In 1973, two years after President Richard Nixon dislodged gold from beneath the US Dollar, making it a baseless fiat currency, Secretary of State Henry Kissinger struck a deal with King Saud of Saudi Arabia whereby all oil transactions with any country were to be via the US Dollar only, thus making it the "Petrodollar", in exchange for US protection against the Soviet Union and other covetous Arab neighbors, who, not long afterwards, all fell in line. This, in addition to the 1944 international conference which established the US Dollar as the "World Reserve Currency", gave the US global economic hegemony on an unprecedented scale, where all countries needing to buy or sell oil were obligated to accumulated huge amounts of US dollars, bonds and treasuries, which raised the Dollar to Money-God status.
This worked well for several decades, when there were few if any global economic contenders. Even the powerful Yen bowed down to the Almighty Dollar, though faint murmurs of discontent have been heard from various quarters. "We have our own stable currency. Why can't we trade in oil directly with it?", which is exactly what China, Russia the EU, the UAE, India, Iran, Brazil, and a host of other countries are saying today. And can we blame them? How would Americans feel if they were told that they could not use the Dollar for buying oil, but were required to used the Russian Rouble or the Chinese Yuan?
In the last three years, China alone has made bilateral agreements with a number of powerful economies on trading with their own currencies rather than through the US Dollar:
- with Russia (Nov. 2010)
- with Japan (Dec. 2011)
- with Australia (Mar. 2012)
- with the UAE (Mar. 2012)
- with Brazil, India, Russia and South Africa (Mar. 2012)
- with Brazil (Jun. 2012)
- with Chile (Jun. 2012)
- with Germany (Aug. 2012)
- with most oil producing and consuming countries (Sep. 2012)
Obviously, all of these countries consider this fair and square - to themselves and each other.
Except the United States, of course, for which, if it develops into a runaway situation, would be a disaster. It is not as much a matter of losing prestige or power, which are luxuries, but of value, which is downright a matter of economic survival. When those countries currently holding vast quantities of dollars no longer need them, they would sell it, and where else except back to the US. If/when this happens, the Dollar will plunge. This in itself may not be lethal, but when the system is already at the "Fiscal Cliff" domestically, a nudge from beyond could just push the economy over the edge.
Are these countries doing this for themselves, or against the US? A bit of both perhaps, but I think more the former - the long suppressed finally standing up for themselves. A stabilizing factor is that China still holds close to $2 trillion in USD, and Japan $1 trillion. If the Dollar gets wiped out, they too stand to lose, and lose big. The thing to look for is if/when they begin making moves to dump the USD in a big way; then, the "shit will hit the fan".
Anthony Marr, Founder and President
Heal Our Planet Earth (HOPE)
Global Anti-Hunting Coalition (GAHC)
Anthony-Marr@HOPE-CARE.org
www.HOPE-CARE.org
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