Trade argument moved from the presidential poll thread

[Kidlicious]

In the other thread we started talking about the effects of free trade between the US and China. It got to this ridiculous point where KH is now claiming if the value of the dollar plummets oil prices in the US won't skyrocket.

WTF are you on about?

Oil is denominated in USD, but to a first approximation it wouldn't matter whether it was denominated in magic beans.

As the USD drops in value relative to other currencies the price of oil in USD will increase and the price of oil in all other currencies will decrease. The quantity of oil produced may increase or decrease. It depends on the relative elasticities of demand in different countries. This will be a second order effect.

The US will consume less oil while others consume more oil. Duh. What is oil? An import. The US will import less as the USD weakens. Which is what I said earlier.

The ONLY difference the currency used in oil markets makes is that it induces foreigners to hold slightly more USD as a foreign reserve currency. The effect of the oil markets on this propensity is relatively minor.

[Kidlicious]

KH, the very simply argument against what you claim is that in order for the price of oil to go up in the US the oil producers have to cut back production.

[Kidlicious]

"Hah. Looking it up, it appears that I've just recreated quantum finance."

-KH

No you aren't. You're using Newtonian finance.

[Naked Gents Rut]

We don't need a separate thread for this. The election is over, so we're turning my poll thread into a trade thread. Mods, please delete.

[KrazyHorse]

Originally posted by Kidicious
KH, the very simply argument against what you claim is that in order for the price of oil to go up in the US the oil producers have to cut back production.

No it doesn't, DT.

[Naked Gents Rut]

It's fitting that "double-****" and "Drake Tungsten" would have the same initials.

[KrazyHorse]

We have three assets: nuts, berries and apples. Berries are traded in terms of nuts. Separately, nuts and apples are traded against each other. All of a sudden a large quantity of nuts come on the market while the number of berries and apples is constant. How much do I pay for a berry in terms of nuts compared to before?

[Kidlicious]

KH,

It's very simple. The value of the dollar falls, which lowers the value of oil. In turn the oil producers cut back production. That's how it works.

[KrazyHorse]

If the price of oil in dollars remains constant while the value of the dollar versus the Euro falls that means that the price of oil in Euros falls. That means that Euros want to use more oil, so they bid the price of oil up. You ****ing dumbass.

[Kidlicious]

Originally posted by KrazyHorse
If the price of oil in dollars remains constant while the value of the dollar versus the Euro falls that means that the price of oil in Euros falls. That means that Euros want to use more oil, so they bid the price of oil up. You ****ing dumbass.

Damn you're ****ing up. It must be psychological or something.

Just because the price of oil goes down in the EU doesn't mean they demand more oil. That's what you are saying. They will consume more oil, not demand more.

You're arguing like you don't know the very basics of supply and demand.

[KrazyHorse]

The demand curve does not shift. The quantity demanded increases. Idiot.

[Kidlicious]

Originally posted by KrazyHorse
We have three assets: nuts, berries and apples. Berries are traded in terms of nuts. Separately, nuts and apples are traded against each other. All of a sudden a large quantity of nuts come on the market while the number of berries and apples is constant. How much do I pay for a berry in terms of nuts compared to before?

You would say the same. I would say you don't know, and this is why. If a small quantity of nuts came into the market the market would function relatively normal. But if a unusual increase in nuts came into the market it would be chaos and noone can say for sure what kinds of things would happen.

[Kidlicious]

Originally posted by KrazyHorse
The demand curve does not shift. The quantity demanded increases. Idiot.

Which has no affect on the profit/bbl that producers recieve, since they get paid in USD.

[KrazyHorse]

Kid, you are bordering on TT territory. As long as demand curves slope downward, an increase in the number of nuts while the number of berries remains constant INCREASES the price of berries in terms of nuts.

[Japher]

The quantity of oil produced may increase or decrease. It depends on the relative elasticities of demand in different countries.

Demand does not determine the production levels of oil, sadly.

Cartels are dumb, throw rocks at them.