Home > The end of Dollar supremacy
12/22/2006 11:59:00 PM GMT
The Iranian government has finally developed a new weapon that can destroy the financial system underpinning the American Empire. The U.S. dollar dominance is coming to an end.
A hundred years ago the U.S. currency’s dominance was refered to as “dollar diplomacy”. After the end of the Second World War, and the fall of the Soviet Union in 1989, that policy evolved into “dollar hegemony.”
But after all these many years of great success, this “diplomacy” or “hegemony” seems to be coming to an end soon.
Iran announced yesterday ordering the central bank to direct foreign transactions and transform the state’s dollar-denominated assets held abroad to the single European currency instead of the U.S. currency.
"The government has ordered the central bank to replace the dollar with the Euro to limit the problems of the executive organs in commercial transactions," government spokesman Gholam Hossein Elham told reporters.
The switch will include not only in the budget but also foreign as well as oil trade, and assets abroad, ending Iran’s dollar dependence.
“Some banks abroad are also willing to go Euro in dealing with us and there is no problem if some others want to do business in other exchanges based on their preference,” said governor of the Central Bank of Iran (CBI), adding that the country’s FRF stands at $10 billion, indicating a 35 percent growth over last year.
It has been said that he who holds the gold makes the rules.
Will other oil producing countries in the Middle East, members of The Organization of Petroleum Exporting Countries (OPEC), follow the suit?
A switch by OPEC members from the U.S. currency to the Euro could enhance the value of the Euro, the new official currency of the European Union (EU) which first came into existence on Jan. 1, 1999, further, ending the U.D. Dollar supremacy.
And despite a claim by Monica Fan, currency strategist at RBC Capital Markets’ that the news from Iran had little impact on the market "as it had already been announced by the Finance Minister on Dec. 4 and an estimated 70% of Iran’s $45.5 billion reserves are already held in non-dollar assets," the impact of Iran’s move on the dollar has immediately been felt.
Yesterday the dollar was slightly lower against its major counterparts, reversing early gains.
Fan however, warned that the "more bearish effect" from Iran is that "the market will suspect this is the precursor to similar moves by other Middle Eastern governments".
Combined, the foreign-exchange reserves of Libya, United Arab Emirates, Saudi Arabia, Egypt, Lebanon, Kuwait, Yemen, Jordan, Qatar, Oman and Bahrain carry a total of about $170 billion, Fan said, according to MarketWatch.
A day before Iran announced converting its dollar-denominated assets held overseas into Euros, Sultan Nasser al-Suweidi, the United Arab Emirates’ central bank governor, said that "we’re waiting for a clear trend to emerge before converting our reserves into Euros or any other currency."
The bank holds 98% of its reserves in greenbacks but plans reducing its dollar holdings to between 50% and 90%.
Analysts aroused fears over Iran’s move, warning it would prompt another U.S. war in the region. When other countries, like Iran, sought payment of oil in other currencies, most notably Euro, the punitive action was in order.
The American President George W. Bush’s Shock-and-Awe in Iraq was not about Saddam’s nuclear ambitions, or the alleged link to Al Qaeda network which the U.S. blames for September 11 attacks, it’s about defending the dollar, and setting an example that anyone who seeks payment for oil in currencies other than U.S. Dollars, which is what Saddam did in 2000, would be likewise punished.
But if the U.S. decided to commit the same mistake it made in Iraq again; i.e. invading Iran, it will definitely bring an end to its political hegemony not just the hegemony of its currency, in the region and the world.
History teaches that an empire should go to war for either defending itself or benefiting from war; otherwise, as Paul Kennedy stated in his The Rise and Fall of the Great Powers, "a military overstretch will drain its economic resources and precipitate its collapse".
Forum posts
25 December 2006, 00:43
With the U.S. debt reaching 403% of the U.S. GDP there are possibilities that the dollar becomes insignificant. But China, the world largest holder of dollar reserves will not just stand by, and is not allowed to reinvest money in the U.S., so it might spend the money around the world, in order to secure resources.
Unfortunately this will give the dollar much more time to survive and that is the reason why the Bush administration is so supportive for the free trade treaties, also it will erradicate more jobs in the U.S.
It is not so easy as it looks and the end is far away.
25 December 2006, 22:14
Anyone familiar with currency exchange and the asset markets knows how a major trend if delayed can ruin investors betting against the dollar. One can go broke being right if the timing is off. The writings of dollar collapse have been on the wall for a very long time but various things prevent the catalyzing process. the US government has recently maneuvered to keep its money supply figures covered up to prevent unsavvy investors from realizing the money printing and market manipulations necessary to prop up a devaluating currency. Who is buying Treasury bonds, why,and what is the true level of monetary inflation in the dollar? It will hurt to bail from the dollar and worse to ride it down. It becomes a guessing game of asset inflation, leverage, worthless paper, and war to hide the details of a financial death spiral. The currency problem parallels a deteriorating biological paradigm of unsustainability as the world’s dominator culture (martialling fellow blissed out consumers ignorant of just about everything) procedes to overshooting phase, aquifer depletion, nuclear weapons proliferation, civil rights necrosis, topsoil loss, deforestation, radioactive pathology, destroyed wastelands, and peak oil syndrome depopulation inthe possible range of 90%. Seizing oilfields with bunker busters, and nuclear power plants, the Cheney solution, in fact accelerates the cultural death spiral through squandering of diminishing resources on nonrenwable industries with no prospects of health beyond a few decades of vain attempts to keep up unsustainable grids. Some people are eating gold as we speak but man I just like them papayas....
27 December 2006, 09:25
What is not mentioned is that the Arab Gulf States have switched their system of payment for oil and natural gas. It is now in the currency the buyer requests. That takes the onus off the Banks and Exchanges and puts the responsibility for the transactions into the hands of the buyer. This started late last spring or early summer.
Now oil or natural gas can be sold for Euros or Gold Islamic Dinars and Energy Exchanges are not stating it as a policy.
roadrunner