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By Robert Fisk | 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.
http://www.huffingtonpost.com/2009/10/06/arab-states-have-launched_n_310826.html
How does this effect you? Well right now all countries need Dollars to buy oil or to exchange their cash for dollars this creates demand for the Dollar this keeps the value of the Dollar strong.
If demand for the Dollar goes down interest rates will go up as the Federal Reserve raises interest rates to prop up the value of the Dollar this will kill the economy.
Also until the higher interest rates raise the value of the Dollar prices for everything especially imports will go up.
Granted this will help American business sell exports but we are a Consumer economy if Consumers spend less because prices are higher that will weaken the Dollar more and create a feed back loop of even less Consumer spending.
Because Consumers, our American Consumers not our exports power our economy thats why the whole import export trade imbalance thing is so important to fix long term.
I humbly submit this Diary as my Resume for the Obama Administration.
10 Comments
Better link to full article at Independent:
http://www.independent.co.uk/n…..98175.html
Thanks:)
This will be as bad for the U.S. in terms of international prestige as would have been a nazi victory on the Normandy beaches.
It will be far worse in terms of suffering here at home.
I say there are traitors who need to be tried for treason.
I would start with Greenspan and Bush’s Treasury Secretary then Helicopter Ben, Geithner and Summers.
Getting them fired and replaced with Lefties should be the priority.
These people did not spend the past 30 years exporting manufacturing capacity, financializing the economy and shoveling resources from individuals to corporations to just roll over now.
Could you imagine what the US would look like should we have to pay for petroleumnot in US dollars, rather in “hard currency?”
The Gulf states have wanted to switch to the euro for awhile now because the longtime weakness of the dollar costs them money. The problem is that while the dollar is weak, so are most of the other likely replacement currencies.
And the Saudis are already denying it anyway:
“It won’t be easy to make such a shift, it’s a pretty unrealistic idea in the near term,” said Qu Hongbin, an HSBC economist in Hong Kong. But in the years to come, he added, China would be delighted if it could print its own currency to pay for oil, instead of having to earn dollars through exports.”; they print their own curency now, it’s just not as ‘fungible’ as the dollar.
Can anyone remember the late 70’s and inflation? If not, better read up because the circle will be completed soon.
It would effect us all, because our dollar would be worth even less, and that means we would pay for oil at the new currency’s price. That means all of our economy would tank, and the depression averted, will be back. The oil barons, and even the Chinese won’t want to loan us money, because our money will be worthless. All you who think your well off, with good jobs, stocks, and investments, will be in the bread lines beside the rest of us. Gee! We could have been working to get away from foreign oil, and doing things to save ourselves, but the ignorant out there think that things will just carry on no matter what happens.
It can’t effect me. It might affect me.
This will create a major spike in the cost of gas at the pump and all commodities that contain petroleum because the dollar will buy less and less, even if the price in euros remains stable. The situation will be worse if the cost of oil in euros, or whichever currency they use, rises.
The cost of food will increase as the costs to harvest crops with machines that run on gas or diesel will be passed on to consumers along with the cost of transporting food to markets. Air travel costs will increase too along with some heating costs.
I don’t want to freak people out, so I’ll reserve judgment until I see some numbers, but this could be a catastrophic blow to our moribund economy and actually kill many people.
Don’t forget that higher food prices will result not only in some people starving, but a change for the worse in the nutritional content of what people eat weakening their immune systems at a time when H1N1 hits. If we have a cold winter and many people can’t stay warm, the situation could be a severe calamity.