Tip Jar

Support Us!!

Tip Jar

ZB Shop

Enter your email address:

Delivered by FeedBurner

January 2008

Sun Mon Tue Wed Thu Fri Sat
    1 2 3 4 5
6 7 8 9 10 11 12
13 14 15 16 17 18 19
20 21 22 23 24 25 26
27 28 29 30 31    
AddThis Social Bookmark Button



  • Add to Google Reader or Homepage

    Subscribe in NewsGator Online

    Subscribe in Rojo

    Add to netvibes

    Subscribe in Bloglines


  • The information on this site is represents an outlook on the economy, markets and the world that is intended for discussion purposes only It is presented as a subject for thought, entertainment, and contemplation. The content is not a recommendation for investment and any investment ideas that may be implied or thought of as a result of the views on this site should be well researched and consulted with a credible financial professional. Under no circumstances is the information contained within this site a recommendation to buy or sell securities.
Blog powered by Typepad

« Ron Paul and Benny B | Main | Risk Inversion and Risk Perversion »

October 02, 2007


Bond investor

ZB, we won't go to war with Iran. All we need to grind their sick economy (sick because of Ahmedinejad's subsidies, repression and politically-induced lack of foreign investment) to a halt is a gasoline embargo. The irony of sitting on top of all that oil, but not having the refining capacity to power the autos in Tehran due to government mismanagement. Now if we can just get the weenies on the Security Council to ever agree on an embargo...

Also, Iranian claims of non-dollar oil income may well be true, but it doesn't mean it's any great accomplishment. Iran could accomplish the same thing by accepting dollars and then exchanging them for euros or yen via a commercial bank. It's still a global market for oil. If oil was cheaper in yen or euros than in dollars, arbitrageurs would eliminate that anomaly quickly. So a decline in oil prices, whether in USD or EUR, would lower Iranian national income. Oil futures have returned to "normal" backwardation -- futures prices lower than the spot price.

Zero Beta

I agree with a lot of what you say. I don't think at this present time we will go to war there. I think economic measures are good, however I also think our economic policy in that region has led to a more scary religious crusade against our country - separate from the actual countries themselves.

You mention that oil priced in Euros and dollars would get arbitraged away. I agree with you and I think thats the fear. If oil is cheaper in Euros than it is in dollars, an arbitrageur would simultaneously buy the oil and euros and sell it in dollars which is buying euros and selling dollars - weakening our currency against the euro. However, what I am talking about is just the effect of Petrodollars and the dollar reserves that they create. The fact that Arab central banks are shifting away from investing their reserves in dollars is something that scares us. They either use them to finance our deficit through Treasury Bonds, which in recent time has been used to support a war that is killing people in their region, or buy stakes in our companies which may or may not be such a great investment. Either way this helps our economy and pumps money through our banks brokereages which basically take a cut on the dollars that flow through them.

The move towards a Euro reserve I think is somewhat economic but also political. Europe is not in the Middle East bombing Arabs, so the Arabs are much more inclined to buy european bonds and euros. Obviously this a relationship that works both ways. European nations, aware of the situation, direct their political and foreign policy to benefit their economy and enable them to socialize healthcare and spend tons of money. IMHO,our problem is that we are not honest with ourselves in every aspect of these wars and don't realize the currency motivation behind confrontation.

The comments to this entry are closed.