Update Drudge: The Demise of the Dollar: Link included

See memo at link.
http://www.zerohedge.com/article/confidential-memos-indicate...

Confidential Memos Indicate Oil SDR Pricing Shift Would Be "Most Damaging" To United States And Precipitate "Serious Market Reaction"
Tyler Durden's picture
Submitted by Tyler Durden on 10/06/2009 10:29 -0500

A recently declassified, formerly Confidential, 30 year old memo prepared by Henry Owen for President Jimmy Carter's eyes only, highlights the perils facing the United States if oil were to be priced in SDRs instead of dollars, a topic which is all the rage today as rumors are swirling that this is an imminent transition to be "put" upon the United States.

In response to your request, we have considered, and discussed with other agencies, whether the US should favor use of SDRs instead of dollars, to pay for cure oil... I have concluded that dollar pricing should be maintained -- a view that is shared by State, Treasury and CEA.

The reasons:

1. An announcement that dollars were no longer being used as the unit of account in paying for oil would trigger selling of dollars on the foreign exchange markets. So we would suffer.

2. I don't see any offsetting gain, since OPEC would probably raise prices in SDR terms, as necessary to recover revenue losses if the SDR appreciated relative to the dollar.

http://www.zerohedge.com/article/confidential-memos-indicate...

the only question is when.

Tuesday, 6 October 2009

Few things would be more powerfully symbolic of the shift in the balance of global economic power than to have oil traded in the Chinese renminbi rather than the American dollar.

True, no one is going to price a barrel of West Texas Intermediate Crude in renminbi tomorrow. But you can see how that could change. Oil is traded in dollars for economic reasons – not sentimental ones. The oil business pretty much started in the US (vividly portrayed in the film There Will be Blood), the giant oil companies are still mostly American, and the US has long been the world's largest consumer, importer and one of the largest producers of oil. The presidency of George W Bush offered ample evidence of the intimate connections between politics and oil. And the dollar is easily the most traded currency in the world. As such, it makes sense to trade oil in dollars.

Yet the financial tectonic plates are shifting – fast. Yesterday the president of the World Bank, Robert Zoellick, articulated what must be weighing on the minds of many Western policy-makers. A legacy of the current crisis "may be a recognition of changed economic power relations". In other words, the recession has accelerated the rise of China. The brutal truth is that for most of the next decade China's economy will grow by more than 10 per cent a year; America's by less than 2 per cent. China will soon be the world's largest economy, and largest creditor nation, a position enjoyed by a pre-eminent America in the 1950s. China will also be the largest consumer of oil, which will help push trading in it and other commodities towards a "basket" of currencies.

Now America is the world's greatest debtor, she can no longer sustain her role as protector of the world's only reserve currency in the long term. The humbling of Wall Street was proof that the American system was not invincible. Suddenly, a G20 embracing China, India and the other emerging powers is the only forum that matters. China has helped bail out our banks. Spats with the Americans and Europeans are set to grow more bitter. Yesterday the head of the IMF, Dominique Strauss-Kahn and the president of the European Central Bank, Jean-Claude Trichet, resumed their attack on the value of the yuan. Next will come an increasing US resentment at the vast debts built up with China, and, in turn, Chinese nervousness about their long-term worth.

And that is the paradox. China holds approaching $3 trillion in dollar assets, so she cannot afford to see the dollar collapse. Longer term, China does want to become less reliant on the dollar as a place to keep its savings. America needs China to buy her Treasury bills; and China needs America to buy her exports. They are like two drunken giants leaning on each other. Yet a sobering reckoning of some sorts seems inevitable; and it is difficult to see how both can be winners.

http://www.independent.co.uk/news/business/comment/sean-ogra...

Report that oil producers may move away from dollar sends US currency closer to year lows
Pan Pylas, AP Business Writer
Tuesday October 6, 2009, 11:50 am EDT

LONDON (AP) -- The dollar fell Tuesday towards year lows against the euro and the yen after a report that Arab states and other countries were contemplating an end to the U.S. currency's role in the pricing oil.

The selling was stoked by an article in Britain's "Independent" newspaper that said secret meetings were taking place between Arab states, China, Russia, Japan and France, to end dollar dealings for oil and moving instead to a basket of currencies, including the euro, the yen and the Chinese yuan.

Officials in several of the countries either denied talks or said they had no knowledge.

But the denials did not stop the dollar selloff. By late afternoon London time, the dollar was down 0.8 percent at 88.80, while the euro was up by 0.7 percent to $1.4748.

Further sustained falls could see the dollar fall below its multi-year low of 87.11 yen, and the euro break above its two-year high of $1.4842, achieved last month.

Kuwait's oil minister, Sheik Ahmed Al Abdullah Al Sabah, said there have been no talks on the topic among Gulf oil ministers. "At our level, no," he said. "I didn't even dream about it."

http://finance.yahoo.com/news/Officials-deny-UK-media-apf-67...

I pledge allegiance to the Constitution of The United States of America and to The Republic for which it stands. One Nation FREE AND INDEPENDENT with LIBERTY AND JUSTICE FOR ALL!

Coming to your bank soon? When the petro dollar goes, the SHTF.

http://www.independent.co.uk/news/business/news/the-demise-o...

It is about going to basket of currencies and gold. Does not say dollar would still be used, but I bet dollar will be big part.

Getting Ready for 2012!
http://garyjohnson2012.blogspot.com/

"First they ignore you, then they laugh at you, then they attack you, then you win!"
GANDHI

This has been a long time coming with oil trading countries and consider it inevitable.

al gore, reagan, bush 1 and 2, and now obama (and every president since kennedy) for taking the greatest country for freedom the world has ever known and "sold" it for their own personal interests and the interests of the nwo...

hey, DPers, do you ever feel like it is you and me against the world?

well, it is...and our government has no idea of what to do!

they have sold us down the road and are now only a reactive force...proactivity is gone...Ben Franklin was right, Thomas Jefferson was right...

now, what is our next move?

btw, have you noticed the biggest news item of the day?

no, no, no...it is NOT the coming collapse of the dollar due to worldwide refusal of it...the biggest question of the day is, "when will you get the chance to take the swine flu virus?"

i am getting so damn sick and tired of this...are you?

O Captain, My Captain, rise up and hear the bells!

In a graphic illustration of the new world order, Arab states have launched secret moves with China, Russia and France to stop using the US currency for oil trading

By Robert Fisk
Tuesday, 6 October 2009

In the most profound financial change in recent Middle East history, 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, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.

Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars.

The plans, confirmed to The Independent by both Gulf Arab and Chinese banking sources in Hong Kong, may help to explain the sudden rise in gold prices, but it also augurs an extraordinary transition from dollar markets within nine years.

http://www.independent.co.uk/news/business/news/the-demise-o...

in a power shift. this is very bad for the US

http://www.independent.co.uk/news/business/news/the-demise-o...

O Captain, My Captain, rise up and hear the bells!