jun 2002  |  IP: Logged
Pogo
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posted 25 June 2003 12:29 AM      Profile for Pogo   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
But as with there is the flip side of the coin. What happens when more and more foreign money holders start unloading their greenbacks?
From: Richmond BC | Registered: Aug 2002  |  IP: Logged
Gir Draxon
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posted 25 June 2003 12:36 AM      Profile for Gir Draxon     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
Originally posted by Holy Spook:

It may be in our interests as Canadians but not as citizens of the planet. As an internationalist I like any move that undermines George W's global supremacy.


Tell me, Holy Spook, how does switching teams mean being internationalist?

Would it not make more sense to create a new international currency, not controlled by North America or Europe or Asia or any particular region?


From: Arkham Asylum | Registered: Feb 2003  |  IP: Logged
clockwork
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posted 25 June 2003 01:46 AM      Profile for clockwork     Send New Private Message      Edit/Delete Post  Reply With Quote 
It could make all the sense in the world but do you think the US, who spurned the world court, who spurned Kyoto and who basically waltzed into the domain of a bad, bad man against world opinion would adopt a currency it cannot control?

quote:
It is at least possible that the real threat to American dominance may come not from violent Islamism or from the "Japanese challenge" (the subject of Mr. Prestowitz's last book, "Trading Places"), but from an old Europe that has its own economic weapons to hand. No more than a European demand for oil sales to be billed in euros rather than dollars would be needed to put serious pressure on the American currency.

A Superpower Goes Its Own Way, at Its Peril

Now I don't think my link should taken out of context and read as support of other links in this thread. It's just one paragraph, after all.

Anyway, I was recently reading something in one of the financial publications (FT, I think) that the devalued dollar has the effect of exporting US economic problems to Europe since China and through it much of Asia is pegged to the US dollar whereas the Euro floats. Don't ask me to explain it, though.

[ 25 June 2003: Message edited by: clockwork ]


From: Pokaroo! | Registered: May 2001  |  IP: Logged
Steve N
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posted 25 June 2003 09:45 AM      Profile for Steve N     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
Would it not make more sense to create a new international currency, not controlled by North America or Europe or Asia or any particular region?

I thought we used to have something like that, called the "Gold Standard".


From: Toronto | Registered: Aug 2002  |  IP: Logged
LittleDoucheCoupe
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posted 25 June 2003 10:18 AM      Profile for LittleDoucheCoupe     Send New Private Message      Edit/Delete Post  Reply With Quote 
Personally, I think the RCMint should start printing bills with Chuckles face on them. Lizzie's visage is getting a tad tiresome for my liking.
From: Toronto | Registered: Jun 2003  |  IP: Logged
DrConway
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posted 25 June 2003 10:42 AM      Profile for DrConway     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
Originally posted by Steve N:
I thought we used to have something like that, called the "Gold Standard".

There are problems with using a "world currency" due to the need to adjust in some way for differing rates of economic growth and differing inflation and unemployment rates.

Scroll about midway down in this thread where I briefly discuss the problems with a world currency.


From: You shall not side with the great against the powerless. | Registered: May 2001  |  IP: Logged
Wide Eyes
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posted 27 June 2003 07:50 PM      Profile for Wide Eyes        Edit/Delete Post  Reply With Quote 
I say screw the US$ and the Euro, the world will soon be usingCanadian Tire money!
From: a lofty perch in my basement | Registered: Sep 2001  |  IP: Logged

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