In a story that’s receiving headline treatment from Matt Drudge, Robert Fisk is reporting in The Independent that several oil producing states, along with China, Russia, and France are working on a plan to abandon the dollar:
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.
Chinese financial sources believe President Barack Obama is too busy fixing the US economy to concentrate on the extraordinary implications of the transition from the dollar in nine years’ time. The current deadline for the currency transition is 2018.
The US discussed the trend briefly at the G20 summit in Pittsburgh; the Chinese Central Bank governor and other officials have been worrying aloud about the dollar for years. Their problem is that much of their national wealth is tied up in dollar assets.
“These plans will change the face of international financial transactions,” one Chinese banker said. “America and Britain must be very worried. You will know how worried by the thunder of denials this news will generate.”
There’s really no way to over-estimate the impact that something like this could have for the U.S. economy.
The end of the dollar as a global reserve currency would mean the end of dollar hegemony, and the end of the ability of the Federal Government and the Federal Reserve to hide the consequences of endless budget deficits and inflationary monetary policy. It would mean that trillions of dollars in reserves held by foreign governments and banks would be dumped on the market, and that would mean that the value of the dollar would finally begin the decline that has seemed inevitable to anyone who understands the inherent instability of a fiat currency system.
As for why it’s happening, well we’ve got nobody to blame for that but ourselves.