Will OPEC Dump the Dollar?

From the AP:

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.

Comments

[gardenbookie]

olephart ~ our gold has already been confiscated and doled out to the richer and richer. GWB will take his to Paraguay (if that hasn't already been done).

So OPEC doesn't want our money? Stop demanding their product. Are you willing to park your car today? Tonight? Tomorrow?

[eliandbo]

I am not defending the monkey, but lets put the blame to the higher price of oil where it belongs.
It was Bill Clinton who sent our jobs to China, now with our jobs and our money, China has a great demand for energy (oil).
Even if the monkey and his Dick (Cheney) had not invaded Iraq and put Iran on the "evil" list, the bidding for oil would still be there.

[gopindrag]

I am so sick of hearing about the 'tax and spend democrats.' Is it just me or doesn't that make a whole lot more sense than the 'borrow and spend' republicans?

[fourex]

AP: "Oil prices rose Monday with more talk among OPEC members about converting their cash reserves to the euro and away from the U.S. dollar."

[sierra]

Lots of good thinking comments!!

The Fed will just keep the printing presses going 24/7 (While we as dumb taxpayers pay for each dollar printed instead of our Congress doing the supervising....since the Fed Act of 1913, but that's "another story!")

The dollar is still "the world's reserve currency."
I can imagine most of the world that holds mountains of "petro-dollars" and "junk securities" wrapped in "jelly-roll" paper must be shaking in their boots....

Where it ends nobody knows, but we can speculate....
A collapse of the dollar (a true collapse), chaos in the "western world" markets....and, China will not escape either....after all so many of our major corporations have "moved" their interests there......

Iraq had threatened and did move some of their oil transactions to the Euro before the invasion of 2003; I suspect that was one of the reasons for the illegal crime committed there by the US.....

The kicker in all this?

Dollar collapse or not:

"In the age of nuclear weapons, either we all talk to each other or we all die!"

sierra

[Dansden]

DOES ANYONE NOTICE A PATTERN HERE?....

Worst economies in American history:
Hoover, Reagan, Bush....

Worst presidents in American History:
Hoover, Nixon, Reagan, Bush....

Worst educational policies in American History:
Hoover, Reagan, Bush...

Most corrupt administrations in American History:
Nixon, Reagan, Bush...

ALL REPUBLICAN:
Hoover, Nixon, Reagan, Bush....

[jwod]

Okay. Whether blameworthy (for the dollar's fall) or not, seems a good reason for all the gas guzzlers amongst us to finally give up on the Republican spend and spenders - and Iran war boosters to stable their warhorses.

[mrcontinental]

Soon we will see the headlines of Venezuela supporting terrorist groups and having weapons of mass destruction.

[rabun666]

The gullible American public doesn't have a clue as most don't even know that the dollar have been devalued by more than 60% by Bush. That's what happens when the president they elect is as clueless as they are about everything, much less governing a country like the USA which is easier to govern much smaller countries without resources because the USA can just throw another $100 billion dollars at it. In the case of Iraq, they just order money by the ton which goes unaccounted for as 3,300 tons of $100 bill has been lost. Probably lost in Dubai from all the construction going on there and where Cheney's Halliburton has moved.If we think that the devaluation of the $ is bad now wait until OPEC starts using the EURO THEREBY CREATING A GLUT OF PETRO DOLLARS in the world. This is what happens when $money is just printed up due to deficit spending, just like Zimbabwe, printing up money and calling it prosperity. This is no secret, except to the clueless American public whose gullibility can never be overestimated.

[TrickleUp]

I HATE TO BE A LUDDITE BUT... I CANT WAIT TO SAY ... I TOLD YOU SO!

[bluesnot]

Lots of good points being made. The circumstances are dire and yet our government is mire in stagnant incompetence.

Everybody knows. Nothing happens.

Is it because the U.S. form of democracy is inadequate to oust a bought administration?

[mamacat]

In the past, FDR used deficit spending to help get the country through the Great Depression, and then he used it during World War II.

Today, President Doofus uses deficit spending to give the super-rich bigger tax cuts, and to pay for invading a country that was never any threat to us.

The next time we actually NEED to be able to use deficit spending, it won't be available. Thanks GOP, and your voodoo economics.

[joebaggadonuts]

Since the Constitution limits Impeachment to high crimes and misdemeanors and since at least 2003, http://www.cnn.com/2003/LAW/06/06/findlaw.analysis.dean.wmd/ we have refused to impeach the criminals who run our country on those grounds, couldn't we just revive those charges to impeach for the painful misadministration, i.e., incompetence that has brought our economic house to collapse?

[Robster]

Rather than tax oil to reduce consumption, we can do the same thing by selectively shutting down production of say Iran and Venezuela to force a shortage and drive prices up- all this and we get to kick some ass, too.

[tomcatv1]

To paraphrase the 't' shirt saying, 7 years of Bush and all we got was a war and a depression. Thanks George. Just remember, it's the economy, stupid.