We have huge news on the economic front today...
In my darker moments, I've called the U.S. economy the "Wiley E. Coyote Economy" because even though the stock market is up almost 50% over the last 7 months, the U.S. economy is so burdened by debt and so crippled by government regulation that recovery won't come for another 5-10 years, if ever.
Back in January, when President Obama was inaugurated, I speculated about how world events would unfold during Obama's first-term, and - just as a pure, hypothetical guess - I predicted that during his tenure, OPEC would go off the dollar (which would spark a new bout of economic chaos).
Well guess what? In today's Independent, Robert Fisk writes...
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 Americans, who are aware the meetings have taken place - although they have not discovered the details - are sure to fight this international cabal which will include hitherto loyal allies Japan and the Gulf Arabs...
The transitional currency in the move away from dollars, according to Chinese banking sources, may well be gold. An indication of the huge amounts involved can be gained from the wealth of Abu Dhabi, Saudi Arabia, Kuwait and Qatar who together hold an estimated $2.1 trillion in dollar reserves.
The decline of American economic power linked to the current global recession was implicitly acknowledged by the World Bank president Robert Zoellick. "One of the legacies of this crisis may be a recognition of changed economic power relations," he said in Istanbul ahead of meetings this week of the IMF and World Bank. But it is China's extraordinary new financial power - along with past anger among oil-producing and oil-consuming nations at America's power to interfere in the international financial system - which has prompted the latest discussions involving the Gulf states.
Brazil has shown interest in collaborating in non-dollar oil payments, along with India. Indeed, China appears to be the most enthusiastic of all the financial powers involved, not least because of its enormous trade with the Middle East.
China imports 60 per cent of its oil, much of it from the Middle East and Russia....Furthermore, Chinese exports to the region now account for no fewer than 10 per cent of the imports of every country in the Middle East...
Ever since the Bretton Woods agreements - the accords after the Second World War which bequeathed the architecture for the modern international financial system - America's trading partners have been left to cope with the impact of Washington's control and, in more recent years, the hegemony of the dollar as the dominant global reserve currency...
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...
Iran announced late last month that its foreign currency reserves would henceforth be held in euros rather than dollars. Bankers remember, of course, what happened to the last Middle East oil producer to sell its oil in euros rather than dollars. A few months after Saddam Hussein trumpeted his decision, the Americans and British invaded Iraq.
This is huge, huge news - even though the mainstream media is basically ignoring it. If the international powers go ahead with their decision to de-link from the dollar (as today's report indicates), it will be a massive vote of "no-confidence" in the U.S. economy.
For over 200 years (and especially over the last 25 years), foreign investors have flocked to American shores because our country was the most profitable game in town. But the Crash of '08 showed that the U.S. economy has morphed into a Giant Ponzi Scam, and despite the nice diplomatic talk of the last year, it was inevitable that China, Russia, Japan, and the OPEC nations (the countries that - you know - actually produce stuff - whether it's oil, natural gas, or manufactured goods) would take their money elsewhere. Thus, The Demise of The Dollar.
Of course, the oil-producing states are denying the report. But while their denials ring on deaf ears, the United Nations itself is calling for a new global reserve currency.
According to today's Breitbart...
"Important progress in managing imbalances can be made by reducing the reserve currency country's 'privilege' to run external deficits in order to provide international liquidity," UN undersecretary-general for economic and social affairs, Sha Zukang, said.
Just to clarify: The country with the "privilege" is the United States.
More to come.
-Todd
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