As I've stated previously, for over 3 decades now, U.S. Oil pricing agreements with OPEC have provided THE foundation for the US dollar's elite status in the world and oil replaced gold (after being dropped by Nixon in 1971) as the backing for the World's Reserve Currency.
We Americans, however, were never satisfied with having a good thing, as we wanted our cake and needed to eat it too, so we racked up enormous/un-payable debts to pay for lots of guns and butter, sold toxic securitized AAA rated garbage to our best friends, family and business partners, squandered international goodwill through inept/arrogant foreign policy, and as of late, we've thrown all caution and common sense into the wind and are now vigorously trying to hyperinflate our way out of this current banking/financial crisis.
Well it was great while it lasted, but the gig is nearly up.
OPEC Rattles the Dollar
The possibility that OPEC would make an active decision to price oil barrels in a currency other than the dollar has been bandied about, but never spoken of by anyone with any real power. That changed today, after OPEC Secretary-General Abdullah al-Badri was quoted in the Middle East Economic Digest, saying "maybe we can price the oil in the euro."
The weakened dollar has eroded the purchasing power of the oil-rich nations at a time when consumers in those countries are also dealing with growing inflation risks, in part because several prominent nations, such as the UAE and Qatar, maintain currency pegs to the U.S. dollar. Inflation has been rising in those countries, but these countries have been lowering interest rates in order to keep pace with U.S. policy, even though they have very different fundamentals.
Eventually, those pegs are likely to be abandoned. "The days of the peg are numbered as these nations can't continue to cut rates to 3% with inflation 4 times that rate," says Ashraf Laidi, head of currency strategy at CMC Markets. "They will need to revalue the peg and change it to a basket of currencies."
When this 1974 OPEC dollar pricing agreement is finally abandoned, the US Dollar's foundation as World Reserve will be yanked out from beneath it.
We in the U.S. better start preparing for a much lower standard of living because it's coming.