US Dollar Dived
The confidence on the US Dollar, the US Banking System and its Monetary Policy is eroding. This was earlier expressed in Low Confidence in the US Dollar and Brazil and China not using the US Dollar . Now, another member of the Group of 20, Russia is shouting about a new global currency to replace the US Dollar.
In the Forex Market, the US Dollar continued its dive against most majors. It took a dive against the Pound. Against the Euro, the US Dollar dropped to its lowest level for this year.
No Confidence in the US Dollar
The lack of confidence in the US Dollar has prompted other nations to consider alternatives to the use of the US Dollar as the world’s main reserve currency.
It was China and Brazil that started the spark on replacing the US Dollar in international trade. The two countries started their negotiation on the use of their own currencies for their trading activities.
Now, Russia is proposing a new supranational currency to replace the US Dollar.
It was reported that Russian President Medvedev has again reiterated his proposal for a new global currency and even suggested the use of the ruble a regional reserve currency. Russia’s submissions to the Group of 20 meeting in London in April included studying the establishment of a supranational currency.
We need some kind of universal means of payment, which could create the basis of a future international financial system
Russian President Dmitry Medvedev said to CNBC on the 1st. June.
It was also reported that the Russian President may discuss his proposal to create a new world supranational currency when he meets his counterparts from Brazil, India and China later this month.
Displacement of the US Dollar
The idea of replacing the US Dollar in international trade is nothing new. The European Nations are now using the Euro. However, the Global Financial Crisis and the current economic recession may accelerate the displacement.
Tun Dr Mahathir Mohamad noted the weaknesses in the US Dollar have been advocating this idea long ago to the Middle East countries.
He repeated his advice in his speech at Institute For Policy And International Studies, Tehran, Iran, on 30 November 2008.
Another solution could be the use of the gold dinar purely for trade payments. In any case the Islamic ummah can reduce the attacks against them by not using the American Dollars for trade payments, especially for oil.
To save our currency and economy from being affected by western banking practices and the U.S. Dollar, a new trading currency should be proposed to replace the U.S. Dollar. Such a trading currency should be tied to gold and used only in international trade.
Truly the Muslim ummah are in the best position to initiate and sustain the monetary and financial systems of the world. This is because they are in possession of more money than they can find use for. They are even in a position to insist that their oil be paid in the local currency or in any currency designated by them. Whatever currency they choose will become strong simply because there will be a demand for it just as today the U.S. Dollar has a value because there is a demand for it in the settlement of trade.
However, it is unlikely the oil producing countries in the Middle East will follow suit the actions of the other counties in replacing the US Dollar for their oil trade. This is because the US could easily persuade them to stick to the US Dollar because most if not all of them have huge investments in the US. They are also highly dependent on the US military equipments.
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