Ok, so the dollar is going down and it’s depreciating. It’s funny to see the goons jump up and down trying to declare the death of the dollar. Hugo Chavez and his friend in Opec, the President of Iran, want to quit tying the price of oil to the dollar. They are suggesting tying it to a currency like the Euro. Ok, great.
If that’s something they want to do because of exchange rate volatility, then that’s just plain stupid. Why? Let’s look over the last 9 years and compare the volatility. The Euro debuted at 1.1789 per dollar in January of 1999. By 2000, it hit it’s low of 0.8252. That’s a drop of 30%. It stayed in that low level until it began to climb in 2002. By late 2003, it finally reached the level it started trading at. It has continued to climb and is now trading near it’s all time high of 1.4722. That’s a 55% increase from its all time low, but it’s only up 25% from its starting point. It seems to me that the Euro-Dollar relationship is cyclical. It seems to me changing from one currency to another won’t make a real difference, you’ll still suffer from the natural cyclical changing of the dollar.
But that’s not the reason why they want to change from dollar denominated contracts. They want to change to the Euro because they don’t like dollar hegemony. That’ ok and I understand it so why trade from dollar hegemony to Euro hegemony. It seems stupid to change from one problem to another.
