by Ben Cohen
A good friend of mine wrote in disagreeing with my post on the demise of the dollar. His argument is definitely worth reading:
like to think we’ve agreed more this last decade than when we first
met, but I’m finally going to comment on one I do disagree.
First, there a number of weaknesses in the arguments suggesting a
transition away from the dollar is imminent:
1. The second word in your post was ‘stunning’. Not really. I wouldn’t
even call it news. In 11/2005, Forbes published a similar article
“Dollar’s Oil Role May Erode”.
2. People made the argument back then too saying “oooh, watch out, the
Euro’s going to replace the dollar, and the US is going to invade
Iran.” Now we’re going to attack both Iran and Pakistan?
3. Iran already began switching its reserves from dollars to euros…
in Spring 2003. Iran’s economy shrank more than the US last year, and
the political atmosphere permeating from this year’s elections will
preclude the Iranian government from rocking the boat any further.
4. France as a country is not in a position to dictate terms for two
reasons: It is only one of 15 member countries participating in the
Euro, and isn’t even the largest economy at that. Also, now that the
Treaty of Lisbon is virtually assured with last weekend’s Irish vote,
France has lost just that much more of its economic autonomy.
5. The supposed oil-trading currency basket will never include the Yuan
which is already a basket of 8 currencies, and is artificially
manipulated by the government.
6. The Khaleeji, the common currency of the GCC (Cooperation Council
for the Arab States of the Gulf) is not expected to be adopted until
2013. And it won’t even include 2/6 member countries (UAE and Oman)
7. In January of this year, OPEC reaffirmed it’s commitment to the
8. Within hours of the Independent’s report, Saudi Arabia’s central
bank chief Muhammad al-Jasser denied such a meeting took place.
9. The new US administration has already done more for global warming
in 8 months than what was done in the prior in 8 years. Besides, if
these other countries are that serious about an oil currency
transition, global warming negotiations simply won’t stop them.
I do not believe the Dollar will remain the sole currency for oil
trading. I’m not sure it’s even wise to have it one sole currency. But
the original Independent article, and thus your post, is jumping the
gun way too early. Such a transition is years, possibly a decade or
more away. Instead, this appears to be a case of “what if?” What if oil
was traded in something other than the Dollar? What if the US didn’t
like it? What if the US invaded another country? These are interesting
questions, but frankly, none of the arguments in favor of any of these
possibilities convince me these scenarios will happen anytime soon, if
ever. What’s more, these questions have been asked for the better part
of a decade now, and so I’m left wondering: “What if this is just a
case of the boy who cried wolf?”
Ben Cohen is the editor and founder of The Daily Banter. He lives in Washington DC where he does podcasts, teaches Martial Arts, and tries to be a good father. He would be extremely disturbed if you took him too seriously.