|
Previous
Page - III
The dollar is an oil-backed, not gold-backed, currency. The Euro's creators were quick in recognizing this. They knew that America's economic and political leadership is still grappling with the issue of gold price suppression. If the United States did allow the price to rise according to market forces, the bullion banks' massive gold short-sales exposure would set off a chain-reaction that could devastate U.S. and world financial markets. So Euro was made to not only co-exist but also benefit from rising gold prices, as gold reserves were valued at the market price.
However, it is not easy for Euro to wipe out the Dollar. The emerging economies have captured dollars to service foreign debts and accumulated dollar reserves sustain the exchange value of their own currency. The world's central banks hold dollar reserves equal to their currency in circulation. The more pressure to devalue a currency, the more dollar reserves are required. This makes each economy dependent upon the U.S. dollar or what is known as dollar hegemony, constructed mainly by oil - in other words, oil producing nations historically only accepted dollars, until the EURO. So retaining its veto power is essential, and if U.S. controls Iraq, oil trade reverts to dollars.
And that is the secret behind the mighty war. They say in the history of mankind all wars were fought for economic gains. This too seems the chip of the same bloc. With a strong dependency upon oil, and petrodollars secure, the White House hopes the EURO will slide. The EURO economy is currently $ 9.6 trillion. As more countries jump on to use EURO, their economy grows. The EURO is new, has little debt. The U.S. dollar has a substantial debt, but is heavily used. The European Union itself is a larger consumer of oil than the U.S. So with the stakes held high, the noose only tightens. The U.S. either takes over the assets they trade, like Iraq, or convinces the rest of the world to exchange their currency for dollars. Well, that's something we have to wait and watch.
Concluded.
* Contributed by -
Swetha Narayanaswamy,
First Year M.B.A.,
ICFAI Business School, Mumbai.
|
 |
|
|
