Thread: Whodunit? Sneak attack on U.S. dollar

Whodunit? Sneak attack on U.S. dollar

EAMON JAVERS | 10/8/09 2:38 PM EDT

It’s the biggest mystery in global finance right now: Who conducted a sneak attack on the U.S. dollar this week?

It began with a thinly sourced but highly explosive report Monday in a British newspaper: Arab oil sheiks are conspiring with the Russians and Chinese to quit using the dollar to set the value of oil trades — a direct threat to the global supremacy of the greenback.

Is it true? Everyone from the head of the Saudi central bank to U.S. officials scrambled to undercut the story, but no matter.

With the U.S. economy on the ropes and America by far the world’s biggest debtor, investors aren’t feeling as secure about the dollar as they used to. And the notion of second-tier economies ganging up on Uncle Sam didn’t sound so far-fetched.

For American officials, the possibility of the dollar losing its long-term dominance in global commerce is a nightmare scenario because it would likely mean sharply higher interest rates at home and a declining ability to finance the U.S. debt. No one believes it could really happen right now, but stories like the British report this week make it seem incrementally more likely.

So the piece by Robert Fisk of the Independent shocked currency traders around the world and almost instantly sent the value of the U.S. dollar spiraling downward and the price of gold skyrocketing to an all-time high, as a hedge against a weakened dollar.

The website drudgereport.com quickly amplified the impact of the story with a headline atop the site: ARAB STATES LAUNCH SECRET MOVES WITH CHINA, RUSSIA, FRANCE TO STOP USING DOLLAR FOR OIL TRADING ...

“You read that story, and you do two things: You sell the hell out of dollars and you buy gold,â€

Is the sinking dollar just a victim of global financial evolution. My gut instinct is no. I believe deep down that our illustrious leader has a hand in this.