Demise of the dollar or total incompetence?

The Independent published a report yesterday that spilled a lot of ink and e-ink about a secret meeting intending to end the dollar pricing of oil by middle eastern countries:

Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.

Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars.

[...]

"These plans will change the face of international financial transactions," one Chinese banker said. "America and Britain must be very worried. You will know how worried by the thunder of denials this news will generate."

Iran announced late last month that its foreign currency reserves would henceforth be held in euros rather than dollars. Bankers remember, of course, what happened to the last Middle East oil producer to sell its oil in euros rather than dollars. A few months after Saddam Hussein trumpeted his decision, the Americans and British invaded Iraq.

This report clearly shows that the reporter has no clue about what his talking about, and same goes for the Chinese banker.

As long as the USD is traded live against every other currency almost 24/7, and hence there is an exchange rate between any currency and the USD. So the fact that oil is currently priced in USD doesn't mean anything. It is priced at the same time in EUR, GBP, SGD and any other currency on the planet.

The current problem (which is a real problem) for the countries mentioned in the report is that they keep their USD in their account as 'reserve currency'. And by doing so, they hurt themselves (since its value declined so much in the past many years), hurt the US citizens (since they prevent the USD from falling a lot faster and hence allow the US Government to pursue their destructive policies) and more generally, then hurt the whole planet (think about how a strong USD helps the US to finance their wars, the US Empire, etc.).

It would be very simple for each country to solve their USD problem: they only need to start selling their USD (to buy gold and silver and other precious metals, no paper currency) and also hedge their income in USD by selling forward those USD or by buying futures contracts on the commodity exchanges.

So technically, they do not need to hold any dollars, any time. They can sell those dollars even before they hit their accounts. And no need to hold secret meetings to do that.

Mish also posted about this.