the visible hand

it is the theory which decides what can be observed – einstein

Axis of Oil vs US Dollar

Posted by ecoshift on May 3, 2007

There’s been a bit of loose talk here and there that the Iraq war was motivated in part by US efforts to keep world trade in crude oil denominated in dollars. This article confirms the rumor that in 2000 Iraq moved to denominate its oil sales in Euros. But, thats almost as an aside – this is a fairly thorough analysis of the current relationships between oil reserves, oil markets, central bank foreign exchange reserves and currency values. The focus is on Iran, Venezuela and Russia as the “axis of oil” with the necessary reserves of crude to challenge the US Dollar’s reserve status in spite of Japanese and Saudi commitments. As usual China, with 1.2 trillion dollars in its central bank reserves and a growing appetite for crude, is a wild card.

If you are up for the detail, read on below and follow the link.

Can the “Axis of Oil” Topple the US Dollar?

By Gary Dorsch, Editor, Global Money Trends newsletter

Were it not for its “reserve currency” status, slowly turning into a post-World War II relic, the US dollar would have already collapsed by now. A string of $4.4 trillion of US trade deficits since 1996, and a heavy reliance on foreign money to fund its external imbalance, has severely weakened America’s global economic leadership over the past five years. The US dollar survives, due to America’s political stability, its military might in the Persian Gulf, its large $12.5 trillion economy (28% of global GDP), and deep and liquid financial markets for bonds and stocks.

Last week, the US dollar fell to an all-time low against the Euro, a new milestone in a steep decline that began more than six years ago. The Euro hit a record high of $1.3682 on April 27th, up from $1.20 a year ago and as little as 83 cents in October 2000, when the rally against the dollar began. The British pound is hovering near $2 area, and the Australian dollar fetches 82.50 US-cents, both at 15-year highs.

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