2009-10-06 05:16:00
Will The US Dollar Still Be Used for Oil Trading?
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An article was published on The Independent (link below) earlier today that sent shock waves throughout the financial world.
The article, which was titled "The End of the Dollar Spells the Rise of a New Order", outlined the framework of a "secret" deal that was being formulated between countries such as China, Japan, France and the Gulf States.
The "plan" would call for the countries to stop using the US currency for oil trading.
Instead, a basket of currencies (including the Chinese yuan, Japanese yen and Euro) would be used.
The report goes on to make a number of other claims, including:
-this transition would be completed by 2018
-countries such as Brazil, Russia, China and Japan would all be involved
-"secret meetings" have been held involving finance ministers and central bank governors of the countries involved in the plan
-the plans were "confirmed by Gulf Arab and Chinese banking sources" in Hong Kong
-gold would be used as a temporary replacement for the dollar until the new currency basket was put into place
-the United States is unaware that these talks have taken place
The dollar initially weakened against many currencies after this article was released, but has since recovered some of its losses.
Many countries are aggressively coming out and denying the story, claiming that the report is "absolutely incorrect" and "totally untrue".
Representatives from Saudi Arabia, Japan and Russia have all denied that such talks have taken place.
Did these talks actually take place?
Some people can't imagine that countries such as Saudi Arabia would have anything to do with these talks, especially considering how much oil the United States imports on a daily basis.
However, there are a few facts that can't be overlooked:
-many countries are nervous about the amount of US dollars that they are forced to hold, due to the fact that oil trades in US dollars. With the US dollar eroding in value over the past few years, I'm sure that some countries would be happy with an alternative
-a number of countries would surely like to see the US dollar replaced as the world's reserve currency
-China has increasing influence, aspirations of being the world's #1 superpower, an outsized number of US dollars in its reserves and real worries about the eroding value of these dollars. You do the math.
Is this news true or not? I guess that we'll find out soon enough..
Source: The Independent - The Demise of the Dollar
Photo: Omer Wazir
Filed under: General Market News
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