Disco Bay

Gulf Countries Urged to Switch Currency Peg from Dollar to a Basket With Oil

There is another option of course. One which is simple and straightforward. The UAE could go on to the gold standard. Gold has been an amazingly stable measure of value over the past 2000 to 3000 years. If you examine a chart which plots the price of oil against gold for the last 65 years, you will see that although there are a few fluctuations, the graph is quite flat. One once of gold today buys about the same amount of wheat it did in ancient times.

I agree that small countries must have some defense against the massive hedge funds which wreak havoc with their currencies. During the Asian financial crisis many countries had first had experience and most lost billions to the hedge funds and speculators.

With the UAE on a gold standard this kind of abuse would not be possible. Whilst hedge funds found it relatively easy to push around some of the Asian currencies, the would find it considerably more difficult pushing around the estimated world supply of 150,000 metric tonnes of gold.

I would think that the gold standard would be particularly appealing to small countries. Especially ones that are developing rapidly but are suffering the effects of high inflation. Two examples that come readily to mind are UAE and Vietnam.