Will OPEC Dump the Dollar?
Iranian President Mahmoud Ahmadinejad said Sunday that OPEC's members have expressed interest in converting their cash reserves into a currency other than the depreciating U.S. dollar, which he called a "worthless piece of paper."
The hardline Iranian leader's comments also highlighted the growing challenge that Saudi Arabia, the world's largest oil producer, faces from Iran and its ally Venezuela within the Organization of Petroleum Exporting Countries."They get our oil and give us a worthless piece of paper," Ahmadinejad told reporters after the close of the summit in the Saudi capital of Riyadh. He blamed U.S. President George W. Bush's policies for the decline of the dollar and its negative effect on other countries.
"All participating leaders showed an interest in changing their hard currency reserves to a credible hard currency," Ahmadinejad said. "Some said producing countries should designate a single hard currency aside from the U.S. dollar ... to form the basis of our oil trade."
Earlier this week there was a story that Saudi Arabia had rejected a proposal to dump the dollar at OPEC's latest meeting.
I can't speak to the various political games being played within the OPEC meeting. However, Iran and Venezuela are OPEC members and neither like the US. In addition, there is a strong argument for OPEC to dump the dollar. Here is a yearly chart of the dollar.
This is a bear chart, no doubt about it. Notice the following.
1.) The dollar has been dropping in value for the last two years.
2.) The simple moving averages (SMAs) are all heading lower.
3.) The shorter SMAs are below the longer SMAs
4.) Prices are below all the SMAs.
In short, this chart says sell me.
OPEC is getting paid in a continually devaluing currency, which no one wants. In addition, as the dollar has dropped, oil has risen over about the last month partially as an inflation hedge. That means oil has been rising because the dollar is falling.
In short, OPEC has a damn good point in getting rid of the dollar. The only reason to keep the dollar is Saudi Arabia will prevent the move, not out of economic interest but out of political will.
Loading comments…
Want to reply to a comment? Hint: Click "Reply" at the bottom of the comment; after being approved your comment will appear directly underneath the comment you replied to
Having just returned from Europe - London, Paris, Rome and Amsterdam, I can tell you that the Iranian PM has a point, and most of us Americans do know that this Iraqi War has caused us quite a loss in fortune with the concomitant negative effect on the dollar. The realization of this is like putting gasoline on an open wound, because we have come to the knowledge of how unnecessary this war has been. We have seen how the Administration's lies and deception have led us into it, thus causing us all the more pain with each human casualty, our own and those of Iraqi Civilians.
As Nero sat doing nothing whilst Rome burned, we have seen Bush sitting idly by, ignoring the root cause of our problem in the Middle East: Israel's reposturing and intransigence in refusing to make a comprehensive peace settlement with Palestine. (Yes, it does exist!)
He even gave the green light to Olmert to invade and largely decimate Lebanon over the capture of two Israeli Soldiers. And he has the foolishness to say that Iran cannot develop nuclear power, that if it does, it will be bombed to oblivion, even though he must know the potential consequences for our troops in Iraq and Afghanistan, and the innocent Israelis, Arabs and others in other parts of the Middle East.
the dollar is garbage. i'm surprised anyone accepts it anymore.
Yet one more way that our belligerent rhetoric and actions are eroding our security. The fact that oil is traded in dollars is the only thing keeping the dollar afloat anymore. If oil was no longer traded in dollars, our currency would drop like a stone.
Guess who else suggested OPEC should move away from the dollar? Yep - Saddam Hussein - in 2000. We all know what happened to him.
Despite whatever other reasons they may give, this will be prove to be the true "cassus belli" for attacking Iran.
I am enjoying the political direction today. Spurred by Hale's posts--one thing has become very clear to me:
The most potent political weapon is money. As YouThinkAndTalk says-
"Call me cynical, but I think that was the plan. The Republicans HATE with a passion supporting the less fortunate, and the best way to do that it to NOT have money."
Where I differ is I believe they hate all of us--anyone not part of the Elite. It is a class war.
Bush bankrupted Texas and Governor Reagan's money policies destroyed California. Filled our streets with the mentally disturbed then in turn, filled our prisons with them and returning Nam vets; turned a top ten education system into one ranked with Mississippi, left our highway system a pock marked moon scape, busted unions, and sold the environment to the highest bidder.
His terms as Pres. were just a national continuation of this, and I think, the first real unveiling of the Neo-con agenda of Class Warfare we see coming to fruition today.
It's not just about repealing FDR, allowing the Royal Corporatocracy obscene profits, or grinding working people down. It's a
comprehensive, cold blooded attack against the very middle class--Note to neos here-I refer to the mass of Americans, not the relative few on welfare you whine about--The Middle Class, that built this country. So where is the logic in that?
From our perspective, there is none. It seems like killing the goose...bu
When Bush laughs about the haves and have mores or Cheney smirks at unwinding the Constitution, remember, they laugh at us. When the Depression hits and half our people starve or go up in the flames of social disintegration, remember that they conquered us without firing a shot; money was their ultimate weapon.
FogBelter, you're somewhat correct when you say
"The rest of the world can't detach itself from the American Economy ... or have you missed the foreign banks that are reeling from the US Mortgage Crisis as well?"
But not completely.
Sure, just like Citigroup at home, many subscribe to the too-big-to-fail theory when it comes to protecting their assets.
And, yes, American dollars have been the assets of choice for stable economies around the globe for some time now.
But times they are achanging.
The European countries, in particular, have realized the error of their ways - and are actively looking for ways to protect their own reserves while detaching themselves from our sinking ship.
Because the whole problem with that too-big-to-fail theory - whether it's with domestic banks or foreign reserves - is that's it's one big pile of crap.
And right now, the whole world is sitting on top of a bunch of crap in the form of sinking dollars.
They'll sit tight for a while. But not forever.
And if OPEC really does dump the dollar, look out.
Things could go into freefall faster than you think.
Better start investing in gold and weapons. The economic collapse and the revolution against those responsible are coming.
the dollar may blow dead goats, but you seriously undermine your point by using credibilit
Hale,
More than a 60% depreciation against the Euro since 2001. Now China, besides announcing a more diversified currency basket, has told it's citizens to "dump" their holdings of US dollars. Coupled with the recent revelation of OPEC concerns, the question is no longer "if" but "when" and will there be a "run" on dollar dumping between OPEC and China?
It is only a matter of time before they switch . . . good business and common sense says no one wants to keep making a loss . . . even the Saudis will have to "jump ship"
so much for neo-con and GOP economics . . .
Obviously current events are following the plans of the real power brokers of this planet. If they weren't, George's life wouldn't be worth a plug nickle and he would have probably been feeding the worms long before this point in time.
Just remember we dumped the gold standard some 36 years ago and replaced it with a floating standard. That paper the Fed prints now relies on commodities like oil to maintain any real value. If the oil producing countries of OPEC decide to deal in a different currency, our currency becomes subservient to that currency. With a weak dollar and increasing inflation caused by the printing of all this funny money, $6 a gallon oil isn't far off and we have no way to stop it. All the current and future wars planned by the Bush Administration are a last ditch effort to retake control through a power grab of these resources. The WTO and the World Bank have been plundering the resources of 3rd world countries for years to achieve the same thing, a global oil empire.
Your words and graphs speak volumes: of COURSE it is a sound business move, even a business imperative, to use a reserve-currency that is not being used as a blank check by its issuing nation. We ought to recall from history that the British Pound Sterling lost its claim to that status for much the same reason. In time, the Euro will do the same.
But there does come a time when "the full faith and credit of the United States" is not worth a tinker's-dam, and that time is right now. America is not the nation it once was. That transformation was by choice, not by necessity, and the reasons why those choices were made also "speak volumes." To a businessman, it simply means that the US is -intending- to take the shirt off his back.
We have reached "the end of Reaganomic
They won't, of course. You wouldn't. No one would.
"The military industrial complex" that has seemed to reign supreme for the last sixty years was, in fact, a product of the industrial power that birthed it. But in the years that it has reigned, it has, as "Ike" Eisenhower predicted, consumed and swallowed and even then excreted all the once-powerful infrastructure that allowed it to exist. It left the country, for the moment, bereft; and its leaders, holding their bags of what is now straw, clueless but still-defiant.
To fix this problem, we must now re-learn what our grandfathers knew, and do once again what they (of grim necessity) did.
Close the barn door after the horses have left, eh?
Sure, some people are just beginning to notice the dollar dropping. Those are the people who are now complaining about being paid in dollars, and anxious to move their money into another currency.
Meanwhile, those moving the markets have been selling dollars for the last 2 years. Once people start panicking, the market movers will swoop in and buy back the dollar while it's cheap.
This happens in almost every market. The armchair investors wait until 1999 to buy, and then ride out the losses until 2002 to sell. Buy high, sell low. It's a sucker's bet.
If you haven't moved your money out of dollars by now, don't bother. Jumping on the bandwagon at the last minute is a notoriously bad investment, whether the market is topping or bottoming out.
The Saudis know this better than anyone. They're not going to sell dollars at their lowest point to buy Euros at the highest point. They would be double losers after all the speculation washes out and the currency markets revert to the historic mean.
George Bush the "backfire" President and I do mean backfire!don't stand behind him!
There are no problems, economically or politically that are insurmountable. That can't be cured by a change of Administrations.
Remeber that 8 short years ago the USA was at the height of prosperity and the height of power.
What is going on these days is a result of having fools in charge. Unbelievable fools who could screw things up so badly in 7 years.
Lord knows I had my problems with Bill Clinton. But he did deliver peace and prosperity.
In an odd sort of way it could be a good thing if the OPECers did settle on the Euro. Boosh and the oil companies and the Theos who so far have been in control of the soul of America will have less money to use to perpetrate their agenda of death for profits, especially oil profits.
The right wingers scream about "the culture of death" but they ARE "the culture of death".
Their "culture of death" agenda began with Goldwater and really took off with Reagan and his defunding of American families.
The decline of the middle class IS the decline of America.
Reagan was put into power by Pope John Paul II and Jerry Falwell. And the results are what is happening in America and the ME. The Repugs can do anything they want and with impunity.
Jesus and our now shredded Constitution admonished against the merging of church and state. But the right winges being the moral relativists and cherry pickers that they are just choose to ignore the teachingsof Jesus and the Laws of God.
I am not the Popes idea of a Catholic and do not choose to be. He can have Bill O'Reilly, Sean Hannity, Scalia, Thomas, Alito, Roberts, Chris Matthews, Joe Scarborough, Guiliani, Russert, Malkin, Ingraham, Beck(now Mormon) etc.etc.et
Dubya may be their jesus but he is not my Jesus.
You must be logged in to comment. Log in or connect with
