[jimmydean]

Correct it would initially have a huge impact on the dollar. If they did it in such a way that it was actually backed by something such as oil they would could have the strongest currency in the world. I'm sure China and Japan would rather own "oil" backed arab federation treasuries than U.S. treasuries at this point. At least they would know they could demand oil in exchange for paper at the worst case rather than just owning a piece of paper who's value is going down every year.

I highly doubt something like this would happen without the U.S. ensuring their interests are served.

There seems to be pressure at this point on fiat currency systems to revert to being backed by gold/silver or oil which will cause huge contractions in the money supply if it happens. Perhaps Buffet's recent interest in silver is enough to indicate what he's thinking

At one point the U.S. dollar was backed by silver ... that could happen again to strengthen the dollar versus other currencies.

[basketballjones]

$this->bbcode_second_pass_quote('jimmydean', 'C')orrect it would initially have a huge impact on the dollar.

[julianj]

Oh, thank goodness, a Peak Oil thread.

I thought I'd accidentally come toSimplisticNationalism.com.



This the proposed Islamic Dinar that has been suggested for some time.

I can't really see the countries actually doing this because of the train-crash it would cause to the US economy.

[smiley]

$this->bbcode_second_pass_quote('', 'A')t one point the U.S. dollar was backed by silver ... that could happen again to strengthen the dollar versus other currencies.

[basketballjones]

You're right, no country wants to bring down the US and in turn cause itself quite an economic pain in the process.

The US's twin deficits are structural however and are not easily fixed. The American economy is a service economy and most of what the US consumes is produced elsewhere. Many countries have suffered substantial devaluation of their currency when their foreign debt reaches 4/5/6% of GDP. The US is currently at or near 6%. Why should the US be any different? http://www.frbatlanta.org/invoke.cfm?ob ... od=display

There's 2 forces at work. One is the artificial propping up of the $US. $US denominated assets have had higher demand in the last 12/18 months. The rise in interest rates over the last year in the US and increase in oil prices (denominated in $US) increases the demand for dollars. The other is the outflow of $US to countries where there is a trade surplus with the US. For the moment, the upward pressure caused by rising oil prices and interest rates are the only things keeping the $US from devaluating.

[The_Virginian]

an Arab Dinar would be very difficult, remember the U.A.R.?

a gold backed Currancy for oil trade would be a double whammy...

But all the USA has to do is buy gold with paper, and then back it with that gold...it would entail "hardship" but enough Gold is mined in the USA that it could be done Gold supply has increased in step with Human "Supply" (population), but the value has not.