Ironduke

Source: Iran slashes oil transactions in dollars - Yahoo! News

__________________
The Buck Stops Here

HistoricalDavid

Thank you, Alan Greenspan.

Zinja

The US needs to come up with a comprehensive package to save its market worth. It's steady decline if left unchecked will be prove very difficult to reverse in the long run. This is slowly making the US increasingly vulnerable to its rivals and in the long run will challenge its very status.

Feanor

Especially given the trillion-dollar deficit. It hit what, 9 trillion recently?

Buu

The United States public debt is approximately nine trillion dollars. However, if intragovernment obligations are considered, the debt rises dramatically to about sixty trillion dollars.

Feanor

Oooh. New member. Go over to the introductions forum and post about yourself so they can either welcome you as a new republican or stone you if you're a democrat

Ray

Trading in Euros.

That sure is bad news.

__________________


"Some have learnt many Tricks of sly Evasion, Instead of Truth they use Equivocation, And eke it out with mental Reservation, Which is to good Men an Abomination."

I don't have to attend every argument I'm invited to.

HAKUNA MATATA

Trooth

Clearly Iran is doing this both tactically (to combat US financial pressure) and politically (to try and exert its own pressue on the US in general).

However it is also just part of the market - the Euro has now matured into a very trade-able currency, from a stable economy so it is an appealing trade prospect. Also given the amount of Oil used by Japan and their lack of natural resources (they'll always be producing Yen and always buying) it too is very trade-able in terms of commodities.

It is only the political aspect that is concern. Even the tactical aspect is to be expected.

__________________
The world as it should be at surrealscoop.blogspot.com

Zinja

The $9trillion is inclusive of intragovernment obligations. The $60T debt is a 'future' obligation debt covering things like social security, medicare, mediaid etc. In reality, the $60T debt is not much of a concern really. Even the $9T debt, it isn't the whole figure that is worrisome but rather the about $6T component of it. This is the bit which is directly a responsibility of the US bank. Otherwise the rest is owed by companies, individuals, intra-states etc.

Shek

For a country with an annual GDP of $13T that is growing at an average of 3% per year, the $8T of debt isn't that burdensome. People making next to nothing take on tens of thousands of dollars up through over a hundred thousand dollars of debt for school. People take out mortgages worth 5-6 times their annual income. What matters is how burdensome the debt service is, and for the US, this is not an issue for now or the forseeable future.

__________________
"So little pains do the vulgar take in the investigation of truth, accepting readily the first story that comes to hand." Thucydides 1.20.3

Zinja

I agree that the debt level for an economy such as the US is not lamentable, indeed it is about number 35 on the list of country debt levels against GDP. If this level was for any ordinary country it would be considered stable. But alas, the US is not an ordinary country. The level of debt has a riple effect of affecting its currency in the world market, and THAT is a cause for concern. The effect is already being felt now with countries like Syria, Italy, Russia, Sweden, and the UAE slashing their US dollar reserves levels. Japan is rumoured to be adopting similar measures but won't make it public (for obvious reasons), and Japan is the largest foreign owner of US debt. Kuwait has lifted its currency from the dollar altogether. These issues can not be left without corrective action especially when 44% of US $5.6T public debt is foreign owned. It makes it even more acute when you consider that at least 60% of this is owned by foreign national banks (very market sensitive).

Also as long as the debt level is not brought under control, US debt service cost will continue to increase with a 'viral' effect consequence.

Individuals debt is not the issue (as explained in my previous post). It is this $5-$6T that should be addressed. To say it is not an issue is overly simplifying issues.

Feanor

The problem isn't the debt itself, it's that it is growing.

Zinja

Bingo! That is what i was trying to explain to Shek that the US needs to take corrective action and not pretend that it is a none issue.

Shek

It is not an issue now or in the near future, even if we continue to run budget deficits. The debt service simply is not that large of a burden, nor will it be. Most of the debt is structured around 30 year and 10 year bonds.

The issue that confronts the United States is its poor savings rate. If this doesn't turn around in the next 10-15 years, then potentially unstable imbalances could develop over time and foreign borrowing to continue the necessary pace of investment spending for growth would start to dry up. However, this is not an issue now.

Zinja

IT IS AN ISSUE. You point out correctly that there is a savings problem in the US, but what you don't point out is the whole picture of the economics. Economic laws dectate that Exports are a result of savings minus investments. If there is a decline in savings it means the US will have to reduce investment or balance the equation by importing. The US has chosen the later option (and wisely so), but importing is putting pressure on the dollar (amongst many other reasons as well) resulting in loss of confidence in the US dollar as a base currency hence the reaction of the countries i outlined in my previous posts. THIS, is an issue, and the US needs to nip it in the bud. And Shek if foreign banks start reacting to this trend with most of them having reserves of more than 90% in US currency, believe me US will have its black Wednesday, this is why im saying this is an issue. The US needs to stabilise the dollar and very fast. They don't have the 10-30years of the bonds to fix this.

However, on the brighter side of things it is not all gloom. A solution is very possible by balancing the budget (asuming that the US is not complacent about this problem). Balancing the budget will allow the US to to use the surplus to control the principal of of the debt whilst using the debt to boost GDP. The US was on course to doing this before 9/11, which allowed the Bush admin to give tax consessions. Now a mixture of bad fortunes have meant that this will only be possible after 2010.