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Thursday, February 14, 2008
In a word; Inflation.
 
CEP News

14:05 02/08 (CEP News) Montreal – The euro spiked a quarter-cent just after 1 p.m. EST after a weekly magazine reported OPEC was pondering a move to price oil in the European common currency.

OPEC Secretary General Abdalla El-Badri told the London-based Middle East Economic Digest that member countries are pressuring the cartel to abandon the floundering U.S. dollar.

“Maybe we can price the oil in the euro,” El-Badri said. “It can be done, but it will take time.”

The report says OPEC may switch to pricing oil in euros within a decade. Middle Eastern sentiment has been slowly turning away from the U.S. dollar in part because of a 21.8% rise in the euro against the U.S. currency over the past two years.

Officials from several Middle Eastern nations, including Qatar and Saudi Arabia, have openly pondered abandoning USD pegs. Iran already prices most of its oil in euros. Until now, the OPEC chief has remained silent.

Read more: http://www.economicnews.ca/login.php?page=reportsDetail...< /a>


My note

The U.S. dollar's value is pinned to the cost of a barrel of oil. Oil drives the world's economy, and was traded in U.S. dollars. The dollar is losing value because of our trade imbalance, especially because now China and India are competing with the U.S. for oil. Since oil is in greater demand, oils intrinsic value is outstripping the dollars ability to buy it. Once oil is traded in Euro's the intrinsic value of the dollar will be lost.

A dollar soon may not buy any oil. Since we are so deeply in debt, and no longer producing the worlds machines and consumer goods, the value of the dollar will only be tied to U.S. Treasuries.

It is very likely in the near future that even our "reported" inflation will out pace interest on U.S. bonds and treasuries. Our currency is backed by an I.O.U, "The full faith and credit of the United States", read any currency you have. Would you take a check (read dollar here) drawn on a empty account? We have to, it's our currency. The rest of the world does not have to, and they are and will trade their vast dollar holdings (trade imbalance) for other currencies, or gold and silver. More dollars back in circulation, the less they are worth. In a word; Inflation.

Buy Gold as an insurance policy and protect your wealth.


JMC
 
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