Industrial Hemp

The Oil Pricing Debate: Dollars or Euros?

The "world currency" for trading oil has been in dollars. So, of course the US has paid for its oil in US dollars, but it also used to hold true for Germany and Japan to purchase oil. Germany and Japan had to pay in US dollars. Part of the reason why US dollars were the "world currency" was due to the fact that the US dollar was stable.

However, in the past 7 years, the US dollar has lost 67% of its value to the Euro. In the past month, the US dollar is worth less than the Canadian dollar. All the while, Condoleezza Rice stated that the US dollars needs to loose another third of its value. The US dollar is being devalued by design.

Back to the US dollar and oil trading... The US dollar is debt. So, with all the US dollars being used by Germany and Japan to purchase oil, its like a bunch of checks -- written by the US Federal Reserve -- never being cashed. So, now that nations are switching to trading oil in Euros, those "checks" are being cashed.

So, imagine your personal checking account. OK, now let's say that you write a bunch of checks and your creditors love you so much, they never cash your checks. Instead, they frame your check and place it on their wall and tell others, "wow, look at this check, its from such and such a celebrity and look at their signature" and so on. Well, now those "checks" are being cashed in. So, recall that we're talking about your personal checking account, you've written all these checks, but most of them have never been cashed. Now, all of a sudden, your personal checking account balance is not looking so great because people are now beginning to cash in all those checks. OK, this is a simplified explanation and yes, we all know that checks can not be cashed after 90 days or so, etc. Once again, this is just a simplification for people to comprehend what's happening when other nations stop trading oil in US dollars. So, in other words, your personal checking account balance doesn't look so great now that all your uncashed checks are being cashed in. That's in part of what's happening to the US dollar.