*****Gulf Arab Nations Break Their Dollar Pegs*****

Seeking Alpha reports about gulf arab nations breaking their dollar pegs. With this development, the US dollar's fate is sealed.

(emphasis mine)

Will the New GCC Single Currency Include Gold?
by: Peter Cooper December 31, 2008

Gulf Cooperation Council leaders yesterday concluded their 29th annual summit meeting in Muscat, Oman with a final approval for the creation of a single currency for the six-nation economic bloc, still targeted for 2010.

Saudi Arabia is the largest economy in the GCC and boasts substantial gold reserves. But whether gold will be included in the currency basket has not yet been decided.

Golden opportunity

GCC assistant secretary-general Mohammad Al Mazroui told Gulf News: ‘We first have to decide on the location of the Central Bank, then the Central Bank and Monetary Council will have to decide on the gold reserves for the Central Bank' .

The creation of the GCC single currency - likely to be known as the Khaleeji which means Gulf in Arabic - is a major gold event for two reasons.

First, the breaking of their dollar pegs by the Gulf Arab nations is clearly dollar negative. Secondly, any inclusion of gold either as a part of the monetary basket, or in the reserves of the new GCC Central Bank will create additional demand for the precious metal.

2009 deadline

The project is gathering pace, and no lesser a figure than Saudi Arabia' s King Abdullah has directed that GCC economic integration committees speed up their work and complete the whole exercise by September 2009.

It is only a couple of months since a group of Saudi businessmen allegedly bought $3.5 billion worth of gold, believed to be the largest ever single transaction for the precious metal. Perhaps in 2009 it will be gold rather than local currencies which become of interest to speculators about monetary reform in the GCC.

Gulf countries are keen to break away from the link with the US dollar because it ties them to inappropriate monetary policies that exaggerate the boom-to-bust cycle in their economies.

My reaction: Wow, Arab countries have announced that in 2010 they will stop selling oil for US dollars. Even more interesting is the possibility of the Khaleeji being backed by gold. Could this foreshadow a move a move back to the gold standard?

In any case, this development, together with China making the Yuan an international currency, effectively end the dollar's role as the world's reserve currency. Soon, the US will be buying its oil in gold/Khaleeji and its consumer goods in yuan. The US dollar is now living on borrowed time.

Think about it: If you can't buy consumer goods or oil with the dollar, what good is it as a reserve currency?

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0 Responses to *****Gulf Arab Nations Break Their Dollar Pegs*****

  1. Anonymous says:

    Way to be on point Eric. This is again a "baby step" towards a global work around. Whether it works or not will be the trillion dollar question.

    These are forays into a different economic paradigm. Its telling however that with the news of this that today gold was down so maybe it's a non-event. But they're trying, and sooner or later they're going to figure it out.

  2. dashxdr says:

    "If you can't buy oil or consumer goods with dollars, what good are they?"

    They're good for lots of things:

    1) Wallpaper
    2) Heating fuel
    3) Toilet paper
    4) Mulch
    5) Lining birdcages
    6) ...

    C'mon, Eric, dollars will always be worth _something_.

  3. Yohay says:

    "The US dollar is now living on borrowed time."
    Borrowed is definitely the keyword. The world will stop borrowing money to them soon.

  4. Anonymous says:

    The US$ is and will always be "an illusion" of money - more appropriately DEBT not money

    It is just a matter of time before the masses realise how they've been screwed.

  5. andy says:

    I read an article stating that the US $ will remain a valuable currency and have many uses, including: paying taxes, paying long term contracts, paying long term debt, and for me paying government student loans. Although I think inflation is the most corrupt form of taxation, I welcome any inflation as I have learned that Gold is the only true savings.

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