“The demise of the dollar“, Robert Fisk, The Independent, 6 October 2009 — “In a graphic illustration of the new world order, Arab states have launched secret moves with China, Russia and France to stop using the US currency for oil trading.”
In the most profound financial change in recent Middle East history, Gulf Arabs 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.
Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars.
The plans, confirmed to The Independent by both Gulf Arab and Chinese banking sources in Hong Kong, may help to explain the sudden rise in gold prices, but it also augurs an extraordinary transition from dollar markets within 9 years.
This is unlikely for many reasons. A few quick ones…
- Some of these nations have no reason to risk destabilizing the USA. Esp the Saudi Princes.
- Some of these nations have no reason to risk destabilizing the global financial system. Esp. Japan.
- Many of these nation have leaders who are some combination of cautious, slow, reactive, and incrementalists.
- Something of this scale would be almost impossible to keep secret 2 days after the first discussions.
- If multiple Hong Kong banking sources knew it, their fingerprints would be all over the US dollar — as they shorted it to the max.
The only thing giving pause is Fisk’s reputation. While strongly anti-American, he is no pilgrim — and he’s well-wired in the Middle East.
(2) Memos from the 1970’s, similar fears
At Zero Hedge are two memos from the Carter Administration discussing the possibility of oil being priced no longer in US dollars, but the IMF’s special drawing rights. The authors:
- Henry D. Owen, Special Representative for Economic Summits
- Anthony Solomon, former Undersecretary of the Treasury and President of the New York Fed
During this period there were concerns that the US debt could no longer be financed in dollars, but that (like 3rd world nations) we would have to borrow in real money.
(3) Recommendations
- Watch for further developments.
- Watch for analysts that take this story seriously; scratch them from your reading list.
- Mark your calendar check to back with Fisk in 2018.
(4) Articles on this topic
- “The Case for Exchange Rate Flexibility in Oil-Exporting Economies“, Brad Setse, Peterson Institute for International Economics, November 2007
(5) For more information
To read other articles about these things, see the following:
- About the Financial crisis – what’s happening? how will this end?
- About the End of the post-WWII geopolitical regime
Reference pages about other topics appear on the right side menu bar, including About the FM website page.
Posts about the US dollar:
- A brief note on the US Dollar. Is this like August 1914?, 8 November 2007 — How the current situation is as unstable financially as was Europe geopolitically in early 1914.
- Economic Warfare, 10 November 2007 — Welcome to the post-war (b. major states) world.
- We have been warned. Death of the post-WWII geopolitical regime, 28 November 2007
- Our metastable Empire, built on a foundation of clay, 3 March 2008 — The US dollar is a big chunk of this clay.
- Words to fear in the 21st century: Lǎo hǔ, lǎo hǔ, Lǎo hǔ, 14 July 2008 — Very pertinent to this post!
- Two essential texts in the theory and practice of financial warfare, 11 September 2008 — It’s coming.
- Rumors of financial war: Russia vs. US, 22 September 2008
- Effective treatment for this crisis will come with “The Master Settlement of 2009″, 5 October 2008 — Speculation about the birth of the new world order.
- A look at the new world – after the downturn, 19 March 2009 — And what role the US dollar has in it.
- Fetters of the mind blind us so that we cannot see a solution to this crisis, 1 April 2009 — The truth is there, but we cannot see it.
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