Iran, Venzuela, Warren Buffet, Taj Mahal & supermodels - and US$

Of course, anyone following the global financial news will know that the 50-year old global romance with US$ is coming to an end... The signs were there since quite some time...

What has changed is that what could be earlier explained as a geo-political or high-end financial investor pheonomenon, is now trickling down to mundane affairs.

The snap-shots of this worn-out/wearing-out romance look like this:

1. Earlier, it was the Communists/"Axis of Terror" countries, who started terminating the relationship
E.g.,

In Nov 2000, Iraq - with world's 2nd largest oil reserves - switched from US$ to Euro in its oil trade (and consequently, got liberated/invaded!)

In Nov 2004, Cuba banned trasactions in US$ and switched to Euro

In May 2006, the Russian Finance Minister, Alexei Kudrin, described US$ as an "unreliable as a reserve currency". Russia has been selling oil in Euros since last 4-5 years.

In Nov 2007, in the OPEC meeing Iran's President Mahmoud Ahmadinejad said that US$ has become a "worthless piece of paper"... Since 2003, in any case, Iran had started demanding to be paid in Euro for oil - and had thus became a part of "axis of evil" country>...

and of course Venezuela... along with Sudan, South Korea, China, etc.
etc., etc..

2. Then, the financially-savvy investors started moving away
E.g.,

Two years back, in the World Economic Forum, Microsoft Chairman Bill Gates publicly dumped the US$: "I'm short the dollar... The ol' dollar, its gonna go down."

Warren Buffet echoed Bill Gates sentiments then, and again noted this year: "We still are negative on the dollar relative to most major currencies, so we bought stocks in companies that earn their money in other currencies".

Peter Schiff, president of Euro Pacific Capital described: "The dollaris a basket case"

Investor Jim Rogers, a former partner of George Soros, of Rogers Holdings (formerly Beeland Interests Inc.) advised people to get out of dollar: "If you have dollars, I urge you to get out... That's not a currency to own." In fact, he is following his own advise by selling his property in dollars to buy Yuan, and expects that he will be able to get rid of all his dollar assets by next summer
etc. etc...

3. The friendly countries/allies start bidding farewells
One can dismiss the above since countries like Cuba, Iran or Venezuela have a political point to make against US. And investors, at best, would be following their self-interest - they would move away from a weak dollar and come back once the dollar picks up.

But more recently, even the friendly countries are getting disenchanted with US$
E.g.,

In May this year, Kuwait stopped pegging its currency, the dinar, to the US$. This was not out of any animosity against US; it was just two expensive for Kuwait to keep the dinar linked to the dollar.

In August, US Treasury showed outflows of $163bn from all forms of US investments. This was the first time since 1998 that on balance the foreigners sold the US Treasuries. Japan and China led a record withdrawl of foreign funds - followed by Taiwan.

In October this year, the Qatari and Vietnamese governments announced that they are rapidly divesting in dollar denominated securities. Qatari Prime Minister mentioned that the government-backed $50bn Qatari Investment Authority (QIA) now had less than 40 per cent of its investments in dollars, down from a high two years ago of 99 per cent.

In the recently concluded meeting of OPEC heads, a closed door meeting "accidentally" got telecasted to journalists. In response to pressure by Venezuela and Iran to replace US$ by a basket of currency for oil trade, Saud al-Faisal, foreign minister of U.S. ally Saudi Arabia said: "...the mere mention that the OPEC countries are studying the issue of the dollar is itself going to have an impact that endangers the interests of the countries..."... That's why, while the issue was discussed and debated, it did not find mention on the draft declaration.

More recently, last week, People's Bank of China vice-director Xu Jian declared the dollar was "losing its status as the world currency." With a dollar-denominted forex of more than a $trillion, this statement may have wider implications.


4. And now these minor reverberations!
Nearer home in India, two developments took place during last couple of months.

Five-star Hotels such as the Le Meridien, the Taj group and ITC Maurya have switched over to a rupee-tariff regime. The foreign guests are required to pay in INR, and not in US$. Accoriding to the COO of Le Meridien: "The dollar was falling every day for the last couple of months ... decision was taken to charge a single tariff from October"

Foreign tourists to about 120 of India's famous historical landmarks (including 27 World Heritage sites, Taj Mahal being one of them) will need to pay the entrance fee in Indian Rupee, and not in US dollar.

And last but not the least, a news from Brazil:

Not that one needs to learn about currency markets from supermodels, but when the 27-year old Gisele Bundchen, the Brazilian supermodel, insisted that she wants to be paid in any other currency, but not US dollars for P&G's Pantene hair product ads, I guess the domino's effect is taking place...


Related Posts:

April 17th, 2003: Gulf War-II: Saving the US$ against Euro

December 9th,2004: The Collapseof Dollar Economy??

February 3rd, 2005: US$ vs. Bill Gates, Warren Buffet, George Soros, China

January 5th, 2007: The Collapse of U$D Economy?? - Part II

October 4th, 2007: Tipping Point for US$?