Gold: The Next Reserve Currency Player
The subprime crisis initiated and perfected in the United States has morphed into a full blown liquidity crush that has infected nearly every corner of the financial world. The one corner that can remain functioning in a largely rational economic way are the Persian Gulf states known as the Gulf Cooperation Council ((GCC)). These include Kuwait, Saudi Arabia, Bahrain, the UAE, Qatar and Oman. Not all of these oil players are of equal consequence, but they all have a common geologic inheritance and a cultural unity. All except Bahrain are ranked in the top 20 oil producing nations and Saudi Arabia alone made over 200 billion US$ in exports in 2008. They represent the great players and the only viable swing producers.
The parabolic rise last year in oil prices gave them daily billion dollar payouts. The drastic fall has still left them able to pay off substantial social committments to their populaces and have enough left over to make forays into the Sovereign Wealth Fund arena. However, there is a future to consider and oil will not be around forever. The twin conundrums the Kuwaitis and Saudis have faced in particular is how to protect themselves from the fallout of either unacceptably low or high oil prices and (critically) depreciating value of the currency they receive for their precious oil - US Dollars.
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