Samson: Can world trade be free from the dominance of the US dollar?
1st September, 2020
Policymakers around the world are looking to break free from the domination of the dollar, because pegging to this American currency deprives them of several advantages that they might obtain in the event of a decline in the value of their local currency
The British newspaper “The Economist” says in a report that the collapse of currencies is considered a negative event, because it makes imports more expensive, in addition to causing a deterioration in the standard of living of individuals and increasing the cost of trade
Nevertheless, economists have always considered that this problem carries with it the seeds of salvation, because the high cost of foreign imports pushes countries towards the orientation to consume domestic production, and thus employ more workers and stimulate the economy, in addition to that, the decline in the value of the local currency means that exports will become cheaper. For other customers, it also boosts the demand for local production
For example, when the value of the Colombian peso collapsed in the summer of 2014, the Minister of Finance at the time expected that this decline would be a good opportunity to revitalize the local economy. Including the global trading system as well. As Colombia does not conduct its commercial exchanges with other countries and companies in the local currency, the peso, but rather trades almost entirely in US dollars. This great link to the movement of global trade in the dollar leads to undermining some of the privileges and benefits that the economies of countries can reap from flexibility in controlling currency rates. Also, when the value of the dollar rises, world trade tends to shrink
A controlling currency
The newspaper explains that the model of trade and currencies in the world was summed up by researchers Robert Mandel and Marcus Fleming in the 1960s, when they considered that in the absence of any role for the dominant currency in the global market, it is assumed that the parties to each commercial transaction agree to set prices using the seller’s currency. If things go like this, after the collapse of the Colombian currency, for example, the goods that this country exports will become cheap and will find great demand, and in the meantime, Colombians who want to buy Brazilian-made clothes will be upset about the high price of these imported goods, and turn to local production
Economists have noticed since the middle of the last century that the currency that companies choose to send invoices to each other can affect the rise or fall of expenses, so if the prices of Colombian exports are determined in dollars and not the local peso, then the decrease in this local currency will not affect the prices at which suppliers buy. Americans, so there will be no increase in demand. Scholars always note that the prices of goods do not change in value or the expected speed themselves, when the commercial transactions between the two countries do not depend on the local currency of each
In recent years, two researchers from the US Federal Reserve Bank in New York collected data on 24 countries during the period in the late 1990s and early 2000s, and their research results confirmed that exports are often not priced in the currency of the country from which they came, as the state of South Korea, for example. In 2001, 82% of its imports were billed in dollars, even though only 16% of these imports came from the United States
Economists confirm these conclusions, as the dollar plays a large role as the “locomotive currency” that is used in financial transfers and bill payments even when the United States is not a party to the transaction, especially when it comes to developing countries, as data collected by the International Monetary Fund cover about Half of world trade showed that the dollar’s share of payments was 4.7 times the share of the United States from imports, and three times its share of exports. Another study showed that the dollar’s share in world trade did not decline despite the decline of the US role in this trade
Pricing is in dollars
The newspaper indicates that when the European Union issued the euro, they were hoping to replace the dollar in the world, but this did not happen, as the volume of commercial payments made in euros is still considered logical compared to the volume of trade carried out by the countries of the Union, for example During the period from 1999 to 2014, the volume of trade in euros was equivalent to 1.2 times the share of the European Union space in global imports
Some consider that using a single currency in controlling international prices avoids unpleasant losses and surprises when market fluctuations occur in the markets, as many prefer pricing in dollars in the trade of precious metals, and relying on the dollar in pricing exports and imports saves the profit margin of investors and protects them from incurring Losses in the event of the collapse of the local currency but according to the newspaper, the question remains, why should this locomotive currency be the dollar? As this green banknote completely controls the world’s money markets, and relies on trading stocks and bonds, transfers between countries and making payments
The newspaper points out that this situation allows America to enjoy a very special privilege, as its revaluation of the dollar by reducing its value directly affects US exports, which become cheaper in foreign markets
On the other hand, other countries devaluing their currency against the dollar does not help them increase their exports. On the contrary, it causes economic suffering, as they become unable to bear the cost of import, and their exports do not achieve any additional attraction when their currency decreases
These economic realities have made policymakers in the world dream about getting rid of the dollar’s control, but this matter remains unlikely in the foreseeable future, as the hegemony of the dollar is the result of millions of individual decisions that all converge to cause this collective problem LINK
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Popeye7: Just finished the CC, and want to say thanks again for your information, and time for relaying it to us Frank, and Walkingstick… Thanks to the 3 Amigo’s for their much valued analysis, and explanation concerning QFS… Thanks to all of the team here at KTFA… God bless, and have a great evening.. Praying for you
Samson: Oil prices rise 1% with the decline of the dollar
1st September, 2020
Oil prices rose on Tuesday, September 1, to reverse course after suffering overnight losses, as investors turned to riskier assets and declined to buy the safe-haven dollar, which reached its lowest level in several years
Brent crude futures rose 47 cents, or 1 percent, to $ 45.75 a barrel by 06:35 GMT. US West Texas Intermediate crude futures rose 43 cents, or 1 percent, to $ 43.04 a barrel
The two benchmarks fell about 1% on Monday, due to concerns about surplus oil supplies, with global demand continuing to below pre-Covid-19 levels
The dollar lost in recent trading 0.04% to 92.146 against a basket of currencies, after reaching its lowest level since May 2018, following a shift in the US Federal Reserve’s policy on inflation announced last week
The lower dollar makes oil and other commodities denominated in US currency more attractive to global buyers LINK
Samson: Parliamentary calls for the enactment of a law that includes criminalizing those inciting sectarian strife
12:32 – 09/01/2020
MP for the Al-Sadiqon Parliamentary Bloc, Thamer Theban, called on Tuesday for the enactment of a law that includes incriminating the instigators of sectarian strife, indicating that there has been a lot of talk about the post-ISIS phase, and many ideas have been put forward in this regard.
Theban said in a statement to “the information”, “There are political or social voices, whether through forums, conferences or electronic sites that seek to move the sectarian psyche and play on sectarianism.”
He added, “In implementation of Article 14 of the Constitution, which says that Iraqis are equal before the law without discrimination,” noting, “We call for the enactment of a law that criminalizes sectarianism, whether by word or deed, regardless of whether the person is religious, political and social.”
Theban pointed out that “there has been a lot of talk about the post-ISIS phase A lot of sectarian ideas were raised in this regard, and it became necessary to legislate the law in the next legislative term.
Samson: Governor of the Banque du Liban: The decisions related to the requirements of the banks will contribute to the stability of the exchange rate
1st September, 2020
Central Bank of Lebanon Governor Riad Salameh said on Tuesday that new decisions related to bank requirements would contribute to stabilizing the lira’s exchange rate
He told Sky News Arabia that Lebanon’s reserves amount to 19.5 billion dollars in addition to gold reserves, and that 30 percent of the money that left Lebanon’s banks must be returned, adding that it is not logical that bank owners should not keep their money in the banks owned by them
He stated that banks that will not comply with the latest directive on capital rates will have to exit the market after February LINK
Samson: Trump’s advisor: Other Arab and Islamic countries will normalize their relations with Israel
31st August, 2020
Robert O’Brien, National Security Adviser to US President Donald Trump, said that more Arab and Islamic countries are likely to follow the example of the United Arab Emirates in normalizing relations with Israel.
O’Brien, Trump’s son-in-law and senior adviser Jared Kushner met with Israeli Prime Minister Benjamin Netanyahu in Jerusalem on the eve of talks in Abu Dhabi to finalize formal ties between Israel and the UAE.
On August 13, Israel and the UAE announced an agreement to normalize relations between them in a deal brokered by Trump. This agreement reshapes the scene in the Middle East from the Palestinian issue to relations with Iran. “We believe that other Arab and Islamic countries will soon follow the example of the UAE and normalize relations with Israel,” O’Brien told reporters after talks at Netanyahu’s residence. He did not name the countries, but Israeli officials have publicly referred to Oman, Bahrain and Sudan.
The Palestinians condemned the Emirati move, describing it as abandoning the policy of linking official relations with Israel with the establishment of a Palestinian state on the lands Israel occupied in the 1967 Middle East war. The Trump administration is trying to persuade other Sunni Arab countries, who share Israel’s concerns about Iran, to join the peace effort in the region.
Kushner, who has been standing by Netanyahu and O’Brien, said the deal with the UAE was a “giant step forward” in this direction. “I say this as the grandson of two Holocaust survivors … to play a role in this matter, it means more to me and my family than I can express.” Kushner, O’Brien and other US officials will join an Israeli delegation on Monday on the first trip of the Israeli El Al company to the United Arab Emirates.
Israeli Regional Cooperation Minister Ofir Akunis told Kan of the Year television in Israel on Sunday that his country hopes to hold a signing ceremony for the agreement to normalize relations with the UAE in Washington by mid-September. LINK