Threats to American economic dominance and the USD continue to grow as oil producing regions talk about, and act on, abandoning USD denominated oil sales and currency pegs. Iran’s announced February 27 oil bourse launch could mark the end of the American empire as we have known it for the last 60 years.

American economic, military and cultural dominance is dependent on and funded by the world’s use of the USD as the foreign reserve currency. The world uses the USD as the primary foreign reserve currency because, up until recently, all sales of oil were closed in USD (see: American decline – January 7, 2008).

This practice ended in December 2007 when Iran stopped selling oil in USD. In the same month Russian oil firm Rosneft followed Gazprom and Lukoil in selling crude in Russian Rubles rather than USD, due in part to dollar depreciation.

American militarism, dollar decline and monetary hyper-expansion have left the country’s resources stretched thin. American rivals are bold knowing that the US military is bogged down in Iraq and Afghanistan and oil producing American allies are growing weary of taking economic hits as the US Federal Reserve continues to cut interest rates and fuel inflation.

Currency ‘pegging’ – the practice of fixing one currency’s exchange rate to that of another – was adopted by Gulf Cooperative Council (GCC) countries that pegged to the USD.  At the time this made sense as it aligned their currencies with their USD denominated oil sales and set the stage for the planned GCC monetary and economic union. The significant decline of the USD has changed the economic calculus, however.