Saudi clerics have issued what amounts to a fatwa against the dollar, but their efforts might be better spent finding ways to invest surplus petrodollars so that the benefits are felt outside the royal palaces. Officially, the Wahabists called on the Saudi government to fight domestic inflation by decoupling the riyal from the dollar. 'We remind you of Prophet Mohammad's words that you are shepherds who are responsible for your flock," the group of 19 well-known clerics, said in a statement. We can sympathize with rank-and-file Saudis who are more concerned about the price of bread and milk than about the cost of custom-outfitting a Boeing 777. But abandoning oil's peg to the dollar in favor of, say, the euro, is not the answer, since such a strategy could backfire disastrously. How so? For starters, the world market for oil would dry up precipitously if buyers had to pay for the stuff with relatively hard money such as the euro. That is why persistent rumors that oil producers will eventually demand gold, the hardest money of all, for oil are so ridiculous. How much oil do you think the world could afford if it had to pay for it in something other than snide? 'Spongy Money' Works Clearly, a spongy dollar suits global trade perfectly -- suits even Arab sultans and princes, who, by buying shares in Citigroup, and in downtown Las Vegas and Detroit, have revealed themselves to be almost as frivolous as the Japanese were in the late 1980s, when they binged on such trophy assets as Rockefeller Center and Pebble Beach. While it is true that oil customers who settle up in dollars are effectively paying for it with confetti, there is as yet no shortage of opportunities for the sellers to convert the confetti into real
LATEST TRADES
