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Mats Kaarbø

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What will China's decision to bypass the American dollar when trading oil mean?

It all starts with this article: http://www.examiner.com/article/dollar-no-longer-primary-oil-currency-as-china-begins-to-sell-oil-using-yuan

"For the first time since the 1970's, when Henry Kissenger forged a trade agreement with the Royal house of Saud to sell oil using only U.S. dollars, China announced its intention to bypass the dollar for global oil customers and began selling the commodity using their own currency."

What does this action by China mean? How will it affect people across the world and especially people in America? Will this escalate the tension between America and China? How will this affect the current world currency or the whole global economy for that matter? [Researched and sourced answers are preferable.]

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    Sep 14 2012: By joining with Russia to undermine the U. S. Dollar in this way, it will cause the US dollar, that is already seriously devalued by excessive dollar creation, to be devalued even more.

    but do understand that our economy is currently unsustainable. Take population growth and combine it with automation (not just in manufacturing, but in so many jobs where the computer itself has put people out of work), and you have a growing economy (which is really just devaluation of currency) combined with an absence of consumers who are no longer earning $ to buy goods, and the value of money is quickly coming to naught.

    this is something that we should all be preparing for. No one will be there to save us when our $$$ has zero perceived value. The value of our money has decreased by 97% since the inception of the fed. It survives by faith alone - a faith that is being eroded.
    • Sep 14 2012: "but do understand that our economy is currently unsustainable. Take population growth and combine it with automation (not just in manufacturing, but in so many jobs where the computer itself has put people out of work), and you have a growing economy (which is really just devaluation of currency) combined with an absence of consumers who are no longer earning $ to buy goods, and the value of money is quickly coming to naught."

      US economy is unsustainable? Are you rather referring to US debt and spending?

      Automation is a good thing and it was around for over a century. What has to happen however is that people continue to learn new skills and acquire knowledge as we continue to move toward knowledge based economy.

      There are many people and companies in the US that are making enormous profits so we need to ensure companies and wealthy individuals get taxed fairly.
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        Sep 15 2012: Corporate taxes are merely hidden personal taxes. Corporations are pass-through entities. If they are taxed, they add those taxes to the cost of goods and services and send them on to the next link in the chain, ending up in the hands of the consumer. Imagine the hidden taxes built into your car. The ore miner, the plastics maker, the truckers, the smelter, the machinists, the parts makers, the manufacturers, the dealerships, etc - each adding its own taxes to

        re: economy unsustainable: No, I meant that the economic model is a ponzi sheme that cannot be sustained in the absence of consumers.

        re: automation: Humans have been on this planet for tens of thousands of years. Automation for little over 100. It has transformed our lives, but it will eventually put all people out of work. Thus, I suggest that we begin educating ourselves about alternative social models that will better serve us. This is our only chance of a controlled crash vs. an uncontrolled crasH.

        Yes, there are many companies who are making huge profits - the biggest of them all - Goldman Sachs, that is replacing analysts with computers who are far more efficient and less expensive. Trading stocks at near the speed of light, nano-minute by nano-minute, is not building anything meaningful into a GDP that is being artificially sustained by such practices.

        Better to cap top incomes than to add more hidden taxes to the products & services that you already can't really afford.
        • Sep 15 2012: "Corporate taxes are merely hidden personal taxes. Corporations are pass-through entities. If they are taxed, they add those taxes to the cost of goods and services "

          That is not necessary the case. For example, large corporations like Google, Apple and Amazon are using tax loopholes to pay low tax rates. At the same time they accumulate billions of dollars in their cash reserves. They can pay their fair share of taxes instead of accumulating so much?

          In addition due to competition companies usually can't just pass the taxes to the consumer but rather look at how to make things more cost effective. Or they can stop paying excessive salaries for their CEOs.

          "Automation for little over 100. It has transformed our lives, but it will eventually put all people out of work. "

          I think this will not be the case for the next few decades. Automation is currently happening in manufacturing and low level jobs. That does not mean we don't have large number of jobs in service sector, research and development, IT etc. Because machines still can't think people that are willing to upgrade their skills can always find a job. I agree that people that do not want to upgrade will have harder time to find work.

          Another trend I see is that there are fewer people that are working. Many people start to retire early or work PT instead of full time in order to have better life-work balance.

          "Goldman Sachs.... is not building anything meaningful"

          I agree on this point =)

          Cheers
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        Sep 15 2012: I don't know how old you are, but a few decades goes by very quickly. Those who have children might disagree with your unspoken suggestion that we not start preparing for the inevitable right now. Then again, they haven't so far. LOL

        You know, if we were to cap top incomes, and better regulate how much $$$ a corporation or a person can hold in reserves (don't know the number any more or even if there is one, but when I owned a business 10 years ago, it was a quarter of a million for corporations), we could go a long way to fixing the problems.

        If a company is tax-free, and if caps are installed, then the price of goods and services goes down - where it can be properly taxed to you directly - through a national sales tax.

        The USA had a revolution because King George wanted the colonies to pay the equivalent of 1.7% in exchange for military security from the Indians.

        I think that if ALL taxes were out in the open, that there wouldn't be nearly so much complacency as we see our futures being flushed down the toilet.
        • Sep 16 2012: "I think that if ALL taxes were out in the open, that there wouldn't be nearly so much complacency as we see our futures being flushed down the toilet."

          Yes I completely agree. I think this would solve most problems and make the system fair. Adding artificial limits might be counter-productive but more transparency would allow anyone to question why certain individuals or corporations don't pay their shares?

          cheers
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        Sep 16 2012: Perhaps then the banking system is the problem. What if we penalized corporations for accumulating weath through interest income. We should install a clause that a certain percentage of revenue be spent in research, innovation, and employee re-education.
        • Sep 16 2012: Yes I also think the banking system is broken.

          I would not place any artificial limits on how much corporations can accumulate but at the same time they need to contribute back to the society in terms of taxes, payment of damage made to the environment through their actions etc.

          Transparency might be the answer where employees can then ask for company's investment in their re-education and government can ensure it receives fair tax revenues in order to support research and innovation?

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