The Iran Bourse myth, demystified

The scenario goes something like this: Iran starts its new oil bourse, "openly trading oil to other nations or buyers in euros, Tehran would set into motion a chain of events in which nation after nation, buyer after buyer, would line up to buy oil no longer in US dollars but in euros. That, in turn, goes the argument, would lead to a panic selling of dollars on world foreign-exchange markets and a collapse of the role of the dollar as reserve currency..." And then no more USA right?

I've read that argument in a thousand places... in comments on AlterNet stories, on blogs about Peak Oil, in the e-mail alerts of the 30 or so yahoo! groups I spy on. And I've been waiting, hoping for someone to shred it to pieces. My prayers have been answered. Thanks to the network of former CIA guys and outsider shady intelligence analysts* at the Asia Times for the handy work. The Iran Bourse myth killer is F. William Engdahl.

In some beautifully stark and concise prose Engdahl explains in two paragraphs that what keeps the US Dollar pre-eminent ain't about what currency countries trade their oil in:

"Since 1979 the US power establishment, from Wall Street to Washington, has maintained the status of the dollar as unchallenged global reserve currency. That role, however, is not a purely economic one. Reserve-currency status is an adjunct of global power, of the US determination to dominate other nations and the global economic process. The United States didn't get reserve-currency status by a democratic vote of world central banks, nor did the British Empire in the 19th century. They fought wars for it.

"For that reason, the status of the dollar as reserve currency depends on the status of the United States as the world's unchallenged military superpower. In a sense, since August 1971 the dollar is no longer backed by gold. Instead, it is backed by F-16s and Abrams battle tanks, operating in some 130 US bases around the world, defending liberty and the dollar."

Get it? The world uses the dollar at gunpoint. And have you noticed, the USA spends more on guns than anybody else?

"Since the shocks of September 11, 2001, and the ensuing declaration of a US 'global war on terror,' including a unilateral decision to ignore the United Nations and the community of nations and go to war against a defenseless Iraq, few countries have even dared to challenge dollar hegemony. The combined defense spending of all nations of the EU today pales by comparison with the total of current US budgeted and unbudgeted military spending. US defense outlays will reach an official, staggering level of US$663 billion in the 2007 fiscal year. The combined annual EU spending amounts to a mere $75 billion, and is tending to decline, in part because of ECB Maastricht deficit pressures on its governments.

"So today, at least for the present, there are no signs of Japanese, EU or other dollar holders engaging in dollar-asset liquidation. Even China, unhappy as it is with Washington's bully politics, seems reluctant to rouse the American dragon to fury."

Slam the door on the Bourse myth would you Engdahl?