Did a Russian write this?
Also if we had a monopoly wouldn't all nations be using the dollar?
Currency is a complicated thing and naturally it is not as simple as this article portrays it.
You can’t eat dollars and nor do they function very well in powering your automobile.
The fact that the US dollar is the world’s reserve currency is an advantage insofar as it provides cheap credit. The US can sell US treasuries for very low interest rates because the US does not have to have dollar reserves to back them up. Countries without a hard currency have to back up their debt with reserves of some currency. When that currency is mostly dollars, it is good for the US because they essentially buy dollars at a low interest rate so they can lend themselves at a higher rate.
The US has had the greatest, but not the only advantage from this. The Pound, Yen and Deutsche Mark also served this purpose - simply to a lesser extent - for the past 60 years as well. The Euro is simply taking a larger slice of the pie.
The link to oil in this article is simply a political slight of hand. The only thing that denominating oil in Euros means is that Europeans will no longer need dollars to purchase oil. It potentially weakens the US currency, but also makes US exports more attractive and investments in US assets cheaper.
If the Euro were to completely replace the dollar, it would mean that US borrowing would become more expensive - because the US would be have to keep Euros on hand. But that will not happen in the next 50 - 100 years and I think a global currency is more likely than that scenario. Moreover, the Rupiah and Remnibi should also be reserve currencies too so the dollar as the super-majority world reserve currency is anyway limited in its duration. This is neither suprising nor alarming.
Perhaps the largest single advantage of the dollar is that several hundred billion in actual bills are floating around the planet and these are essentially an interest free loan to the US treasury. Given inflation, it is like lending money the US and asking to be paid back less. Still it is not so sigificant. The only reason people are willing to keep dollars is that the US has never, ever refused to recognize he value of its currency. A new currency or devaluation would be a disaster for the US and therefore ensure the US currency would lose its status as the world reserve currency.
The article’s conclusion of what the US might do would have the exact opposite effect of what its intention would be´. In other words, it is pure garbage.
At this point, “tax cuts for the rich,” it became clear that the author had only the shallowest understaning of economics.
If, and its a big if, countries started using Euros as the preferred exchange medium for oil, then the ramifications and fallout would have a tremendous effect on global financial system.
But you don’t send the largest economy on the planet off the rails without having a look at the consequences. No matter how badly they might hate America, the global economy is deeply intertwined with the dollar.
That may be the reason why OPEC and other countries haven’t been rushing to support this.
As long as we are telling stories to scare the children, here is the current OPEC estimate of Peak Oil:
http://money.cnn.com/2008/07/10/news/international/opec_report.ap/index.htm
VIENNA (AP) — World energy needs will spike by more than 50% by 2030 but adequate oil reserves, conservation and new methods of recovery mean supply will keep pace with demand, the Organization of Petroleum Exporting Countries said Thursday.
. . .
The report projected oil demand to rise by 29 million barrels a day from 2006 through 2030 to reach a daily 113 million barrels a day - a drop of 4 million barrels a day over its predictions last year, “due in part to the higher oil price assumption” - expectations that pricey petroleum is here to stay.
New recovery methods to boost supply
A large part of that projected demand will be met by new recovery and production procedures, meaning total demand for “conventional crude” - oil pumped from wells and other methods using present day technology - will not exceed 82 million barrels a day by 2030, said OPEC.
. . .
OPEC Has Already Turned to the Euro...The source for the euro exchange rate is the Federal Reserve, and I have calculated the euro's average exchange rate to the dollar for each year based on daily data.
GoldMoney Alert
February 18, 2004
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US Imports of Crude oil
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|||||
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(1)
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(2)
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(3)
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(4)
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(5)
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(6)
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|
Year
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Quantity (thousands of barrels)
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Value (thousands of US dollars)
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Unit price (US dollars)
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Average daily US$ per € exchange rate
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Unit price (euros)
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|
2001 |
3,471,066
|
74,292,894
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21.40
|
0.8952
|
23.91
|
|
2002
|
3,418,021
|
77,283,329
|
22.61
|
0.9454
|
23.92
|
|
2003
|
3,673,596
|
99,094,675
|
26.97
|
1.1321
|
23.82
|
We can see from column (4) in the above table that in 2001, each barrel of imported crude oil cost $21.40 on average for that year. But by 2003 the average price of a barrel of crude oil had risen 26.0% to $26.97 per barrel. However, the important point is shown in column (6). Note that the price of crude oil in terms of euros is essentially unchanged throughout this 3-year period.
As the dollar has fallen, the dollar price of crude oil has risen. But the euro price of crude oil remains essentially unchanged throughout this 3-year period. It does not seem logical that this result is pure coincidence. It is more likely the result of purposeful design, namely, that OPEC is mindful of the dollar's decline and increases the dollar price of its crude oil by an amount that offsets the loss in purchasing power OPEC's members would otherwise incur. In short, OPEC is protecting its purchasing power as the dollar declines.
The US no longer responsibly manages its currency, and in fact is taking steps that will actively devalue it even further.
It takes an openly belligerent enemy to come out and say it, but the dollar is taking slow steps to the exit as a reserve currency, though the unwinding will take years if not decades.