Offshoring Interests and Economic Dogmas Are Destroying the U.S. Dollar

On Dec. 8, Chinese and French news services reported that Iran had stopped billing its oil exports in dollars.

Americans might never hear this news, as the independence of the U.S. media was destroyed in the 1990s when Rupert Murdoch persuaded the Clinton administration and the quislings in Congress to allow the U.S. media to be monopolized by a few mega-corporations.

Iran's oil minister, Gholam Hossein Nozari, declared, "The dollar is an unreliable currency in regards to its devaluation and the loss oil exporters have endured from this trend." Iran has proposed to OPEC that the U.S. dollar no longer be used by any oil-exporting countries. As the oil emirates and the Saudis have already decided to reduce their holdings of U.S. dollars, the United States might actually find itself having to pay for its energy imports in euros or yen.
Venezuela's Hugo Chavez, survivor of a U.S.-led coup against him and a likely target of a U.S. assassination attempt, might follow the Iranian lead. Also, Russia's Vladimir Putin, who is fed up with the U.S. government's efforts to encircle Russia militarily, will be tempted to add Russia's oil exports to the symbolic assault on the dollar.

The assault is symbolic because the dollar is not the reserve currency due to oil exports being billed in dollars -- it's the other way around. Oil exports are billed in dollars because the dollar is the reserve currency.

What is important to the dollar's value and its role as reserve currency is whether foreigners continue to consider dollar-denominated assets sufficiently attractive to absorb the constant flow of red ink from U.S. trade and budget deficits. If Iran and other countries do not want dollars, they can exchange them for other currencies regardless of the currency in which oil is billed.

Indeed, the evidence is that foreigners are not finding dollar-denominated assets sufficiently attractive. The dollar has declined dramatically during the Bush regime regardless of the fact that oil is billed in dollars. Iran is dropping dollars in response to the dollar's loss of value. This is a market response to a depreciating currency, not a punitive action by Iran to sink the dollar.
Oil bills are only a small part of the problem. Oil minister Nozari's statement about the loss suffered by oil exporters applies to all exporters of all products.

A quarter century ago, U.S. oil imports accounted for the U.S. trade deficit. The concerns expressed over the years about "energy dependence" accustomed Americans to think of trade problems only in terms of oil. The desire to gain "energy independence" has led to such foolish policies as subsidies for ethanol, the main effect of which is to drive up food prices and further ravage the poor.

Today, oil imports comprise a small part of the U.S. trade deficit. During the decades when Americans were fixated on "the energy deficit," the United States became three to four times more dependent on foreign-made manufactures. America's trade deficit in manufactured goods, including advanced technology products, dwarfs the U.S. energy deficit.

For example, the U.S. trade deficit with China is more than twice the size of the U.S. trade deficit with OPEC. The U.S. deficit with Japan is about the size of the U.S. deficit with OPEC. With an overall U.S. trade deficit of more than $800 billion, the deficit with OPEC only comprises one-eighth.

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