Ditching the Dollar

(Thumbnail image: The San Francisco Chronicle)

An exclusive report in The Independent newspaper broke the news of secret plans to stop using the U.S. dollar as the main currency for oil.

“Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council…”

The political and economic leaders of these countries have denied the existence of such plans to the press. But that didn’t stop speculation about it.

We’re taking a look at what The Wall Street Journal, CNBC, Al Jazeera English and Russia Today have to say about The Independent's report. 

The Wall Street Journal’s MarketBeat Blog talks about how the article’s claims has already affected the value of the dollar and rekindled the debate of the dollar’s future.

“…even if they’re completely false, the report seemed to have refocused traders on the potential risk to the greenback’s special status among world currencies. In an early note foreign exchange traders at Scotia Capital noted the Independent’s report saying, 'This has pressured the [U.S. dollar] lower over the last 12 hours.'"

CNBC talks to Dan Dicker, an independent oil trader, who says that it would be unreasonable for the present world economy to replace the dollar.

“…as the Saudi minister said it really doesn’t make a lot of sense, the American economy is enormous compared to these others that they’re talking about and it fact from the Chinese point of view, where a lot of this seems to be coming from in the article, they really don’t move something like this. They can actually pay off in dollars, it actually helps them to be taking them, they take 60 percent of their oil, they import 60 percent. If they pay off in dollars it’s a way to get rid of American currency which they are very long in.”

But Al Jazeera English talks to Steven King, chief economist from the HSBC group, who says that a move away from the dollar will happen, although not immediately.

“In the old days, we used to think that whatever happened in the U.S. would absolutely dominate the rest of the world. But the U.S. is a shrinking force and what we’re now going to begin to see is the world economy being driven by China, by India and by others."

Russia Today talks to Ronald Smith of Russia’s Alpha Bank. Smith believes that replacing dollar would affect the U.S. economy in several ways, including increasing competitiveness and at the same time, higher inflation.

“…there would be mixed, overall I say it would be negative. The U.S. could use a strong dollar, the world could use a strong and stable currency. But unfortunately the macroeconomic drivers right now are pushing the dollar toward a weaker position.”

As the value of the dollar continues to fall, how do you think the world will react? What will happen to its position as the leading crude currency? We’d like to hear your opinions.