Today the US dollar is the world's reserve currency. That means many necessary commodities, including oil, are priced exclusively in dollars. Since every nation that conducts trade must accumulate dollars, our currency maintains its value.
The world has to buy our money.
That's how we finance our massive trade and budget deficits. This has allowed us to live well beyond our means for a generation, wage our wars, and avoid the consequences of our dysfunctional economy. If the US dollar were not the de facto global currency, our present economic debacle would be much worse.
Wall Street's implosion has created the worst economic disaster since the Great Depression. Yet the Obama administration has not been forced to drastically raise taxes and cut spending. The US Treasury Department and Federal Reserve have simply printed trillions to cover the losses.
The rest of the world has watched in disgust as our financial firms were bailed out with what amounts to the world's money.
The recent G-20 summit was part public facade, where such niceties as global warming were discussed. Behind closed doors, the real issue was the stability of the dollar. The world's reserve currency has lost 15 percent of its value this year, and there is a very real prospect of a dollar devaluation.
Russia's Central Bank has abandoned the dollar as a reserve currency in favor of the euro. China's Ministry of Finance held their first auction of treasury bonds on September 28th. These bonds denominated in yuan will allow China's currency to trade internationally.
Robert Zoellick, the President of the World Bank, issued a warning after China's latest move: "The United States would be mistaken to take for granted the dollar's place as the world's predominant reserve currency. Looking forward, there will increasingly be other options to the dollar."
Then the financial world was roiled by Robert Fisk, a journalist for The Independent. According to him, Economic ministers from China, Russia, Japan and France have been secretly negotiating with OPEC "to end dollar dealings for oil." His news report sent gold prices soaring to record highs, and put more downward pressure on the dollar.
These recent events illustrate how precarious the dollar's status as the world's currency is. But this begs a question: How far will our regime go to defend this petrodollar monopoly?
The United States has suddenly taken a much more belligerent stance against Iran. The Obama administration is scrambling to get new sanctions passed, and even threatening war. Why?
Because Iranian President Mahmoud Ahmadinejad ordered his country to conduct all oil trade in euros on September 12, that's why. His executive decree also shifted the nation's $80 billion in foreign exchange reserves from dollars to euros. Our confrontation with Iran has less to do with their nuclear program than with saving the dollar.
On September 15, just three days later, the Bipartisan Policy Center issued this statement:
"If biting sanctions do not persuade the Islamic Republic to demonstrate sincerity in negotiations and give up its enrichment activities, the White House will have to begin serious consideration of the option of a U.S.-led military strike against Iranian nuclear facilities."
On September 24, President Obama chaired a meeting of the United Nations Security Council. During his opening remarks he issued the following grim warning:
"Just one nuclear weapon exploded in a city -- be it New York or Moscow, Tokyo or Beijing, London or Paris -- could kill hundreds of thousands of people, and it would badly destabilize our security, our economies and our very way of life".