(a follow-up from article written yesterday, by Editor of ArizonaEnergy.org)
It is our opinion that this is an important article. Sadly it is too deeply mired in the jargon for most people to read with complete understanding. So we offer this brief summary of what we think it said and its implications.
The oil producing nations in the Persian Gulf have formed an organization which recommends possible courses of action. This organization, the Gulf Cooperation Council (GCC) is considering switching oil from being denominated in US Dollars to the Euro or to a "basket" of currencies.
We have recently experienced a dramatic increase in the cost of oil. We have just as dramatically lost value in our dollar relative to the Euro. In fact this loss of value of the dollar is shocking. 7% is just six months. (It caused the rise in oil prices of 162% instead of 77% if the dollar had not lost its value!)
The GCC is losing buying power along with us as the dollar falls. Any income obtained from the sale of oil is offset by the dramatic loss in the dollar. It has very real motivation to change the status quo because of this.
The Asian Central Banks, the article says, have been discussing the possibility of shifting their foreign reserve holdings from the dollar to the Euro. We think it is quite possible that this is actually a contributory cause of the loss of value of the dollar this past six months. They may have already started the process thereby supporting the value of the Euro and depressing the value of the dollar. You add to this the Gulf Central Banks probable participation and you enhance the probability of the truth value of this scenario.
So, whereas the Gulf states have not yet switched oil from dollar based to some other currency base as yet, they may have already started the procedure that may render such a decision is a foregone conclusion. This procedure is the simple increasing of the sale of dollars and purchasing of Euros.
If this decision is made the impact on Americans will be doubled in impact. Not only will oil continue to inflate in value by itself but then payments will have to be made in Euros. While the Asian and Gulf Central Banks continue to withdraw from dollar and into the Euros, the dollar will continue to deflate in value. We will pay much more for oil than ever before and accelerating.
This is an exceptional wake-up call. Energy is experienced everywhere. Our concentration on one aspect might potentially blind us to the changes already taking place elsewhere. This has the nightmarish potential to make the dollar completely collapse. Require the Federal Reserve to increase interest rates to unworkable levels (to counter inflation). Shut down industry (loss of credit sales -- the prime mover of the economy). And make the dollar at home as worthless as it is already becoming in foreign markets.
DISCLAMER
This is our opinion. Whatever actions you take are yours (not ours). Thank you.