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The number of people linking to articles such as this...

The number of people linking to articles such as this one: Cash-strapped Iran asks Japan to pay for oil in yen over the past several days has been enormous. I was expecting to see a lot of 'We are about to invade Iran' calls but those invasion calls never came. (If it happens it will be Bush arrogance not an oil pricing unit that causes an invasion).It's time we finally put to bed two ideas. BEA 4th Quarter GDP 1st Estimate 0.7% Q&A: Why Did GDPNow Rise After Durable Goods? When are Construction Revisions Coming? over the past several days has been enormous. I was expecting to see a lot of 'We are about to invade Iran' calls but those invasion calls never came. (If it happens it will be Bush arrogance not an oil pricing unit that causes an invasion). People seem to be having an extremely hard time distinguishing between a pricing unit and a holding unit. The difference is significant. Clearly Iran has already been taking Yen for oil. Obviously there is not an absolute requirement to trade oil in dollars even though oil is priced in dollars. I am still staggered by the fact that people just cannot see the difference even though anyone in London can walk into a gold dealer and buy gold in the British Pound or Euros even though gold is in dollars. For some strange reason people think that oil trades only in dollars even though currencies are totally fungible. Furthermore it would not matter one iota even IF oil only traded in the pricing currency given that currency trades can execute in less than a second. Asking Japan to pay for oil in Yen is a political sideshow. In and of itself it is meaningless. Iran can convert dollars to Yen in one second flat. Nonetheless, add Iran to the list of countries attempting to divest themselves of dollars. If no one is willing to hold dollars, then we have a problem with dollars, do we not? Thus it is lack of faith in the US$ that is the real problem, not the pricing unit. The pricing unit is nothing but a sideshow even as the significance of the event is missed. The significance is that that someone (in this case Iran) appears to want to hold the Yen vs. the US dollar when the two weakest currencies have been the Yen and the Dollar. This puts downward pressure on the dollar and upward pressure on the Yen even though the announcement itself is pure politics. In the end it is Iran's actions (refusal to hold dollars) as opposed to Iran's words (in regards to the pricing unit) that matters. The content on this site is provided as general information only and should not be taken as investment advice. All site content, including advertisements, shall not be construed as a recommendation to buy or sell any security or financial instrument, or to participate in any particular trading or investment strategy. The ideas expressed on this site are solely the opinions of the author(s) and do not necessarily represent the opinions of sponsors or firms affiliated with the author(s). The author may or may not have a position in any company or advertiser referenced above. Any action that you take as a result of information, analysis, or advertisement on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.

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