More on the dollar and its growing role as the fault line of the China-U.S. relationship: China, Russia, Brazil, France and the Gulf States are plotting to switch global oil trading out of dollars, according to Robert Fisk writing in The Independent. Instead they would price oil against a basket of currencies and gold. Secret meetings of finance ministers and central bankers to this end have been held, Fisk says.
What is no secret is that less of the world’s oil trade is priced in dollars than was once the case as buyers and sellers have sought to dampen the volatility that the dollar has exhibited in recent years. The mechanics of pricing oil against a basket of currencies and commodities would be a nightmare, unless the IMF’s special drawing rights (SDRs) or some close facsimile become a widely accepted currency, which this Bytander doubts will happen anytime soon. And what constitutes a secret meeting when it comes to finance ministers and central bankers getting together is another thing of definitional fuzziness.
Saudi central bank governor Muhammad al-Jasser has flatly denied The Indie’s report, saying there have been no such discussions secret or otherwise. Japan’s finance minister Hirohisa Fujii said much the same. But it is certainly no secret that China, along with some other leading developing economies, is steadily chipping away at the notion that the dollar should be the world’s sole reserve currency, and with it the U.S. sway over the world economy.