{"id":391,"date":"2007-11-12T10:11:27","date_gmt":"2007-11-12T00:11:27","guid":{"rendered":"http:\/\/www.khanfactor.com\/blog\/?p=391"},"modified":"2007-11-12T10:11:27","modified_gmt":"2007-11-12T00:11:27","slug":"7-countries-considering-abandoning-the-us-dollar-and-what-it-means","status":"publish","type":"post","link":"https:\/\/www.khanfactor.com\/blog\/?p=391","title":{"rendered":"7 Countries Considering Abandoning the US Dollar (and what it means)"},"content":{"rendered":"

November 6th, 2007<\/p>\n

By Jessica Hupp<\/p>\n

It\u2019s no secret that the dollar is on a downward spiral. Its value is dropping, and the Fed isn\u2019t doing a whole lot to change that. As a result, a number of countries are considering a shift away from the dollar to preserve their assets. These are seven of the countries currently considering a move from the dollar, and how they\u2019ll have an effect on its value and the US economy.<\/p>\n

    \n
  1. Saudi Arabia<\/strong>: The Telegraph reports<\/a> that for the first time, Saudi Arabia has refused to cut interest rates along with the US Federal Reserve. This is seen as a signal that a break from the dollar currency peg is imminent. The kingdom is taking \u201cappropriate measures\u201d to protect itself from letting the dollar cause problems for their own economy. They\u2019re concerned about the threat of inflation and don\u2019t want to deal with \u201crecessionary conditions\u201d in the US. Hans Redeker of BNP Paribas believes<\/a> this creates a \u201cvery dangerous situation for the dollar,\u201d as Saudi Arabia alone has management of $800 billion. Experts fear that a break from the dollar in Saudi Arabia could set off a \u201cstampede\u201d from the dollar in the Middle East, a region that manages $3,500 billion.<\/li>\n
  2. South Korea<\/strong>: In 2005, Korea announced<\/a> its intention to shift its investments to currencies of countries other than the US. Although they\u2019re simply making plans to diversify for the future, that doesn\u2019t mean a large dollar drop isn\u2019t in the works. There are whispers<\/a> that the Bank of Korea is planning on selling $1 billion US bonds in the near future, after a $100 million sale this past August.<\/li>\n
  3. China<\/strong>: After already dropping the dollar peg<\/a> in 2005, China has more trouble up its sleeve. Currently, China is threatening<\/a> a \u201cnuclear option\u201d of huge dollar liquidation in response to possible trade sanctions intended to force a yuan revaluation. Although China \u201cdoesn\u2019t want any undesirable phenomenon in the global financial order,\u201d their large sum of US dollars does serve as a \u201cbargaining chip.\u201d As we\u2019ve noted in the past<\/a>, China has the power to take the wind out of the dollar.<\/li>\n
  4. Venezuela<\/strong>: Venezuela holds little loyalty to the dollar. In fact, they\u2019ve shown overt disapproval, choosing to establish barter deals<\/a> for oil. These barter deals, established under Hugo Chavez, allow Venezuela to trade oil with 12 Latin American countries and Cuba without using the dollar, shorting the US its usual subsidy. Chavez is not shy about this decision, and has publicly encouraged others to adopt similar arrangements. In 2000, Chavez recommended<\/a> to OPEC that they \u201ctake advantage of high-tech electronic barter and bi-lateral exchanges of its oil with its developing country customers,\u201d or in other words, stop using the dollar, or even the euro, for oil transactions. In September, Chavez instructed<\/a> Venezuela\u2019s state oil company Petroleos de Venezuela SA to change its dollar investments to euros and other currencies in order to mitigate risk.<\/li>\n
  5. Sudan<\/strong>: Sudan is, once again, planning<\/a> to convert its dollar holdings to the euro and other currencies. Additionally, they\u2019ve recommended to commercial banks, government departments, and private businesses to do the same. In 1997, the Central Bank of Sudan made a similar recommendation in reaction to US sactions from former President Clinton, but the implementation failed. This time around, 31 Sudanese companies have become subject to sanctions, preventing them from doing trade or financial transactions with the US. Officially, the sanctions are reported<\/a> to have little effect, but there are indications that the economy is suffering due to these restrictions. A decision to move Sudan away from the dollar is intended to allow the country to work around these sanctions as well as any implemented in the future. However, a Khartoum committee recently concluded<\/a> that proposals for a reduced dependence on the dollar are \u201cnot feasible.\u201d Regardless, it is clear that Sudan\u2019s intent is to attempt a break from the dollar in the future.<\/li>\n
  6. Iran<\/strong>: Iran is perhaps the most likely candidate for an imminent abandonment of the dollar. Recently, Iran requested<\/a> that its shipments to Japan be traded for yen instead of dollars. Further, Iran has plans in the works to create an open commodity exchange<\/a> called the Iran Oil Bourse. This exchange would make it possible to trade oil and gas in non-dollar currencies, the euro in particular. Athough the oil bourse has missed at least three of its announced opening dates, it serves to make clear Iran\u2019s intentions for the dollar. As of October 2007, Iran receives non-dollar currencies for 85% of its oil exports, and has plans to move the remaining 15% to currencies like the United Arab Emirates dirham.<\/li>\n
  7. Russia<\/strong>: Iran is not alone in its desire to establish an alternative to trading oil and other commodities in dollars. In 2006, Russian President Vladmir Putin expressed interest<\/a> in establishing a Russian stock exchange which would allow \u201coil, gas, and other goods to be paid for in Roubles.\u201d Russia\u2019s intentions are no secret\u2013in the past, they\u2019ve made it clear that they\u2019re wary of holding too many dollar reserves. In 2004, Russian central bank First Deputy Chairmain Alexei Ulyukayev remarked<\/a>, \u201cMost of our reserves are in dollars, and that\u2019s a cause for concern.\u201d He went on to explain that, after considering the dollar\u2019s rate against the euro, Russia is \u201cdiscussing the possibility of changing the reserve structure.\u201d Then in 2005, Russia put an end to its dollar peg, opting instead to move towards a euro alignment. They\u2019ve discussed<\/a> pricing oil in euros, a move that could provide a large shift away from the dollar and towards the euro, as Russia is the world\u2019s second-largest oil exporter.<\/li>\n<\/ol>\n

    What does this all mean?<\/strong><\/p>\n

    Countries are growing weary of losing money on the falling dollar. Many of them want to protect their financial interests, and a number of them want to end the US oversight that comes with using the dollar. Although it\u2019s not clear how many of these countries will actually follow through on an abandonment of the dollar, it is clear that its status as a world currency is in trouble.<\/p>\n

    Obviously, an abandonment of the dollar is bad news for the currency. Simply put, as demand lessens, its value drops. Additionally, the revenue generated from the use of the dollar will be sorely missed if it\u2019s lost. The dollar\u2019s status as a cheaply-produced US export is a vital part of our economy. Losing this status could rock the financial lives of both Americans and the worldwide economy.<\/p>\n

    Source<\/a><\/p>\n

    How the Euro will Finish What Osama Couldn’t Achieve<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

    It\u2019s no secret that the dollar is on a downward spiral. Its value is dropping, and the Fed isn\u2019t doing a whole lot to change that. As a result, a number of countries are considering a shift away from the dollar to preserve their assets. These are seven of the countries currently considering a move from the dollar, and how they\u2019ll have an effect on its value and the US economy. Continue reading →<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"om_disable_all_campaigns":false,"_monsterinsights_skip_tracking":false,"_s2mail":"","jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"footnotes":"","_jetpack_memberships_contains_paid_content":false,"jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false}}},"categories":[13],"tags":[],"jetpack_publicize_connections":[],"aioseo_notices":[],"views":2913,"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p2ttSq-6j","jetpack_sharing_enabled":true,"jetpack_likes_enabled":true,"jetpack-related-posts":[],"_links":{"self":[{"href":"https:\/\/www.khanfactor.com\/blog\/index.php?rest_route=\/wp\/v2\/posts\/391"}],"collection":[{"href":"https:\/\/www.khanfactor.com\/blog\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.khanfactor.com\/blog\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.khanfactor.com\/blog\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.khanfactor.com\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=391"}],"version-history":[{"count":0,"href":"https:\/\/www.khanfactor.com\/blog\/index.php?rest_route=\/wp\/v2\/posts\/391\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.khanfactor.com\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=391"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.khanfactor.com\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=391"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.khanfactor.com\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=391"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}