A Saudi change from the petrodollar might well get the Washington chimpanzees agitating about "regime change"...

Well, those twenty-two brigade groups in Iraq gotta go somewhere when we pull them out of Iraq. Over the horizon into Saudi Arabia is as good as over the horizon into Kuwait. We've already built the roads along the Saudi/Iraqi border which we could use for logistics - fifteen years ago.

still more heavily subsidized than renwables. If only they were right.

You got that right - like those three carrier strike groups cruising in the Gulf and Arabian Sea right now. That cost doesn't get entered into the idea of subsidy. Ditto for the twenty-two brigade groups on the ground in Iraq costing a cool $200 billion per year. We'd be one hell of a lot closer to having renewables actually in widespread use in the economy if we had spent $200 billion per year for the last four years instead of literally pissing it into Mesopotamian sands. To whom do we send the bill for subsidy?

Arguing that the U.S. is the preferred place for investment, over China, Russia, western Europe, or any other alternative, is an opinion based on one's nationalist viewpoint. It isn't born out by economic statistics - money today is flowing into China and other emerging markets, or places like western Canada with large hydrocarbon resources. The investment balance on the U.S. current account hasn't shown any great improvement, certainly not in relation to these other investment magnets.

Your friend is expecting the 1980s and 1990s to replay themselves, but if that were the case we would see that by now. U.S. corporate earnings would be predominantly from within the U.S., whereas most successful corporations these days are generating their earnings overseas (see Hewlett-Packard's numbers this morning).

I think your friend, and maybe even his financial institution, are going to have some rough times ahead if they continue to think nothing has changed for America in the past twenty years. But whatever happens, it sounds like your friend will never change his political tune and will always think of some glib retort to any argument you can make.

...all day with my friend via email. He is a libertarian by nature, and is an Obama supporter. He isn't necessarily conservative, except his economic views are very hard right. He reposnded to me when discussing the importance of the devaluing of the dollar with this statement:

"There is only one thing in play, too many dollars outside of Treasury's control. Oil has even less to do with this, that's a total political argument, not reality. The only thing oil affects are the stock and futures markets. If people start grabbing Euros as an investment, that's great news. The Euro will start feeling the downwards pressure of currency outflow and the dollar will rise. There's no magic to the way floating currency markets operate. They float based on supply and demand. It's math, not speculation."

I just don't get it that he doesn't get it and that it IS about the oil (and the dollar and the Yuan...and the Euro..), that this is a dismantaling of the entire global economic system...

"If people start grabbing Euros as an investment" this does not lead to downward pressure on the currency. The only outflow of significance would be the interest payments on the investment, say about 5% p.a., which is dwarfed by the principal being invested. It would take about 15 years for the interest payments to even equal the amount of the investment, so clearly the pressure in the FX markets of the one-time, initial investment is much greater than the interest payments over time.

If OPEC producers decided to accept only euros in payment for oil, and refuse dollars, the effect in the exchange market would be immediate and ongoing pressure on the U.S. dollar.

Let us trust your friend is not in some significant position in his financial firm, like investment advisor, because his knowledge of the markets is sketchy.

is much the same way. He's argued that the lack of cellphone/internet provider choices in the US is a sign of a healthy, optimized market. And that the quality of cable TV and the amount of commercials on it are entirely justified because "that's what they need to do to make a living." And that black people are less successful than whites because of "genetic differences... or maybe cultural ones too." (We had a looong talk after he spouted that crap). He also says he's conservative because "he doesn't believe in helping people. If you give them everything they need, like liberals want to do, then they won't work hard, they won't be proud of themselves, and they'll do nothing." Apparently, wallowing in poverty and barely scraping by day-to-day makes you more "proud" than getting a little cash to get back on your feet.

It's the right-wing bizarro world. This same guy stood in line for 4 hours to get Sean Hannity's autograph and listens to conservative talk radio all the time. Luckily, he doesn't use terminology like "asset driven markets," though he just got a job that may introduce him to such things... That'll make our conversations harder, as he learns new phrases to throw out like chaff and distract from real debate.

Europe is not all one economic area operating on the same import replacement/expanstion cycles. And that means that large chunks of it are constantly getting the wrong feedback.

... about Canada - Alberta, Ontario out of sync - and the US - California versus the rest. I don't deny the validity of the observation but I don't think that ever fragmenting currencies could be the answer. I think in the EU the overall ease of business facilitated by one currency is a net benefit. Especially taking into account the transfer payments that happen within the EU between countries (similar to the transfers between provinces). I.e. in my view its just fair that Germany as one of the biggest beneficiaries of the euro pays the most into the EU budget.

how many vital regional cities did the US have 100 or 50 years ago as compared to now?

Transfer payments don't cut it, they aren't feedback.

I won't deny there are advantages to having one currency over a large area. However, in my view, the loss of feedback is almost never worth it.

... that migration and geographic concentration of economic activity will be the outcome of the lack of feedback?

I think a very good example for this is the migration from East Germany and the economic malaise there when the old currency was abandoned after reunification.

In the case of Europe as a whole I believe that cross country migration is still severely stalled by language barriers and an overall stronger cultural bias against relocation when compared to North America. In West Germany I found that most people rather go without job for a long stretch of time rather than to relocate to another city.

Also if you go back a couple of century pretty much every European currency was based on gold. I strongly suspect that Europe is just to diverse and densely populated to play out the same dynamics as the US.

explains it best in Cities and the Wealth of Nations, but basically, in a properly functioning currency:

1) the currency goes down when your economy needs a boost in exporting and should be import substiting.
2) the currency goes up when your economy should be buying other people's goods. (First you have to buy them, then you substitute them, with a few exceptions).

Since economic regions are not country based, but are based around functioning metropolitan areas, if you have too many metro areas with the same currency they get inappropriate feedback.

Gold backed currency did not mean there were no currency fluctuations, in fact there were.

Universal currencies are a bad idea. And we haven't even really touched on what happens when you have one central bank.

Anyway, I'm not talking about migration per se, although that can be one side effect of booms and busts and backwards areas.