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PattyFlipper
Joined: 14 Nov 2007
Posts: 572
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 Posted: Wed Dec 16, 2009 8:51 pm Post subject: The 'Gulfo' is coming. (IBM!) |
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http://www.telegraph.co.uk/finance/economics/6819136/Gulf-petro-powers-to-launch-currency-in-latest-threat-to-dollar-hegemony.html"
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Gulf petro-powers to launch currency in latest threat to dollar hegemony
The Arab states of the Gulf region have agreed to launch a single currency modelled on the euro, hoping to blaze a trail towards a pan-Arab monetary union swelling to the ancient borders of the Ummayad Caliphate.
By Ambrose Evans-Pritchard
Published: 7:12PM GMT 15 Dec 2009
�The Gulf monetary union pact has come into effect,� said Kuwait�s finance minister, Mustafa al-Shamali, speaking at a Gulf Co-operation Council (GCC) summit in Kuwait.
The move will give the hyper-rich club of oil exporters a petro-currency of their own, greatly increasing their influence in the global exchange and capital markets and potentially displacing the US dollar as the pricing currency for oil contracts. Between them they amount to regional superpower with a GDP of $1.2 trillion (�739bn), some 40pc of the world�s proven oil reserves, and financial clout equal to that of China.
Saudi Arabia, Kuwait, Bahrain, and Qatar are to launch the first phase next year, creating a Gulf Monetary Council that will evolve quickly into a full-fledged central bank.
The Emirates are staying out for now � irked that the bank will be located in Riyadh at the insistence of Saudi King Abdullah rather than in Abu Dhabi. They are expected join later, along with Oman.
The Gulf states remain divided over the wisdom of anchoring their economies to the US dollar. The Gulf currency � dubbed �Gulfo� � is likely to track a global exchange basket and may ultimately float as a regional reserve currency in its own right. �The US dollar has failed. We need to delink,� said Nahed Taher, chief executive of Bahrain�s Gulf One Investment Bank. |
It remains to be seen whether the 'Gulfo' will actually get off the ground. Getting a group of Arabs to reach a consensus about anything is at best a tenuous and drawn-out process. Co-ordinating a pan-Gulf project of this magnitude will be like herding cats. The squabbling has already started with the UAE taking its ball home because the Central Bank will be located in Riyadh rather than Abu Dhabi. Oman is also refusing to join because it doesn't want to implement the fiscal measures which membership of the new currency will impose (i.e. has no desire to dismantle its barriers to free trade and break up its oligarchical monopolies, both public and private).
The Gulf monarchies and sheikhdoms like to trumpet their grandiose schemes with much hype and fanfare, however such schemes are often not particularly well-planned or thought out, and have a tendency to unravel at the execution stage. Toadying flunkies and courtiers, including expats and foreign 'consultants' on the gravy-train, are unlikely to point out any serious flaws either, even if they spot them; and those in charge probably wouldn't want to hear it anyway.
Not being racist here, simply stating my opinion based on observation and experience from many years of living and working in the region. Personally, I would love to see a strong GCC version of the Euro, delinked from the US dollar, but I have serious doubts that it will come to pass in the stated time-frame. |
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Cleopatra
Joined: 28 Jun 2003
Posts: 3657
Location: Tuamago Archipelago
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| Posted: Thu Dec 17, 2009 5:43 pm Post subject: |
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| The Gulf monarchies and sheikhdoms like to trumpet their grandiose schemes with much hype and fanfare, however such schemes are often not particularly well-planned or thought out, and have a tendency to unravel at the execution stage |
Unlike, say, the US occupation of Iraq (or Afghanistan)? |
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PattyFlipper
Joined: 14 Nov 2007
Posts: 572
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| Posted: Thu Dec 17, 2009 7:19 pm Post subject: |
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| Cleopatra wrote: |
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| The Gulf monarchies and sheikhdoms like to trumpet their grandiose schemes with much hype and fanfare, however such schemes are often not particularly well-planned or thought out, and have a tendency to unravel at the execution stage |
Unlike, say, the US occupation of Iraq (or Afghanistan)? |
An absolute debacle, I totally agree, however this thread discusses the proposed introduction of a common Gulf currency. How are Bush and Blair's little adventures relevant to that? |
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norwalkesl
Joined: 22 Oct 2009
Posts: 366
Location: Ch-Ch-Ch-Ch-China
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| Posted: Fri Dec 18, 2009 4:32 am Post subject: |
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Back on topic:
How will this possibly affect ME ESL salaries? |
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helenl
Joined: 04 Jan 2006
Posts: 1202
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| Posted: Fri Dec 18, 2009 6:00 pm Post subject: |
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A) I doubt it will happen soon
B) I doubt it will have a big influence on world currency markets in the short term and seriously doubt it will in the long term - the political situations and the geo political influences will not allow it to have a major global impact - the reason why the USD has lasted so long is because of general political stability and a large diverse economy - neither of which can be said for the GCC which for the most part have pegged their currencies (or linked them in a basket of currencies) to the USD.
C) In the short term - possibly a mild rise in ESL (and other salaries in local currencies vs USD) but probably a loss over the long term.
D) I am not a forex expert and have been wrong before. But given the history of the region, the history of the financial systems globally - I would bet money on C |
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Cleopatra
Joined: 28 Jun 2003
Posts: 3657
Location: Tuamago Archipelago
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| Posted: Fri Dec 18, 2009 6:09 pm Post subject: |
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| How are Bush and Blair's little adventures relevant to that? |
Admittedly not very. I was being facetious.
As for this 'gulfo', it kind of reminds me of the 'women driving ban to be repealed' talk here in KSA. It's been said to be 'imminent' for the past several years, but it's never happened. Which isn't to say it won't happen, it almost certainly will, but the question is when. Ditto with the 'gulfo' would be my not very informed guess. I would say the GCC countries will depeg fromt he dollar, and they will probably form a single currency, but likely not any time soon. Of course, the introduction of a new currency would have to be a gradual process with obvious changes in the banking and finance sector over a period of time before the new currency would actually be launched, so this is one thing that can't happen 'overnight' as is usually the way in this part of the world. |
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veiledsentiments
Joined: 20 Feb 2003
Posts: 17644
Location: USA
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| Posted: Fri Dec 18, 2009 6:23 pm Post subject: |
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Although the idea of a single currency make a lot of sense, based on what I have seen over the years from the GCC, I don't see it happening. Their national 'egos' won't let it. In the beginning there was supposed to be one airline... Gulf Air... it made perfect sense. But... no... one by one each country organized their own airline. Now they are all competing with each other for pilots, crew, etc. Having one airline was the common sense way... but each ruler wanted his own.
Then there was the extremely sensible idea of having one medical university... it was to be in Bahrain and be able to excel by having top professors and equipment. Well... we saw how that worked out. One by one they each started their own medical universities. So, instead of having one premier institution, we have 6 mediocre ones.
If I was betting, my money would be on all of them eventually going for basing on a basket of currencies rather than the dollar, like Kuwait. But I can't see any of them giving up having money with their pictures on it. Common sense never trumps ego in things like this.
VS |
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Pikgitina
Joined: 09 Jan 2006
Posts: 420
Location: KSA
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| Posted: Sat Dec 19, 2009 4:12 pm Post subject: |
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| veiledsentiments wrote: |
| But I can't see any of them giving up having money with their pictures on it. Common sense never trumps ego in things like this. |
Even though I get the point you're making, this is true only for Saudi Arabia and Oman. There are no pictures of people on the Bahraini Dinar, the Qatari Riyal or the Emirati Dirham. I don't know what they have on the Kuwaiti Dinar as I've never been to Kuwait. |
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veiledsentiments
Joined: 20 Feb 2003
Posts: 17644
Location: USA
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| Posted: Sat Dec 19, 2009 4:48 pm Post subject: |
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It is still an ego thing... just like the UK not wanting to go with the Euro.  And it likely has pictures of their "stuff."
VS |
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15yearsinQ8
Joined: 17 Oct 2006
Posts: 462
Location: kuwait
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| Posted: Sun Dec 20, 2009 12:36 pm Post subject: |
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the 'ego issue' is that who would be THE central banker and which country would the centrla bank be located in
while it also looks sensible on the surface, each country is different and during the 'crises' inflation rates varied greatly for instance , leading a 'one size fits all ' monatary policy to be a bad thing for the majority
what's teh differeance between a certain golfer and santa claus ? santa claus stopped a 3.... as in ho ho ho |
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Cleopatra
Joined: 28 Jun 2003
Posts: 3657
Location: Tuamago Archipelago
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| Posted: Sun Dec 20, 2009 7:17 pm Post subject: |
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| while it also looks sensible on the surface, each country is different and during the 'crises' inflation rates varied greatly for instance , leading a 'one size fits all ' monatary policy to be a bad thing for the majority |
Well, if countries as different as Germany and Greece (and a dozen or more others) could unite under the same currency, the Gulf countries could do the same - in theory. And of course it is true that the jury is out on just how succesful the Euro has been and will be.
In the case of the Gulf, wouldn't one obvious problem be that one country - KSA - is so much larger than all of the rest put together? Surely any such currency would inevitably be dominated by the Saudis? |
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scot47
Joined: 10 Jan 2003
Posts: 15343
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| Posted: Mon Dec 21, 2009 4:18 am Post subject: |
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| ...............and that is why the other countries are not so enthusiastic ! |
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