By Goodwin Ginger
In the newly released issue of the Post-Autistic Economics Review, Margaret Legum argues that the real motivation of current US posturing towards Iran may have more to do with Iran’s plan to open an oil market denominated only in Euros. This is a credible argument insofar as a shift to a Euro denominated oil market would undermine the US dollar as the central global currency and thereby undermine its capacity to finance both the largess of Empire and domestic spending.
Some caution should be exercised in reading such analyses for they are closely linked and in some respects are a twin of the Gold Bugs. Who are the Gold Bugs? Well they are a subculture in the world of financial analysts. In short, they have been predicting doom since the end of the gold standard. Oil Bugs view oil as the underlying international value asset i.e., international commodity money (taking the place of gold).
Most credible observations on the likely impact of Iranian move to open a bonafide bourse denominated in Euros suggest that it will cause some strain on the value of the US dollar and some strain on the ability of the US to finance its twin deficits.
However, as the movement off the gold standard demonstrated long ago the move to a credit based financial order did not bring an end to the world as we know it. Nor do we suspect would an end to the monopoly the US currently enjoys on the denomination of oil in US dollars. If the end of the US as a hyper-power could be brought about by simply re-denominating oil in another foreign currency it would have happened long ago. That it has not happened also suggests that oil producing countries get something out of the current arrangement so there is more than just coercion at play here. In any case, a grain of salt is as always the curative for any analysis which concludes with the sky is falling.
Margaret Legum (SANE, South Africa) …………………………………………………..
William Clark made this such argument back in 2004 in his article published at the Centre for reasearch on globalisation. See The Real Reasons Why Iran is the Next Target: