Monday, October 5, 2009

The beginning of the end for the USDollar

It's already been occurring, as a few middle eastern Arab states have already unpegged from the USDollar for their oil exports. According to Bloomberg:

Oct. 6 (Bloomberg) -- Arab states have started talks with China, Russia, Japan and France to stop using the U.S. currency for oil trading, the Independent reported, citing Middle Eastern and Chinese banking officials it didn’t name.

The oil-producing nations are seeking to move to a basket of currencies, including the yen, the yuan, the euro and gold to settle transactions, the newspaper said.


I've predicted this, but didn't realize it would occur this soon. Kuwait, Syria, and the United Arab Emirates had already unpegged to the dollar last summer, in order to combat domestic inflation caused by the weak USDollar.

http://www.bloomberg.com/apps/news?pid=20601087&sid=ahGpyu4D9xBk


The rest of the world is now unpegging, as they diversify away from the USDollar. The financial implications of this are enormous, and could cause a run on the dollar. This will roil any economic recovery, as US borrowing costs will soar, and yields on US Treasury bonds will have to rise to attract diminishing demand.

Gold soared on the news.

No comments:

Post a Comment