October 06, 2009
The demise of the dollar
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.
Robert Fisk in The Independent:
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 nine years.
More here.
Posted by Abbas Raza at 05:58 AM | Permalink
Comments
except that it's not true
Posted by: cgb | Oct 6, 2009 6:28:44 AM
and nine years is a heckuva long time anyway
Posted by: eli | Oct 6, 2009 9:29:43 AM
and there's nothing secret about it. This has been happening openly for a long time and closed-door meetings between the countries for coordination purposes is neither surprising nor conspiratorial.
Posted by: ODB | Oct 6, 2009 10:17:27 AM
"Bankers remember, of course, what happened to the last Middle East oil producer to sell its oil in euros rather than dollars. A few months after Saddam Hussein trumpeted his decision, the Americans and British invaded Iraq"
This is pure coincidence. Americans invaded Iraq to bring freedom and democracy to the Iraqi people. Seriously, it is inevitable that China will become more dominent in the world economy as the US fades. The energy in China is extraordinary - the entire country is under construction. Meanwhile, the U.S. is in it's late casino capitalist phase where the only thing it can produce is toxic trumped-up securities with no underlying value - but that game is up. China just becomes more and more productive. Americans are living on borrowed money and borrowed time. When I was in China last month, I noticed that businesses were, for the first time, refusing to accept American credit cards. It's that bad.
Posted by: J.H. | Oct 6, 2009 10:44:16 AM
I can recommend a number of books on this topic.
First and foremost is the very great social scientist and political economist Immanuel Wallerstein's "The Decline of American Power: The U.S. in a Chaotic World".
This book predicted this occurrence with great insight and prescience.
Also see Wallerstein's "Utopistics: Historical Choices for the 21st Century"
Another excellent book which explores this topic and again written with great predictive analysis is by William R. Clark
http://www.petrodollarwarfare.com/
Another book on the decline of American hegemony is Michael Mann's "Incoherent Empire"
Finally, an extraordinary general economic history is
David Hackett Fischer's "The Great Wave: Price Revolutions and the Rhythm of History"
The world-historical and geopolitical question which faces us is the following. If the decline of American power and empire is inevitable and we therefore move from "uni-polar"
world to a "multi-polar" world - an idea which fascinates and which is very attractive to eg the Indians - then will this world be "better" or "worse".
Jurgen Habermas certainly has his doubts and hence his strong condemnation of the Bush admin.'s Iraq War.
See Habermas "The Divided West"
Posted by: John Milton XIV | Oct 6, 2009 10:50:33 AM
I forgot to mention
Robert Brenner's "The Boom and the Bubble: the U.S. in the World Economy"
Posted by: John Milton XIV | Oct 6, 2009 10:57:32 AM
Obviously, it is not good for the world to be dominated by any hegemonic state, no matter how morally pure it considers itself to be. The U.S. has much to answer for, from the extermination of native peoples to the injustice of slavery, from the atrocities in IndoChina (millions murdered by carpet bombing) to the toxic meltdown on Wall Street. China also has much to answer for, but at least China does not seek to dominate the world with a network of thousands of military bases spread all over the globe. And China never invaded anyone unless you accept the argument about Tibet. I was in Tibet recently, and I have never seen a place so encumbered by medieval superstition. It badly needs modernization, and China is doing that by buidling roads, airports and electrical grids.
Posted by: J.H. | Oct 6, 2009 11:01:53 AM
J.H.
I tend to agree and to share your views and your sentiments.
However, for the sake of argument, consider the following:
(By sheer and remarkable coincidence, your initials are the same as Jurgen Habermas'!)
I can't hope to do justice to Habermas's position in the short space allotted here . Let me quickly characterize his "groove" (at least at it seems to me) as a sort of "Goethean, Olympian Enlightenment Project"
As a defender and inheritor of the Enlightenment, Habermas - contra his Frankfurt School forbears - held a great deal of hope for the Universalization of Enlightenment values and toward this end he hoped America would be the agent for this historical occurrence.
Because of this, he seems to be a rather dismayed man lately. Again see his "The Divided West".
Posted by: John Milton XIV | Oct 6, 2009 11:15:40 AM
And China never invaded anyone. . .
I wonder if the Koreans, Vietnamese, Mongolians, Uighurs, Burmese, and etc. would agree with that.
Posted by: giotto | Oct 6, 2009 11:27:31 AM
At some point is may come to pass that either a collection of currencies or another "reserve" currency replaces the dollar. For example, the Euro or the Chinese Yuan might someday replace the dollar.
The idea that gold will replace the dollar is silly. Gold is extremely volatile and its use as a currency makes it more volatile. Anyone accepting payment in gold risks losing more in the price fluctuation of gold than they would lose in the loss of the dollar's value. Note that "the loss of the dollar's value" is relative to something else. For example, the loss of value relative to the Euro. Gold, by itself, cannot be spent in the modern world. It must be converted to a currency (again, the Euro, Yuan or Japanese Yen).
The Chinese economy remains strongly export driven. This may change in the future, but for right now I don't see the Chinese promoting the idea of the Yuan as a reserve currency. This would require a floating exchange rate for the Yuan, which goes against China's managed economic policy.
The Euro does float and the European Union is about the size of the United States economy. In theory the Euro could replace the dollar. However, the European Union suffers from many of the same economic problems that the US does. They also have a few of their own, as economies like Italy demonstrate.
There remains the possibility that oil producers will accept a basket of currencies: dollars, Euros, Yuan and Japanese Yen. But this will be on a producer by producer basis, if it happens. Each producer would calculate the currency hedge that they feel most comfortable with. While a basket of currencies reduces currency risk, there are always exchange costs. Again, if you're in Saudi Arabia and you have Japanese Yen and you want to buy something in dollars, you have to exchange the Yen for dollars.
All of these issues suggest that for the foreseeable future, the dollar will remain the reserve currency.
Posted by: Foo | Oct 6, 2009 1:53:40 PM
Purely in the realm of ideas, a notion which appeals to me is that we could avoid the post-Bretton Woods instability and the Krondratieff cycle of pure and destabilizing financial speculation and crony capitalism by turning to Keynes' idea of "the Bancor".
(shrugs) as I said I like the "idea". never gonna/extremely unlikely to happen; still it's a nice idea.
Henry C. K. Lui writes long think-tank like pieces from an East Asian and socialist (??) perspective at the below address:
http://www.atimes.com/atimes/others/Henry.html
Posted by: John Milton XIV | Oct 6, 2009 6:27:38 PM
Actually guys, check this out
http://en.wikinews.org/wiki/Asian_countries_call_for_global_currency
Posted by: John Milton XIV | Oct 6, 2009 6:51:04 PM
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