I assume if this report is accurate, that it means we will see a large increase in the price of gas as the dollar falls in value in comparison to the other currencies? I am not sure I understand the repercussions here. Any input would be appreciated.
That will be just one repercussion of an abandonment of the PetroDollar, the other will be increasing interest rates on Federal and State Debt as the dollar would then have to be converted to that basket of currencies, meaning the dollar will plummet further causing imported goods to rise in price as the Dollar losing even more purchasing power via unfavorable exchange rates.
Some smart people might see this coming and form a company backed by Chinese Yuan and form a break type cost structured organization for US distribution of Chinese goods and get paid in Yuan........................ Here is a great...and I mean great link if you want to use the system to benefit...and some...hmmmmm...do...................Article 9 section 5 and article 7 section 1 are very key, as is the 2008 amendment to the Chinese code........this is the original treaty in 1984 but still relevant for definition.......we cannot get taxed more than 25% on Chinese dividends (USG cannot touch us) and since we ....gee make no income from our US entity...our personal income tax is nill...and oh yeah..please send us poor folks that have no US income some free health care please.......... http://www.irs.ustreas.gov/pub/irs-trty/china.pdf High cost of money in yuan interest (paid by Chinese credit lines) but the marginal Gross Profit and reciprocal tax ratios more than make up for the 90-120 day money turn around....and my ...I mean that smart guys.... Chinese tax rate is lower than the US tax rate would ever be (combined corporate and personal income) as long as we do not break the 10% of revenue dividend (basically you have to be a large enough organization to benefit AND you get to deferred capital gains until you "cash out" if you break the 10% dividend "rule").....and the Chinese owners get the tax credit in the form of reciprocal rates of US taxes based on their "loss", basically balancing the differential rates.....completely legal and that smart guy is still a US citizen.. you have to have some Chinese connections or are willing to allow 51% Chinese ownership ........ or have some...uhhh...other ways of protecting your US entity from reciprocal definitions.............. ....from China Law blog.........With the promulgation of the new Corporate Income Tax (CIT) code in January, 2008, China set out on a entirely new approach to taxation. The new approach involved two major changes. First, all companies will be taxed at the same rate without consideration of the nationality of their owners; the new tax law sets the tax rate at 25% for all companies and as Henry Lui said....... The issue is not whether Asian central banks will continue to have confidence in the dollar, but why Asian central banks should see their mandate as supporting the continuous expansion of the dollar economy through dollar hegemony at the expense of their own non-dollar economies. Why should Asian economies send real wealth in the form of goods to the US for foreign paper of declining value instead of selling their goods in their own economy? Without dollar hegemony, Asian economies can finance their own economic development with sovereign credit in their own currencies and not be addicted to export for fiat dollars that repeatedly lose purchasing power because of US monetary and fiscal indiscipline. As for Americans, is it a good deal to exchange your job for lower prices at Wal-Mart? The Chinese are simply protecting their own economies so they do not get screwed because we spend a gazillion dollars on crap driving our dollar to $hit.......but I am sure some will rail on the Chi-coms for protecting their own economy from our stupidity of voting these morons into office ... repeatedly ...... just do not blame moi for benefiting from the system and our own stupidity as a society.................. Put cap and tax into the equation and balance the shipping costs....and we make mo money mo money mo money.............sucks to be a US manufacture or employee but we voted the idiots that want to tax is to death in........and those are the rules.........
i have my doubts. i believe that they may want to move away from the US Dollar due to the falling strength, but it's a necessary evil. part of the reason the dollar is so weak is just by nature of how superfluous it is - there is so much of it out there. a roundabout way to discuss inflation, basically. the yuan and euro cannot possibly be the oil standard as there just isn't enough of them out there (float) to cover the oil transactions on a daily basis. the yuan and euro cannot accomodate this, and gold won't work for the same reason - not enough of it out there. gold is even more of a case in that it is a finite resource - so the option isn't there to print more of it (like a currency) to accomodate increased trading. the only option would be if they created a completely new currency and printed ridiculous amounts of it to cover all the transactions.... but the likelihood of that is pretty low. You'd have to have every country buy into it, and that won't happen. i think this is a knee-jerk reaction to the value of the dollar, honestly, but the bottom line is the dollar is just too convenient for the world to use for this purpose. if any currency was to supplant the dollar, it would have to be a currency that has enough of a float out there to handle the daily multi-billion dollar volumes.
the chinese wont allow this to happen, because their investments would be worth zilch.... china cannot afford to have the dollar get smoked
