2009 October 05 Monday
Gulf Arab Countries Plot To Stop Oil Trading In Dollars?

Writing in The Independent Robert Fisk reports on efforts by the Gulf Arab countries and several major industrial countries to phase oil trade of oil in dollars. Since a decline the dollar causes a rise in the price of oil and since these countries can immediately exchange received dollars for other currencies I question whether a halt to dollar-based trading would help them much. Still, these discussions are a sign of the times.

In the most profound financial change in recent Middle East history, Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.

Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars.

One can understand why countries are questioning the dollar's role. The United States is quickly going deep into debt. Check out this page from the US Congressional Budget Office: The Budget and Economic Outlook: Fiscal Years 2009 to 2019. That page points to lots of budget documents. In particular, check out page 6 of this PDF document. The amount of government debt held by the public could hit multiples of yearly GDP. Doesn't sound like a country whose currency you should want to hold.

The United States can no longer take for granted the role of top dog in the world.

“The United States would be mistaken to take for granted the dollar’s place as the world’s predominant reserve currency,” the World Bank president, Robert B. Zoellick, said in a speech at the School for Advanced International Studies at Johns Hopkins. “Looking forward, there will increasingly be other options to the dollar.”

We've got too many financial and demographic problems building. An argument can be made that America peaked in the 1960s. The high school graduation rate in the United States peaked in the late 1960s. Since whites are a declining portion of the US population the graduation rate is going to decline much more than it has already. We are gradually losing the ability to maintain a first world nation.

In an NBER Working Paper published in 2007 7, we demonstrate why such different conclusions have been reached in previous studies. We use cleaner data, better methods, and a wide variety of data sources to estimate U.S. graduation rates. When comparable measures are used on comparable samples, a consensus can be reached across all data sources. After adjusting for multiple sources of bias and differences in sample construction, we establish that: 1) the U.S. high school graduation rate peaked at around 80 percent in the late 1960s and then declined by 4-5 percentage points; 2) the actual high school graduation rate is substantially lower than the 88 percent estimate; 3) about 65 percent of blacks and Hispanics leave school with a high school diploma, and minority graduation rates are still substantially below the rates for non-Hispanic whites. Contrary to estimates based on the status completion rate, we find no evidence of convergence in minority-majority graduation rate Exclusion of incarcerated populations from some measures greatly biases the reported high school graduation rate for blacks.

These trends are for persons born in the United States and exclude immigrants. The recent growth in unskilled migration to the United States further increases the proportion of unskilled Americans in the workforce, apart from the growth attributable to a rising high school dropout rate.

We no longer live in a nation that believes there are solutions. The American public has lost faith in higher spending on education as the solution.

In another sign of declining confidence, the public is less willing to spend more money on public education. In 1990, 70% of taxpayers favored spending "more on education," according to a University of Chicago poll. In the latest poll, only 46% favored a spending increase. That's a 15 percentage point drop from just one year ago when it was 61%.

But when it comes to actual dollars spent per pupil, Americans get the numbers wrong. Those polled by Education Next estimated that schools in their own districts spend a little more than $4,000 per pupil, on average. In fact, schools in those districts spend an average of $10,000.

Smart parents who are willing to do home schooling could do a lot better with that money.

Share |      By Randall Parker at 2009 October 05 10:35 PM  Civilizations Decay

Stephen said at October 6, 2009 12:03 AM:

Randall said: "Smart parents who are willing to do home schooling could do a lot better with that [$10,000] money."

Not wanting to divert from the substantive topic, but a smart parent who chooses to stay at home will forgo earnings that are ten times greater. Its far more sensible for the smart parent to enter the workforce and use a portion of the surplus income to contract out the child's education.

Mthson said at October 6, 2009 8:35 PM:

There are services that facilitate home schooling programs with personalized tutoring from professors in India.

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