Moves Afoot in the Gulf Cooperation Council

From Arab News, the official organ of this guy…

(Image from here.)

No, not that one. The other one… or maybe of both of ’em. In any case, Arab News is now reporting:

JEDDAH, 1 December 2007 — The pressure on the Gulf Cooperation Council (GCC) countries is growing to drop their pegs to the tumbling US dollar with the Dec. 3-4 GCC Summit expected to take a decision on the matter in order to stop soaring inflation in the region.

The latest call for depegging from the dollar came from Jassem Al-Mannai, chairman of the Arab Monetary Fund (AMF), who urged the GCC states to lift their pegs to the dollar, saying revaluations would not solve the problem of rising inflation. Speaking at an economic seminar in Abu Dhabi, he advised the GCC that groups Saudi Arabia, Qatar, Bahrain, Oman, Kuwait and the UAE, to switch to a managed float or peg their currencies to a basket, including the euro, sterling and yen.

Mannai said there was no harm in linking GCC currencies with a basket of currencies as many countries have successfully adopted this monetary measure in the past.

“There is no currency exchange system suitable for all ages and places … In the past GCC economies were negligible and now they have to adopt polices that suit their economic progress,” he said.

Mannai called upon the GCC states to adopt an exchange rate based on a basket weighted on currencies of their main trade partners, including the euro, dollar, sterling and yen. The European Union is now the main trading partner of the GCC accounting for 35 percent of their foreign trade, followed by Asian countries 30 percent and the US 10 percent.

The UAE, the second largest economy in the GCC after Saudi Arabia, called this month for all Gulf oil producers to switch from fixed exchange rates to currency baskets. According to some sources, Saudi Arabia could consider revaluing its currency for the first time in 21 years without dropping its peg to the dollar.

I honestly don’t think anyone has quite thought through all the implications to the US if the dollar becomes just another currency.