Secret Cabals and the Demise of the Dollar
On Tuesday, Robert Fisk of Britain’s Independent reported that Gulf Arab states, China, Russia, Japan, and France have been holding secret meetings to end the pricing of oil in dollars. Instead of the greenback, the group has decided to use a basket of currencies for this purpose. Included in the basket will be gold, yen, renminbi, euros, and a new unified currency for the states of the Gulf Cooperation Council. The deadline for the move away from the dollar is 2018.
Does such a cabal exist? Fisk’s article states the facts were “confirmed to the Independent by both Gulf Arab and Chinese banking sources in Hong Kong.” Apparently, no official of any government talked to the reporter about the conspiracy and none of his sources went on the record. Fisk’s story predicts that participants in the arrangement would issues denials, and the denials from Gulf oil officials in fact came swiftly. “We have never heard of this or discussed this, not even secretly,” stated Abdullah bin Hamad Al Attiyah, Qatar’s oil minister. Said Sheik Ahmed Al Abdullah Al Sabah, Kuwait’s oil minister, “I didn’t even dream about it.”
Normally, smoke does not appear without fire, but the article alleging a currency conspiracy had a fantastical quality about it. For one thing, the renminbi is not convertible and, at the moment, is tightly pegged to the dollar. Although the Chinese say they will loosen their currency practices, Beijing’s most recent move, evident since the middle of last year, has been to back away from reform, making the renminbi unsuitable for the basket. Moreover, the inclusion of a currency that does not exist yet stretches credulity, and it would be a minor miracle if Fisk’s list of countries, which includes both oil producers and consumers, could agree on the basket’s composition. The Gulf states rely on America for their security, so it is unlikely they would try to undermine the greenback while Iran is threatening them with its nuclear program. In any event, the price of oil moves up whenever the dollar declines, so producers are insulated from dollar weakness. Finally, as the astute Tom Holland of the South China Morning Post points out, New York and London oil futures, used as a benchmark, will still be denominated in dollars.
Bob fisk is a passionate character, quite the performer (definitely go to see him speak if he’s ever in town) and I’m sure he means well, but I wouldn’t assume anything he reports is exactly gospel
Another one I’d put in the same boat is seymour hersch. He’s been predicting a military attack on iran of some sort for several years now – every time it’s been based on impeccable sources, and every time he’s been dead wrong.
I think this nervousness about currencies just shows that the US is feeling exposed. You guys really do reap dividends from having so many global transactions (including your own debts) measured in something you print yourselves. It shouldn’t MATTER if the middle east starts trading in euros (it certainly doesn’t matter to most other countries – I think australia’s central bank has most of its foreign currency in euros now), but apparently it’s something the US is (presumed to be) sensitive about. Tough luck, I reckon – this is the sort of risk of fluctuations that everyone else has to live with, and you’re not far off no longer being the world’s biggest economy any more. You had your time in the special seat
It can’t hurt to have the world’s biggest military suddenly become painfully concerned about global stability for a change (although that’s increasingly the case these days anyway).
Anything Fisk writes is best taken with a heaping teaspoon of salt.
The dollar at its lowest in GASP 14 months . . . back when Bush was president and “the fundamentals of the economy were strong.”
Keep it up. You’re doing a great job reminding America why they threw your sorry asses out.
of course, Jean Claude Trichet as the representant of the EU Central Bank is the figure of France there ? n’importe quoi !
Germany has more weight in the EU currencies than any other EU countries, Besides, Money EU policies are decided in Brussels, NOT in Paris, to our damn though !
Now, this isn’t a new NEWS, alredy before that the Desert Storm was launched, it was said that Saddam wanted to reverse his oil incomes into the programmed future Eu currencies, then again in 2003, as well as Syria, Iran… that the arab members of OPEC were/are studying the question.
In reality, countries have interest to divert their currencies holding, having only dollars into your basket can drive you to bankrupting, so that is why China buy different money currencies, and will be a major playor in the win-win money game
Why worry? It’s not like the Treasury is about to run out of ink and paper. The deficit has tripled and the economy is, at best stable if not declining. Of course, higher taxes will solve all the problems, right?
It isn’t like people are losing jobs and unable to pay more taxes. Social Security is soundly backed with IOUs. Congress is dreaming up more wonderful schemes for our lives.
It’s one thing to face problems, acknowledge them as being real, and plan to overcome them. It’s another thing entirely to ignore them, to lie about them, and to actively seek to compound them. You shouldn’t be worrying, you should be panicking.
Strengthening the dollar would be a good thing if we were not in a recession. Exporting affordable goods abroad is necessary for recovery, a strong dollar would only make things worse.
I don’t doubt that there has been talks in this regard, the use debt is horrible and market dominance is changing. When the Fisk story broke I was watching the spot price of gold trade in real time with the widget http://www.learcapital.com/exactprice and it was pretty cool to see.
But one question I’ve had since the night this news and the UN position on the possible need for a different reserve currency is this: Was this leaked to give a warning to the USA over Iran? In other words, “get back” or else we’ll use our economic weapon on you? So to speak. That warning of course carries with it the demand to rein in Israel.
Just a thought that’s been digging around my head all week.
Fisk is not the dunce many are claiming he is. I suspect the obstacles to replacing the greenback as the reserve currency will be overcome gradually at first, then quite rapidly when our “friends” realize the jig is up. Get your gold and (especially) silver bullion and shares in their mining stocks now, while they are cheap. Gold moonshots and silver slingshots may sound silly now, but they have more credence than the signs of recovery we keep hearing about. The toxic debts keep growing and the National Socialists are hell bent on destroying our economy so they can save us from the evils of capitalism and the climate change boogeyman. France is becoming the leader of the Free World and China is lecturing us on economic sanity. We followed Alice down the rabbit hole and we will be here for quite a while.
better to have the chinese running the international currency. ever wonder how they
always have 9 percent fixed gdp growth ala madoff.
they actually owe us a couple trillion.
I believe we are over looking the facts of Fisk’s past questionable posts. Is there a chance that this was an intentional act of economic terrorism aimed at the dollar, or a trial to see what is possible?
It is only a matter of time before these interests move strongly to another currency to deal with for trade.
As long as the Dems and RINO’s continue to spend so crazily, the value of the dollar will gradually continue to weaken. It is like gravity. And with it, the relative strength of the USA.
Obama is trying to destroy it, not overnight, but doing his best. He would much rather be Hugo Chavez of a small lake USA than a nothing in a big strong USA.
Seriously:
“Exporting affordable goods abroad is necessary for recovery, a strong dollar would only make things worse”
Good lord, man – you’re talking SENSE! Keep up the good work.
People have an irrational view of exchange rates – they always think higher is better, and it isn’t. That said, the outcome of this week’s interest rate hike has me considering an amazon order …
Hal (GT):
“Was this leaked to give a warning to the USA over Iran?”
Or was it simply invented, for the same purpose? Not out of the question, IMHO.
Gary Ogletree:
I suspect the obstacles to replacing the greenback as the reserve currency will be overcome gradually at first…”
I’m no expert on these things, but the greenback is hardly the only reserve currency now. At the moment, the australian reserve bank has 15 billion in US dollars, nearly 19 billion in euros and 11 billion in yen (plus 9 billion in gold et al).
http://rba.gov.au/Statistics/IMFMonthlySurvey_Current.xls
I think Fisk is right. The foreigners can see what is coming. Every effort to run an economy with fiat money has resulted in collapse. That is why the founding fathers put in the constitution that the government could mint but not print money. This was gotten around by means of the Fed. The convertibility of dollars into gold for foreigners was a restraint until Nixon closed the gold window. Since then we have had one economic crisis after another.
Matthew, you wrote: “and you’re not far off no longer being the world’s biggest economy any more.” Check the figures, the U.S. economy is by far the largest. Second place Japan is trillions behind in the GDP race.
Class Clown, you wrote: “Anything Fisk writes is best taken with a heaping teaspoon of salt.”
Agreed, but the markets apparently believed him.
MarkD, yes, it is time to worry. Thanks for putting this in such a clever way.
Hal (GT), I don’t know the answer to your question, and I suspect there is no link, but this is nonetheless something to be investigated. Thanks.
Gary Ogletree, you are right that if the end comes for the dollar, it will come quickly. This is another example of a tipping point.
keithacita, yes, the Chinese are quite good at coming up with the right number, whatever the occasion.
Sapwolf, I am all for restraint in spending. Thanks for raising the issue.
RAP, agreed. We need to create spendning restraints on Congress. Want to start a nationwide movement?