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Home Front: Economy
Dollar May Fall on Concern Oil Prices Will Slow U.S. Economy
2004-10-06
The dollar may fall for a second day against the euro in Asia after oil prices rose to a record, raising concern the U.S. economy may slow. Oil costs have been negative for the economy, and an increase in first-time jobless claims last week may mean job growth will be less than forecast, Robert McTeer, president of the Federal Reserve Bank of Dallas, said yesterday. U.S. service businesses expanded at the slowest pace in 16 months, while an index of consumer confidence fell, reports yesterday showed. ``Soft U.S. data is pressuring the dollar versus the euro,'' said David Mozina, currency strategist in Sydney at ABN Amro Holding NV. ``With oil over $51 a barrel it has a taxing effect on the economy. Dollar weakness is coming back.''
--------Snipped-----
Enough with all the oil futures, Mark!
Posted by:Mark Espinola

#31  Four to the Floor
Posted by: Antiwar   2004-10-06 9:18:24 AM  

#30  * golf clap *

Nice writing, Mike E.!
Posted by: Seafarious   2004-10-06 11:22:54 PM  

#29  Steve, sorry for the delay. Everything is ok :)
Posted by: Mark Espinola   2004-10-06 8:29:31 PM  

#28  Weird Al, lol

This is something to really think about. I shall endeavour to add some humour. First off, placing myself as a semi-well healed Wahhabist ..oy no ..ok if I must, here goes, I am a secular Saudi, London educated, in the clothing trade, with a moderate amount of dough on hand. I like to play the horses and dogs too, that's why the money department is only moderate.

That teasing blond Stockholm tomato is expecting a jet set looking Porsché for her birthday, which will set me back at least 98k for this 2005 special edition 911 Targa.

Ha, look at that, and it's in cranberry colour, just want she dreamed of.

Linnéa, my tall Swedish girl "needs the Targa" she "test drove" in early September which was fully loaded with a huge sliding moon roof coupled with the best in-dash 10 cd player known to mankind. I have been informed of this birthday gift amongst other some ones, no less than 50 times since the first test drive. I called her 47 of those conversations. Oh Ali Babba she thinks I am the Crown Prince Abdullah bin Abdul Aziz himself with these outlandish requests of hers.

Mmm, ok, ok, let me locate that gold plated calculator that rich Kuwaiti gave me, the one my cousin introduced me to last year, while we were at a party in the Sheraton Kuwaiti Hotel & Towers. Ah, for the love of Mike, what's his name, oh yea, Abdallah Abd al-Rahman al-Tawil, the minister of Trade & Industry for Dawlat al Kuwayt. He is the one I gave an incredible deal on Gucci suits and all those Prada , Fendi, & Ferragamo shoes for his four wives. As I now recall this Kuwaiti Minister was so delighted with the suits & shoes, when all of us departed from the Sheraton he placed Fendi hat on his favourite camels out in the camel portion of the car lot. I think that schlemiel was so happy because he drank all the punch, one full glass after the other, when there was nobody looking of course.

The idea of converting my higher worth Euros (current valuation equals $1.22 USD for every Euro) then U.S. Dollars begged against the Mainland 'Red' Chinese Renminbi (yuan) currently is about 1:8.3 (1 dollar = 8.3 yuan,) Hay.... this is too confusing. Better not do that yuan, it's making me sleepy just saying it. I'll stick with Eruos and U.S. greenbacks.

Since I am just a little Saudi schmoe and do not have any meaningful influence with any Arabian upper crust oil barrons, the best thing I can do is buy my own oil contracts, 'calls' of course, since after the American election Bush is going to settle old scores with those rotten, infidel, Shi'ite mullahs sending those fea ridden rodents back to the stone age. The Iranians ....opppps!... Ay Carumba! I just thought of this, those Persian fruitcakes might fire their new missiles right our huge Ghawar oil fields and we would go down the drain like wet sand. That's it! Mmm, I'm relocating to Sweden with Linnéa and play the London & NY oil markets from there.

Ah yes, I have it by George, open two trading accounts, one in Euros for North Sea Brent and the second in Dollars, to trade theNYMEX, plus, think of this, I will be out of arms way if once those boys in Tehran go on a jihadic kick.

Let's see now, with oil being about $52 in NY if those mad mullahs push the panic button I could double my money quickly. Maybe two Targas could be ordere , but they are sooooo small!
Posted by: Mark Espinola   2004-10-06 8:28:03 PM  

#27  Errr. Mt. St. Helens.
Posted by: John (Q. Citizen)   2004-10-06 5:43:15 PM  

#26  I think the old cranium is about to go the way of Mt. St. Helena.
Posted by: John (Q. Citizen)   2004-10-06 5:39:10 PM  

#25  Mark, no problem with your posts, there were just a lot on same subject today. Thanks for contributing to the discussion.
Posted by: Steve   2004-10-06 4:42:33 PM  

#24  Mark: I certainly defer to your expertise. Let me put out a more personal scenario and hear your thoughts. You are a moderately wealthy saudi businessman, who for years has been taking your honest bribes in dollars and putting them under your pillow. Your Swedish mistress is expecting a very nice present. You decide to buy her a 911 Targa. Costs 80k Euro. Four years ago, you would have needed 72k dollars to buy it. Now you need 98k. Are you happy? Multiple by a million or so, and you have a bunch of unhappy people. Couldn't they convince OPEC to cut production 10%, demand Euros, and sell to the Chinese, taking their currency and using it to buy their goods? Doomsday scenario, but totally impossible?
Posted by: Weird Al   2004-10-06 4:27:38 PM  

#23  Steve, I was not aware of your name otherwise I would have addressed you more properly on the issue.

Being involved in energy/commodities, at times I encounter people who are exclusively in the 'stock world' which strongly dislike any discussions of the 'commodity world' since it's like vicious cats and attacking dogs within the overall financial trading world. This is in no way the case here.

Although each of the articles posted, and I do agree they had an abundance of 'trade talk' which may be a bit of mumbo jumbo to some unless in the field, but there was also various, broader based, economic viewpoints regarding numerous energy producing nations, with different outlined current trending developments, coupled with future projected causes & effects concerning 'petrol-inflation' along with the generalized and specifics of the global topic of rising energy costs.

Since you fully explained you position, I stand corrected and offer an apology for being on the harsh side & a posting putz. I believe it was due to thinking I needed to schlep out this joint & fill her up, again today, with high-test no less :)
=================================================

Wierd Al, they are not are friends. The Euro would have to totally devastate the U.S. Dollar from present levels before those guys would refuse to except $$$'s.
Posted by: Mark Espinola   2004-10-06 4:16:36 PM  

#22  Al, the single greatest purpose in life for both the Sudi and Chinese leadership is the continuance of their existance in power. As gratifying as they might see an economic slap at the United States, it won't keep them in the positions to which they've become accustomed.

That said, I would never discount the ability of any human or group of humans to be totally stupid.
Posted by: Chuck Simmins   2004-10-06 3:56:14 PM  

#21  How many people think the SA or the Chinese wouldn't refuse payment in dollars or stop buying treasuries if they thought it would wreck our economy, even if they took a big hit at the same time?? Put another way: how many people think these guys are our friends?? Hmmm???
Posted by: Weird Al   2004-10-06 3:47:19 PM  

#20  Mark, I counted at least three oil stories from you today. Most duplicate the same information. One will be enough to discuss the problem, that is all I meant in my comments.
Posted by: Steve   2004-10-06 3:12:52 PM  

#19  
Monitor in green......you really mean 'Enough with the oil'? No further postings on the subject oil prices? I wonder if everyone else agrees?

Wow, in the 'future' I'd better start using orange juice in my gas tank. So should all you 18 people (thus far) posting comments to this worthless, fish wrapping rubbish, after all nobody really cares what they shell out at the gas pump....... do they?

Throons Ebboose8966, your well thought out comments, #3, should be reviewed, among many other postings like Chuck Simmins, Lex & Badanov plus many more.

Throons: "What this report is saying is that much of the world's economy revolves around the price and availability of oil. OPEC, particularly our good friends the Saudis, want payment in dollars." You & others fully grasp the tinkering global economic situation in relation to the rising cost of petroleum & energy in general.

Bingo! Badanov: "The Saudi putting a currency pegged on a near socialist economy teetering now was we speak on recession, would spike hyperinflation in Eurostan. You add to that American traders with a strong sense of revenge would make certain the Euro fails. There is a trader's axoim: The action on the downside can be as good as the action on the upside."
Perfecto! Right on target!!

Opps, I almost forgot, we are not allowed to talk about anything relating to 'crude oil futures' ..............correct?

It's a shame only (((one))) guy, which does not see any relevancy what-so-ever in discussing in public the one volatile, geostrategic commodity everyone in the entire world utilizes, should ban the topic from discussion(??).

[Yes] or [No] Monitor? I want it said in pain English and a credible, logical reason why, so everyone comprehends?
Posted by: Mark Espinola   2004-10-06 1:36:27 PM  

#18  The Saudis make a fine scapegoat, but they are no longer a major player in the U.S. economy. China is, and that is a scary thing

True. We're focusing way too much on OPEC and Europe. China is the relationship that matters above all others. Utterly ridiculous that we have G8 economic "summits" each year with a group of nations that excludes the nation that's more crucial to us than all the others (exc maybe Japan) combined.
Posted by: lex   2004-10-06 12:45:06 PM  

#17  Chuck - thanks for the interesting post. I'd comment - but it's a bit out of my league :-)
Posted by: 2b   2004-10-06 12:37:58 PM  

#16  The Chinese continue to have the largest stock of U.S. currency reserves, and have their currency tied directly to the dollar. Why? Because we are just about the only nation running a trade deficit with China. They need vast quantities of dollars.

Chinese demand for oil is up at least 20% this year. They are the world's largest consumer of copper, 20% of demand, and consume 25% of the world's aluminum production. Their economy is predicted by the IMF to expand 9% this year versus 4.3% for the United States. Inflation is running at a seven year high of 5.3%.

China imports 90% plus of the oil it needs. China's importation of wheat increased 180% in the last year, and it is now running a deficit in agriculture. Its grain production has decreased 15% since 1999.

China needs dollars to feed and fuel itself. That's why it is resisting our demands that it untie the yuan from the dollar and float it.

14% of our oil imports are from the Saudis, and it's old oil, which takes significant refining to be usable. The US gets 49% of its imported oil from the Western hemisphere. The Saudis make a fine scapegoat, but they are no longer a major player in the U.S. economy. China is, and that is a scary thing. LINK to my blog post
Posted by: Chuck Simmins   2004-10-06 12:02:52 PM  

#15  Agreed! - The economic incentive gets great enough it will occur. Look at the bright side. The more the Arabs and Socialists try to bring us down by witholding their oil, the sooner they will self-destruct.
Posted by: 2b   2004-10-06 11:48:46 AM  

#14  We have the technology to obtain alternative sources. Right now there isn't the will or the economic incentive.

Well it's a bit late in the day to keep waiting for the miraculous market to save us. It's obvious we need to reduce our dependence on imported oil. So let's f***ing get on with it. Nuclear, wind, solar, drill in ANWR, any and all of the above.
Posted by: lex   2004-10-06 11:35:35 AM  

#13  you guys are losing the forest through the trees. It's like you are trying to predict which way the wind will blow by sticking your fingers in the air in Asia.

In the US, there is demand - there is supply. We have both in the US. Now it's just a matter of price. That's the problem with a little knowledge - it's a dangerous thing.
Posted by: 2b   2004-10-06 11:27:59 AM  

#12  Agree major threat is the Japanese and Chinese central banks. I was simply sticking to the immediate subject and giving an example of a different currency. All the chinese/SA/Japanese have to do is stop accepting payment in $ and demand another currency. Any other currency. OR: the same group could announce they were no longer going to buy US treasuries. Very bad news either way.
Posted by: Weird Al   2004-10-06 11:11:56 AM  

#11  hey...just keeping it simple, I think you are all underestimating the power of the market.

Supply and Demand baby. We have the technology to obtain alternative sources. Right now there isn't the will or the economic incentive. Dry up the supply and the demand will remain, with all those profits still to be made.

The best thing that could happen to us, in the long run would be for the oil cartels to make it worth our while to develop domestic sources and alternative fuels. And when the price of oil gets high enough it will happen.

It's wrong to consider the supply side to be limited to oil from the non-domestic sources.
Posted by: 2b   2004-10-06 11:09:24 AM  

#10  Key player's not the Sauds but the central banks of China and Japan. So long as they retain confidence in US treasuries, and prefer those to higher-yielding Euro-denominated govt debt, we're OK. But not something we should take for granted. Wouldn't be all bad to have divided gov't again in Washington, if divided gov't's what it takes to bring our deficits down.

Otherwise, we may be risking a triple whammy: pressure on Treasuries from an unsustainable debt; pressure on the dollar from rising oil prices, thereby (causing an increase in the foreign portion of our debt obligations; rising interest rates needed to compete with non-dollar debt investments, causing slowed economic growth and a higher deficit, and on we go.
Posted by: lex   2004-10-06 10:57:24 AM  

#9  SA already tried the Euro route, lost $200 billion, IIRC. Article in Brit paper earlier this year - Euro not ready for prime time, $ is king.
Posted by: anonymous2u   2004-10-06 10:44:13 AM  

#8  the Saudis begin to demand payment in Euros Why wouldn't that just be an additional sur-charge for an enterprising country to make the conversion?

What's really going impact things is when oil becomes expensive enough, the US will turn to domestic and alternative sources and kiss our foreign sources goodbye. It won't take long when the price goes high enough. Then the sound you hear won't be our economy crashing.
Posted by: 2b   2004-10-06 10:16:15 AM  

#7  [really, truly not meant sarcastically] Badanov, would Ami traders take revenge if it meant their own bank accounts, too?

Antiwar, you haven't finished reading your etiquette books. Shame!
Posted by: trailing wife   2004-10-06 10:05:40 AM  

#6  [Off-topic or abusive comments deleted]
Posted by: Antiwar TROLL   2004-10-06 9:18:24 AM  

#5  Try this instead: the Saudis begin to demand payment in Euros rather than dollars.The crashing sound you would hear in the background would be the world economy self destructing

More like a comedy routine. The Saudi putting a currency pegged on a near socialist economy teetering now was we speak on recession, would spike hyperinflation in Eurostan. You add to that American traders with a strong sense of revenge would make certain the Euro fails.

There is a trader's axoim: The action on the downside can be as good as the action on the upside.
Posted by: badanov   2004-10-06 7:52:11 AM  

#4  Sorry. Throons is me.
Posted by: Weird Al   2004-10-06 7:45:44 AM  

#3  What this report is saying is that much of the world's economy revolves around the price and availability of oil. OPEC, particularly our good friends the Saudis, want payment in dollars. With the high US deficits, both internal and external, the dollar is worth less, so the OPEC countries want more dollars for their oil in order to get the same bang for the buck, further depressing the dollar's value.

If you want a real nightmare scenario, forget the Iranians getting nukes. Try this instead: the Saudis begin to demand payment in Euros rather than dollars.The crashing sound you would hear in the background would be the world economy self destructing.
Posted by: Throons Ebboose8966   2004-10-06 7:42:45 AM  

#2  I know that I am economically retarded, but it seems to me that 'dollar down'= 'U.S. exports up'. Surely this isn't a bad thing for the economy, not to mention domestic employment numbers.
Posted by: trailing wife   2004-10-06 7:23:47 AM  

#1  this article may well be true, I don't know - but it falls clearly into the "never cry wolf" category.

MSM has been spinning good news as bad for so long - that if it actually is bad news, no one will believe them.
Posted by: 2b   2004-10-06 2:10:40 AM  

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