Dollar may be dropped in oil trade

Posted on October 5, 2009

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A troubling article in the UK Independent reports that Gulf Arabs are planning with China, Russia and France to begin dropping the dollar as the trading currency for oil and moving to a hodgepodge of currencies including the Chinese yuan, the Japanese yen and the euro. Meetings have already been held discreetly by the involved finance ministers, and though it seems the US is aware of the planned move, the details weren’t yet known.

If it’s true, it signals a devastating worldwide blow to an already hammered dollar. On one hand, you can’t blame other nations for moving away from America’s currency with our current economic and budgetary woes. The move would leave America with a decidedly lessened global influence in fiscal and monetary matters and solidify a growing Chinese stranglehold on Middle Eastern oil in Iraq and Iran.

The whispers seemed to have mutated into the writing on the wall. Through whatever mechanism of blame, America’s global influence is on the decline. Our dollar weakens while our manufacturing and production is outsourced to other nations, all while government spending grows out of control and the federal debt increases with each passing day.

Against this backdrop America should be strengthening its own economic foundation instead of expanding government entitlements and running up record deficits. Instead of road signs and seasonal construction we should be fortifying and buttressing our manufacturing and tech sectors. Instead of pleading for China to finance more of our debt we should cut the burden of government spending and let the engine of American commerce sputter back to relevance.

The wild card is Chinese ownership of American debt, which would leave Beijing with a vested interest in making sure the dollar remains at least somewhat strong to ensure their investments aren’t worthless. And there’s always the chance that the report is overly alarmist, but even if it is, the trends still point in the same direction – America’s stock is down on the world market. It’s precisely the wrong time to expand government at the expense of the economy, but it’s what we’re poised to do with likely disastrous results.

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Posted in: News, Politics