The "Switch from USD to Euro" Effect

[Faux Real]

A lecture on how the USA could collapse economically at any moment based on it's imperialist brand of capitalism concluded with the professor saying "all it takes is Saudi Arabia switching the currency for their oil reserves from US Dollars to Euros."

The effect this has is still unclear to me, although it seems like a noobish economics question. (I've probably seen the answer, just can't remember)

Couldn't the people of the US, or at least the rich, just switch their currency to the Euro to cure the crisis if the situation gets so dire for the US economy?

If not, then what creates these conditions for economic collapse?

What effects does it leave?

Is it an internal contradiction within capitalism?

[Die Neue Zeit]

If this is done slowly (the Saudis are talking about pricing oil in a "basket" of currencies), then there won't be an economic collapse. The question is: how long will non-Americans tolerate the depreciation of the US dollar?

[spartan]

Couldn't the people of the US, or at least the rich, just switch their currency to the Euro to cure the crisis if the situation gets so dire for the US economy?

It isnt as simple as that (Though i am sure that the Bourgeois would try to do such a thing in times of desperation) as doing this would practically be an admission of failure by the Bourgeoisie.

On another note i was told that "Euros accepted" signs have started appearing all over shops in New York.

The shopkeepers reasoning behind this acceptance of Euros is that "any money is still money".

Looks like we will soon be in desperate times.


If not, then what creates these conditions for economic collapse?

The very nature of a free market Capitalist economy.


What effects does it leave?

Hopefully it will have the affect that your average worker in the west will better understand their oppression (Due to the laying off and moving of jobs to new markets that is almost a certain when things start getting far worse) which could lead to an increase in popularity of Communism amongst the Proletariat.

Though it alternatively could lead to a rise in popularity for Conservative and Fascist politics as well (The economic recessions of the 20's and 80's gave us Hitler, Reagan and Thatcher respectively).


Is it an internal contradiction within capitalism?

Not a contradiction as such, just something that is impossible to guard against in a free market Capitalist economy.

These economic recessions seem to happen once every 30 years in our modern times.

[Zurdito]

On another note i was told that "Euros accepted" signs have started appearing all over shops in New York.

The shopkeepers reasoning behind this acceptance of Euros is that "any money is still money".

Looks like we will soon be in desperate times.

The very nature of a free market Capitalist economy.

Well, in itself, that might not indicate desperate times, because an influx of Euros would raise the value of the US dollar.

However, in general I do not doubt that we are heading for a global recession.

[followthemoney]

The short answer is that the only reason people want dollars is bacause at the moment you need dollars to buy oil. American access to imported goods will be cut off if a decent supply of oil is available for Euros. Because America no longer produces the goods that its people need to maintain their current standard of living, imports are essential to the American economy.

To gain a better understanding of why oil being sold in Euro's is such a big deal, a bit of history is needed for context.


Where do US dollars come from?
Until 1913, American currency came from the American government. However, in 1913 Congress gave a private bank calling itself the Federal Reserve (or "Fed") a monopoly over US monetary policy and supply. Since then, an elite cabal of bankers have had absolute power over who "has" and who "has not" - if the Fed central bank tells your local bank to deny your loan request then you "has not".

Why are US dollars valuable?
Until the Fed's ascention, American currency was valuable because it could be brought to a bank and exchanged for gold (the Gold Standard). The money supply was static and more bills could only be printed when more gold reserves made their way into the bank's vault. However, thanks to the dual disasters of "fiat currency" and "fractional reserve lending" (google it), the private central bank can now print as much free money as it wants (Haha! What ruinous idiocy!)

So now that the dollar has lost 97% of its value due to the Fed printing too many of them, the only reason people still want dollars has to due with the American military and oil.

American military might has coerced the oil producing nations of the world to only sell oil in US dollars. So if you are the government of a Nation State you NEED an account full of US dollars or else your power plants go offline and your citizens can no longer drive to work.

If America were still producing manufactured goods (after WWII, something like 70% of the worlds heavy industry took place in US) then people would still want dollars to purchase goods other than oil. However, those industries have been moved to China and today America does not make anything except for interest payments on the money it has loaned to other countries.

If you could buy oil in any other currency, you would not need US dollars. If you don't need US dollars, US dollars lose their value. If US dollars lose their value, the price of imports in America skyrockets. If the price of imported goods skyrockets, the "haves" will move from New York to Bejing or Dubai, and America will lose its status as a major player on the geopolitical stage and be doomed to a decent into obscurity and irrelevance. If all that happens, the people who are stuck in North America will have to go through a strugle simmilar to what Cuba faced when they suddenly had to become more-or-less totally self-sufficent.

Iraq implied that it might be thinking about accepting Euros for oil, and the next day the World Trade Towers were demolished, and the day after that the occupation began. Iran implied that it might be thinking about accepting Euros for oil, and the next day the American media started claiming a need to bomb Iran because of its nuclear program. Iran stopped accepting US dollars for its oil in December of '07, and the next day Israel escelates the conflict in Gaza, 5 undersea fiber-optic cables that connect the Middle East to Europe are severed (leaving Iran with no internet access and a severly limited capacity to trade its oil in European markets but Israel is completely unaffected), and America invaded Pakistan (where there is a pipeline for Iranian oil to reach Europe).

Venezuala and Saudi Arabia have both suggested they might begin to accept Euros for oil, and if you combine that with the potential for China and friends to dump their reserves of US currency, the circumstances are present for a financial "perfect storm" to kick off the kinetic stage of the conflict America v. Globe.