Syria Switches To Euros

Discussion in 'Current Affairs, News and Analysis' started by Not_Whistlin_Dixie, Feb 13, 2006.

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  1. From Reuters.

    The state-owned Commercial Bank of Syria announced today that all Syrian government foreign exchange transactions would henceforward be conducted with euros rather than US dollars.

    The linked article quotes conjecture by an unnamed "economist" that the move may have been intended to protect Syrian assets from American exchange controls in the event Syrian/US relations become even frostier than they presently are.

    That explanation doesn't strike me as credible. The Syrian government could keep dollar assets on deposit in Europe or euro assets in Europe. It seems to me that the choice of depository institutions, rather than currencies, would be the determinant of vulnerability to having the US government block the account.

    The linked article doesn't mention what Syria proposes to do the dollar denominated liquid assets it already owns. I think it would be telling if the Syrians dumped these in favor of some other liquid asset.

    The linked article also says that Syria is an oil producer on a modest scale with an output of about 400,000 barrels/day.

    "UPDATE 2-Syria switches to euro amid confrontation with US"
    Mon Feb 13, 2006 5:11 PM ET
    http://today.reuters.com/investing/financeArticle.aspx?type=governmentFilingsNews&storyID=URI:urn:newsml:reuters.com:20060213:MTFH50822_2006-02-13_22-10-01_L13432231:1
     
  2. The Economic reasons are probably more related to the fact that the dollar has been for some time a much less stable currency than the euro, on top of that there is a suggestion that if enough oil producing countries ask to be paid in euros for their oil instead of dollars then the dollar will lose its gold standard throughout the world. This means in practise that the US can not bankroll foreign spending by simply selling more dollar bonds.

    The fact that the main foreign stocks of dollars are held by China and Japan is a matter of consternation to world economists, as they could be cashed at any time which would wreck the US and in series the world economies.

    In addition to this, if China asked to be paid in euros rather than dollars by the US, given the amount of imports from that country the US would simply grind to a halt.

    Syrias move to euros could be a small shift in this direction, as well as an isolent, but well considered b1tch slap to the US, which is like finding a fiver, and a quid underneath. I like Syrias style- they are the french of the middle east.

    edited for mong spelling
     
  3. As for as I can tell this Syrian announcement has not yet had any discernable effect on the position of the US dollar in the foreign exchange market.

    Live streaming quotes at http://www.netdania.com/QuoteList.asp

    Left click on any quotation for a graph showing the day's price action.
     
  4. Fascinating! There is a feeling that the dollar may be over-valued at the moment, and this is not helped by the huge current account deficit that America is currently running. America is sucking in imports and paying for them with dollars. Those dollars are held by the Japanese, the Chinese and the oil producers. Some of it is recycled into buying raw materials - Japan has to buy oil. China is buying oil, steel and raw materials. Some of those dollars are going into gold.

    The current account deficit cannot last and, at some point, these countries will decide they don't want dollars. If they start to sell their dollar holdings, things could move fast. We could see the £2/£ again and Florida will then be cheap....

    Against all that is the sad story of the Euro. The strains of the single currency are still there - magnified in some countries and hidden in others.
    If the dollar started sinking, the pound and the Euro would rise which would not be good for either, long-term, IMHO!

    Should I be following the Syrians?

    Litotes
     
  5. If the Yankee $ goes TITS then the £ will be down the river even faster.
    john
     
  6. Yeah but we can always join the euro- there is no stability with, dare I say it, small currencies anymore- they float on the seas of the big uns
     
  7. sounds like we may eventually be on to the path of single global currency.
     
  8. Do you mean beer? :D
     

  9. I like your policies

    you get my vote at the next elections..
     
  10. Ord_Sgt

    Ord_Sgt RIP

    Didn't Iraq insist on being paid for it's oil in Euros before the invasion. It reverted back to the US dollar rather sharpish after the yanks arrived.

    I also remember reading that Iran is considering moving to Euros too.

    It appears to be the one way oil producers can put pressure on the US and if it catches on sink the country into a recession from hell. Now that would be veeery scarey.
     
  11. Two words I didn't see in Mr. Lynn's article: "Peak Oil." I'm referring to the hypothesis that we have reached the point at which the marginal cost of extraction starts to rise and that we are headed toward an outcome in which the amount of energy consumed in extracting a barrel of crude oil exceeds the amount of energy in that oil.

    http://www.princeton.edu/hubbert/current-events.html

    The questions of (i) whether the Peak Oil hypothesis is actually valid and (ii) whether we have yet reached or passed the peak are both quite controversial and technical.
     
  12. NWD - and irrelevant. The fix is in, alternative sources of energy are coming on stream rapidy. So long as oil remains over $40 long-term, the incentive is there to invest in alternatives.
     
  13. Nuclear? :lol:

    litotes
     
  14. Niclear for sure unless ya have sum majic alternative.
    john