Nov 19 2007
OPEC Considers Dropping Dollar
OPEC met over the weekend to discuss, among other things, the falling U.S. Dollar–the currency which it denotes its reserves. This is largely a political debate with little economic merit. Is it a coincidence that the push to move to a different currency is spearheaded by Iran?
Consider the following from the Associated Press: “They get our oil and give us a worthless piece of paper,” Ahmadinejad told reporters after the close of the summit in the Saudi capital of Riyadh. He blamed U.S. President George W. Bush’s policies for the decline of the dollar and its negative effect on other countries.
Michael “Mish” Shedlock has the right take on this red herring. He suggests that the basket of currencies OPEC considers for a replacement might be called WHSIT, short for “What the Hell Is It?” From a recent post of his:
That night you tune into CNBC and the commentator says “crude reached a new high at 102.3 WHISITs”. This would last about 3 days or less simply for the novelty of it. Eventually someone would be smart enough to figure out what percentage the US$ was of WHISITs and compute a price of oil in US$. Every country on earth would do the same thing and that would be the end of discussion of WHISITs for all practical purposes.
[Picture by Hasan Sarbakhshian/ AP Photo]
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[…] Iran and Venezuela have proposed that OPEC move off the U.S. Dollar as its currency of choice for pricing crude oil, but it’s not going to happen. The political move is designed to further destabilize the damaged dollar, but isn’t getting any traction from Saudi Arabia–the linchpin of any OPEC decision. (See our last story on the subject.) […]
[…] Dollar peg in May. OPEC is also considering dropping the dollar in favor of a basket of currencies, as we’ve written about earlier this month. The U.A.E.’s move is unlikely to upset the U.S. applecart just as the OPEC move is similarly […]