Brad Setser on the War in Iran and the Future of the US Dollar
Quotes & Clips
5 clipsCurrent oil shocks differ from the 1970s
“The seventies oil shocks, you know, seventy three was a function of the om Kumbor War Israel, the Arab nations reactions to that the second oil shock in nineteen seventy nine was a function of the Iranian revolution. Same geographic region, different in the sense that the US and Israel are the instigators, and different in the fact that so far, at least the magnitude of the shock is not at all comparable.”
Physical oil interruptions outpace current price reactions
“We’re kind of in this weird world where the physical interruption is bigger the price reaction is smaller. That could change if you look at it in terms of physical interruption of the flow of oils... it’s noted, yeah, we’re similar, maybe even worse.”
US naval power sustains global dollar dominance
“One of the things that connected dollar dominance was this idea of well, the US Navy is what police the highest and made global trade flow and stuff like that. If that is under question of whether the US actually can keep ships going and the way they were, how does that change the equation?”
Iran positions as a Hormuz Strait tollbooth
“And so yes, we've had this really big oil shock, and in addition, we might have some sort of shift in the global balance power, particularly if Aron is a tool keeper, it's a way with. What if it happens to be the case that to go from one place to another you need to pay in Chinese un instead of dollars.”
Global trade seeks alternatives to US dollars
“If you're paying for oil in un does that mean that you're going to save that money in yon dollar reserve assets or are you just going to put it like right back into treasuries? There are a lot of questions that we have about this current moment. Obviously everything's still highly uncertain.”
Want to hear more clips?
Get a daily email of the best quotes & audio clips from the top podcasts.
Episode Description
It's possible that the war in Iran could reshape financial flows in significant ways. Perhaps the Gulf states will end up as less desirable places to do business. Perhaps Iran will have a tollbooth at the Strait of Hormuz. Perhaps this episode will accelerate the world's shift away from oil. It's impossible to say. But given the uncertainty, fresh questions are being raised about the existing financial world order, upon the top of which the US dollar sits. On this episode, we speak once again with Brad Setser, the Whitney Shepardson senior fellow at the Council on Foreign Relations. We discuss how the war is already creating new global imbalances, and the degree to which this episode parallels past energy shocks. We also talk about broader trends in reserve management, other factors driving financial flows, and the unique situation facing East Asia, which is seeing a surge in its energy import bills at the same time its making making a fortune selling chips for the AI boom. Read more: US Probes Suspicious Oil Trades Made Before Trump Pivots China’s $51 Trillion Savings Help Bonds to Outperform During War Only http://Bloomberg.com subscribers can get the Odd Lots newsletter in their inbox each week, plus unlimited access to the site and app. Subscribe at bloomberg.com/subscriptions/oddlots Subscribe to the Odd Lots Newsletter Join the conversation: discord.gg/oddlots See omnystudio.com/listener for privacy information.