Ok, I have taken some time off from blogging to take care of other things, but things are starting to heat up again so, I thought I would chime in again.
We know things in the economy are slowly sliding down hill. People are watching the hosing bubble burst and think that this is pretty bad.
Well, that ain't the half of it. Today, the "fit hit the shan." Things are about to get down right ugly for us here in the good ol' U.S. of A. Today, Iran announced that it would require Japan to pay for its oil imports in Yen instead of U.S. dollars.
This might not sound so disturbing to the average person. But it should scare the snot right out of you. The dollar has already slid tremendously in the past year. Now, it is going to crash. The one thing that holds up the dollars value is the fact that all oil is bought and sold in U.S. dollars. This means that all the countries around the world must hold quite a bit of U.S. currency in order to buy oil. Russia is also thinking about converting to the Euro since it has better buying power.
Our economy is going to take huge hit with this. As more and more countries switch away, things will get worse and worse and we will see the same type of stagflation that we saw in the late 70's.
Why is Iran hitting Japan? Because it is one of the biggest U.S. allies that does not have sway on the UN security council.
Iran Asks Japan to Pay Yen for Oil, Start Immediately (Update3)
By Megumi Yamanaka
July 13 (Bloomberg) -- Iran asked Japanese refiners to switch to the yen to pay for all crude oil purchases, after Iran's central bank said it is reducing holdings of the U.S. dollar.
Iran wants yen-based transactions ``for any/all of your forthcoming Iranian crude oil liftings,'' according to a letter sent to Japanese refiners that was signed by Ali A. Arshi, general manager of crude oil marketing and exports in Tehran at the National Iranian Oil Co. The request is for all shipments ``effective immediately,'' according to the letter, dated July 10 and obtained by Bloomberg News.
The yen rose on speculation for an increase in demand for the currency, the result of Japan's annual 1.24 trillion yen ($10.1 billion) of oil imports from Iran. Central bankers in Venezuela, Indonesia and the United Arab Emirates have said they will invest less of their reserves in dollar assets because of the weakening currency.
``What else can Japan do but to accept the request, once the oil producer sent its wish?'' said Hirofumi Kawachi, an analyst at Mizuho Investors Securities Co. in Tokyo. ``The tensions between the U.S. and Iran are escalating, and it's Iran's measure to hedge risk.''
A spokesman for Iran's oil ministry in Tehran said he could neither confirm nor deny that the letter had been sent. Most Japanese oil refiners have until now used U.S. dollars to pay Iran for oil, said the spokesman, who declined to be identified by name because of government policy.
The yen advanced to 122.07 per dollar at 2:30 p.m. in New York, from 122.42 late yesterday.
Iran is cutting its U.S. dollar reserves to less than 20 percent of total foreign currency holdings, and will buy more euros and yen as tensions with the U.S. increase, Central Bank Governor Ebrahim Sheibany said on March 27.