Skip to comments.Mideast Banks Revolt Against US Dollar
Posted on 03/15/2006 8:58:19 AM PST by ex-Texan
A number of Middle Eastern central banks said on Tuesday that they would seek to switch reserves from the US greenback to euros.
The United Arab Emirates (UAE) said that it was considering moving one-tenth of its dollar reserves to the euro, while the governor of the Saudi Arabian central bank condemned the decision by the United States to force Dubai Ports World to transfer its ownership to a "US entity", the UK Independent reported.
"Is it protectionism or discrimination? Is it okay for US companies to buy everywhere but it is not okay for other companies to buy the US?" said Hamad Saud Al Sayyari, the governor of the Saudi Arabian monetary authority.
The head of the UAE central bank, Sultan Nasser Al Suweidi, said that the bank was considering converting 10 percent of its reserves from dollars to euros.
"They are contravening their own principles," said Suweidi. "Investors are going to take this into consideration [and] will look at investment opportunities through new binoculars."
The Commercial Bank of Syria has already switched the state's foreign currency transactions from dollars to euros, Duraid Durgham head of the state-owned bank said. The decision by the bank of Syria follows the announcement by the White House calling on all US financial institutions to end correspondent accounts with Syria due to money-laundering concerns.
Syria's finance minister Mohammed Al Hussein said: "Syria affirms that this decision and its timing are fundamentally political."
Internet buzz means nothing to me. Paper dollars are no more worthless than paper euros. Our economy is stronger than the European economy so the US dollar is not likely to decline significantly relative to the euro.
Illegal Mexicans do more to depress our standard of living than DPW could ever have done to raise it.
It's hard for me to believe that the port fiasco had absolutely nothing to do with this.
Let them switch to Euros. They'll lose money like never before.
The problem for the Arab countries is that the market controls the sale of oil, despite their stranglehold on supply. As it stands, Middle Eastern oil contracts are sold in dollars just like North Sea Crude is sold in Pounds Sterling. Even OPEC admitted a few years ago that they can't control the denomination of oil contracts. If they want to convert their dollars to euros then fine, they'll have to convert back when the oil is sold. Plus, how absurd is it to convert from one denomination to another denomination that's selling near its high. It doesn't make sense.
Better this then they have the ports.
That's no big deal. It's just a correction of a speculative bubble in the middle eastern markets. That correction is probably good for our market because capital flowing out of those markets will flow into ours. It looks like they had a massive rally in those Arab markets because of rising oil prices over the last few years, and that kind of rally usually gets overdone to the upside. So now it's correcting back down, but in a global sense the lost market value is very small. It's a tiny loss of wealth compared to the loss in our market from 2000 to 2002, and we made it through that major bear market in fairly good shape thanks to swift, decisive action by Bush and the Fed.
It's a fascinating scenario. The game works this way: The first person that successfully exits the dollar door without alerting the others gets to transfer his dollars into other currencies with minimal losses, as their cash-ins drop the value of their dollar holdings. However, any move towards the door alerts the others, which prompts them to move toward the door too, thereby guaranteeing that EVERYBODY loses their asses via a panic selloff and a precipitous drop in the value of the dollars they will be desperately trying to cash in enmasse.
Yeah...this'll last forever.........
This worked out well for them.
I think the top leaders of the UAE understand that the ports deal was derailed by political games and emotion, not by a fundamental change in our business relationship and security relations with the UAE. There will be a lot of publicity about "fallout from the ports deal" because writers have to write about something, but the ports deal isn't going to affect trade with the UAE significantly.
"Better this then they have the ports."
I wouldn't be too sure about that. This could merely be the tip of the iceberg.
I don't predict that it will cause a backlash but it's a possibility. A situation that could have been completely avoided with a little more thought in the Administration and on the Hill.
The UAE has been our strongest ally in the ME and this whole thing was not handled properly by us.
....and here it comes...
If and when those diaper-hat wearing geeks decide to totally switch to the Euro we better tighten up our buttcheeks because our dollar will deflate faster than Pamela Anderson's ta-ta's.
Either we call an all out war for oil now - or wait until our money and credibility is worthless before trying to kick those Arab scumbags off the planet.
Forecasting a dollar collapse is an absolutely unrewarded enterprise. If you're wrong - everybody can come back to you within the highly-functional status quo to razz your butt about being wrong.
If you're right, nobody's gonna A) give a crap and B) be able to get online for you to accept any kind of acknowledgement in any case.
Therefore, if I'm wrong - I will be happy to earn your razzing by the fall of this year. If I'm right, good luck to us all.