Yesterday, Venezuela’s Hugo Chavez met with Iran’s Mahmoud Ahmadinejad in Tehran after both of them had attended the OPEC summit in Riyadh over the weekend. In the Iranian capital they continued their attack on the dollar that they had started a few days earlier.
In Saudi Arabia, the Iranian president, backed by Chavez, had wanted the thirteen-member cartel to price oil in a currency other than the American unit—such as the euro—or at least with reference to a basket of currencies. Saudi King Abdullah blocked that idea, but only for the present. The summit’s final declaration contains vague language about “financial cooperation” among the group’s members, and Iran’s oil minister later said that the words meant a reconsideration of acceptance of the dollar.
For now, America’s allies inside OPEC can hold off Ahmadinejad and Chavez because the price of oil has skyrocketed as the greenback has fallen. Yet continued erosion of the dollar will strengthen their case that our currency is “worthless paper”—as Ahmadinejad said in Riyadh—and should they prevail, they will have gone a long way toward dethroning it as the world’s reserve currency. The menacing pair—“united like a single fist” in Chavez’s words—knows what’s at stake. “God willing, with the fall of the dollar, the deviant U.S. imperialism will fall as soon as possible too,” the Venezuelan leader said after his meeting with his Iranian counterpart in Tehran.
There have been bouts of dollar selling in the past, but our currency has nonetheless retained its central role in the financial markets. Yet at some point, people will stop accepting the buck as its value decreases. Brazilian supermodel Gisele Bundchen made headlines at the beginning of this month when her sister-manager revealed that she demanded to be paid in almost any currency other than the dollar—even when working for a U.S. company. Treasury Secretary Henry Paulson has repeatedly reaffirmed America’s strong-dollar policy, but it’s clear the Bush administration does not intend to do anything to stop what looks like a free fall.
The President’s apparent lack of concern is a mistake of enormous proportions: all his international problems will become immeasurably harder when no one wants our currency and American financial sanctions become meaningless. Ahmadinejad and Chavez are normally full of bluster, but they have now found a tactic that can injure the United States. That’s because irresponsible economic policies over the course of past administrations have essentially handed our adversaries in Iran and Venezuela a weapon.