Dollar poses dilemma for Bric countries

http://news.bbc.co.uk/2/hi/business/8101154.stm

15 June 2009

Brazil, Russia, India and China, collectively known as the Bric countries, are holding their first formal summit in the Russian city of Yekaterinburg. On the agenda is the role of the dollar and its status as the world's dominant currency. China, Russia and, to a lesser extent, Brazil have expressed a desire to see the dollar one day replaced as the world's main trading currency. Fears that these big holders of dollar assets may be looking to switch from the US currency have unsettled financial markets and US politicians. These concerns have in part led to a decline in the dollar against other major currencies in recent months and sent jitters through the market for US government debt.

To address these concerns, US Treasury Secretary Timothy Geithner visited China at the end of May to give assurance over the safety of dollar assets, and met with his Russian counterpart over the weekend at the sidelines of the G8 finance ministers meeting.

Will the US dollar remain king?

http://news.bbc.co.uk/2/hi/business/7965518.stm

26 Mar 2009

The dollar's role as the world's dominant currency is coming under intense scrutiny. This week, China added its voice to demands for a new global currency as an alternative to the dollar in international trade and finance. China's central bank governor Zhou Xiaochuan called for a new reserve currency run by the International Monetary Fund. China has almost $2 trillion in foreign exchange reserves, of which 65% is believed to be in dollars.

US Treasury Secretary Timothy Geithner said he was "quite open" to China's idea, triggering a plunge in the dollar. But he then added that the dollar was likely to remain the world's reserve currency for a long time, helping the currency to recover.

"The machinations of currency policy between the US and China are becoming increasingly intriguing," says Neil Mellor, currency strategist at Bank of New York Mellon. As the world's largest holder of dollars, China's comments cannot easily be dismissed. Should reserve managers begin to shift away from the dollar, it would have a "massive impact" on US markets, says Mr Kotecha at Calyon.

Obama News Conference

24 Mar 09

Question: Taking this economic debate a bit globally, senior Chinese officials have publicly expressed an interest in international currency.

Obama: So the goal at the G-20 summit, I think, is to do a couple of things. Number one, say to all countries: Let's do what's necessary in order to create jobs and to get the economy moving again. Let's avoid steps that could result in protectionism, that would further contract global trade. The steps that we've taken are ones that are restoring a sense of confidence and the ability of the United States to assert global leadership.

Question: (Off-mike) global currency?

Obama: I don't believe that there's a need for a global currency.

China suggests switch from dollar

http://news.bbc.co.uk/2/hi/business/7960620.stm

24 Mar 2009

China's central bank has called for a new global reserve currency run by the International Monetary Fund to replace the US dollar. With the world's largest currency reserves of $2tn, China is the biggest holder of dollar assets. Its leaders have often complained about the dollar's volatility. China has long been uneasy about relying on the dollar for trade and to store its reserves and recently expressed concerns that Washington's efforts to rescue the US economy could erode the value of the currency. On Tuesday, the dollar weakened against most major currencies following the announcement of a US plan to buy up toxic debt.

Iran leader dismisses US currency

http://news.bbc.co.uk/2/hi/americas/7101050.stm

18 Nov 2007

Iranian President Mahmoud Ahmadinejad has suggested an end to the trading of oil in US dollars, calling the currency "a worthless piece of paper".

Rapper Jay-Z dissing the dollar

http://news.bbc.co.uk/2/hi/business/7097736.stm

16 Nov 2007

Wads of dollar bills are usually as much a part of rap videos as fast cars, diamond-encrusted jewellery and scantily-clad models. But in an apparent nod to the low value of the dollar, rapper Jay-Z's new video Blue Magic features another currency. He is seen cruising the streets of New York in Bentleys and Rolls Royces (now owned by Germany's Volkswagen and BMW) with a briefcase of 500 euro notes.

Supermodel 'rejects dollar pay'

http://news.bbc.co.uk/2/hi/business/7078612.stm

6 Nov 2007

The world's richest model has reportedly reacted in her own way to the sliding value of the US dollar - by refusing to be paid in the currency. Gisele Bündchen is said to be keen to avoid the US currency because of uncertainty over its strength.

 Dollar Dropped in Iran Asset Move

http://news.bbc.co.uk/2/hi/business/6190865.stm

18 Dec 2006

Iran is to shift its foreign currency reserves from dollars to euros and use the euro for oil deals in response to US-led pressure on its economy. In a widely expected move, Tehran said it would use the euro for all future commercial transactions overseas. Analysts said Tehran had been steadily shifting its foreign-held assets out of dollars since 2003 and that Monday's announcement was unlikely to affect the value of the dollar, which has weakened significantly in recent months.

 Oil Producers Shun Dollar

http://www.ft.com/cms/s/277471c2-8889-11db-b485-0000779e2340.html

11 Dec 2006

Oil producing countries have reduced their exposure to the dollar to the lowest level in two years and shifted oil income into euros, yen and sterling, according to new data from the Bank for International Settlements. The revelation in the latest BIS quarterly review, published on Monday, confirms market speculation about a move out of dollars and could put new pressure on the ailing US currency. Russia and the members of the Organization of the Petroleum Exporting Countries, the oil cartel, cut their dollar holdings from 67 per cent in the first quarter to 65 per cent in the second.

Venezuela 'may swap oil currency'

http://news.bbc.co.uk/2/hi/business/4990302.stm

17 May 2006

Venezuela has hinted it could price its oil exports in euros rather than US dollars, further weakening its links to the US. President Hugo Chavez said he was considering taking the step following a similar declaration by Iran. Earlier this month, Iranian authorities gave backing for the launch of an oil exchange that traded solely in euros.

Experts have suggested that, should Iran demand payment for its exports in euros, central banks could opt to convert some of their dollar reserves to euros and therefore possibly trigger a further decline in the US currency.

The dollar has already come under pressure in foreign exchange markets in recent weeks, triggering nervousness in world stock markets. Central banks, especially in Asia, who hold large amounts of the US dollar, could find the value of their foreign currency reserves substantially reduced.

Rumored Iran Plan has Blogs Breathless

http://sfgate.com/cgi-bin/article.cgi?f=/c/a/2006/04/04/BUGQRI2OAI1.DTL

04 Apr 2006 

Iran has a plan to destroy America, and it has nothing to do with the bomb. Instead, the Islamic republic will use oil and euros to slay the Great Satan, breathless accounts on the Internet warn. The attack will proceed as follows: Iran will open an oil trading exchange that operates in euros rather than dollars -- until now, the world's sole currency for buying crude. Other countries, whose central banks were holding onto dollars largely to buy oil, will dump their dollars en masse.

The greenback's value will collapse. The American economy will tank. The U.S.-dominated New World Order will disappear in a flurry of currency trades. This tale has circulated on the Web for months. Bloggers type apocalyptic postings about it. People who identify themselves as economists engage in detailed, sometimes arcane debates on it. And like any good online story, the saga of the Iranian oil exchange, or bourse, has taken on a viral life of its own. It has veered deep into the Web's netherworld of conspiracy theorists.

Syria Picks Euros Over Dollars

http://english.aljazeera.net/NR/exeres/ABA36728-9F9D-4A2C-8F37-9C3230B7E971.htm

14 Feb 2006

Syria has switched all of the state's foreign currency transactions to euros from dollars amid a political confrontation with the United States. Duraid Durgham, the head of state-owned Commercial Bank of Syria, said on Monday: "This is a precaution. We are talking about billions of dollars. Switching to the euro will help us avoid settlement problems in the United States.

Iran - A Threat to the Petrodollar

http://www.countercurrents.org/rutledge161105.htm

16 Nov 2005

[Emilie Rutledge is a British economist based at the GulfResearchCenter in Dubai]

Iran’s reported intention is to invoice energy contracts in euros rather than dollars. The contention that this could unseat the dollar’s dominance as the de facto currency for oil transactions may be overstated but this has not stopped many commentators from linking America’s current political disquiet with Iran to the proposed Iranian Oil Bourse (IOB).

It is primarily the US which stands to lose out from any move away from the petrodollar status quo, it is the world’s largest importer of oil and a move away from invoicing oil in dollars to euros will undoubtedly have a negative effect on its economy. Fewer nations would be willing to hold the dollar in reserve which would cause a significant devaluation and result in the loss seigniorage revenues. In addition US energy related companies stand to lose out as they will be unable to participate in the bourse due to the longstanding American trade embargo on Iran.

The current petrodollar system greatly benefits the US; it enables it to effectively control the world oil-market as the dollar has become the fiat currency for international trade. In terms of its own oil imports, the US. can print dollar bills without exporting commodities or manufactured goods as these can be paid for by issuing yet more dollars and T-bills.

George Perkovich, of the Washington based Carnegie Endowment for International Peace has argued that Iran’s decision to consider invoicing oil sales in euros is "part of a very intelligent strategy to go on the offense in every way possible and mobilize other actors against the US."

The Real Reasons Bush Went to War

http://www.guardian.co.uk/comment/story/0,3604,1270414,00.html

08 Jul 2004

There were only two credible reasons for invading Iraq: control over oil and preservation of the dollar as the world's reserve currency. In 1999, Iran mooted pricing its oil in euros, and in late 2000 Saddam made the switch for Iraqi oil. In early 2002 Bush placed Iran and Iraq in the axis of evil. If the other Opec countries had followed Saddam's move to euros, the consequences for Bush could have been huge. Worldwide switches out of the dollar, on top of the already huge deficit, would have led to a plummeting dollar, a runaway from US markets and dramatic upheavals in the US.

Imperial Hubris by Michael Scheuer, 2004, Excerpts

Just under the noise, death, and rhetoric yielded by the foregoing episodes of war lies a largely ignored factor that may constitute al Qaeda’s main war effort – the steady bleeding of the U.S. economy. The immediate impact is massive expenditures – at all levels of American government – that will add permanently to the size and cost of government. In addition to the cost of hiring thousands of federal employees for homeland security purposes; acquiring buildings, equipment, and training to make them effective; and requiring proportionate upgrading at state, municipal, and local levels; there lie what must be substantial amounts of unpredictable expenditures for overtime wages – in government and business alike – whenever Washington raises the threat level, or when high levels of security are provided at public places or functions heretofore not seen as serious security risks.

The September 11 attacks were not apocalyptic onslaughts on Western civilization. They were country-specific attacks meant to inflict substantial, visible, and quantifiable human and economic destruction on America.