Economic Warfare

For a number of decades, the U.S. dollar has acted as the world’s reserve currency. A reserve currency is essentially a currency,

. . . which is held in significant quantities by many governments and institutions as part of their foreign exchange reserves. It also tends to be the international pricing currency for products traded on a global market, such as oil, gold, etc. This permits the issuing country to purchase the commodities at a marginally lower rate than other nations, which must exchange their currency with each purchase and pay a transaction cost. . . It also permits the government issuing the currency to borrow money at a better rate, as there will always be a larger market for that currency than others.¹

Over the course of the last year, the dollar’s role as the world’s reserve currency has come under attack. The other day it was noted,

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. . . .

This sounds like a dangerous prediction of a future economic war between the US and China over Middle East oil – yet again turning the region’s conflicts into a battle for great power supremacy.²

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