Thread: Dollar's demise plotted by oil producers, China and France

Dollar's demise plotted by oil producers, China and France, report says

The world's oil producers, as well as China and France, are planning to end using the dollar as the currency to buy and sell oil, the Independent newspaper reported.

Published: 6:39AM BST 06 Oct 2009

The move would see oil priced not in dollars but in a unit based on a basket of currencies including the Chinese yuan, the Japanese yen, and a new currency intended for use by the Gulf emirates, according to a report in Tuesday's Independent newspaper. The paper added that the transistion from the dollar to a new currency will take almost a decade.

Finance ministers and central bankers have held meetings in Russia, China, Japan and Brazil to discuss the idea, which the Americans are aware of, the Independent said.

"Eventually there will be a move to non-dollar commodity contracts, and it may be the next big risk for the dollar," Ben Simpfendorfer, chief China economist for Royal Bank of Scotland, told Bloomberg. "At the same time, I don't want to overplay the importance of the story. There's no credible sources there."

The financial crisis has intensified speculation about the eventual demise of the dollar as the world's reserve currency. In the last six months, Russia, Brazil, India and China have already discussed buying each other's debt as a way of cutting their dependence on the dollar, while the United Nations last month proposed a new global currency to replace the greenback.

The dominant role of the dollar in world trade and financial markets - a position it inherited from sterling - has already been under threat since the formation of the euro and the emergence of China as a major economic power.

The amount of the the world's currency reserves held in dollars has fallen over the past decade, with the it declining to a record low of 62.8pc in the second quarter, figures from the International Monetary Fund showed last week. The euro's share climbed to 27.5pc from 25.9pc.

But few experts expect the dollar's status to be quickly eclipsed.

Niall Ferguson, a Harvard University Professor, said yesterday that there wouldn't be a dollar collapse given the lack of proper alternatives. “There are enormously strong arguments for maintaining a substantial pile of your reserves in dollar form,â€

This idea probably appeals to Obama. Rather than see his precious, youthful supporters come out of their dream world and put their noses to the grindstone and start producing some tangible value---rather than elusive "services"--he probably figures a weaker dollar will eventually stimulate US exports. That's the standard reasoning for not defending our currency.

However, Obama is trying to find new exports that the Rust Belt can manufacture and export. What are the Republicans doing on that?