The Euro, The Dollar, and Oil
There's a 'story' making the rounds on the blogosphere that one reason America went to war was that Iraq was threatening to denominate its oil trade in euro rather than dollars. (I've seen this most recently at The Muted Drum, but it's popped up in a lot of places. In various forms, it claims that the US feared that the dollar would be replaced as a reserve currency, and so we invaded Iraq in order to stop it.)
This seems to me like an economically illiterate 'tail wags the dog' story. The article I've linked to makes a number of post hoc errors, takes no consideration of the scale of the numbers involved, and uses these distortions to paint a pretty disturbing picture. Nonetheless, I can't buy it.
Does anyone have a link to a compelling counter-argument by a respected economist? I'd prefer to have a reference or link to use next time I see this urban myth.
Comments
For the record, I don't believe it either. And if neither of us believe it, it's unlikely to be true. I can't construct enough economics at this time of night to disprove the argument, so I'll just note that the piece you link to isn't an argument, more a series of linked assertions and not worth reading.
I also recall that there are threats to dollar hegemony to do with the stability of south east asian banks, but I can't remember what or why. Nothing to do with oil though - and not actually that serious either.
M
jfgynnxPosted by: Martin | October 23, 2003 05:51 PM
I can't imagine that this is the case. But on the other hand a strong euro you can count on is definitely a big risk for America. The world produces, America consumes. How do they pay? With the money the whole world invests in the US. If this changes ..
Best from Germany
cktkAndi
Posted by: Andi Nagler | October 30, 2003 03:49 PM
I can't imagine that this is the case. But on the other hand a strong euro you can count on is definitely a big risk for America. The world produces, America consumes. How do they pay? With the money the whole world invests in the US. If this changes ..
Best from Germany
xohysyAndi
Posted by: Andi Nagler | October 30, 2003 03:51 PM