Debunking the Dumping-the-Dollar Conspiracy

I notice that the trustworthy news sources kept links with large headline like "Dollar falls on oil plan report" without even a mention of 'fake' or 'unconfirmed'. There is a reason some people have more trust in Jon Stewart, he doesn't need to sensationalize things when the BBC does it for him.

Mr. Baker contends that a high estimate is that 4.2 billion US dollars might be spent on buying oil from producers daily. He then compares this to 1 trillion US dollars which China holds as reserve. That's no comparison. The real question is at what rate does China buy US dollars for its reserve? The fact that China has 1 trillion US dollars is irrelevant to the actual demand for US dollars. Oil sales supposedly accounts for 4 billion US dollars in daily demand. I'm pretty sure that China does not buy 4 billion US dollars for its currency reserve on a daily basis. If it did, it would acquire more than 1 trillion dollars each year.

The bottom line is that, while there may indeed be nothing to fear as Mr. Baker suggests, it is not because China can reduce its holdings by more than is spent on oil on a daily basis. The demand for US dollars for the purchase of oil is more or less assured and continuous. Were China to reduce its holdings at a similar rate to the spending on oil it'd run out of dollars pretty quickly.

One of the few ways in which long-standing autocracies are destroyed is through a sharp decline in the exchange value of their currencies. Though I am not an historian, I believe that the French Revolution occurred when the French peasants and workers could no longer afford bread ("Let them eat cake"!) The Bourbon king's treasury was empty and his ministries and agents unfunded. The Weimar Republic, for all its faults, lost credibility in 1923, from wild inflation and finally fell when inflation and unemployment returned after a mid 1920s pause in the crash of world stock markets.

A rejection of the US dollar in foreign exchange would be very punishing to the American middle-class, which at present is relatively complacent about the military extravagances of our government and ruling, corporate class. Loss of savings and pensions, sky-rocketing prices for food, gasoline, all these would finally make Americans realize how poorly they are governed and there would be considerable social unrest.

Of course, such a catastrophe could install a military dictatorship and harsh repressions, but one result would undoubtedly be the end of US bases around the world and invasions by us of foreign countries with consequent killing of large numbers of innocent civilians and some of our own poorer citizens.

I spend about $100 a day, does that mean that I need to only hold $100 cash?

Also the main reaon that a shift would be significant, is its implications for the dollar as The reserve currency. What would happen if the US government had to borrow in Euros? That is the real danger of the move.