Greenspan says drop Dollar!

[seekingtruth1]

http://english.aljazeera.net/NR/exeres/FC515689-75CC-4121-BD37-2A84E5BF0C60.htm

[Nova]

Alan Greenspan, the former chairman of the US central bank, or Fed, has said that inflation rates in Gulf states, which are reaching near record levels, would fall "significantly" if oil producers dropped their US dollar pegs.
Speaking at an investment conference on Monday in Jedda, Saudi Arabia, he said the pegs restrict the region's ability to control inflation by forcing them to duplicate US monetary policy at a time when the Fed is cutting rates to ward off an economic downturn.

(Above quoted from the article)

Yes, the Middle East would have less inflation if it unpegged from the dollar. This is a no brainer. Actually, why they haven't done so before now, makes no sense to me. But there must be political reasons, because they certainly aren't economic ones.

If (my hunch is when) OPEC & other currencies unhinge from the dollar, then things will escalate here.

[seekingtruth1]

Yes its true...but Im dubious anytime a US citizen is making thsoe statemnets to thsi group. I just wonder what team he is really batting for these days.....

(Above quoted from the article)

Yes, the Middle East would have less inflation if it unpegged from the dollar. This is a no brainer. Actually, why they haven't done so before now, makes no sense to me. But there must be political reasons, because they certainly aren't economic ones.

If (my hunch is when) OPEC & other currencies unhinge from the dollar, then things will escalate here.

[felixthecat]

How credible is aljazeera.net ?

[seekingtruth1]

How credible is aljazeera.net ?
About as credible as Fox or CNN.

[JenGC]

OK I have no idea what a "US dollar peg" is but I am assuming it is where the Middle East has made the official currency for oil in US dollars so they pegged the currency to US dollars. If this is true, how can dropping the US dollar help our inflation? Wouldn't that just make the value of the dollar plummet more than it has in the past year?

[SoThankful]

OK I have no idea what a "US dollar peg" is but I am assuming it is where the Middle East has made the official currency for oil in US dollars so they pegged the currency to US dollars. If this is true, how can dropping the US dollar help our inflation? Wouldn't that just make the value of the dollar plummet more than it has in the past year?

I believe he was referring to the mideast currencies, our dollar is in deep trouble and even more so if this happens.

[Nova]

OK I have no idea what a "US dollar peg" is but I am assuming it is where the Middle East has made the official currency for oil in US dollars so they pegged the currency to US dollars.

Yes, oil is (currently) priced in dollars.

If this is true, how can dropping the US dollar help our inflation?

It won't. You missed the part where he is recommending Arab states do this to help their internal inflation. It will hurt us. But it is sensible move for their economies.

Wouldn't that just make the value of the dollar plummet more than it has in the past year?

You have the cause & affect switched. The low value of the dollar is the big risk factor for other currencies & oil to unpeg (ie switch to something other than dollars.) Pricing oil in another currency will drive up oil costs if the value of the dollar keeps dropping.

OPEC or another currency unhinging from the dollar is a major trigger for things to get worse here (in my opinion.)

But leads one to wonder why Greenspan is giving Arabs sensible advice.