Saturday, December 30, 2006

Will the dollar continue to decline?

I was reading a post over on Politics in Mudville, which is a local blog that covers local and national poltics and in the comments on a post about Saddam's hanging and Iran, microdot wrote a comment about the Arab Emirates beginning to sell more dollars off for euros. This may not sound like it's that big of a deal but it has potentially huge issues for the United States. This article confirms it's not just the UAE:

ABU DHABI: The United Arab Emirates plans to convert 8 percent of its foreign-exchange reserves to euros from dollars before September, the latest sign of growing global disaffection with the weakening U.S. currency.

The U.A.E. has started, "in a limited way," to sell part of its dollar reserves, the governor of the country's central bank, Sultan Bin Nasser al-Suwaidi, said in an interview. "We will accumulate euros each time the market appears to dip" as part of a plan to expand the country's holding of euros to 10 percent of the total from the current 2 percent.

The Gulf state is among oil producers, including Iran, Venezuela and Indonesia, looking to shift their currency reserves into euros or sell their oil, which is now priced in dollars, for euros. The total value of the reserves held by the U.A.E. is $24.9 billion, Suwaidi said


Nor is it just the euro:

Central banks in Russia, Switzerland and New Zealand are also diversifying away from the dollar and into yen after the Japanese currency reached a 10- month low against its biggest trading partners in October.

As I pointed out in March of 2005 the monetary unit used for oil being the dollar is critical to our survival as a nation:

The petro dollar makes the US function. Almost two-thirds of the world's currency reserves are kept in dollars, because oil importers pay in dollars and oil exporters keep their reserves in the currency they are paid in. The entire global oil trade was conducted in dollars. This means that everyone needs to keep dollars. Since 1971 the dollar was no longer measured in terms of gold. This removed the restraints on printing new dollars. The dollar has become the world’s dominant currency and the core reserve asset of central banks all over the world. It has replaced gold as an international currency. This money is invested in dollar securities like US Treasury notes, stocks, mutual funds, and bonds. The US dollar's current strength is supported by OPEC’s requirement that all OPEC oil sales be denominated in dollars. This was done by an agreement between the US administration and Saudi Arabia. In 1975 OPEC officially agreed to sell its oil only for dollars.

1 comment:

Hooda Thunkit said...

"The US dollar's current strength is supported by OPEC’s requirement that all OPEC oil sales be denominated in dollars. This was done by an agreement between the US administration and Saudi Arabia. In 1975 OPEC officially agreed to sell its oil only for dollars."

Creating a tidy little group of incestuous thieves to rule/control the world???