The dollar is sliding on the currency markets this morning after reports by the Independent newspaper that Arab states are in secret talks with China, Russia and France to stop using the US currency for oil trading.
The move – if it happens – would be the most profound financial change in recent Middle East history, argues the paper. It would send shock-waves through the international oil market, and change the geo-political landscape. The story, written by the highly respected Robert Fisk, has already led to a rush of denials that this is about to happen.
According to Fisk, “the Gulf states are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.”
Apparently secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil.
Fisk argues that the move could be the precursor to a “future economic war between the US and China over Middle East oil – yet again turning the region’s conflicts into a battle for great power supremacy.” It also signifies a shift in global supremacy from the US towards China.
One country has already made the change, Iran announced late last month that its foreign currency reserves would henceforth be held in euros rather than dollars.
But Reuters has just reported that the United Arab Emirates central bank has come out denying the reports “They are going to stay with the dollar. For so long oil pricing is in dollars and it would be difficult for producing countries to change.”
But such is the way, the very fact that talks are ongoing about maybe dumping the dollar, means that the dollar is now falling. “The very fact that such an idea is being entertained is undermining the dollar,” said Dariusz Kowalczyk, chief investment strategist at SJS Markets in Hong Kong.
But some analysts believe that the dollar’s long-term future as the currency for oil trading is in serious trouble and will be replaced over the next few years.
“China, Russia and many Middle East countries already have large dollar reserves. They want to stop them getting higher, and may even want to start diversifying them into other currencies,” says David Hart, oil and gas analyst at investment bank Hanson Westhouse.
This is our future in the U.S. until our leadership puts the future of the dollar over the political careers.
Great post guys!
Thanks alot Obama. Maybe if you knew how to balance your checkbook, and stop spending money we don’t have, the rest of the world wouldn’t want to drop the dollar.
This has been building for some time…talked about in previous years….the Obama admin inherited a monster mess: The economists have said that without our infusions of stimulous money we would have been down the drain before now…but we are still bleeding out: the vampire feeding on our dollar continues with endless war & massive debt expenditures to the military industrial complex while the fianancial industry is bleeding us from the other end with smoke & mirrors.
It began when we outsourced American jobs & production under the our corporate owners wishes for “free trade”. It accelerated with our spending on wars without end and borrowing from China (who now owns most of our debt). But it was hammered home with deregulation: actually forseen by some with the deregulation of the Glass Steagal act in 1999.
What we need to do:
1) Get the corporate owned cronies out of our government and legislators with stringent Campaign finance reform…yesterday. Half of our legislators are currently outright owned by corporate interests and many of the other half are influenced by the same.
2) re Regulate the bejesus out of these financial debt industries that have sucked our blood dry.
3) Get back the taxes on the wealthiest and corporate loop holes.
I think it is in serious trouble too, the dollar I mean. But boy, Gold is shinning like crazy. Silver following suit. I’m tracking the precious metals with the free widget http://www.learcapital.com/exactprice and man to see the action today was something. Right now gold is $1,042.90.
The Arab states are now coming out and claiming that they were not in talks to tank the dollar so the spin is beginning. My opinion is that the info leaked out and they are trying to get ahead of it because they didn’t want gold to jump so quickly. Particularly China.
you’ve got be careful to discern the difference between ‘talks’ and ‘agreements’. Just because they’re holding secret talks doesn’t mean that China will renege on it’s commitment to keeping the dollar (of which it holds vast quantities) at a high value.
Thanks alot Bush. If you hadn’t been such a goof-up and driven up the “biggest deficit ever” and if you understood the value of keeping great-paying American jobs in America, maybe the dollar would have more value today.
President Obama will probably spend both terms in office cleaning up this mess!
Very well put James! ^.^
The U.S. economy would crumble if oil traders stopped using the dollar to trade.
They can do as they want — what they are selling only makes sense in relation to its consumption…and we consume the most of it.
Also, with Hydrogen we’re on the verge of divorcing ourselves completely from oil.
So these countries like a business who knows its chief customer has found a cheaper supplier and so makes wild plans to “branch out” into new markets. Good luck.
So, last chance at the dollar bar fellows…drink up while you can.
We have huge oil reserves of our own which have not been developed. US dump the Middle East, produce our own. Let’s see what happens to their economies then. Oh I forgot, the bleeding heart environmentalists don’t want that to happen. They still want to drive their cars, fly in their airplanes, but goodness gracious we can’t drill for our own oil. Drill the Bakken! Come on Oil companies you can do it. Senate, House and Mr. President stand up for the US- support US citizens instead of other countries.
Creditor nations have been subsidizing US standards of living for a decade, and they’re unwilling to keep doing so. Certainly the current administration’s policies raise inflation fears, so foreign sellers of a commodity would naturally examine ways that they can limit their risk exposure. If this worries us as Americans, maybe we should get our financial house in order and stop looking for new ways of spending money that we don’t have. National health care, anyone?
The dollar also dropped after a top US central banker said that interest rates in the world’s biggest economy were likely to remain very low for some time.
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