Russia Smacks Down the Dollar

Although the execution is not upon us, at some point soon, Russia will no longer trade oil in dollars, but rubles.

This may sound innocuous but there are some serious ramifications for the US economy once this begins.

First of all, with the falling dollar and the general feeling toward the US, other countries will probably follow suit. Iran has stated for some time now that they would like to trade their oil in some other currency than the dollar.

The US will no longer be able to trade under a trade deficit. Other countries had to have dollars on hand for oil contracts. In the past and because of that the dollar was always in demand.

The ruble could become the global currency replacing the dollar. While the middle east has had oil, its business and political processes were never able to capitalize on the opportunities oil wealth offered. Russia is a different situation.

A scarier thought is if the current situation with Russia coming into its own as an oil producer (second only to Saudi Arabia) 20 years ago, the Cold War might have had a different ending.

Although I wouldn't go investing in rubles yet, I would think that it is time the US free itself from oil. If the dollar is no longer pegged to oil, it could free fall causing oil prices in the US to climb prohibitively high. At that point the US will have to start refining oil shale or going green.