Iranian Oil Bourse

Two months from now, on March 20th, Iran is expected to commence operations of an international oil bourse (trading market) which is based on the Euro. Currently, there are two bourses in New York and London, both of which use US dollars as their base currency.

The reason this is important is because a Euro-based bourse will have huge strategic implications for the value of the US dollar. Countries around the world will no longer be forced to hold US currency in their central bank accounts to buy oil, since they can opt to use Euros. This means that, in layman's terms, the US dollar will become less "useful" in the world, and demand will fall. As demand falls for the dollar, the value of the dollar will therefore fall.

This may seem to be unimportant on the surface. Some Canadians might say "oh, well that's good, because that means that the Canadian dollar will increase in value." Unfortunately, at the same time, the Americans will have significantly less purchasing power, and Canadian exports will suffer tremendously. So will tourism. In fact, there will be all kinds of problems. This seemingly innocuous event could be the "straw that broke the camel's back" and cause the US real estate and stock market bubbles to burst, throwing the country (and world) into recession. Forget Iran's supposed push for nuclear fuel enrichment - this event will be far more significant.

Things with Iran could get pretty messy in the next few months.

On a positive note, it's a Friday!