Dec 16, 2009

Persian Gulf Nations Create A New Currency - Will It Kill The U.S. Dollar?

In a move that could radically shake up the entire financial world, several Arab states in the Persian Gulf region have agreed to launch a single currency modeled after the Euro. The initial phase of this currency will be implemented next year, and Saudi Arabia, Kuwait, Bahrian and Qatar will be participating. They have agreed on the creation of a "Gulf Monetary Council" that they believe will evolve very quickly into a "full-fledged" central bank. But ultimately the desire of the creators of this currency is to create a pan-Arab monetary union that encompasses all of the territory of the ancient Ummayad Caliphate. The implications of this move are staggering. Will this new currency become the new "petro dollar"? What would that do to the U.S. dollar?

Those are important questions.

Fortunately for the U.S., the Emirates are staying out of the monetary union at least for the initial stage. They are apparently upset that the central bank for the monetary union will be located in Riyadh at the insistence of Saudi King Abdullah rather than in Abu Dhabi.

However, they are expected join the new currency later on, along with Oman.

So if this new currency is used to buy and sell oil, what will that mean?

It will mean that there will be a lot less of a demand for the U.S. dollar.

That means the value of the U.S. dollar will sink like a rock.

Those participating in this new monetary union hope that it will give them greater financial power on the world stage.

Between them, the countries involved in this monetary union have a GDP of 1.2 trillion dollars. They also own approximately 40 percent of the world’s proven oil reserves. That makes this new monetary union a significant player.

So why did they choose to launch this new monetary union now?

According to the Telegraph, Nahed Taher, chief executive of Bahrain’s Gulf One Investment Bank was very clear about why this move was made now....

"The US dollar has failed. We need to delink."

The truth is that Taher is absolutely correct. In order to prevent a complete economic collapse, the Federal Reserve has pumped an insane amount of money into the U.S. economy. Just consider the chart of the U.S. money supply below....

Do you see what is happening? The truth is that the U.S. economy has been flooded with cash and the U.S. dollar is dying.

The U.S. financial system is coming apart at the seams, and yet the U.S. government and the mainstream media continue to insist that recovery is on the way and everything is getting back to normal.

But everything is not getting back to normal. The dollar is headed for a really hard fall, and this move by the Gulf states is only going to make things worse.

It is time for all of us to spend our dollars while they can still buy something.

Liberty and Tyranny: A Conservative Manifesto

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