World rethinking the dollar's hegemony
Wednesday, December 20, 2006
With more countries shedding dollars in favor of euros, political motives are clear, as is economic common sense. Both might diminish the economic influence of the US
TAYLAN BİLGİÇ/CALEB LAUER
ISTANBUL - Turkish Daily News
Iran is to move against the ailing U.S. dollar, saying it will no longer keep or do business using it. Instead, the country will sell oil for euros and also shift its foreign currency reserves into euros.
This shift has a clear political motive and has created wild speculation about the �downfall of U.S. monetary hegemony.� According to analysts, Tehran has been steadily shifting its foreign-held assets out of dollars since 2003.
�There will be no reliance on dollars,� said Gholam-Hussein Elham, spokesman for Iran. �This change is already being made in currency reserves abroad.�
The Central Bank of Venezuela has also slashed its dollar reserves. Iran and Venezuela have political motives for wanting to hurt the U.S. economy, but the tendency shows sign of spreading to �U.S.-friendly� countries, too.
The dollar is the world's currency and is regarded by some as a pillar of U.S. hegemony. They argue if the dollar loses its position as the world's reserve currency, this will signal the diminishing influence of the United States.
A massive sell-off of dollars would be bad news for the United States; currency instability causes inflation. If countries start selling off some of their dollars in exchange for euros, any dollars kept in reserve would be worth much less.
Others say it is unrealistic to expect the U.S. dollar to lose its position as the international reserve currency; however, they advise against relying exclusively on dollars for international exchange.
