The Demise of the Dollar

Veteran Middle East correspondent Robert Fisk reports that “secret meetings” between Russia, China, Japan, Brazil and some Arab States have occurred to discuss the possibility of pricing a barrel of oil in a basket of currencies rather than US dollars. Some believe such a development, if true, might ignite a new economic war between the US and China, which consumes more oil than the US on the margin and is seeking access to oil deposits all over the world. What has led to such proposals, reported by Fisk, remains a mystery. He quotes a Chinese banker as saying "These plans will change the face of international financial transactions.” However, other than kicking the US while it’s down, it is unclear how such a shift would benefit the nations involved. It may even hurt countries like China or some of the Gulf States that have large US dollar currency reserves. That is, a decline in the demand for dollars would lower the value of those countries’ holdings. Indeed, no one is forced to purchase oil only in dollars. In the end, the real conflict may be over the value of the dollar and those countries unlucky to hold large reserves of it precisely when it is falling in value. – YaleGlobal