Uniqueness The dollar remains as world currency, but is on the brink of being replaced Chinadaily.com.

cn May 8, 2008 Thursday STORM CLOUDS OVER DOLLAR SYSTEM The author is a researcher with China Institute of Contemporary International Relations. After the World War II the US established the reciprocal relationship between the US dollar and gold price by wielding its political, economic and military might as well as its monopoly on gold, thus building up a de facto US dollar system. Particularly noteworthy is that, after two oil crises, the US began running "crude oil futures trading" on the New York Mercantile Exchange in 1983 in a bid to secure oil consumption interests. The oil future market required the US dollar be used as the sole trading currency. The move established the "oil pillar" for the US dollar system. From then on the US dollar became some sort of common language in the world and was circulated around the globe easily, thanks to the lowest trading cost of the day. Most of the other currencies thus had to rely on the US dollar as the choice medium to link with one another. The US dollar has become a currency "beyond the US"; while the dollar system became a tool for the US to make money and practice hegemony around the world. Since the September 11 incident and especially the start of the war in Iraq, the prices of oil and other strategic resources have been rising and left the US dollar's status as the unrivaled trading currency in doubt. The oil-exporting countries in particular began to explore the feasibility of replacing the US dollar with the euro or the Japanese yen. The "oil pillar" of the US dollar system is now in danger of toppling. The subprime crisis further exposed the defects of the capitalist financial system of the US in addition to directly jeopardizing the market foundation of the dollar system.During the 1970s the dollar nearly collapsed, as oil prices surged and gold skyrocketed. The US used the New York Stock Exchange and its colossal trade deficit to play the role of a global supplier of (circulating) capital to protect and strengthen the dollar system. In this respect the global circulation of capital centered on the US and in the form of the US dollar has become a basic prop for the dollar system to remain standing.

Link: Keeping the world reserve in dollars depends on the U.S. in the oil market, if we remove ourselves the dollar will collapse
Dr Ahamed Kameel Mydin Meera is associate professor, Department of Business Administration, Faculty of Economics and Management Sciences, International Islamic University Malaysia. Dr Aziuddin Ahmad is a fellow at the Al-Bukhary Foundation Malaysia. The Edge Malaysia, December 4, 2006, My Say: The dollar hegemonyhttp://www.lexisnexis.com/us/lnacademic/results/docview/docview.do?docLinkInd=true&r isb=21_T4130157083&format=GNBFI&sort=RELEVANCE&startDocNo=1&resultsUrlKey=29_T 4130157086&cisb=22_T4130157085&treeMax=true&treeWidth=0&csi=261521&docNo=4

Everyone knows that the US dominates the world economically and militarily. But the exact mechanism of
this domination is less well understood. This mechanism is none other than the US dollar, carried out effectively by the fiat money system.The domain of political economy is the struggle for wealth and power. In past history, when one side goes to war and wins, it basically get to control the resources of the side that lost and exercise authority over them. The same can be said of today's world. Control over wealth, resources and power can be acquired but this time, through the control of the fiat money system.Fiat money is money not backed by anything with intrinsic value like gold. Fiat money is not redeemable for gold, unlike during the time of the gold standard. Therefore, the person or institution that is given the "right" to create and issue fiat money enjoys the free purchasing power that it creates,

is called seigniorage.The current international finance architecture is based on the US dollar as the dominant reserve currency. The dollar has
namely the benefit of using the newly created money for the first time. This benefit been a global monetary instrument that only the US can produce. World trade is now a game where the US produces dollars and the rest of the world produces things that the dollars can buy. The dollars cost the US virtually nothing to produce. So the fact that the world uses the currency in this way means that the US imports vast quantities of goods and services for free.The US Federal Reserve creates the dollar. Thus, it is able to assert immense power over national governments and exert control over global resources simply because it can create considerable global purchasing power practically for free. This power is being further amassed, consolidated and extended through

The position of the dollar as the international currency is considerably strengthened through the international pricing of oil in dollars. But the dollar's
globalisation and financial liberalisation worldwide. dominance in the global arena is dwindling since too much of it has been created. In fact, the world is saturated with it. It is obvious that the dollar is losing its power as the global currency, prompting the rise of the euro that challenges its status as the dominant international currency. Regarding this rivalry between the dollar and euro, Nobel Laureate Robert Mundell remarked, "Let us hope that the most important event of the 21st century will be that the dollar and the euro learn to live together."Fearing the imminent demise of the dollar, the US has gone "hysterical" over its gradual loss of global dominance. The euro is challenging the dollar hegemony, while China, on the other hand, is rising to become a global economic superpower. Something, therefore, has to be done. This is where the propaganda game

the dynamics for the dollar's imminent collapse is deep-rooted in economics and, therefore, is inevitable. This was when the US unleashed the war in the Middle East. Basically, the objective is to take physical control of the oil resources there as quickly as possible before the dollar is officially put to rest. This physical control over oil is necessary for the US to continue its global dominance because it could check both China and Europe as both rely greatly on the Middle East for their energy supply.
of the war on terror comes in.But

Internal Link: Without the dollar, U.S. loses all global dominance Dr. Bulent Gokay , Senior Lecturer in International Relations and, Director of European Studies Programme SPIRE, Keele University, 2004 The dollar hegemony is key to the future of American global dominance, in many respects as significant if not more so, than the overwhelming military strength. And the Petrodollar has been at the heart of the dollar hegemony since the early 1970s. Almost two-thirds of the world's currency reserves are kept in dollars, because oil importers pay in dollars and oil exporters keep their reserves in the currency they are paid in. The entire global oil trade is conducted in dollars. This means that everyone needs to keep dollars. This effectively provides the American economy with an interest-free loan, as these dollars can be invested back into the U.S.A. with zero currency risk. This money is not inactive; it is invested in dollar securities like US Treasury notes, stocks, mutual funds, and bonds. The US dollar's current strength is supported by OPEC’s requirement that all OPEC oil sales be denominated in dollars.
This was secured by an agreement between the US administration and Saudi Arabia, the largest OPEC oil producer. This had been determined in June 1974 by Secretary of State Henry Kissinger, establishing the US-Saudi Arabian Joint Commission on Economic Cooperation. In 1975 OPEC officially agreed to sell its oil only for dollars.

Impacts: 1. When the U.S. loses influence, Iran gains and becomes a huge threat The Opaque Nature of the Iranian Threat By Nicholas Connor, 16th May 2008

These proxies and overall Iranian influence forms a complex tapestry of threat against the west.
Many of these proxies and much of the influence has gone unchecked and as a result Iran is now in a more powerful position than she has ever been.

Iran’s strategy is to create concentric circles that she can push toward action against the west without actually having to involve territorial Iran in a direct confrontation with either Israel or the United States of America. This strategy circumvents the power that both America and Israel possess in terms of military hardware and in turn exploits the weakness both have in terms of fighting irregular warfare and mobilising their
populations for a series of conflicts. As a result of Iranian influence going unchecked her proxies are far and wide and take many shapes. There are few analysts who are aware, for example, of Iranian/Hezbollah influence in the Tri border area of South America in a city called Ciudad del Este. Even those who are aware of Iranian presence in that area tend to overestimate the impact the South American authorities have had in clamping down on both legal and illegal actions that Iran and Hezbollah have undertaken. Furthermore, Iran has a large influence in West Africa where not only a sizeable Lebanese community exists but also the illegal diamond trade is rampant, allowing Hezbollah to muscle in on the trade. While some perspective is necessary in that both areas are not home to large numbers of the Iranian armed forces, they do however represent a conduit from which Iran can act to upset the west. Therefore it is feasible for Iran to smuggle nuclear weapons into Europe via West Africa, a far more devastating act than that of trying to hit Europe with its faulty ballistic missiles. As for Iran in South America there is much more urgency required: at the moment South America is viewed solely as a means to generate revenue. There have been constant suggestions that there are many Hezbollah teams operating in the Tri-border area with the capacity to attack Western interests in South America and possibly even attack the American mainland, making use of South America’s porous borders.Iran also has interest in Lebanon via Hezbollah; in the Gaza strip through the training of Hamas and the deployment of its own agents; and interests in Iraq where it directly funds terrorism through conduits such as the Imam Reza foundation and the Mahdi army. Lastly, we must not ignore Iranian-Armenian co-operation and Iran’s control of the Straits of Hormuz. There are three more important issues we must consider when viewing the full extent of the Iranian threat, the first being the close ties of the Alawites of Syria (many hold positions of high office). This minority religious group have been persecuted by mainstream Muslims as heretics. Thus their position in Syria is vital: if Syria changes government or its government falls, then it will surely mean that the Alawites would face massive persecution, discrimination and poverty. To bolster their position and retain the status quo, the Alawites require Iranian help. This means to some extent Iran has control and influence over a religious group that holds positions of high office in Syria. This places Iran in a strong position to influence Syrian policy toward Israel, Europe and the West in general.Another important issue with regard to Iranian influence is that Shia numbers in other Arab countries might be underestimated. It has been suggested that the act of Taqiyya is practiced by many Shia in Sunni lands to protect them from persecution. This allows them to lie about their faith, and as a result it has been suggested by some analysts that there may be a larger and more embittered Shia population inside Sunni lands than presently thought. In turn this would provide Iran with a population ripe for creating disorder in Sunni-majority countries.Lastly, and arguably of most importance, is

the way in which Iran uses oil

and oil contracts to divide the west and gain powerful allies. Austria, Germany and Switzerland all have very lucrative oil or oil-reliant contracts with Iran. Japan requires Iranian oil to keep its economy running; most worrying of all China and India are becoming increasingly dependent on Iranian oil, all of which puts Iran in a position of immense influence and power. These power bases on their own do not make Iran a threat to the west: it is the patience and long-term aspect with which Iran is using them that does. In essence Iranian strategy can be summed up as patience and proxies. The long term use of these proxies would ensure the west would be overstretched in dealing with them and would be divided as to how to deal with them. Continuous low-intensity conflict would also erode domestic political support across the west, as is already happening with regard to the war in Iraq. This is Iran’s true power, the ability to divide and bleed the west dry.

2. Without U.S. power, conflicts would go nuclear

Zalmay Khalilzad, "Losing the Moment? The United States and the World After the Cold War," Washington Quarterly Reader, Order and Disorder after the Cold War (ed. Brad Roberts) 1995, p.60 In the Persian Gulf, U.S. withdrawal is likely to lead to an intensified struggle for regional domination. Iran and Iraq have, in the past, both sought regional hegemony. Without U.S. protection, the weak oil-rich states of the Gulf Cooperation Council (GCC) would be unlikely to retain their independence. To preclude this development, the Saudis might seek to acquire, perhaps purchase, their own nuclear weapons. If either Iraq or Iran controlled the region that dominates the world supply of oil, it could gain a significant capability to damage the U.S. and world economies. Any country that gained hegemony would have vast economic resources at its disposal that could be used to build military capability as well as gain leverage over the United States and other oil-importing nations. Hegemony over the Persian Gulf by either Iran or Iraq would bring he rest of the Arab Middle East under its influence and domination because of the shift in the balance of power. Israeli security problems would multiply and the peace process would be fundamentally undermined, increasing the risk of war between the Arabs and the Israelis. The extension of instability, conflict, and hostile hegemony in East Asia, Europe, and the PErsian Gulf would harm the economy of the United States even in the unlikely event that it was able to avoid involvement in major wars and conflicts. Higher oil prices would reduce the U.S. standard of living. Turmoil in Asia and Europe wold force major economic readjustment in the United States, perhaps reducing U.S. exports and imports and jeopardizing U.S. investments in these regions. Given that total imports and exports are equal to a quarter of the U.S. gross domestic product, the cost of necessary adjustments might be high. The higher level of turmoil in the world would also increase the likelihood of the proliferation of weapons of mass destruction (WMD) and means of their delivery. Already several rogue states such as North Korea and Iran are seeking nuclear weapons and long-range missiles. That danger would only increase if the United States withdrew from the world. The result would be a much more dangerous world in which many states possessed WMD capabilities; the likelihood of their actual use would increase accordingly. If this happened, the security of every nation in the world, including the United States, would be harmed.

Extensions

If the U.S. isn’t in the oil market, the dollar will be replaced No author given, Iran paper on real benefits of oil price rise, urges OPEC for single currency, BBC Monitoring Middle East – Political, Supplied by BBC Worldwide Monitoring, December 21, 2007 Friday

In order for America to maintain its upper hand in the region, it is necessary for the region to be in constant tension and crisis. America used the "fight against terrorism" [punctuations as published here and throughout] as an excuse to launch an attack against the Middle East. After toppling the former Iraqi regime, America justified its military presence and an increase in the oil price by creating false crisis and security illusions in the region. If we study closely, we will find out that only two countries benefit from an increase in oil price: Russia and America. These countries are both major exporters of technology and commodities. America uses its hegemony over Iraq's oil wells and sells more than 4 million oil barrels per day with a high price in order to cover the costs of its military action in Iraq whilst controlling the supply to Europe and selling commodities and technologies with high prices back to the countries of the region. The high oil price has an adverse effect on the neighbouring countries such as Turkey, Pakistan and African countries and in this way America keeps its hegemony over these countries too. Therefore, in effect America does not want Iraq's crisis and the so-called Iran's nuclear crisis to be over because America loses its reasons to stay in the region and maintain its global hegemony. Under such circumstances, our politicians and economists must remain vigilant. If we do not control our economic policies and allow the cash flow in the society to grow, our country will face even higher inflation and further irreparable damages. If God wills, the dear officials of our country will start budgeting in Euros instead of dollars and continue to encourage OPEC to sell oil in Euros instead of dollars so that a logical balance between our buying and selling is achieved

As a global hegemon, the United States leads the global market with the dollar Dr. Bulent Gokay , Senior Lecturer in International Relations and, Director of European Studies Programme SPIRE, Keele University Since the emergence of the United States as the dominant global superpower after 1945, the hegemony of the US has rested on two unchallengeable pillars. First, the overwhelming US military superiority over all other rivals; and second, the control of global economic markets with the dominant role of the US dollar as reserve currency. Reserve currencies are held by governments and institutions outside the country of issue and are used to finance international economic transactions, including trade and the payment of debts. Reserve currency status is not just an international status symbol. It brings international seigniorage, benefits for ‘home’ financial institutions, relaxation of the ‘external constraint’ on macroeconomic policy, a greater role for the issuer in international institutions, and the wider geopolitical consequences of exercising currency hegemony. In the aftermath of the Second World War this was understandable because the US dollar was backed up by gold. In 1971, US president Richard Nixon took the dollar off the gold standard that has been agreed to at the Bretton Woods Conference in 1944. Since 1971 the dollar has been an irredeemable currency, no longer defined or measured in terms of gold. This removed the restraints on printing new dollars. The dollar has become the world’s dominant currency and the core reserve asset of central banks all over the world. It has replaced gold as an international currency. Central banks around the world have built up large reserves of dollar. Those dollars flow back into the US banking system in the form of investments in US dollar-denominated assets. The dollar hegemony is key to the future of American global dominance, in many respects as significant if not more so, than the overwhelming military strength. And the Petrodollar has been at the heart of the dollar hegemony since the early 1970s. Almost two-thirds of the world's currency reserves are kept in dollars, because oil importers pay in dollars and oil exporters keep their reserves in the currency they are paid in.

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