For half a century, the American dollar has been the world’s reserve currency: Seventy percent of all currency reserves are in dollars.
This has a lot to do with the fact that oil, the most important commodity traded in the world, is mostly priced in U.S. dollars. This, together with related economic considerations, encourages the majority of countries—being oil importers—to keep most of their foreign currency in dollars.
The debt-burdened U.S. economy is dependent upon this high demand for its currency in order to remain afloat. The day this demand comes to an end will portend disaster for the American economy.
There is a move underway, however, to end the dollar’s reign. Behind it is the world’s fourth-largest producer of crude oil—and declared enemy of the United States—Iran.
In August, Tehran reconfirmed that it plans to create a euro-based exchange in oil—to compete with the London and New York dollar-denominated oil exchanges, both American-owned.
The proposed March 2006 launch of the Iranian oil bourse (iob), if successful, would give the euro a foothold in the international oil trade, solidifying its status as an alternative oil-transaction currency. This, in turn, could be a catalyst for a major currency flight from the dollar to the euro—and a disaster for America.
The iob will see crude oil, petrochemicals and other commodities of the same kind traded in euros.
Iran no doubt has multiple motives for making this move. For one, it makes sense economically, especially since the European Union is Iran’s biggest trading partner. But more importantly, it would strike a blow to Iran’s archenemy, America—and, by helping Iran become the main hub for oil deals in the region, help drive the Islamic Republic forward in its quest for regional supremacy.
George Perkovich, an Iran expert at the Carnegie Endowment for International Peace in Washington, stated it frankly: “It’s part of a very intelligent, creative Iranian strategy—to go on the offense in every way possible and mobilize other actors against the U.S.” (Christian Science Monitor, August 30).
For Iran, which foresees a “clash of civilizations” between Islam and the west—particularly America—undermining the dollar could prove to be its best and most effective strike against a more capable military foe.
Asia Times reported that only one major actor stands to lose if oil-trading in euros takes hold: the U.S. By contrast, “Oil in euros would benefit millions … in the EU and its trading partners …. And it would loosen the grip the U.S. has on opec members” (August 26).
“One of the Federal Reserve’s nightmares may begin to unfold in the spring of 2006,” one expert on the subject stated, “when it appears that international buyers will have a choice of buying a barrel of oil for $60 on the nymex [New York Mercantile Exchange] and ipe [London’s International Petroleum Exchange] or purchase a barrel of oil for €45 to €50 via the Iranian bourse” (Global Politician, September 2).
If oil-trading in euros were to get going, the current global trend of foreign currency reserves being shifted from dollars to euros would rapidly accelerate. In turn, “countries switching to euro reserves from dollar reserves would bring down the value of the U.S. currency. Imports would start to cost Americans a lot more …. As countries and businesses converted their dollar assets into euro assets, the U.S. property and stock market bubbles would, without doubt, burst” (Foundation for the Economics of Sustainability, Nov. 15, 2004).
The snowballing effect of a reserve currency switch would be catastrophic for the U.S., according to the Global Politician. The U.S. “would simply have to stop importing” (op. cit.).
Considering how America’s industrial and agricultural heartland has been gutted over the last half century, this possibility would be grave. As one commentator put it, the impact of the Iranian oil bourse on the U.S. dollar—and the follow-on effect on the U.S. economy—could be worse than Iran launching a direct nuclear attack.
Though many economists consider the chances of Iran’s ambition succeeding as remote, we can know from Bible prophecy that the U.S. financial system will be brought down—along with the U.S. dollar as the reserve currency.