Contemporary Wars

Well now: the US$ to Euro ratio of worldwide currency reserves is, as mentioned above, 70% to 15%. The amount of value "blocked" in US$ is thus 4-5 times bigger than the amount of Euro value. Since the EU can't simply print money (it would lead to domestic inflation), nor can it resort to barter exchanges (so far no EU banks accept payments in green bananas) US$ holders would have to accept an exchange rate that would require a (rough approximate of about) 400% devalorisation of the US$ (my math skills aren't that good) in order to exchange their dollars into euros. Isn't that reckless dumping?

And yes, it would be enslavement - politically decided enslavement - just as it was enslavement when the communist regimes in E Europe "agreed" to renounce trade ties with the free world and the afferent hard currency payments and to set up international barter cooperatives with the friendly USSR and payments in soviet rubles - does "Sovrom" ring a bell?

Yes, it's not bad at all that the Euro gradually and justifiedly (i.e. the EU produces and sells more and better commodities) increases its share of global trade value. That would be great, market economy at its best. What would be catastrophic is the politically-decided adoption of Euro as world currency, when the market hasn't called for that yet - and hasn't for a LARGE margin.

And the OPEC (as does any other trader) only wants money it can use. What use have Euros for them when the EU is, right now, an unattractive market for investments? E.g. why would I ask my clients to pay me in $ if I want to go and buy a car (or a company) in Euros, in Germany? And viceversa for the USA! Makes no sense whatsoever.

Why do you always bring that number up -- 70% to 15%? Its irrelevant, as nobody is talking about a simultaneous, worldwide adoption of the Euro.

But thats not very important.
Whats important is that you make a big error. You take that 400% difference in the 70-15 relation you mentioned and consider that that is the level of losses incurred in the exchange. Which is false.
That would mean actually that 1 dollar = 4 Euros in exchange rates, which indeed would make anybody wanting to switch to euros look mad.
But look, the situation is roughly rather like this: 1,5 dollars = 1 Euro. No to mention that inter-bank exchange rates are sometimes lower than the "conventional" exchange rates.

So changing to Euros is not utterly catastrophic, its not the end of the world. Not to mention that the assets are not blocked in dollars.

As for the inflation issue, dont worry. The EU CAN print money without leading to inflation as long as they are used to cover real-value exchanges. And if other countries adopt the Euro as the main currency in value-exchanges, then the EU can print them.
Ofcourse this is another discussion, but I trust the European Central Bank has enough smart people not to print "inflation". So I think they could handle it, don't worry.

My personal conclusion is that switching to Euros is not only possible, but also recommended for some countries.
And also switching to Euros is not the cause of the dollar's downfall, but its effect!

Some data:

http://www.bloomberg.com/news/markets/currencies.html

This post has been edited by Imperialist on February 15, 2005 03:11 pm

Basing in Irak.

"the U.S. is planning a long-term military relationship with the emerging government of Iraq, one that would grant the Pentagon access to military bases and project American influence into the heart of the unsettled region"

American officials have tried to make the point that the US presence in Iraq will not be a permanent or long-term one. US Defense Secretary Donald Rumsfeld in a 21 April 2003 press conference said that any suggestion that the United States is planning a permanent military presence in Iraq is "inaccurate and unfortunate." Rumsfeld said "I have never, that I can recall, heard the subject of a permanent base in Iraq discussed in any meeting. ...

On 23 March 2004 it was reported that "U.S. engineers are focusing on constructing 14 "enduring bases," long-term encampments for the thousands of American troops expected to serve in Iraq for at least two years....

Full article

So, 6 months, 2 years... or long term ? And what if Sistani simply asks to leave ?

This post has been edited by Chandernagore on February 15, 2005 11:45 pm

For someone who has stayed up late at night and worked on these problems I can tell you that renewables are an alternative only for small, village sized, food-sufficient communities. Not for an entire industrial economy and its infrastructure. Not at this high level of development at least.

Surface ships and submarines cannot be effective on land. If you are talking about carriers, their power lies in the airplanes, and airplanes use fuel. At least I never heard of a nuclear-powered fighter.

The world experienced high growth rates only in the last 100 years, with the advent of oil-driven industrial capitalism. The question is not of the end of the world when the oil is over, but of what will happen with the surplus of population acquired in that period.
Lebensraum as a doctrine will be back like never expected.

Maybe u didn't drink enough coffee. I've been up nights. too, in the science biz. Tech developement will catch up with infrastructure fast; it always does. It IS the base.

I'm speaking of trends. Renewable energy technology will only advance. As oil goes up in price, out in supply, renewable energy stocks will go thru the roof in value, and technology will zoom in on new profit opprtunity like a heat seeking missle.


Don't make the ancient mistake of fighting tomorrow's war with today's weapons...your analysis seems to be grounded in the fog of the present....who says nuc. fighters r impossible? I had an aviation engineer friend who worked on brainstorming that in the 60's. His company dropped it for obvious reasons, but nothing's impossible. End of oil will not be end of hi tech warfare.

Case in point: front page article in today's NYT; robot soldiers almost ready for battlefield. I presume they r powered by fuel cells. (the soldiers, not the NYT)

O ye of little faith.

POPULATION!!!!! Don't u read the papers? Western E. and Russia have such declining/stable birth rates that IT is a problem. U don't think the Chinese and Indians will figure out they can have 2 cars if they only have 1 kid? (or none). (O.K. S. America could take a while longer). Lebensraum? R u writing from the last century somewhere?

High growth rates only in the last 100 years only?!!!!! Pick up an economics history textbook, please: high growth rates did not even start with the Industrial Revolution, (150-200 years ago) much less with, say, J.D Rockefeller and Standard Oil apogee (approx. your date). Many European monarchies had extreme growth rates (thank u, conquistadores) in the age of "Exploration"....And..ever hear of the Romans? They did pretty well, growthwise for awhile, even if u argue they were only protocapitalists.

Oil=growth, if that's your claim, is impossibly unidimensional, imo.

1st, I was talking about the oil-driven industrial capitalism if you ever bothered to read carefully. So I see no point in you taking me back to the first industrial revolution orthe Monarchies of Europe, with their economies largely based on Commercial Capitalism and only small scale industries until the advent of fossil fuel-driven industry and transport.
And, in case I did not make myself clear, I was obviously talking about growth rates HIGHER than the ones achieved during earlier technology tree. Therefore, trying to underline the qualitative impact of oil on growth rates, not imply that growth rates were inexistent before! (how can you possibly think that???)

2nd, Please use a friendlier tone. You're not impressing anyone with that.

3rd, if you analyse the history of technological "trees", you will see that the qualitative jump has occurred not through technology, but rather thru the exploitation of new energy resources (with a higher energy "punch").
Ofcourse, the technology had to be there to exploit them, but it did not create the energy resources, it fed on them.

Therefore the question is not whether renewables are going to make a comeback while oil exits the stage, but whether renewables carry enough of an energy "punch" to be able to replace fossil fuels at current levels of consumption.
That IS my argument, please do not reinterpret it!

And the answer is NO. Unless you plan to cover all of the US with solar-panels.

If you say that new technologies will appear that will render my argument futile, then fine!!! But until then in the PRESENT, my argument stands.

Thanx.

1st, I was talking about the oil-driven industrial capitalism if you ever bothered to read carefully. So I see no point in you taking me back to the first industrial revolution orthe Monarchies of Europe, with their economies largely based on Commercial Capitalism and only small scale industries until the advent of fossil fuel-driven industry and transport.
And, in case I did not make myself clear, I was obviously talking about growth rates HIGHER than the ones achieved during earlier technology tree. Therefore, trying to underline the qualitative impact of oil on growth rates, not imply that growth rates were inexistent before! (how can you possibly think that???)

2nd, Please use a friendlier tone. You're not impressing anyone with that.

3rd, if you analyse the history of technological "trees", you will see that the qualitative jump has occurred not through technology, but rather thru the exploitation of new energy resources (with a higher energy "punch").
Ofcourse, the technology had to be there to exploit them, but it did not create the energy resources, it fed on them.

Therefore the question is not whether renewables are going to make a comeback while oil exits the stage, but whether renewables carry enough of an energy "punch" to be able to replace fossil fuels at current levels of consumption.
That IS my argument, please do not reinterpret it!

And the answer is NO. Unless you plan to cover all of the US with solar-panels.

If you say that new technologies will appear that will render my argument futile, then fine!!! But until then in the PRESENT, my argument stands.

Thanx.

O.K., all I'm saying is that the end of oil is not the apocalypse.

Thank u for qualifying your statement; I'm glad u don't think high economic growth started with oil. My argument is that neither will it end when the last barrel is pumped.

I apologize if my flippancy sounds unfriendly. I'm generally a very friendly guy. To me, this forum is a conversation/debate, like u might have in a bar, say. I use a tone that I'm used to in that context. No offense intended. I dislike pomposity and inflexibility, and I try to make friends, not lose them. I'm sorry I was too flip.

More to the point of the thread (contemp. war); I don't know what a technological "tree" is, but imo war is the major author of technology "jumps", not energy sources. i'm confused by your statement; qualitative jump of what? of tech or of economy? Energy source/tech r in symbiotic rather than causative relation, imo. Or maybe they r each preconditional to the other.

Whatever the case, the upshot is the kind of economic growth the West saw postwar; a whole new level of affluence unsustainable without cheap oil, unthinkable without technology.

I subscribe to Kuhn's notion of scientific progress occuring thru paradigm shift, presume the same applies to technology. Thus, if, e.g., u look at the P. shifts that WWII engendered it's incredible! Jet aircraft, nuc energy, whole new chemistries, antibiotics, computers (depending on your reading of their conceptualization), and, unfortunately, SUV's (the jeep, )

I presume the contemporary "oil wars" (if that's what they r) will spin off their own advances. I should say I hope they will.

I totally agree, and I also dismiss any apocalyptic scenarios.
I only say it will be tough and chaotic.

I hope that too. But you see, we could have had this discussion in the '60s, me a, a disbeliever in new technology fossil-fuel-free, and you, well, a believer.
I would have told you apocalyptically about Hubbert and the coming peak in US oil production.
You would have told me that new things are in the making, nuclear power is the future, so that by the year 2000 the US would not even need oil anymore. And even in the defense industry, nuclear jets are the future...
I would have said, like I say now, I won't believe it till I see it, and its hard to see that happening.
You would have said that with high oil prices in the '70s people will find it provitable to invest in renewables or nuclear, and they'll go up like a heat-seeking missile.
Also, the Vietnam War was raging, but look, the War has brought no technological jumps, at least not the technological jumps in energy use/shift we are talking about.

Sorry for this imagined dialogue, but I think you understand the analogy.


take care

Well the whole damn economics discussion started from this very premise (a near-immediate $-to-Euro switch) brought up by Chandernagore's URL theory that the Iraq-Iran switch to Euro payments will swiftly bring down the US$! And, sorry to inform you but the structure of global currency reserves is quintesential and anything but irrelevant in macroeconomics!

Re my error: perhaps you didn't read me well - so if I have an equivalent of 1 bil ROLei of savings and 70% of them are in US$ and 15% in Euros that would mean that the exchange rate is $/Euro=1/4? Hardly.

So, let's do some math (feel free to criticize). For some reasons the global combined monetary resources consist of 70% $ - let's say 700 mil ROLei equivalent ( ~24.500$), 15%Euros - 150 mil ROLei equivalent (~ 3.800 Euro), and other currencies. Right now the standard exchange rate is 1.30$ per 1 Euro.

Here's the 50%-50% $ to Euro value scenario: all of a sudden govts of the world and the world oil exporters resolve that they will force the market to use equal amounts of $- and Euro-value in the global trade (or, in my fictional example, the Romanian Government, for foreign currency operations in Romania, while I'm the perfect statistic average of a Romanian businessman) . I.E., by making a political decision that completely goes against the market trend and current situation, they'd be forcing the US$ holders to exchange $ to Euros. Because VALUE nor MONEY can't simply pop up in the world economy nowadays, according to their wishes, the value of $ reserves would have to decrease from 70% to 42%, and the value of Euro reserves would have to increase from 15% to the same 42%.

As a result, in this 50-50 $/Euro scenariu, I think that US$ holders would be forced to support a net loss of (70-42)/70=40% of their reserves value, while the Euro holders would gain a net (42-15)/15=180% of their reserves value. To put it otherwise, my 24.500$ would only buy me 420 mil ROLei (1$=17.500 ROLei), while my 3.800 Euro would buy 420 mil ROLei (1 Euro=110.500 ROLei), too. 110.500/17.500=6.31 $ for 1 Euro. Is that a 5 times depreciation or what?

Now: all I put into this oversimplified scenario (and I'm not sure the calculations are 100% correct) was the exchange rates. No depreciation due to ensuing stock crashes, no anything else (partly because I hated Economy in college, I still do and partly because I think the discussion's strayed off topic long enough), but unfortunately those would aggravate much further the final outcome of such a political switch.

Thus, in order to draw some conclusions of mine on this issue: is the crash of the US$ possible if Iran switches to Euros? No. Would it have been possible if Iraq too had been still trading in Euros today? No. Would it be possible if due to some misterious reasons all oil exporters decide to switch to Euros? Yes. Would that decision simply evaporate the above-mentioned oil exporters (and the rest of the world's) current savings and investments, too? Yes. So why would they do that? Out of unadulterated, sheer madness, IMHO.

Regards,

valachus

This post has been edited by valachus on February 18, 2005 10:33 am

No, it would not. And here is the crux of our misunderstanding I think.

I do not believe countries behaves much "out of sheer madness". I hope it's not the only way left for you to deal with the reality that several OPEC countries *are* actually showing increasing signs of currency shift intent.

But then I agree with imperialist that it is a result, not a cause of the dollar weakness. Perhaps there is even some amount of political badwill at work. But madness is not usually called upon to explain major economic decisions.

No, it would not. And here is the crux of our misunderstanding I think.

I do not believe countries behaves much "out of sheer madness".

1) I take it you never experienced 1st hand the effects of massive inflation. You can still have the same amount of money but if their value drops by 50 or 80 percent or even worse, the government forces you to dump it at artificially fixed rates, you'll understand better that "value" and "money" are two different things and that often economics are way better off without politics getting mixed up in their inner workings.

2) It's not "countries" who act out of madness but their governments. I won't discuss the case of post 1950s Socialist Bloc because the underlying case there wasn't "pure" madness but blind belief in the tenets of "scientific marxist economy" - a belief widely held even today by various people around the world. It's very interesting though to study as psychiatric cases of economics Peronist Argentina and, lately, Hugo Chavez' Venezuela.

Your double standards are truly amazing me No need to argue further, time will tell. But I can already see the picture on wall and I'm confident.

On the other hand the statement that economics and politics should not be mixed is very curious. I can't find a single example of this actually occuring for any period of time anywhere in the world. For politics is about human activity and economics are one of it's tools. Just one tool.

This post has been edited by Chandernagore on February 18, 2005 01:14 pm

Valachus, are you trying to trick me?

Sorry about that, lets get serious:

1. You say you have 24,500$ and 3,800Euro. Hmm...
The current exhange rate is as follows:

1$ = 29,111 Lei
1Euro = 38,026 Lei
1Euro = 1,30$

So your reserves would be 713,219,500 Lei (in $) and 144,498,800 Lei (in Euros).
If you change ALL your $ for Euros, you'd get 18,846 Euros.
That would be 716,637,996 Lei!!! [ I used a Calculator ] Besides the remaining 144 Million Lei you still have in Euros!

So I don't get it.... what are you losing exactly? In fact, this only proves that you are bound to lose MORE Lei if you continue to keep them in $!!!

Your mistake was that you first changed the dollars in Lei and then tried to buy with the Lei Euros.
But who forced you to do that? Is there some kind of silly rule forcing you to use the Lei as middle-man in an $-Euro exchange? I am not aware of such a rule.

Now apply my demonstration on countries that sell millions of barrels of oil per day in $ and understand why they want to change to Euros.
For them value does come from nowhere, it pops out from the earth. They want to make the most of it.

This post has been edited by Imperialist on February 18, 2005 04:43 pm

Maybe I didnt make my point clear enough: if one considers only the well-being of ordinary people, politics shouldn't try to supress free market economy and its rules, but encourage it. Whilst in the free world politics serve the economy because the politicians are highly dependent to numerous economical interest groups, on the contrary, political decisions in non-democratic and statist (i.e. politicized) economy countries often use economy as a mean to a political end of the ruling elite, invariably to the detriment of the bulk of their own citizens - e.g. Allende's Chile, Castrist Cuba, Maoist China, USSR & the Eastern Bloc, etc etc. etc.

You have to consider the fact that there are no Euros materializing overnight nowhere on this planet.

The ROLei could be any value standard, gold/yens/SDR (special drawing rights) whatever you want. My point was the fact that a more or less forced switch to Euros just for the Euro's sake, implies forcibly accepting TO PAY MORE $ FOR THE EURO than Euro's value is right now!

If the EU doesn't discover the philosopher's stone, at the current exchange rate there is no massive supplementary source of Euros for the surpluss $ sold by $ holders that have no use for their money, except the printing presses! Unless of course the exchange rate changes, as I showed above!

This scenario is absolutely comparable with the situation of Romanians back in 1990 when they had plenty of ROLei, needed US$ or DMs but there was no such thing available for them! So people often bought currency at rates 3-5-8 times higher than the official exchange rate.

Now, imagine what would have happened if the PECO stations in the country would have decided at that moment to take exclusively US$ instead of ROLei for gas (because they thought US$ were a better currency than ROLei - no truer argument than that, too).

And - finally - replace in the above paragraph as follows: PECO with OPEC ; the ROLei with $ ; and, the US$ with Euro. Maybe you'll finally understand what the situation's like.

P.S. you really left me open mouthed when you said that somehow in Romania today one can sell $ for ROL then buy Euros with those ROL and actually make an overall profit!

This post has been edited by valachus on February 18, 2005 02:46 pm