Bourse of a Sow's Ear
Regarding the Iranian Oil Bourse trading oil in Euros, which is slated to open in March 2006...
From Econobrowser: "Those selling oil could convert those dollars back to euros or Japanese yen or whatever their hearts desired, and likewise could convert euros obtained through sales on an Iranian bourse back into dollars, if they wished. What ultimately determines the demand for dollars is not the unit of account for the transaction, but rather the desired asset holdings of those who are accumulating the wealth."
also... "you'll pay exactly the same price either place once you make the currency conversion at the current exchange rate."
From Mish's GET: "The KEY issue behind all of this hype is that of reserve status of the US dollar. The "Bourse Nonsense" seems to imply two things that simply are not true: 1. Oil will have to be priced in euros (or some other currency) for the US dollar to lose reserve status. 2. As long as oil remains priced in US dollars the US will retain reserve status."
All of the above observations may be true. But, I tend to think like a broker or a bookie, not an academic, so I must weigh in now...
Lets not even talk about the currency valuation effect. Of course these oil transactions all of which require currency conversions are done for "free" right??? And the currency conversions are done for "free" also, right???
Let's do the math: 85 Million Barrels of Oil per day x $70 a barrel x 45 days (contract life) = 267,750,000,000 or a 1/4 of a TRILLION reasons why you might not want to have to pay to exchange your currency for any commodity transaction.
In 365 days there are around 250 trading days, multiply 1/4 Trillion every 45 day cycle by 5.5 and you get 1,472,625,000,000 or 1.5 TRILLION reasons annually why the US wants to keep all oil transactions worldwide conducted in dollars.
And they want those transactions to occur on the NYMEX and London IPE, not anywhere else.
Neither seller nor buyer, shall ye be, thee be the broker of the deal, in this there is always profit. Pay the winners with the losers money and keep the vig for thyself.
Unless they have already cut the appropriate parties in on the deal, I cannot fathom the rath that the Iranians are about to bring down upon themselves.
This is worse than screwing with the church or mobs main source of income, where winding up chum would be a better fate than whats coming.
From Econobrowser: "Those selling oil could convert those dollars back to euros or Japanese yen or whatever their hearts desired, and likewise could convert euros obtained through sales on an Iranian bourse back into dollars, if they wished. What ultimately determines the demand for dollars is not the unit of account for the transaction, but rather the desired asset holdings of those who are accumulating the wealth."
also... "you'll pay exactly the same price either place once you make the currency conversion at the current exchange rate."
From Mish's GET: "The KEY issue behind all of this hype is that of reserve status of the US dollar. The "Bourse Nonsense" seems to imply two things that simply are not true: 1. Oil will have to be priced in euros (or some other currency) for the US dollar to lose reserve status. 2. As long as oil remains priced in US dollars the US will retain reserve status."
All of the above observations may be true. But, I tend to think like a broker or a bookie, not an academic, so I must weigh in now...
Lets not even talk about the currency valuation effect. Of course these oil transactions all of which require currency conversions are done for "free" right??? And the currency conversions are done for "free" also, right???
Let's do the math: 85 Million Barrels of Oil per day x $70 a barrel x 45 days (contract life) = 267,750,000,000 or a 1/4 of a TRILLION reasons why you might not want to have to pay to exchange your currency for any commodity transaction.
In 365 days there are around 250 trading days, multiply 1/4 Trillion every 45 day cycle by 5.5 and you get 1,472,625,000,000 or 1.5 TRILLION reasons annually why the US wants to keep all oil transactions worldwide conducted in dollars.
And they want those transactions to occur on the NYMEX and London IPE, not anywhere else.
Neither seller nor buyer, shall ye be, thee be the broker of the deal, in this there is always profit. Pay the winners with the losers money and keep the vig for thyself.
Unless they have already cut the appropriate parties in on the deal, I cannot fathom the rath that the Iranians are about to bring down upon themselves.
This is worse than screwing with the church or mobs main source of income, where winding up chum would be a better fate than whats coming.
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