Interesting Quote

Here's an interesting quote.

"The bottom line this; the dollar is underwritten by a national debt that now exceeds $8 trillion dollars and trade deficits that surpass $600 billion per year. That means that the greenback is the greatest swindle in the history of mankind. It's utterly worthless. The only thing that keeps the dollar afloat is that oil is traded exclusively in greenbacks rather than some other currency...As long as the oil market is married to the dollar, this system of global indentured servitude will continue."
-ConfederacyofUnity

Is this true? It certainly is plasuible, but I find it hard to believe that the US dollar is so flimsy. If this is in the wrong forum, feel free to move it mods. I just thought SDF was the best place where I knew people who could give me some analysis of this.

Well, the word has been around for quite a time that the greenback is a big joke, not beeing backed by real gold reserves and especially since Kissinger abolished the Gold-Dollar equivalence and decreted the value of the dollar "floating", meaning it would be determined by the US trade balance.

And yes, the only thing that keeps the dollar high is that most international deals, and especially the oil trade, are in dollars. The Euros was a great blow to the dollar supremacy, and since it appeared the dollar lost one third of its value on the iranian change market.
But everytime there is a major crisis, Iran and sometimes China treaten that they will ban the dollars from all their international exchanges, and the day they do it, we will hear a big loud 'FLOP'.

Finn McCool said:

"The bottom line this; the dollar is underwritten by a national debt that now exceeds $8 trillion dollars and trade deficits that surpass $600 billion per year. That means that the greenback is the greatest swindle in the history of mankind. It's utterly worthless. The only thing that keeps the dollar afloat is that oil is traded exclusively in greenbacks rather than some other currency...As long as the oil market is married to the dollar, this system of global indentured servitude will continue."
-ConfederacyofUnity

Click to expand...

The above statement is not accurate. The US dollar is THE strongest currency in the world presently.

During the earlier decades of the cold war, all currencies were pegged to gold bullion. The amount of bullion gold in the possession of a nation determined the value of the currency of that nation. Gold was the benchmark that was chosen, because economically the demand for gold was equivalent in all nations.

According to an article that was read by me earlier on this forum itself, a condition was extracted from the House of Saud by the US in return for installing them in power in Arabia (now Saudi Arabia).
This condition was that all exports of oil to be made by Saudi Arabia, were to be made against the US dollar ONLY; and NOT by converting the currency of the importing nation to the dinar using gold as the benchmark.

Eventually during the mid-70s and later, the demand for oil grew at an extremely high rate and it continues to do so. Gold was soon replaced by oil as the new benchmark for currency conversion. Now since ALL middle-eastern nations exported oil against the US dollar, it was infact the US dollar that became the benchmark for all currency conversion.

Upto this point, morally and economically there has been nothing incorrect.
The explanation for how the world has been cheated by the US economically, is as follows :

Since the currency in which a barrel of oil is traded is the US dollar, the value for the oil as imported by the United States is decided according to the consumption rate of US citizens. Now it is very likely that the US must definitely have pegged lesser dollars as the price for one barrel of crude oil than is actually the demand in the US.
Thus the OPEC nations get lesser value for the oil sold to the US, but that is compensated by the value gained by export to other nations since the demand for oil in those nations is not as much as in the US.

All trade is pegged against the US dollar, i.e. according to the demand of a barrel of oil in the US. Thus, all world trade is conducted according to the cosumption patterns of US citizens.

Now the US is the world's largest exporter. Its exports are not linked to oil, but according to their proper value, whereas the exports of most nations are liked indirectly in one way or the other to the price of one barrel of oil.

Thus the result is that indirectly, all nations are simply giving money to the US.

A large part of the demand for US dollars comes from the fact that oil is denominated in dollars. As the price of oil increases, so does the dollar. If major oil producing countries like OPEC and Russia switch away from the dollar to the Euro or something, the US dollar may drop 50% or so overnight. The percentage of foreign ownership in companies incorporated in America would skyrocket. Living standards would plummet as price of imported goods (which is just about everything) skyrocket.